cuteyoungchic,
It's possible I was confused:) You didn't mention rental increases. Only that the government didn't want to provide extra public housing. Not sure if that was true in the 80s but I agree that it would definately be something government would take into consideration now.
Don't you think, however, that providing public housing for down on thier luck citizens is a government responsibility?
Here is your real issue .. <edit> about negative gearing abolishment like its a good thing.
At this stage .. thanks to negative gearing .. the owner of the property who is using negative gearing is getting incentives to own a property at great expense to provide housing for renters. This means the government is effectively paying through reimbursement a small portion of your rents. It also means the property owner is providing rental accomodation for the renter, otherwise .. it makes more sense just to trade the property .. without worrying about rents.
If you remove all the incentives that exist in negative gearing .. you create two outcomes. The rents WILL go up, as there is now no subsidy structure in place to assist with dampening rents. Second .. the incentive to own property for tax deductions goes, reducing the amount of actual rental properties on the market.
So you will end up with a situation where you are dependant on the government for reasonable and responsible housing for living situations. Ask anyone who has been searching for public housing how that works with the government. One major factor in our current housing issue is that the government hasnt been doing proper levels of public housing for almost 30 years. Can you really see that improving as more affluent renters fall into the same boat? I dont think so.
Summing up .. remove negative gearing .. you cancel these incentives, make rentals harder and harder to find and more expensive. If thats your idea of an ideal world … i suggest you try somewhere that already has these issues. Like .. New York for instance. Its never fixed a pricing issue .. or patched a rental gap. It has however separated those who can afford their issues from those who cant. And personally I wouldnt want to see that here.
Well said Xdrew!
My sentiments exactly
Cheers,xdrew,
you suggest that 30 years ago the government did provide a reasonable level of public housing. I agree they haven't in a long time, not sure if it has been a full 30 years but definately more than 15. Why is it not possible that they cannot provide a reasonable standard of public housing again?
It doesn't have to end up like NY – it can revert to what it once was.
back @ genYguy:
If negative gearing is abolished & property is dumped as an asset class with a subsequent drop in house values it is a little too simplistic to say the government will buy them. A) there is no compulsion for any govt to buy up private housing, irrespective of price;
there are no funds available in the coffers to pay for it; C) it is not govt policy to do so; D) someone inevitably will have to pay for it eg by higher taxes to cover borrowings & interest; E) it will affect the precious AAA rating; F) hugely politically unpopular if house prices drop.Looking further afield, other investments will become more attractive ie equities, possibly leading to overpricing etc.
I've said this before and the information comes from a book I read at the library:
Negative gearing was once abolished back in 1985, only to be reinstated two years later. The attempt to remove negative gearing actually led to a rise in house prices and rent. When negative gearing was restored in 1987, house prices and rent increased yet again!
Considering what an epic fail it was in the past, I challenge the government to do it again. More to the point: can you (yes, all those who think negative gearing should be scrapped) stomach the potential increase in rents and/ or house prices? Can you truly tolerate the resulting negative fallout (which falls on renters and would-be first home buyers) from something you're proposing?
As is so often said: Careful what you wish for. You might get more than what you bargained for. 'Never eat anything bigger than your head', and don't try to paint complex issues in a simplistic manner.
ummester wrote:Don't you think, however, that providing public housing for down on thier luck citizens is a government responsibility?
It is, but only at our (ie. tax-paying workers) expense of course.
Additionally, on the topic of public housing…in Singapore, where I was born, house prices are very high indeed. To aid FHB onto the ladder of having their own home, there is government subsidised housing from the Housing Development Board (HDB): relatively small apartments in blocks of several hundred each. FHB that qualify for a HDB flat must meet strict requirements in terms of level of income, amount of assets, even marital status.
These HDB flats are sold by the government to qualifying buyers on a 99-year lease. Read: After 99 years your flat is worth $0 if you're left holding that hot potato.
People who originally bought HDB flats from the government and then looking to upgrade to a condo or landed property may sell their HDB flats to buyers on the 'open market', buyers who don't meet the government's strict requirements but cannot otherwise afford a private condo or landed property will have to buy on the 'open market', where prices can be double of what was actually paid to the government.
Not to mention that Singapore has amazing infrastructure and a public transport system that runs like a well-oiled machine, is comfortable and relatively inexpensive, although albeit crowded because of Singapore's burgeoning population.
Of course it's needless to say that with such housing policies in place and well thought-out infrastructure, a tiny island can support a population in excess of 5 million.
It also ensures that while there are properties costing more than $35 million for a bungalow on Sentosa, to a below-average landed property (eg. corner terrace in the 'suburbs' on a tiny block of land) selling for over $1.8 million, there are plenty of Singaporeans who can still afford their own home. Those who can't simply live at home with their parents, even take care of them as they age. It's considered part of the culture.
At least they didn't sit around and whinge and try to start a FHB strike, for crying out loud.
However I once raised the issue of such 'HDB' flats being built in Australia for the sake of discussion and it got no response. The only responder said 'no', citing that he/ she didn't want gangs and ghettos in Australia.
FYI, HDB flats in Singapore are NOT ghettos and there ain't no gangs around there because of the strength of police presence, which in turn generates a life where you could feel safe walking almost anywhere at night.
My point is this: if we want affordable housing, the government should get its butt into gear. But the rest of us will need to get used to high density housing near our homes. Instead there's the Not-In-My-Backyard attitude. C'mon, we can't have it both ways.
Even if such a scheme materialises in Australia, I'm betting my bottom dollar that people will still be whinging that they cannot afford to buy that McMansion in a tree-lined street, minutes to the beach, CBD, trendy shops and cafes, that has a triple garage, four living areas, 5 bedrooms and each with an ensuite, Olympic sized pool and a massive entertaining deck.
Of course I'm exaggerating. But the problem is not actually 'unaffordable housing'. It's 'property envy'.
fWord wrote:I've said this before and the information comes from a book I read at the library:Negative
gearing was once abolished back in 1985, only to be reinstated two years later. The attempt to remove negative gearing actually led to a rise in house prices and rent. When negative gearing was restored in 1987, house prices and rent increased yet again!Considering what an epic fail it was in the past, I challenge the government to do it again. More to the point: can you (yes, all those who think negative gearing should be scrapped) stomach the potential increase in rents and/ or house prices? Can you truly tolerate the resulting negative fallout (which falls on renters and would-be first home buyers) from something you're proposing?
As is so often said: Careful what you wish for. You might get more than what you bargained for. 'Never eat anything bigger than your head', and don't try to paint complex issues in a simplistic manner.
What's the book?
Here is a recent Domain article
Here is a SMH article based on a bankers research of what actually happened
http://www.smh.com.au/articles/2003/08/24/1061663676588.html
We have rememberred a political myth. NG removal does not have the effects we have been led to believe it does.
fword,
Singapore has something related to housing requirements that Australia does not – an actual land shortage.
Oh, Canberra has the 99 year lease thing also. Being landlocked, ACT can argue it has land shortages.
And ultimately, re the FHB strike, what does it matter? If the property market is so stable – what difference will it make if a majority of new entrants decide to opt out? Investors can flip with each other and pretend their asset values are solid foirever, can't they?
Here's an extra bit on NG – as this thread has caused me to refresh my memory on it's history:
Quote:Supporters of negative gearing argue that its abolition would lead to a ''landlords' strike'', driving up rents and exacerbating the shortage of affordable rental housing. They point to ''what happened'' when the Hawke government abolished negative gearing (only for property investment) in 1986, claiming that it led to a surge in rents, which prompted the reintroduction of negative gearing in 1988.This assertion has attained the status of an urban myth, but it isn't true. Rents (as measured in the consumer price index) did rise rapidly (at double-digit annual rates) in Sydney and Perth, but that was because in those two cities, rental vacancy rates were unusually low before negative gearing was abolished. In other state capitals (where vacancy rates were higher), growth in rentals was either unchanged or, in Melbourne, actually slowed.
Suppose, however, that a large number of landlords were to respond to the abolition of ''negative gearing'' by selling their properties. That would push down the prices of investment properties, making them more affordable to would-be home buyers, thereby reducing the demand for rental properties in almost exactly the same proportion as the reduction in their supply.
And that, of course, is the reason why negative gearing will forever remain untouched – because the negative reaction and loss of votes from people who would experience declines in the value of their properties would outweigh the positive reaction from people who would benefit from lower property prices and would change their votes accordingly.
It's something to remember next time you hear a politician saying he or she is committed to improving housing affordability, or increasing participation in the workforce, or both.
From this article http://www.smh.com.au/business/imagine-a-tax-system-that-penalised-work-20110329-1ceqb.html
ummester wrote:What's the book?
Renton's Understanding Investment Property, if I remember correctly. A thick and stuffy book, but covers some of the basics.
ummester wrote:fword,Singapore has something related to housing requirements that Australia does not – an actual land shortage.
Oh, Canberra has the 99 year lease thing also. Being landlocked, ACT can argue it has land shortages.
And ultimately, re the FHB strike, what does it matter? If the property market is so stable – what difference will it make if a majority of new entrants decide to opt out? Investors can flip with each other and pretend their asset values are solid foirever, can't they?
Arguably, government 'red tape' and regulations have caused a virtual land shortage. And the high cost for developers may then contribute to a shortage of new projects. We then have a shortage of affordable housing. If this is indeed the case, then people need to start moving their 'rage' to a different target. Abolishing negative gearing ain't fixing the problem. People should be lobbying the government to provide better public transport and infrastructure, decentralisation of services and amenities away from capital cities into smaller 'satellite' cities, and provide government subsidised housing.
And no, we're not worried about a FHB strike. I think the key issue at hand is that FHB don't know who their true enemy is and property investors are being called greedy punters heading a ponzi scheme.
We all know that if we want answers, we should ask the correct questions and also not bark up the wrong tree.
This is the extra bit i think you should add to the above stated facts from the SMH … which pretty much say .. people who are holding onto their property because its worth money … dont want to have people do things to make that go down.
The reality is … property in a civilised society is just an asset .. like anything else. But people moving in and out of this asset places the asset in demand. And not everyone who sells their housing asset goes on to buy another house. Some sell and reinvest that money in the economy, creating small businesses .. and investing in other areas.
So what you are percieving as just a property loss is not just a OMG its property falling loss. Its a loss of capital that would feed fabric and fund other members of society.
In the very early years of the United States, there was a puritanical idea that property was there for the common good, and as a result no private property ownership. Come a couple of harsh winters and poor crops, people started starving for no good reason other than they had no private property to lend against .. for fabric and food. With a little rethink .. they re-established private property rights. And as they said at the time … 'nary hath been a person who looked back'
fWord wrote:Arguably, government 'red tape' and regulations have caused a virtual land shortage. And the high cost for developers may then contribute to a shortage of new projects. We then have a shortage of affordable housing. If this is indeed the case, then people need to start moving their 'rage' to a different target. Abolishing negative gearing ain't fixing the problem. People should be lobbying the government to provide better public transport and infrastructure, decentralisation of services and amenities away from capital cities into smaller 'satellite' cities, and provide government subsidised housing.And no, we're not worried about a FHB strike. I think the key issue at hand is that FHB don't know who their true enemy is and property investors are being called greedy punters heading a ponzi scheme.
We all know that if we want answers, we should ask the correct questions and also not bark up the wrong tree.
I'm not trying to claim that removing NG will fix the problem – just that removing NG won't create the nightmare rental scenario that it has been politically expediant to try and sell as the truth for the past quater decade.
Removing NG outright will kill the market and likely the Australian economy – it would stop the flow of much credit dead in it's tracks. NG is something that has to be carefully phased out over time – it can't be removed outright.
And I agree that the Australian shortage is something that has many factors – land availabilty not being one.
Land release. Credit fueled demmand. Govt stimulated demmand. Poor city infrastructure and planning. State govt funding over-reliant on housing transaction. NG is just another factor that adds to the overall issue.
The big wild card is the thing that Steve hinted at in his USA interview thread – the willingness of the poulace to believe in housing assets as being bullet proof and over indebt themselves because of it. This is why these get up campaigns and recent news stories may present perhaps the most important piece in destabilizing the Australian RE bubble – they show a subtle yet growing change in what people are willing to believe about the asset class.
It wasn't debt that killed the tulip bubble – it was people finally realising that tulips weren't worth as much as they were paying for them.
xdrew wrote:This is the extra bit i think you should add to the above stated facts from the SMH … which pretty much say .. people who are holding onto their property because its worth money … dont want to have people do things to make that go down.The reality is … property in a civilised society is just an asset .. like anything else. But people moving in and out of this asset places the asset in demand. And not everyone who sells their housing asset goes on to buy another house. Some sell and reinvest that money in the economy, creating small businesses .. and investing in other areas.
So what you are percieving as just a property loss is not just a OMG its property falling loss. Its a loss of capital that would feed fabric and fund other members of society.
In the very early years of the United States, there was a puritanical idea that property was there for the common good, and as a result no private property ownership. Come a couple of harsh winters and poor crops, people started starving for no good reason other than they had no private property to lend against .. for fabric and food. With a little rethink .. they re-established private property rights. And as they said at the time … 'nary hath been a person who looked back'
xdrew,
I'm fully aware of the fact that the Australian property bubble popping could have dire consequence for the wider economy. I started researching all this stuff back in 2007, when I just had the chip on my shoulder 'it's so unfair attitude'. I got over that and started putting money away to hedge against it.
Personally, stagantion will yield the same buying results for me (in 4 years when I plan to start looking seriously again) as a crash would. Not only that, but I know staganation will be less demorlazing for society and the economy as a whole.
I'm just afraid our govt and debt levels have pushed it all too far for any reasonable type of stagnation now. But I actually hope I'm wrong – because I have close relatives that stand to suffer badly if I'm not.
The flipside to the loss of capital that you mention is that capital may be currently tied up in assets that are too unproductive themselves to provide true economic growth.
Either way, the world's debt levels (including Australia's) must be dispersed via deleveraging. Oddly, those debt levels exist because of population bubbles brought on by the wars and it is because of those same groups of the population that the economies of the world will deleverage.
ummester wrote:I'm not trying to claim that removing NG will fix the problem – just that removing NG won't create the nightmare rental scenario that it has been politically expediant to try and sell as the truth for the past quater decade.Apologies, I wasn't referring to you as an individual. I'm referring to the individuals who preach 'end negative gearing' like it were to be taken as Gospel and the thing that solves the problem. It's a comment I see quite often, angry folk who believe negative gearing is the source of all their woes.
ummester wrote:…they show a subtle yet growing change in what people are willing to believe about the asset class.Maybe so. But perhaps they'd prefer to bad-mouth something that they cannot afford, rather than to put in the hard yards and work towards it.
fWord wrote:Maybe so. But perhaps they'd prefer to bad-mouth something that they cannot afford, rather than to put in the hard yards and work towards it.This is an interesting comment.
I agree that people should work towards the things they want but they should do that first buy saving a reasonable percentage of the purchase cost first. There is too much easy debt extended nowadays for anyone to have to truly work towards anything.
Lets say it isn't houses. Let's say its big TVs. If you save your 3k to buy your massive tele – good on you, you deserve to sit back and enjoy it. I can't shake the feeling that getting extended the entire purchase cost of the tele with no money down somehow undermines the 'hard work' involved in purchasing one with savings.
Of course most people can't save the 300-400k required to purchase a first home (should cost 250-300k to be inline with wages IMO). But they should be required to save 20-25% of that purchase price. That is the hard work.
100k of savings for the average working Aussie is hard to achieve. 50-70k is a bit more reasonable – it's a years average earnings (which means you should be able to knuckle down and put it away in 4 to 5 years if you budget correctly). It would alos bring stability to the housing market and disable much of the speculation.
If a person really wants to own a property, REALLY wants to, they'd do their damndest to achieve it.
Instead of bitching & belly-aching at others because of what they don't have, why can't they get off their backsides, & instead of watching TV every night, go get a part-time job at night.
Restaurants, pubs, cafes etc are screaming out for additional staff, so I wonder what's stopping them?
I worked 2 jobs to buy my first house, I continued to work 2 jobs to pay for it, and I continued to work 2 jobs to buy my second property, I've continued to work 2 jobs & am about to sign on the dotted line tomorrow to build 2 home units behind the second house – & I've always been a low income earner!
The bitchers & belly-achers don't want to buy a property, they want it to be given to them.Cheers,
did you have to save a deposit for your first place cutyoungchic?
there are no funds available in the coffers to pay for it; C) it is not govt policy to do so; D) someone inevitably will have to pay for it eg by higher taxes to cover borrowings & interest; E) it will affect the precious AAA rating; F) hugely politically unpopular if house prices drop.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
