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#31 | ||
FF.Com.Au Hardcore
Join Date: Jul 2011
Posts: 4,819
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what does "compound growth" mean in this context?
I always thought compound growth meant when one reinvests interest earned in the previous period to accrue interest in the next. How does one do that with a house? Unless she means that because the increase in value of the house is stored it is implicitly reinvested in perpetuity. But then by that definition saying "compound growth is over for good" means that housing prices will only remain constant or go backwards??? Please explain Gail Last edited by Shonky.; 15-06-2012 at 10:34 PM. |
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#32 | ||
FF.Com.Au Hardcore
Join Date: Feb 2011
Location: On The Footplate.
Posts: 5,086
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About time...houses are still way overpriced, but are still falling in a lot of areas. We've been watching the house market in Rockhampton for about four years now, and prices have fallen steadily (despite what frightened looking real estate agents say in the local paper
![]() We've seen the same houses for sale for a loooong time in Rocky, with the price slowly dropping month to month. We'll probably buy later in the year, but they'd better expect some drastic reduction in the offered price we make...it's a buyers market and has been for some time. |
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#33 | |||
Where to next??
Join Date: Oct 2006
Location: Sydney
Posts: 8,893
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I can't remember the exact statistic... 4-6 decades ago the average house cost 3.? times the average wage. Now the average house costs 8-9 times the average wage. Then, think of all the other gadgets / dsitractions / financial commitments we have these days to add to the cost of living that wasn't around back then??? We get paid heaps more these days, but the money buys less...
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#34 | ||
FF.Com.Au Hardcore
Join Date: Apr 2007
Location: Miranda, NSW
Posts: 6,771
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My 2c
While you have a commodity that's in demand it cannot be a dead set certainty that its value won't increase. The demand for housing can only increase where there are net increases in migration and no commensurate increase in building activity. However in the mix this time is the fact that many who would otherwise be buying or upgrading are holding on to their cash, not borrowing (or not adding to their existing borrowings) and instead seeing what happens regarding our current econonic problems. As we all know, unless you're in an area positively impacted by the mining boom things are pretty bad right now economically. I suespect most if not all of the Eastern states are in recession.
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#35 | ||
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Location: Perth
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#36 | |||
FF.Com.Au Hardcore
Join Date: Dec 2004
Posts: 12,077
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Try buying a house in Buderim or someone like that..... |
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#37 | |||
FF.Com.Au Hardcore
Join Date: May 2007
Posts: 575
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#38 | |||
XY Falcon
Join Date: Oct 2011
Posts: 413
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It comes under the United Nations UDHR (Universal Declaration of Human Rights). Says something to the effect of having the right to a standard of living adequate for health and wellbeing, which includes housing amongst other things. So affordable housing is a basic human rights issue.
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_________________ 1971 XY Falcon 500 Last edited by karj; 16-06-2012 at 06:12 PM. |
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#39 | |||
FF.Com.Au Hardcore
Join Date: Feb 2011
Location: On The Footplate.
Posts: 5,086
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...Or brought in rent control as has been done in other countries. It's frankly criminal that houses in my area are being rented out at up to nearly $4000 a week in some towns. Ones in my town are nearly a grand a week, ones in Blackwater are well over that. Moranbah is eye-watering. The trick is, a house...cheap kit homes like they throw up in weeks...don't cost much more to build out here than down the coast, and land isn't that much more either. It's just greedy landlords snapping up old houses and filling them with miners. One house recently sold in our town and eight miners have moved in. Another sold and at least four or five will be living there...god knows what the landlord is charging the mines for them. |
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#40 | ||
Regular Member
Join Date: Feb 2007
Posts: 321
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The housing market in any area that the resources sector has impacted is so messed up its not funny.
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#41 | |||
FF.Com.Au Hardcore
Join Date: Aug 2006
Location: Melbourne
Posts: 1,674
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#42 | |||
FF.Com.Au Hardcore
Join Date: Aug 2006
Location: Melbourne
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Get rid of negative gearing to solve a few issues.
Australia would have to be the only country in the world that negatively gears property investment surely?
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#43 | ||
I was correct - AGAIN
Join Date: May 2010
Location: Third rock from the sun
Posts: 1,801
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Dave289 was right.
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#44 | |||
Where to next??
Join Date: Oct 2006
Location: Sydney
Posts: 8,893
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Quote:
I was going to do a little buying and selling over the next few months, I'm seriously considering not doing both to be honest.... It's all crystal ball stuff, but my reckoning is that it will make me more short term money now by holding on to what I already have, and save me in the long term if prices do go down. I don't see rental costs going south any time soon, purchases prices?? Undecided. If there is a housing deficit as the experts say rentals will always be sought as more people would be in the rental market rather than the buying market should things be uncertain.
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#45 | |||
FF.Com.Au Hardcore
Join Date: Apr 2007
Location: Miranda, NSW
Posts: 6,771
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Quote:
Julia Gillard rules out scrapping negative gearing tax provisions for property investors By Larry Schlesinger Tuesday, 12 June 2012 Negative gearing tax breaks for property investors will not be removed, says Prime Minister Julia Gillard. Gillard says her government has ruled out removing the tax break. It was in response to a question asked on the ABC’s Q&A program. “We didn’t agree with the Henry Tax Review,” Gillard said. “We think that an abolition of negative gearing will cause distortions to the property market that we did not want to see,” she said. The federal opposition also appears loath to remove the tax break, with Coalition spokesman Joe Hockey tweeting after the broadcast that negative gearing “holds down rents... just ask Bob Hawke and Paul Keating. They tried to get rid of it and reversed their policy.” However Sarah Toohey, spokesperson for lobbying group Australians for Affordable Housing, disagreed with Hockey, tweeting that “rents only rose in Sydney and Perth when Keating changed [negative gearing]. “[Rent rises] have been nationwide if that [were true],” she tweeted. Property buyers’ advocate Catherine Cashmore agreed with Toohey, tweeting that negative gearing needed to be phased out. “No other country has such a generous gearing policy – it does nothing to ease housing affordability,” she tweeted. Negative gearing was used by around 2 million property investors in the last financial year to reduce their tax bill, according to ATO figures. A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs and capital depreciation – exceed the rental income it produces. The Henry Tax Review called for a raft of investment tax breaks – including negative gearing – to be replaced with a 40% discount on the marginal tax rate. I think there's no chance it being abolished. Labour doesn't want to smash the battlers and Liberals don't want to smash the mum and dad investors. Only chance would be if the Greens got a majority somehow
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#46 | ||||
XY Falcon
Join Date: Oct 2011
Posts: 413
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Negative gearing creates a housing bubble. It spawns investors who compete to buy property, thus pushing house prices up. More rent then has to be charged to cover those larger investor loans.
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#47 | |||
FF.Com.Au Hardcore
Join Date: Aug 2006
Location: Melbourne
Posts: 1,674
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Thanks for that arcticle. I knew a lot of Australians are negatively geared at the moment in properties, but 2 million last financial year staggers me, that is a huge figure, no wonder neither Labour or the Liberals wan't to upset any property investors.
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#48 | |||
Petro-sexual
Join Date: Dec 2004
Location: Melbourne
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#49 | ||
FF.Com.Au Hardcore
Join Date: Jul 2011
Posts: 4,819
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Doesn't negative gearing encourage investment in essential infrastructure?
We can still continue to build more houses (albeit further out) as long as people want to buy them. It's a genuine question? I don't know the answer. Someone will say that removing negative gearing will push property prices down making housing more affordable for buyers and pushing rents down. But if people are going to miss out on the tax benefits of investing in housing they will need higher rents to offset it or will invest elsewhere. Then you will have housing shortages You could chase your tail all day on this stuff. There will never be consensus amognst Economists even if they were able to decide without any political influence other than to come up with the best outcome. |
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#50 | ||||
FF.Com.Au Hardcore
Join Date: Aug 2006
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#51 | |||
FF.Com.Au Hardcore
Join Date: Apr 2007
Location: Miranda, NSW
Posts: 6,771
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Quote:
I get sick of the mentality held by some that those who use negative gearing strategies are wealthy investors investing in property with the primary objective to obtain a tax benefit. There are many property investors out there using NG who are not overly wealthy but are Mr and Mrs average trying to provide for their retirement and not be a burden on the government.
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2005 BA MK2 FPV GT - 6 SPEED MANUAL , SILHOUETTE, SWISSVAX, SUNROOF, BILSTEIN AND LOVELLS, FACTORY GENUINE 19'S, X-FORCE STAINLESS QUAD CATBACK, ADVANCE HEADERS, 200 CPSI CATS, BLUEPOWER CAI, HERROD BREATHER KIT, 4:11 DIFF RATIO, MAL WOOD OPT 3+ CLUTCH, BILLET SHIFTER, MELLINGS 10227, NOW WITH REVERSE CAMERA/SENSORS, ALPINE SPEAKERS & SUB - CUSTOM TUNED TO 275 RWKW NOW WITH A NEW ADDITION - 2017 MUSTANG V8 GT FASTBACK - , 6 SPEED AUTO IN PLATINUM WHITE, Last edited by GT0132; 19-06-2012 at 12:13 AM. |
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#52 | ||
Performance moderator
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Location: St Clair..N.S.W
Posts: 14,875
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With the economy the way it is..
Nearly everything is slowing down.. Not just real estate... Back when NG was abolished. Many investors got out of rentals which caused a housing shortage.. One thing you have to keep in mind.. The average family investing in rentals is trying to set themselves up as self funded retires.. If they didn't ?? Chances are they would be drawing a pension..
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#53 | ||
XY Falcon
Join Date: Oct 2011
Posts: 413
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OK, bit of a long post.
At its simplest, real estate as investment is the problem and negative gearing encourages investment in real estate. What happens is this. People who already own or are paying for their 1st house realise that they can use the capital in that house and negative gearing to get a loan to purchase another as a viable investment. Then they realise they can get another loan and purchase another house after that. And so on it goes until you have a property portfolio. Meanwhile, other homeowners are realising that they can do the same thing. So what you end up with is a whole heap of investors buying property. These investors can get larger loans than people who don't already have the benefit of being able to leverage the capital of their 1st house (talking about first home buyers). So you have a bunch of investors competing with each other with money they got from the bank. House prices skyrocket as a result of this competition (artificial inflation). These investment houses are then rented out... but in order to be financially viable, rent has to cover most of the interest generated by the large mortgage. Rent then skyrockets to accomodate for that, so you end up with a large number of rental properties available, but with artificially inflated rents. The argument is that negative gearing makes the investment more viable so less has to be charged in rent to recoup the cash loss. But negative gearing encouraged the investment in the first place, so it's a pointless argument with very little merit. End result is a housing bubble - very expensive house prices and very expensive rents. Government tries to address this with first homeowner grants... but this just further inflates the bubble. Banks and real estate agents like housing bubbles because they get insanely rich off them. Private rentals are important to take the strain off public housing... but if house prices were affordable, there wouldn't be such reliance on public housing or rentals because 1st homeowners would be able to break into the market. You wouldn't somehow end up with a mass of homeless people. I'm not in any way demonising property developers or people (mum & dad investors) using the current system to better their position. It's just that the current system of negative gearing is bad policy. However, removing it now would cause significant financial issues for current investors as it would devalue property and these people would have loans that exceed their property value. The best time to remove negative gearing (and it should be removed) is when the housing bubble gets so artificially inflated that it bursts. Unfortunately, investors will lose money when that happens. The sharemarket remains the best option to invest if one wants to set themselves up for retirement. It is more flexible than real estate, allows for greater long term returns and doesn't cause the same major societal/class issues that investment in real estate does.
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_________________ 1971 XY Falcon 500 Last edited by karj; 19-06-2012 at 02:31 AM. |
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#54 | ||||
FF.Com.Au Hardcore
Join Date: Feb 2005
Posts: 5,040
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The single biggest issue affecting property prices is credit availability. The most recent housing bubbles worldwide were caused by lax credit standards, and we know how that ended. |
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#55 | |||||
XY Falcon
Join Date: Oct 2011
Posts: 413
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There's a number of issues that affect the market and you can see that very clearly in the cost of property in towns experiencing mining booms. Abolishment of negative gearing in property is not a silver bullet to solve all the issues, but it is certainly a big part of the issue.
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_________________ 1971 XY Falcon 500 Last edited by karj; 19-06-2012 at 11:59 PM. |
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#56 | ||||||
FF.Com.Au Hardcore
Join Date: Feb 2005
Posts: 5,040
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Quote:
i would argue a better way to approach this would be to treat rental properties similarly to non-rental properties. IOW, only allow deductions of a capital nature at the time of sale rather than year to year. this would have a significant impact on the tax saving which is what a lot of investors chase with negatively geared properties. i dont agree with scrapping negative gearing on properties unless you do it for ALL investments. favouring one investment almost always results in a bubble in that asset class. remember the run on the sharemarket immediately prior the GFC when the government made superannuation changes favouring big deposits tax free? the super funds flooded the sharemarkets with billions in cash, driving up share prices. Quote:
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#57 | ||
FF.Com.Au Hardcore
Join Date: Jul 2011
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To push up the amount of housing you need to either move the supply curve or the demand curve.
I think there is general consensus that supply side economic policy (such as Negative gearing) is more effective than demand side (such as first home owners grant) The First Home owners grant was almost immediately reflected in house prices = completely ineffective policy I think the most important thing for policy makers is just a steady steady approach. Nothing dramatic like abolishing tax incentives on housing investment (a revision maybe though) |
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#58 | ||||||||
XY Falcon
Join Date: Oct 2011
Posts: 413
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I'm not the only person who believes negative gearing has contributed to unaffordable housing. It's a sentiment that has been expressed by the RBA at different times as well as other economists.
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_________________ 1971 XY Falcon 500 Last edited by karj; 20-06-2012 at 01:40 AM. |
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#59 | ||
Performance moderator
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Location: St Clair..N.S.W
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One part often not bought up..
Is everyone wants to live near CBD... Especially first home buyers..
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#60 | |||
Pity the fool
Join Date: Jan 2007
Location: Wait Awhile
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![]() Which is why we're looking at places 20klm out but with easy access to a railway line.
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