# Forum More Stuff At the end of the day  House affordability

## Marc

This term, loved so much by the left and thrown around as if talking about some rare desease, is my pet hate for today.  
The left dominated media loves to portray home investors as bastards who are first hand responsible to price (intentionally mind you) the poor younger generation out of the market. What a heartless mob they are this sick rich bastards. The media and the left hate free market, in fact they hate freedom altogether. 
So you would think that the government that stands in front of cameras and talks about this so called housing affordibility,  in order to create a more "affordable" product they would fall over each other and run to contract builders to build cheap housing sold at cost to the right candidates right? After all it is their high horse and they ride the high moral ground. 
No no no, not for a minute. They propose to legislate against a basic taxation principle that allows any business to deduct expenses from their earnings in order to exist. Yes no business can exist outside this universal principle. Well may be cocaine production can.  
So in order to help this allegedly hopelessly stranded young generation in their quest to buy a property in Sydney and Melbourne, they will purposely sabotage the market so that it stops being viable and so that a large proportion of people sell or stop buying, the price crashes and so that the young will triumphantly march through the homeownership door. 
And they talk about it as it is perfectly natural, like a bowel movement.  
This is called theft, it's called stealing, and if it was shares it would land the manipulator in jail.  
We really live in truly pathetic times when a conservative party proposes legislation that would make a Venezuela president proud.

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## Bros

I hope you feel better now.

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## Johnywilson

Hear, hearThey want a big house, in pristine condition, in a desirable location, for a cheap price without being willing to make the required sacrifices like fancy $5 coffees, overseas holidays, the latest smartphones and boutique beers.......that's my 2 cents.

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## METRIX

It all comes down to Supply and Demand, Sydney and Melbourne are in high demand, so prices won't relax in these cities.
The young people these days are no different to when I bought my first place, or my parents, it's just seem a lot of money now when a crap box cost $1M+, that's what happens in cities like these as they are Internationally renowned. 
Suck it up I say, and do what we had to do, save your money and start off in something affordable like an older apartment in the outer suburbs, then move on as time dictates.
I'm sick of them saying the young cant afford this or that, I was never given a car by my parents like the young expect to these days, I had to get a job and buy my own car, and it was a shyt box, I also had to pay for petrol, rego and insurance myself, which is also expected by the average youth for the parents to pay for. 
I see so many P platers in either brand new or 1-2 year old cars which are worth more then $30K, and I see a lot in $60K+ cars, I don't know how they get these, I never had that much money even in my first full time job to afford anything except a piece of 20 year old crap 
So many people I know pay for all these things for their kids, even though the kids have either part time or full time jobs, learn how to save and appreciate money instead of expecting everything to be given to you on a silver spoon.
And look at property in another area instead of highly desirable areas which have always been expensive. 
My sister has three kids, they all drive now and they all have either 2-3 year old corollas, and have so from first getting their P plates.
My parents taught us to save and appreciate what you earn, and to not live beyond your means, thats all gone the way of the Pokemon nowadays.

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## Marc

Yes, Metrix I agree, however that is a generational issue. I am talking about a conservative government of prosperous individuals that proposes to confiscate equity from your and my property to score political points. That is worth a revolution.

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## barnes

Cheap credit is to blame. If there was no cheap money there would never be a housing price bubble. But there is a way around it. Don't buy in Sydney or Melbourne, there are better places to buy price wise. A lot of cheap housing is in US. It's a bargain even compared to Adelaide.

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## barnes

> Yes, Metrix I agree, however that is a generational issue. I am talking about a conservative government of prosperous individuals that proposes to confiscate equity from your and my property to score political points. That is worth a revolution.

  If it's your Primary residence - than there is no problem. I don't care how much my house is worth, I live there. It only maters when you sell.

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## chrisp

Just to stir the pot, I think that one of the points of contention as the 'double dipping' available to property investors that (I suspect) is distorting the market.  Investors can claim 'negative gearing' to cover their losses while buying equity in the property.  In effect, tax payers are subsidising the purchase of the property. 
When the investors decides to sell and realise their capital gain, they are given a 50% capital gains tax reduction!   
I say say that it should be only one or the other - but not both!

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## OBBob

> ... these days are no different...

  Had this discussion recently.   
Mean wage in 1995 for metropolitan aussies was a touch under $30k and median house prices in Melbourne and Sydney averaged out at roughly $165k. 
In 2015/16, mean wage is roughly $80k, and median house prices in Melbourne and Sydney average out at $850k. 
So...  
This is interesting. Just for the sake of augments ...  :Smilie:   http://www.rba.gov.a...tics/cash-rate/ 
1995 cash rate (for sake of argument) - 7.5%
2016 cash rate (for sake of argument) - 1.75%   
Repayment on $165k (at 1995 cash rate) = $266 per week on 30 year term
Repayment on $850k (at 2016 cash rate) = $700 per week on 30 year term 
Increase in average wage between 1995 and 2016 = 266% 
Increase in repayments between two examples above = 263% 
In other words it appears to be a very similar portion of income.  
Wow that's weird how closely that comes out.    
Go forth and pick my logic to bits.   :Biggrin:

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## Marc

No one is to 'blame', there is no blame, it's the natural cycle of offer and demand. Do you blame the buyers for the price of the Commonwealth bank shares? what about those horrible buyers of BHP shares (bastards) ... oh, and what about those who bought Google shares!!! Now there is a bunch of pigs! 
Governments have no business interfering and sabotaging a market in order to manipulate the price down stealing a whole generation of their hard earned equity. Of course younger people have choices, of course they are a peculiar generation, they have to be because they have peculiar parents, us! 
I find it intriguing that people have difficulties getting their head around this concept. Say the government legislate to preclude the comm bank from paying dividends to share owners that earn more than 100k. The shares collapse and your kids buy the shares. Later the legislation is repudiated ... perfect!

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## OBBob

Which legislation are you referring to exactly, is it a general comment or something that I've missed today?

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## chrisp

Is this the new 'emissions trading' thread????

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## Marc

> Just to stir the pot, I think that one of the points of contention as the 'double dipping' available to property investors that (I suspect) is distorting the market.  Investors can claim 'negative gearing' to cover their losses while buying equity in the property.  In effect, tax payers are subsidising the purchase of the property. 
> When the investors decides to sell and realise their capital gain, they are given a 50% capital gains tax reduction!   
> I say say that it should be only one or the other - but not both!

  Oh dear. 
Claiming expenses against earnings is available to all business on the planet. 
Fact.
Negative gearing is a term invented by real estate agents and accountants and repeated back by those who don't know what it is. 
If you want to destroy a market you disallow deduction of expenses. That's it, fact accomplished. 
50% reduction in capital gain after one year of ownership? Available to anyone who is liable to pay capital gain tax. Shareholders included.  
Capital gain is another form of legalised theft. What "gain"? Check Bob's post. a proeprty is worth today the same that it was worth 20 years ago, there is no change, nor gain. You can not buy a property cheap, sell it at a gain and then buy another cheap. The cost of a proeprty is almost identical in real terms, there is no profit there is no "gain" to tax. The apparent profit is an illusion since if you buy one property at 100k and sell it at 1000k you did not make 900k in fact you made nothing at all since to buy a similar property you must fork out 1000k no profit!

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## Marc

> Which legislation are you referring to exactly, is it a general comment or something that I've missed today?

  Oh no not today, it has been the hobbyhorse of the left forever. BAN negative gearing so that the bad rich stop making money at the expense of our kids .... oh what a load of garbage!

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## Bros

> Oh no not today, it has been the hobbyhorse of the left forever. BAN negative gearing so that the bad rich stop making money at the expense of our kids .... oh what a load of garbage!

  At least any talk of banning negative gearing is not retrospective unlike what they propose with superannuation.

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## Marc

I disagree, it is very much retrospective, as far back as when you bought the investment property.

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## Bros

> I disagree, it is very much retrospective, as far back as when you bought the investment property.

   All I have heard and read it will apply to properties bought at a date sometime in the future.

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## chrisp

> Oh no not today, it has been the hobbyhorse of the left forever. BAN negative gearing so that the bad rich stop making money at the expense of our kids .... oh what a load of garbage!

  They can make their money - just let them use their own money to do so if it is such a good 'investment'.   
Leave my, and other tax payers', money out of it.

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## Marc

Chrisp you are arguing without even understanding the basic problem.  
There is no "Taxpayers subsidy" in negative gearing. Negative gearing is writing off your losses against your gains. Something the fish and chip shop does every day and that BHP does every day. Take it away and you have no BHP and no fish and chips.   
The property investor is a target because he is a landlord and therefore a scrooge who exploits the poor by charging them rent. Furthermore he has this magic wand, the 'negative gearing wand', that deprives the government of taxes and so hospitals are not built, and rolls in millions when he sells at very inflated prices and has the gall to pay only 50% of CGT. 
i am sure you relate to that. I think all property investors should be sent to Cuba.

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## SilentButDeadly

Must be the end of the financial year again and Marc has just been talking to his accountant again...#worldssmallestviolin 
Ours is not to reason why. Merely to point and giggle.

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## chrisp

> There is no "Taxpayers subsidy" in negative gearing....

  Hmmm, perhaps you better contact CommBank and tell them that they have it wrong... The key benefit associated with negative gearing is that the loss associated with the property ownership may be offset against other income earned, such as your salary, reducing your taxable income and therefore your tax payable. The result is that the cost of owning the property is being funded by your tenant in the form of rent, by the Australian Tax Office in the form of tax savings, and by your other surplus cash flow, such as your savings and other forms of income.  https://www.commbank.com.au/guidance...ax-201605.html

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## Craigoss

Perhaps these first home buyers should look for opportunities outside the capital cities. I know in Newcastle you can still buy a house for <$400k, with the medium price more in the $550k for desirable suburbs.  Depending on your career, you can still chase the same incomes as Syd/Melb without the high property prices and long commutes to work.

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## barnes

> Chrisp you are arguing without even understanding the basic problem.  
> There is no "Taxpayers subsidy" in negative gearing. Negative gearing is writing off your losses against your gains. Something the fish and chip shop does every day and that BHP does every day. Take it away and you have no BHP and no fish and chips.   
> The property investor is a target because he is a landlord and therefore a scrooge who exploits the poor by charging them rent. Furthermore he has this magic wand, the 'negative gearing wand', that deprives the government of taxes and so hospitals are not built, and rolls in millions when he sells at very inflated prices and has the gall to pay only 50% of CGT. 
> i am sure you relate to that. I think all property investors should be sent to Cuba.

  Buy positive geared properties or buy with cash only and you won't have to worry  about abolishing negative gearing. But yes - negative gearing is taxpayers subsidy. In case of BHP or fish and chips shop - it's a business entity - they are different, they produce something one way or another. Individual property investor produces nothing.
Buy the way Cuba is starting to be an interesting place for property investing. It'll soon boom big time.

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## Marc

Political claptrap. The investor is one business entity with one ABN and one tax return, and what he spends and what he earns are one and the same. The fact that he loses in one activity and gains in another is academic. any other business can offset from one source against the other. The investor pays tax on his overall earnings, there are no subsidies, only in political talk or like in this case to lure investors into believing there is. In the eighties real estate agents would take out full pages in newspapers selling properties with the slogan let the tax man pay for your investment. Anyone with one ounce of business acumen knows this to be false.
If you have an investment that makes a loss of say 10,000 a year and you have a job that pays you 60k a year, the best you can hope to recover from your losses is $2,000 big whoop. If you earn $250,000, you recover at best $4,500. THose are not subsidies, they are tax deductions just like deducting the cost of wages from the gross income in a shop.
And this proves how brainwashed people are from lefty media propaganda. 
And as far as the comment that an investor produces nothing, that is a typical communist concept and I beg to differ. 95% of investment properties are in the hands of single property owners. They singlehandedly subsidise and make the rental market possible and employ thousands of RE agents, property managers, and every trade under the sun. No amateur investors with zip experience and with naive hopes, no rental market. 
Take away negative gearing and see the rental market go in the hands of corporations with hundreds of properties and see the rental market go through the roof.

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## barnes

> Political claptrap. The investor is one business entity with one ABN and one tax return, and what he spends and what he earns are one and the same. The fact that he loses in one activity and gains in another is academic. any other business can offset from one source against the other. The investor pays tax on his overall earnings, there are no subsidies, only in political talk or like in this case to lure investors into believing there is. In the eighties real estate agents would take out full pages in newspapers selling properties with the slogan let the tax man pay for your investment. Anyone with one ounce of business acumen knows this to be false.
> If you have an investment that makes a loss of say 10,000 a year and you have a job that pays you 60k a year, the best you can hope to recover from your losses is $2,000 big whoop. If you earn $250,000, you recover at best $4,500. THose are not subsidies, they are tax deductions just like deducting the cost of wages from the gross income in a shop.
> And this proves how brainwashed people are from lefty media propaganda. 
> And as far as the comment that an investor produces nothing, I beg to differ. 95% of investment properties are in the hands of single property owners. They singlehandedly subsidise and make the rental market possible and employ thousands of RE agents, property managers, and every trade under the sun. No amateur investors with zip experience and with naive hopes, no rental market. 
> Take away negative gearing and see the rental market go in the hands of corporations with hundreds of properties and see the rental market go through the roof.

  What do you care. Are you renting?
Corporations will do nothing to change the rental market. If there is no one to pay higher rates, there will be no higher rents. Like in Perth where rents fell 30% in the past 2 years.
Government housing is also a part of a rental market.
 I would like for the negative gearing be abolished.

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## justonething

> Had this discussion recently.   
> Mean wage in 1995 for metropolitan aussies was a touch under $30k and median house prices in Melbourne and Sydney averaged out at roughly $165k. 
> In 2015/16, mean wage is roughly $80k, and median house prices in Melbourne and Sydney average out at $850k. 
> So...  
> This is interesting. Just for the sake of augments ...   http://www.rba.gov.a...tics/cash-rate/ 
> 1995 cash rate (for sake of argument) - 7.5%
> 2016 cash rate (for sake of argument) - 1.75%   
> Repayment on $165k (at 1995 cash rate) = $266 per week on 30 year term
> Repayment on $850k (at 2016 cash rate) = $700 per week on 30 year term 
> ...

  Unfortunately, not all the money can be borrowed. I haven't done any detailed calculation, how long would it take to save a 10% deposit today compared to 10% in 1995? 16.5k on a 30k salary is probably much easier than 85K on 80k salary. It will be worse if the bank requires more than a 10% deposit.

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## Marc

Barnes, you can't be serious.
I am telling you that abolishing negative gearing would steal the equity from millions of people who have paid banks, councils, re agents and tradesman for decades in the hope of a nest egg for retirement. This is an assault on private property. by a western pretend conservative government. Just like it is  robbery to change the super rules. 
Of course I care. I can understand why you don't care.
Government housing, now that is something that should be abolished. It would be way cheaper for the state government to pay 100% of the rent and not to own any property.

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## SilentButDeadly

Something like 60-70% of the property in my regional centre is occupied by renters. Median house price is somewhere around $200k. Typical rental is high 200 to low 300 per week. At these prices, current home loan repayments are similar or slightly less than weekly rental prices. And yet few seem to either try or are capable of  owning their own home. 
Two of my twenty something colleagues in full time employment and renting think that a deposit is currently out of reach...both have substantial HECS debts hanging over them which adds to their debt wariness. 
What do you all think that says about housing affordability? 
Ours is not to reason why. Merely to point and giggle.

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## barnes

> Barnes, you can't be serious.
> I am telling you that abolishing negative gearing would steal the equity from millions of people who have paid banks, councils, re agents and tradesman for decades in the hope of a nest egg for retirement. This is an assault on private property. by a western pretend conservative government. Just like it is  robbery to change the super rules. 
> Of course I care. I can understand why you don't care.
> Government housing, now that is something that should be abolished. It would be way cheaper for the state government to pay 100% of the rent and not to own any property.

   No, it will not. Most of the properties are positively geared, a lot of them don't have any loans at all (I know mine don't). Don't buy negative geared property and no worries.
I don't care because it doesn't bother me.

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## SilentButDeadly

> Government housing, now that is something that should be abolished. It would be way cheaper for the state government to pay 100% of the rent and not to own any property.

  So only the individual or corporation should own property? And governments should lease from as required? Gee... that'd work. Not. 
Ours is not to reason why. Merely to point and giggle.

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## Smurf

> There is no "Taxpayers subsidy" in negative gearing. Negative gearing is writing off your losses against your gains. Something the fish and chip shop does every day and that BHP does every day. Take it away and you have no BHP and no fish and chips.

  No argument there, being able to deduct losses against gains seems more than reasonable to me. 
That said, there's something fundamentally flawed with a business model that makes a profit only through selling the underlying asset to someone else at a higher price and with the business as such being unprofitable. That's unsustainable (economically) at best. 
BHP wouldn't last too long if they lost money on every tonne of ore dug up and made a profit only through flipping their shares to someone else at a higher price. Sooner or later investors would wake up and realise that the business was actually worth only what it's machinery, offices etc could be sold for, the actual mining operation being financially pointless, and at that point we'd see the share price collapse and in due course the company would be wound up once the assets were sold. 
One of my fundamental investment rules is that I don't invest in businesses which aren't profitable or at least reasonably expected to become profitable in the foreseeable future. Asset prices go up and asset prices go down. If the actual business is losing money then that makes the whole thing nothing more than speculation on asset prices and there's easier ways to do that than owning physical property.

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## chrisp

> I am telling you that abolishing negative gearing would steal the equity from millions of people who have paid banks, councils, re agents and tradesman for decades in the hope of a nest egg for retirement.

  So, you are stating that negative gearing, i.e. tax payer subsidy, is propping up the equity in investment properties.  And that property prices will fall without it? 
What was the argument you were trying to make about housing affordability being a media beat up? 
By all means save up for your retirement, or whatever, and make whatever investments that you like, but don't cry foul if - and when - the government withdraws a tax payer funded subsidy that is propping up your investments.

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## Smurf

> don't cry foul if - and when - the government withdraws a tax payer funded subsidy that is propping up your investments.

  Regardless of the arguments for or against, the writing's on the wall here. 
As each year goes past we've got more younger people who are "priced out" of the market. Meanwhile more oldies inevitably fall off their perch. 
Slowly but surely the politics swings from "house prices going up is good" as was the case a decade ago to "house prices are a problem" as is the case now to "we need to bring prices down to win the next election" and we'll get to that point in due course. 
Any investment depending on government is always high risk due to the reality that governments and their policies change. It's even higher risk when there's mounting pressure on government to make such a change. 
It's the same with any investment. If technology or politics are against you then that's never good.

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## chrisp

> Regardless of the arguments for or against, the writing's on the wall here.

   :What he said:  
I suspect that Marc also knows this too. If he is worried about changes in tax policy or tax subsidies undermining his investments, then maybe he should consider other investments.

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## Marc

> No argument there, being able to deduct losses against gains seems more than reasonable to me. 
> That said, there's something fundamentally flawed with a business model that makes a profit only through selling the underlying asset to someone else at a higher price and with the business as such being unprofitable. That's unsustainable (economically) at best. 
> BHP wouldn't last too long if they lost money on every tonne of ore dug up and made a profit only through flipping their shares to someone else at a higher price. Sooner or later investors would wake up and realise that the business was actually worth only what it's machinery, offices etc could be sold for, the actual mining operation being financially pointless, and at that point we'd see the share price collapse and in due course the company would be wound up once the assets were sold. 
> One of my fundamental investment rules is that I don't invest in businesses which aren't profitable or at least reasonably expected to become profitable in the foreseeable future. Asset prices go up and asset prices go down. If the actual business is losing money then that makes the whole thing nothing more than speculation on asset prices and there's easier ways to do that than owning physical property.

  Mm ... I try once more. It is irrelevant if the business is good or bad. More irrelevant what I do or have done personally, the fact remains that this pathetic government in order to score political points is planning to sabotage the property market. Abolishing negative gearing will affect a large number of people who are making losses on the investment. Not everyone of course, even if it is 10% and it is clearly way more than that, such change will make the investment unprofitable for them, and force them to sell. 
The market is one, lots of people sell, prices fall. The person who bought cash and had positively geared all his life will still be affected by the fall in prices. 
Not hard to see.
To hint at what I should do is once again irrelevant. I have been ahead of the game for the last 20 years, but that does not make me blind to the incompetence of the mob in Canberra and how their action are destroying personal assets that took decades to build.

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## OBBob

> Unfortunately, not all the money can be borrowed. I haven't done any detailed calculation, how long would it take to save a 10% deposit today compared to 10% in 1995? 16.5k on a 30k salary is probably much easier than 85K on 80k salary. It will be worse if the bank requires more than a 10% deposit.

  Yeah, I know. You're probably right, just a rough example to suggest that perhaps it isn't as vastly different a challenge as it's sometimes made out to be. I think spending your twenties globe trotting and exploring sounds brilliant ... but I don't think it's then fair to complain that you're (not referring to you justonething  :Smilie:  ) thirty and it's hard to afford a house - many of previous generations started on that path 10-15 years earlier. We all know time is the biggest factor in these sort of investments.

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## toooldforthis

> ... 
> That said, there's something fundamentally flawed with a business model that makes a profit only through selling the underlying asset to someone else at a higher price and with the business as such being unprofitable. That's *unsustainable* (economically) at best.

  yep.   

> ... 
> One of my fundamental investment rules is that I don't invest in businesses which aren't profitable or at least reasonably expected to become profitable in the foreseeable future. Asset prices go up and asset prices go down. If the actual business is losing money then that makes the whole thing *nothing more than speculation* on asset prices and there's easier ways to do that than owning physical property.

  yep.

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## johnc

> Had this discussion recently.   
> Mean wage in 1995 for metropolitan aussies was a touch under $30k and median house prices in Melbourne and Sydney averaged out at roughly $165k. 
> In 2015/16, mean wage is roughly $80k, and median house prices in Melbourne and Sydney average out at $850k. 
> So...  
> This is interesting. Just for the sake of augments ...   http://www.rba.gov.a...tics/cash-rate/ 
> 1995 cash rate (for sake of argument) - 7.5%
> 2016 cash rate (for sake of argument) - 1.75%   
> Repayment on $165k (at 1995 cash rate) = $266 per week on 30 year term
> Repayment on $850k (at 2016 cash rate) = $700 per week on 30 year term 
> ...

  There has been a bit of work done analysing this area, price of housing seems to have a link between what we can borrow (repayment capacity) and what the bank is prepared to lend, a drop in interest rates will help push up house prices in periods when demand exceeds supply as there is no rigid lid on the amount we can borrow. If interest rates climb though it will all fall apart.

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## Bros

Anyhow what started all this off as the current government poured cold water on the idea so where is the evidence or is it just a troll post?

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## johnc

> Mm ... I try once more. It is irrelevant if the business is good or bad. More irrelevant what I do or have done personally, the fact remains that this pathetic government in order to score political points is planning to sabotage the property market. Abolishing negative gearing will affect a large number of people who are making losses on the investment. Not everyone of course, even if it is 10% and it is clearly way more than that, such change will make the investment unprofitable for them, and force them to sell. 
> The market is one, lots of people sell, prices fall. The person who bought cash and had positively geared all his life will still be affected by the fall in prices. 
> Not hard to see.
> To hint at what I should do is once again irrelevant. I have been ahead of the game for the last 20 years, but that does not make me blind to the incompetence of the mob in Canberra and how their action are destroying personal assets that took decades to build.

  A lot of emotion in this for you Marc, I would suggest you step back a bit, the Government is looking at this area from a policy perspective but there are no plans to rock your little world in the way you outline. There is also insufficient information to indicate that stopping negative gearing will have that sort of impact either, especially as any suggestions to date have indicated  grandfathering those already using negative gearing if a change did eventuate down the track. I really don't have a lot of time for people whining about how tough life is for them when it consists of a slew of insults directed at others that are intemperate, ill-considered and quite frankly plain wrong. If people have an investment that is profitable then they don't need negative gearing, if the only way negative gearing works for a person is to get a tax deduction then they are relying on capital growth in other words they are not running on a business basis but relying on idle speculation and this type of individual skews markets and are little more than distorters of value because they rely on a future buyer to pay enough to bail them out of an investment that provides a lousy income return. You will not change your mind and will have yourself endlessly locked into a mindset that makes you think you are hard done by regardless of what happens, don't over look that while you rail against left wing café latte types it is actually a right wing government that is in power, quite frankly if someone is completely reliant on a forever upward increase in house prices they only have themselves to blame if prices turn south, a prudent investor should always ensure they are insulated against downward swings by not over borrowing on income producing assets and ensuring their income is sufficient to meet repayments  should we endure a cyclic downturn.

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## Bros

> quite frankly if someone is completely reliant on a forever upward increase in house prices they only have themselves to blame if prices turn south, a prudent investor should always ensure they are insulated against downward swings by not over borrowing on income producing assets and ensuring their income is sufficient to meet repayments  should we endure a cyclic downturn.

  An example of this is mining towns and those towns who rely to some degree on mining (sole mining towns are the worst) as investors there have not only been burnt they have been boiled and fried as well. My son is looking at a house that has been repossessed by the bank from a buyer who paid $630,000 2 yrs ago from new and the bank is offering it at $400,000 and there are many others the bank have repossessed.

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## johnc

> An example of this is mining towns and those towns who rely to some degree on mining (sole mining towns are the worst) as investors there have not only been burnt they have been boiled and fried as well. My son is looking at a house that has been repossessed by the bank from a buyer who paid $630,000 2 yrs ago from new and the bank is offering it at $400,000 and there are many others the bank have repossessed.

  I think there are probably plenty of examples of people getting scolded on housing as mines and businesses shut in small towns. I do have a lot of sympathy when it is their residence and they are locked into a high mortgage with no income and are forced to sell, For some it is a situation they will often not fully recover from.

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## Spottiswoode

Rolling back negative gearing on property will affect the market. I don't think anyone really knows what the full effect will be. Sure some will have picked what would happen, but at this point the experts are divided and only some of them can be right. At the least it will probably slow the market initially until investors work out what is going on in the real world, then after a while we will find a new normal. 
I have no doubt that the housing market is currently driven by low borrowing rates and 'easy' finance. People seem to have forgotten high interest rates. I was a bit shocked how much we could borrow when we purchased last year. My risk appetite only allowed the size of the loan we had as an interim between buying first, then selling but others would willingly take on such a massive loan.

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## barnes

> Rolling back negative gearing on property will affect the market. I don't think anyone really knows what the full effect will be. Sure some will have picked what would happen, but at this point the experts are divided and only some of them can be right. At the least it will probably slow the market initially until investors work out what is going on in the real world, then after a while we will find a new normal. 
> I have no doubt that the housing market is currently driven by low borrowing rates and 'easy' finance. People seem to have forgotten high interest rates. I was a bit shocked how much we could borrow when we purchased last year. My risk appetite only allowed the size of the loan we had as an interim between buying first, then selling but others would willingly take on such a massive loan.

  Exactly, that's is how I see it too. If there is no borrowing ability - there is no price rise. Banks should ask for a 50% deposit and no less - the market will correct itself pretty quick and we will all have a healthier housing market on our hands for years to come.

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## johnc

Housing prices across the country aren't consistent there are many areas, country towns in particular which have housing prices close to what you would consider normal ratios to average weekly earnings. Our major centres particularly Melbourne and Sydney are completely outside their historical multiples, these areas will correct, while interest rates remain low and demand up then capacity to meet repayments and an appetite to borrow will see things remain as they are, over time though the economic forces will see housing correct downwards. It is simply a matter if that correction will be slow or if an economic trigger will see a sudden decline. It isn't just negative gearing it is also household as well as overseas ownership that influence prices. Removing negative gearing would place downward pressure on an over heated market but on its own is unlikely to collapse a market. The most likely trigger would be an economic correction or decline coming on us suddenly that would knock the socks off the market, the GFC only caused a pause in Oz the most likely change in the short term I reckon would be an absence of overseas purchasers at a time of declining confidence in the Australian economy. At this stage there is nothing to indicate any sudden change in the world view of our countries economic health so I figure high prices will remain regardless of us putting a lid on negative gearing or not. A slow decline would most likely be caused by a big drop in net migration seeing new builds adding to supply to the point that the demand cycle could see prices reduce with supply up and very few new entrants to the market placing pressure on demand.

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## pharmaboy2

> A lot of emotion in this for you Marc, I would suggest you step back a bit, the Government is looking at this area from a policy perspective but there are no plans to rock your little world in the way you outline. There is also insufficient information to indicate that stopping negative gearing will have that sort of impact either, especially as any suggestions to date have indicated  grandfathering those already using negative gearing if a change did eventuate down the track. I really don't have a lot of time for people whining about how tough life is for them when it consists of a slew of insults directed at others that are intemperate, ill-considered and quite frankly plain wrong. If people have an investment that is profitable then they don't need negative gearing, if the only way negative gearing works for a person is to get a tax deduction then they are relying on capital growth in other words they are not running on a business basis but relying on idle speculation and this type of individual skews markets and are little more than distorters of value because they rely on a future buyer to pay enough to bail them out of an investment that provides a lousy income return. You will not change your mind and will have yourself endlessly locked into a mindset that makes you think you are hard done by regardless of what happens, don't over look that while you rail against left wing café latte types it is actually a right wing government that is in power, quite frankly if someone is completely reliant on a forever upward increase in house prices they only have themselves to blame if prices turn south, a prudent investor should always ensure they are insulated against downward swings by not over borrowing on income producing assets and ensuring their income is sufficient to meet repayments  should we endure a cyclic downturn.

  Jeesus john, punctuation? 
you are on the money though - the reason negative gearing for property is debatable is because it's price speculation where the property has no reasonable likelihood of turning a profit in the medium to long  term (<10 years) and so does not really look like a "business" - this is especially so for interest only loans in low inflation environments where costs will always be greater than income and that is not a business run to earn a profit. 
thats really where any changes should be made, you can deduct against other income any investment for a period of say 8 years, then you can no longer deduct against other income.  Treat it then as a capital loss versus capital gain deduction and allow normal rules of applying against other capital losses, just allow the income deduction to transfer to capital deduction.   
This would be a truer reflection of the actual investment

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## Marc

It's interesting to see how it is almost impossible to debate this issue. 
There seem to be a visceral resentment against property owners with instant schadenfreude, and the enormity of the injustice against all owners including owner occupier is lost in translation.  The fact that you will be next, in a similar fashion on another issue is ignored. A government that can utter this even if it seems they will not be able to do it, will go and find something else and this time may be you don't like it. 
A government made of little people who need to assert their particular issues of inadequacy is as dangerous as a dictator. 
Criticism against tax deductions comes so swift, particularly from those who don't understand the rules and would like them to be harder on others whilst softer on themselves. 
If owning a rental property (or god forbid multiple), is not a business and should therefore be deprived from tax deductions, I wonder what is left for those who own shares who do not pay dividends? Flogging? yes, I suppose in North Korea that would be the general consensus. 
Oh well ... no surprises there.

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## pharmaboy2

> It's interesting to see how it is almost impossible to debate this issue. 
> There seem to be a visceral resentment against property owners with instant schadenfreude, and the enormity of the injustice against all owners including owner occupier is lost in translation.  The fact that you will be next, in a similar fashion on another issue is ignored. A government that can utter this even if it seems they will not be able to do it, will go and find something else and this time may be you don't like it. 
> A government made of little people who need to assert their particular issues of inadequacy is as dangerous as a dictator. 
> Criticism against tax deductions comes so swift, particularly from those who don't understand the rules and would like them to be harder on others whilst softer on themselves. 
> If owning a rental property (or god forbid multiple), is not a business and should therefore be deprived from tax deductions, I wonder what is left for those who own shares who do not pay dividends? Flogging? yes, I suppose in North Korea that would be the general consensus. 
> Oh well ... no surprises there.

  ok MArc , name me a business that is normal to make a loss for the first decade? 
now, you imply that a business not paying dividends is similar?  Really? The company pays Tax on profits, regardless of whether they pay out dividends to the investor.  Second, the average holding period for shares is far lower, which crystallises the investor profit far earlier than residential property investment. 
if you have no expectation or likelihood of making a profit in a business then it's a hobby. 
because a substantial part of the benefit of property ownership with negative gearing is tax relief, then it means that those with the highest rate of personal income tax have an economic advantage in this marketplace - that's a market discrepancy. 
criticism here, is in reaction to your as yet unsupported rant.  What law change, policy are you on about?

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## Marc

Mm ... not surprisingly your idea of 'business' is rather provincial but, I let you find out by yourself. 
You can just 'Google' it.  
Oh, by the way, google "private property" too since you are at it. 
When you grasp the basics just let me know.

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## chrisp

> Mm ... not surprisingly your idea of 'business' is rather provincial but, I let you find out by yourself. 
> You can just 'Google' it.  
> Oh, by the way, google "private property" too since you are at it. 
> When you grasp the basics just let me know.

  The irony in your post is astounding! 
The 'business' uses government subsidies to acquire the property/ies - and you are suggesting that someone else should look up 'private property'!  All while worrying about a possible reduction in tax concessions making the (loss making) 'business' unviable - and you suggest that they look up 'business'! 
It seems that you are relying on 'socialising the losses and capitalising the gains' to have a viable business!  
Best of luck with your 'private property' 'business' venture!  By all means make the best of the current tax policies while you can - and be grateful for tax concessions while they last.

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## PlatypusGardens

Great thread    :Tv Happy:

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## Marc

Ha ha, Chrisp, you are one of a kind. There are no 'government subsidies' to acquire a property ... actually there use to be very large ones called first home buyer schemes, a bit like the gonski and the school halls, but only applies to first home buyers, and distorted the market badly enough for decades. The are more moderate now. 
See, just in simplified terms for you, Deducting expenses from profits is not a concession you see, it's a basic taxation principle and without it no business is viable. 
As far as income tax payment that you see under threat from me, I think you are safe. 
First because I haven't had a loss making property for decades, so you are safe there, plus ... from the ATO own database, 50% of the population that pays income tax on paper, rakes it back in some form or another of government payments so pays zero tax. 
Surely the same 50% is on standby to protest against apple and google not paying their 'fair share' ha ha, thats another good one but a diferent socialist beat up.  
There are no subsidies in the property market besides the first home buyer scheme and other socialist market distorting exercises. The present hopefully dead concept to abolish tax deductions, is an attack on a legitimate business that makes rental property available to the tenant, employs millions of people directly or indirectly and not only affects those who need those legitimate tax deductions until the property turns a profit, but would also sabotage the value of property enough to rob anyone that owns a property and wants to sell of a good chunk of the equity they have in their home.  
As far as business that do not turn a profit for long time, there are millions of examples of business not making a profit for years, thousands of successful business who had to battle it for 5 to ten years. Others who have never made a profit ever in 20 years like Amazon. I would like to see a government stating that since they do not make a 'profit' they are a hobby ... ha ha ... Business is not only about making a profit to buy a car or do some shopping. The concept is a bit wider reaching. But anyway, don't let the truth come in the way of a good socialist protest.

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## woodbe

Of course negative gearing should be wound down. 
Why? Because it is blocking out most of the youngsters in normal occupations from owning their own home. That is not fiction, it is a fact.

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## woodbe

House price growth: Wages falling behind   

> *HOUSING*
> Property is where the really scary figures come out.
> In  Sydney, the average house cost $28,000 in 1975. Today, it costs  $850,194. Thats 30 times as much as it used to be. Your 10-times as  much annual earnings isnt looking too great right now, huh?  
> Melbourne is even worse, at 31 times the cost of 1975. Back then, the average house was $19,800. Now, its $615,068.
> In Brisbane, its 27 times higher from $17,500 to $473,924.
> In Adelaide, its 28 times higher from $16,250 to $459,258.
> In Perth, its 32 times higher from $18,850 to $604,822.
> In Canberra, its 21 times higher from $26,850 to $573,326
> In Hobart, its 21 times higher from $15,200 to $322,274.

  Australiaâs housing boom in five graphs | afr.com

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## ringtail

> .... is an attack on a legitimate business that makes rental property available to the tenant, employs millions of people directly or indirectly and not only affects those who need those legitimate tax deductions until the property turns a profit, but would also sabotage the value of property enough to rob anyone that owns a property and wants to sell of a good chunk of the equity they have in their home.

  legitimate business ? Is it ? AFAIK there is no need for a registered business name, company structure, ABN etc... to have a rental property or any other form of investment negatively geared or otherwise.  Why does an investor "need those" legitimate deductions ? Is it a bad investment otherwise or is the investor simply using the investment to minimise their primary tax obligations ? The latter I suspect. Who are these millions of people employed by investors ? Property managers ? They do SFA. Landlords spend as little as is humanly possible so bugger all people are employed as a result of investors, unless it's through new home builds. Property investment is not a business. Merely another way to legally offset tax. No business that opens the doors to deliberately make a loss purely to offset another tax obligation should be allowed to exist. The answer is quite simple. Abolish interest only loans, Neg Gearing and all other tax incentives for investments but at the same time abolish all CGT. Pay tax on the rental income. If the tax payer is not propping up the investor then the tax payer has no right to a slice of the profits when the asset is realised.

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## toooldforthis

there are a lot of issues here..
negative gearing
Capital Gains Tax
1st home buyers grants
income V cost 
all help to distort or explain the market in their own way. 
but for me the real culprit for such a huge ramp up in house prices in recent decade(s) is the "easy credit" mentioned above.
You can't get such easy cheap credit for other "investments" such as a business that might employ people or have some productive capacity. (and while you might argue that housing employs people in construction and maintenance, housing is not a productive investment. It is primarily shelter) 
Banks are gaming the system. A system they dictate the rules on by having too much influence over politicians. 
If you go back and look at when house prices started to ramp up and why they happened you will find this is the main reason. 
Remember when Investment/Trading Banks & Saving Banks were different entities? (and so the Capital to Loan ratios they had to hold were more restrained)
Remember when you needed a 30% deposit for a house? (not the 100% loans you can get these days). 
and this is not just about housing affordability. 
land/business structures are expensive too. A sunk cost that makes businesses uncompetitive because their cost base is too high. 
/my rant  :Smilie:

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## toooldforthis

> legitimate business ? Is it ? AFAIK there is no need for a registered business name, company structure, ABN etc... to have a rental property or any other form of investment negatively geared or otherwise.  Why does an investor "need those" legitimate deductions ? Is it a bad investment otherwise or is the investor simply using the investment to minimise their primary tax obligations ? The latter I suspect. Who are these millions of people employed by investors ? Property managers ? They do SFA. Landlords spend as little as is humanly possible so bugger all people are employed as a result of investors, unless it's through new home builds. Property investment is not a business. Merely another way to legally offset tax. No business that opens the doors to deliberately make a loss purely to offset another tax obligation should be allowed to exist. The answer is quite simple. Abolish interest only loans, Neg Gearing and all other tax incentives for investments but at the same time abolish all CGT. Pay tax on the rental income. If the tax payer is not propping up the investor then the tax payer has no right to a slice of the profits when the asset is realised.

  yep.

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## phild01

> there are a lot of issues here..
> negative gearing
> Capital Gains Tax
> 1st home buyers grants
> income V cost 
> all help to distort or explain the market in their own way. 
> but for me the real culprit for such a huge ramp up in house prices in recent decade(s) is the "easy credit" mentioned above.
> You can't get such easy cheap credit for other "investments" such as a business that might employ people or have some productive capacity. (and while you might argue that housing employs people in construction and maintenance, housing is not a productive investment. It is primarily shelter) 
> Banks are gaming the system. A system they dictate the rules on by having too much influence over politicians. 
> ...

   Don't leave out what dual incomes have done. 
Interest rates so low, will the government start printing money next!

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## Bros

Did I click on the emission thread by mistake?

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## PlatypusGardens

:Cheerleader:  rant! rant! rant!  :Cheerleader:

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## PhilT2

> will the government start printing money next!

  They aren't already? Then where does it come from?

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## chrisp

> They aren't already? Then where does it come from?

  Money, apparently, is generated by capititsts  :Rotfl:

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## pharmaboy2

> Don't leave out what dual incomes have done. 
> Interest rates so low, will the government start printing money next!

  Dual incomes absolutely have made a massive difference since 1987 or thereabouts when banks were forced to take into account both incomes. 
Woodbe, you should be careful with applying a simple metric such as average wages versus average property.  First you have to include household income, second it needs to be disposable household income not gross, and finally (the real biggy), is Aussies don't pay cash for houses, they borrow, and Aussies see the cost of a house not in number of years salary, but in monthly payments. 
what you really have is the Australian housing market following payments as a percentage of disposable household income. 
so through JH as PM period, you had a real take home income growth of 30% driving housing, and low interest rates continuing.  Instead of Australians saving the money, they have bought housing. 
any residential investor knows the aim of the investment is to either start "positively geared" or get there quickly - maybe 5 years.  However the way you do that is by making a significant paper loss with depreciation gaining you a tax deduction that allows the property to return positively for you, but only because you've made it run at a loss with non cash flow deductions. 
the trick then is to make sure you don't do capital works, but lots of fully deductible "maintenance" - in addition, most will spend on their own home maintenance but claim it as a rental property expense, putting them on equal footing with those who skim tax free cash out of their businesses/labour. 
so Marc, how about you put up a link to this change you say is on the way with the current govt? 
c'mon Marc, answer a direct question for once .   

> No no no, not for a minute. They propose to legislate against a basic taxation principle that allows any business to deduct expenses from their earnings in order to exist. Yes no business can exist outside this universal principle. Well may be cocaine production can.  
> Snip 
> We really live in truly pathetic times when a conservative party proposes legislation that would make a Venezuela president proud.

  Seriously, where is this "proposal" - I've somehow missed it

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## woodbe

> Dual incomes absolutely have made a massive difference since 1987 or thereabouts when banks were forced to take into account both incomes. 
> Woodbe, you should be careful with applying a simple metric such as average wages versus average property.  First you have to include household income, second it needs to be disposable household income not gross, and finally (the real biggy), is Aussies don't pay cash for houses, they borrow, and Aussies see the cost of a house not in number of years salary, but in monthly payments.

  Not at all. Of course couples generally have a greater income, but not all youngsters in work are in a relationship. Or do you think only couples should be able to buy into the housing market? 
Perhaps you missed my previous post:   

> Of course negative gearing should be wound down. 
> Why? Because it is blocking out most of the youngsters in normal  occupations from owning their own home. That is not fiction, it is a  fact.

  Almost every person who graduated with me from high school (and whom I still know), put a deposit down on their house before they were in a serious relationship. We all knew, the earlier we got into the market the easier it would be for us. Mid 20's for me and without family support, and without a high paying job. Now when I look at our kids and their friends, who are in their 20's, only a small fraction have been able to enter the market and all of them by parental financial support.  
The problem is that those with adequate assets have been ripping into the housing market because it is a low risk investment funded by taxpayers. The result is shown by the above graphics: Housing prices are exploding and are out of reach of the young today unless they have solid support from their family. If their family doesn't have the funds, they're screwed.  Why we aren't laughing at your house prices joke, PM | The New Daily

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## pharmaboy2

Like all issues that carry a political slant, media articles tend to start out with an answer in mind.   
Given people borrow, there is no place for median price versus median income multiples to accurately compare over time without correcting for interest rates.  Cities have increased in size greatly - prices of property have been adversely affected by govt supply restraints which come in the form of taxes to subdivide/change zoning and also govts that prevent rezoning.  There is somewhere around 50 to $100,000 in "fees" paid to local government for instance per block of dirt. 
another difficulty is the use of prices of housing instead of dwellings - ie the assumption that as our cities get bigger, everyone should still live in a house and not a unit. 
i am well aware that housing affordability is worse now than it was, but how much worse is not a simply answered question, nor are the causes because it is not a simple answer - I know the great majority of young people I know are in the housing market, but when I was 20 not a single one of my peers was in the housing market (this was circa 87) - this of course changed over the ensuing years as incomes rose, interest rates declined and access to credit improved. 
anyone who thinks they can simply blame negative gearing simply hasn't spent enough time examining the complexities of housing supply and demand. 
whenever costs of capital go down, the tendency for asset prices to rise is strong

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## JB1

Seems like I'm the only one with Marc.  I've got a positively geared property so it's not like I'm benefiting from it. 
Negatives gearing gets a bad rap as pushing up house prices in capital cities.  What some people don't take into account is that neg gearing was introduced to offset the introduction of CGT.  
Neg gearing is available to all taxpayers investing in any investment such as shares also. 
I don't agree that neg gearing is stealing other taxpayers' monies. 
If it is, so is claiming for tools, motor vehicle expenses,  donations etc etc. To get a benefit of any tax deduction you need to pay tax. 
No one invest to lose money, the end goal is make money and you pay tax later on in the form of CGT (or waiting to the property to become positively geared). 
People who buy homes to live in don't get the advantage of negative gearing but do get to keep any profits tax free. 
Sent from my SM-G930F using Tapatalk

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## PlatypusGardens

Meh 
you can post all the graphs and tables you want.
Keep complaining about "young people" and how they drive shiny cars etc. 
I know a lot of people with kids who would LOVE to be able to get a well paying job and a house to buy, nah, make that RENT as they're still living at home.  
As a fat cigar-smoking ex-treasurer (who will retire with benefits) once said "it's simple, get a well-paying job, then go to the bank and they'll give you money to buy a house"   :Rolleyes:   
The same guy also said "Poor people don't have cars, and those who do, don't drive very far"   
Well if a pollertishun said it, it must be true.
I'm sure he's lived in a mining town where rent for a 4-bedroom house peaked at $6000/week.
Yes.
Six grand a week 
Mining is GREAT for the community.  
Or is it?
I guess it is if you actually work in the mines and can afford to rent a house 
Then it all changed.
Mines downsized.....we went from 6K/week rentals to 1500 empty houses over night (give or take) 
Now what? 
well.....since the mines left town, so did all the people, and so did a lot of businesses....and with them......all the jobs. 
So now we have empty houses, 20-25 year old kids living at home as there's no work.  
Politicians really need to take a long hard look at what is going on around them.
Coal is goood for humanity....said some ex-PM. 
He should visit some of these dying mining towns.
Oh....I'm sure he did back in the day when it was all booming and he strutted around in his Hi-Vis and shook hands with people, posing for photos in front of a dragline bucket.  
It is what it is, and no amount of statistics and politicians babbling on is gonna change the fact that it is getting harder for those who want to get a permanent job and buy a house.     
so there

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## pharmaboy2

> People who buy homes to live in don't get the advantage of negative gearing but do get to keep any profits tax free. 
> Sent from my SM-G930F using Tapatalk

  ah, you've hit on something there, and I'm not talking about your Samsung phone. 
why is it that the ALP for example are currently chasing down negative gearing but not interested in the tax free nature of capital gains for the family home? 
they are both as equally culpable

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## woodbe

> Keep complaining about "young people" and how they drive shiny cars etc.

  Gotta say, any of the young people I know who are struggling to buy a home are not driving shiny cars. In fact, most of them don't have a car at all. Public transport. 
We should be listening to the young rather than telling them to do it like we did it. Not possible to do it like that any more.  
We should stop ramping up house prices beyond wage/inflation rates. That is what is screwing over the young, and negative gearing is definitely part of the cause of it. 
Young people are being price blocked from buying homes resulting in their lowest ownership rates ever.

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## phild01

> ...but not interested in the tax free nature of capital gains for the family home?

  What am I missing! Buying the family home 20 years ago, and there seems to be a profit selling it today.  But to buy it back, you need more money than what you sold it for.  I don't see any profit in that at all!  It's actually a loss and the government takes some extra tax.

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## woodbe

> ah, you've hit on something there, and I'm not talking about your Samsung phone. 
> why is it that the ALP for example are currently chasing down negative gearing but not interested in the tax free nature of capital gains for the family home? 
> they are both as equally culpable

  Wasn't the ALP chasing down negative gearing on existing homes and leaving it in place for new homes? 
Capital Gains tax on family homes would be one of those policies that gets you kicked out of any chance of government...

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## PlatypusGardens

> Gotta say, any of the young people I know who are struggling to buy a home are not driving shiny cars. In fact, most of them don't have a car at all. Public transport.

  Exactly.
but P-platers and shiny cars were mentioned earlier in this thread, which is why I brought it up.    

> We should be listening to the young rather than telling them to do it like we did it. Not possible to do it like that any more.

  Indeed

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## chrisp

> What am I missing! Buying the family home 20 years ago, and there seems to be a profit selling it today.  But to buy it back, you need more money than what you sold it for.  I don't see any profit in that at all!  It's actually a loss and the government takes some extra tax.

  I think that I know what you mean.  While house prices have gone up, it is really only 'on paper' value to most home owners, as you say, it will cost just as much to buy another similar house. 
But this is the problem for those who wish to buy in to the market for the first time. And I suspect that it is this same 'on paper' value that is the 'profit' for property investors.

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## phild01

> I think that I know what you mean.  While house prices have gone up, it is really only 'on paper' value to most home owners, as you say, it will cost just as much to buy another similar house. 
> But this is the problem for those who wish to buy in to the market for the first time. And I suspect that it is this same 'on paper' value that is the 'profit' for property investors.

  Yeah, I'm a bit out of context but just responding to any thought that the family home should be considered as a capital gain.  And to to be off tangent even more, any 'family home' upgrades should only have the price difference subject to stamp duty rather than the whole new purchase price.

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## Micky013

Just reading through this epic thread i find it hard to stomach the comments that dismiss how hard young people have it to enter the market. My parents came out to Aus in the late 50's with nothing but somehow managed to buy and fully pay for 4 investment properties, for the most part on one income (that of a carpenters).  
As a 30 year old and only just recently having bought my first home (with the wife) ill be lucky to pay it off before im dead. At least those of past generations had the opportunity to work and pay off a home.  
Bit hard these days .....

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## Marc

> What am I missing! Buying the family home 20 years ago, and there seems to be a profit selling it today.  But to buy it back, you need more money than what you sold it for.  I don't see any profit in that at all!  It's actually a loss and the government takes some extra tax.

  I see that not all is lost, a few scant rational replies, here is one.
You own home is not an asset but a liability. Fact.
if you buy a house for 150k and sell it 20 years later at 500k you have not made a profit since you can not buy another for 150 since all have gone up. That is why capital gain tax is stealing. There is no gain, there is devaluation of the currency and there is increased demand for a limited commodity. 
Allowing expenses to be deducted from a different revenue source from the same taxpayer was supposed to alleviate this blatant confiscation called fallaciously capital gain tax. 
The business of property investment for those that missed it, is not in buying "cheap" and sell "expensive" and keep the difference. Such is an impossibility. You can only make a profit on a property if you improve on it and such work can be done below market cost. Not easy as most people here probably know. 
As with any other asset, the market dictates the price and the asset is only worth what the market is willing to pay for it. Unless you can squeeze above market price you never make a profit you just convert an asset into cash or cash into an asset. And you must pay the cost of this conversion that in property is rather high either way. 
Property investment business is based on achieving an income producing asset. The way to that point can be long and the cost can be a string of losses along the way. The losses are not the objective of investing, the selling price is not the objective, the income is. A rental property can produce 5% to 10% return and that is a reasonably good return compared to what the money market is today.  
Considering that the focus of all the chorus of complaints in this thread is on the high price of properties, think for a moment what is driving up demand. 
Property demand is driven by, 
a) the number of people. Open the floodgates of immigration legal or illegal and watch the prices go up. Either from buyers or from rental pressure. Higher rent better investment returns more demand. Investors do not control immigration last time I checked.
b)Low interest rates. A shot economy the result of incompetent politicians that can ransack it without fear of being taken to court as a CEO would, produces low interest rate. No good having money in the bank. Alternatives are shares or property. Shares in a shot economy are risky, ergo property is again more attractive. Investors do not legislate foolish social experiments.
c) Indiscriminate and illegal foreign ownership. If you have been to an auction in the last 10 years or so, you may have noticed that most go to overseas bidders. I have been to real estate agency that wouldn't even talk to me and sell everything to chinese buyers. THere are rules but they are not enforced. The government does not differentiate between investment and ownership, their short term mentality is geared to the quick buck to save face and disregard the cost. They simply do not care. Investors do not control foreign ownership illegal activities. 
d) Foolish and myopic regional decisions that destroy regional economies and produce urban migration. Farmer goes bankrupt, comes to town, needs a place. Investors do not control regional economic mismanagement.  
There are many more factors that weigh heavily on the demand in the property market, but hei ... you can google it.  
Negative gearing? Oh yes, 80% of properties have a mortgage and claim the cost of borrowing money as one of the many expenses. Considering that the tax department is a virtual partner in the so called capital gain, the only reason anyone would consider investing in property knowing there is an armed robber at the bank when he sells, is the capacity of claiming the interest against another income whilst the property is making a loss, hopefully for not too long. 
This legendary "negative gearing" expression that was coined by con man and tricksters in the RE industry and accountancy, is in fact a very poor compensation for such a large chunk of what we now know is not profit. 
Think about it, if you pay 20% personal income stright tax, and you make a loss of 10k on a rental a year, all you get back is $2,000, the other $8,000 are a real loss. That loss goes towards making a rental place possible for a tenant that needs it. And the government knows it. Kill negative gearing, kill the rental market. 
But there would be another victim here besides the tenant and that is every property owner be it investor or owner occupier because if the market takes a tumble the loss in the value of assets will be irrecoverable. 
If negative gearing is abolished it would be a criminal act that would make a communist government proud.

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## SilentButDeadly

Kill negative gearing...and nothing much will happen. Lots will change but nothing much will happen. 
Bit like if we started emission trading again... 
You are tilting at windmills, Marc. 
Ours is not to reason why. Merely to point and giggle.

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## intertd6

> Had this discussion recently.   
> Mean wage in 1995 for metropolitan aussies was a touch under $30k and median house prices in Melbourne and Sydney averaged out at roughly $165k. 
> In 2015/16, mean wage is roughly $80k, and median house prices in Melbourne and Sydney average out at $850k. 
> So...  
> This is interesting. Just for the sake of augments ...   http://www.rba.gov.a...tics/cash-rate/ 
> 1995 cash rate (for sake of argument) - 7.5%
> 2016 cash rate (for sake of argument) - 1.75%   
> Repayment on $165k (at 1995 cash rate) = $266 per week on 30 year term
> Repayment on $850k (at 2016 cash rate) = $700 per week on 30 year term 
> ...

  it turns out very different when you compare income against outlay ratio, low interest rates on the short term payment periods mean nothing unless that rate is for the term of the loan, which it never is. Housing is more expensive now & it's getting more and expensive to buy a home & it's getting more expensive & bureaucratic for builders to build them.
inter

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## pharmaboy2

> Wasn't the ALP chasing down negative gearing on existing homes and leaving it in place for new homes? 
> Capital Gains tax on family homes would be one of those policies that gets you kicked out of any chance of government...

  Youve got it - it's political expediency, especially on the latter.

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## pharmaboy2

> What am I missing! Buying the family home 20 years ago, and there seems to be a profit selling it today.  But to buy it back, you need more money than what you sold it for.  I don't see any profit in that at all!  It's actually a loss and the government takes some extra tax.

  Usually you have a like for like provision as in the US.  so when you sell, you have 12 months to repurchase and avoid a CGT event, and you pay CGT on the profit if you downsize (catches tax particularly from home renovators, and flippers) 
its ts not ever going to happen because that would include too many people to get voted in, and that's my point, policies are chosen because the people they impact are not going to vote for you or are too small in number to matter.

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## Marc

> Kill negative gearing...and nothing much will happen. Lots will change but nothing much will happen.

  False and unsubstantiated. 
What will happen is that the investor that can, will corporatise and have all his income streams in the same company so no one can take away from him the right to claim all expenses against all incomes. 
The mom and pop one property investor who have a job, will be screwed and sell, that is 95% of investment properties 
Eventually all rental will be in the hands of corporations. Guess to venture what will happen to the cost of rent?

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## sol381

The end goal really is to be positively geared.. noone wants to lose money on their investment..in qld anyway where the house prices are still slightly normal.the rent is about equal to what the loan repayments are anyway..the most anyone would lose in a given year would be no more than $10,000 anyway.. after tax savings are around $4,000 ,.,at best..with interest rates at an all time low and rent at an all time high, id say most property owners will be getting close to having cash positive properties..
I doubt negative gearing gives the government much money at all..when you deduct how mush they gain from tax paid on gains made from rent and cgt it probably just evens out.. 
One very astute property investor i do work for always has interest only loans.. He said the banks can get my money when i sell the property.. 
At the end of the day the idiots in canberra will decide whats best for all of us and will probably be the wrong decision anyway..

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## Spottiswoode

I agree with SBD. Killing negative gearing will not be the golden bullet for house pricing that everyone is carrying on about, there will be impacts, but not the end of the world.  
If corporations end up being the only property landlords rents might rise a bit, but they can't keep going up becuase you still need tenants who can afford to rent. Corporations won't like lower property returns though.  
Let's kill off low interest rates and double incomes and see what happens to house prices.

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## Marc

> I agree with SBD. Killing negative gearing will not be the golden [silver] bullet for house pricing that everyone is carrying on about, there will be impacts, but not the end of the world.  
> If corporations end up being the only property landlords rents might rise a bit, but they can't keep going up because you still need tenants who can afford to rent. Corporations won't like lower property returns though.  
> Let's kill off low interest rates and double incomes and see what happens to house prices.

  Yes dear leader let's do that

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## Spottiswoode

:Rofl5:

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## Smurf

> You own home is not an asset but a liability. Fact

  I fail to see how that is true.  *Your own* home, by definition one that you own outright, is most certainly an asset that can be sold in an open market. It is reasonably durable and provides a practical service, accommodation, whilst you own it. 
If it wasn't an asset then generally speaking banks wouldn't lend money against it, there would be no point insuring it due to low value and this forum would not exist since nobody would be interested in renovating a throwaway item with an expected lifespan from construction to demolition of no more than a few years. 
A rented home or one with a large mortgage is not your asset but it's still someone's asset (landlord or bank as the case may be). But if you do own it outright, or at least own a substantial portion of it, then it's an asset for sure. At least it is so long as it's able to be sold for a price that exceeds the cost of selling it.

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## joynz

> I fail to see how that is true.  *Your own* home, by definition one that you own outright, is most certainly an asset that can be sold in an open market. It is reasonably durable and provides a practical service, accommodation, whilst you own it. 
> If it wasn't an asset then generally speaking banks wouldn't lend money against it, there would be no point insuring it due to low value and this forum would not exist since nobody would be interested in renovating a throwaway item with an expected lifespan from construction to demolition of no more than a few years. 
> A rented home or one with a large mortgage is not your asset but it's still someone's asset (landlord or bank as the case may be). But if you do own it outright, or at least own a substantial portion of it, then it's an asset for sure. At least it is so long as it's able to be sold for a price that exceeds the cost of selling it.

  It is very common for people to extract equity from their home to put towards the purchase of an investment property.   
So, definitely an asset in my opinion. 
However, the debt isn't tax deductible, so in that sense it's not the same type of asset as an investment property.

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## Bigboboz

I don't have a problem with negative gearing, I think problems come from being able to gear property higher than other investment options which creates a skew in investment options.  I'm not aware what other asset class allows an investor to leverage as high and cheaply than property, plus no risk of margin call if you make your instalments.  It's the perfect conditions for risky speculation which isn't great for any investment class in the long term. 
Then throw in the kicker for speculators that for this asset class (particularly applies to capital cities, not so much mining towns) people will always need the asset so there's always a bid there if they need to liquidate.  Handy.  My point is to lump property into the same bucket as other 'businesses' is just false, I can't think of another asset class that has the same characteristics.  Certainly nothing of similar size.   
Not everyone wants to own a home for many different reasons and that preference changes on their circumstances so investors in the residential property market certainly have their place but to say that's the end of the argument is also not right. An investor buying an established house doesn't increase stock if there's a shortage but it's certainly a ripe environment to make a profit.  This is an example of where investor participation is strictly at odds with 'housing affordability'. 
Why does housing affordability matter from my perspective? High mortgage payments or high rents soaks up people's capacity to spend money on other businesses, ie a big distortion to the economy.   
Also becomes bloody expensive for someone to move to where work takes them or upsize as their circumstances change (family getting bigger or smaller).  Stamp duty on elevated prices only benefits the government.  Stamp duty is about 5%, agent fees 2%, plus moving and other costs, you're getting up towards 10% of your house value to move.  As prices have increased, this cost has become massive.  Also not great for an economy... 
Second issue for me is if prices are too high then a downturn in the economy will be amplified as the prices and consequently rents collapse. Perfectly illustrated by what happens in mining towns but very exaggerated obviously. 
These are bigger picture arguments and harder to relate to than what's in it for me. 
So what's the right mix between home owners and investor? Don't know but I don't think the current taxation framework gets the balance right.

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## Bigboboz

> I see that not all is lost, a few scant rational replies, here is one.
> You own home is not an asset but a liability. Fact.
> if you buy a house for 150k and sell it 20 years later at 500k you have not made a profit since you can not buy another for 150 since all have gone up. That is why capital gain tax is stealing. There is no gain, there is devaluation of the currency and there is increased demand for a limited commodity.

  So if prices fall there's no loss? 
Your own home is clearly an asset, to say otherwise boggles the mind. Short of living like a hobo you need to live somewhere so the associated maintenance expenses have to be covered in the long run regardless if the house is owner occupied or an investment property. Or are you arguing by owning it you're giving away too many benefits?

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## Marc

Bob, you may be big but your argument is not ...  :Smilie:  (only joking OK?) 
The definition of an asset is somehow flawed. Of course the ATO, Centrelink, the bank, the family man  and an entrepreneur all differ in their views for obvious reasons. 
Tell the average Joe that he worked 20 years to pay off his family home only to own a liability and you will probably have an argument. 
However that is exactly what an owner occupied property is. 
Just like your car and your boat. No different.
An asset is something that puts money in your pocket.
A liability is something that takes money out of your pocket. 
An investment property that makes a loss is a liability until it stops being one. A family home unless you can rent some of the rooms out or have a factory in it and make an income out of it will never be an asset. 
A liability not only does not produce any income, it demands income to be diverted to it. The benefits of having a liability are mostly overstated for marketing purposes. If you watch TV you will see that owning a new home in that new suburb, a new car or a new kitchen mixer will transform your life into something out of this world ... 
So your home is a liability.
Fact.
And even Centrelink agrees with that one. 
As far as property prices, they are high? High is a relative concept, it may mean many things, among them that you are low so they seem high. Solution, climb a bit higher to reach them, and don't ask the government to steal from others to accommodate you. Just a thought. 
Another thought is to actually understand why property prices go up and demand from the government to stop foreign ownership and curb indiscriminate immigration for starters. 
I am sure that all those little people with conflicts of adequacy running Canberra will feel much better if they can dictate something like that and tell the ABC cameras why they did it. 
PS
Losses on a rental property have to be seen as a tool to turn a liability into an asset. Sadly many who think that having disposable income makes them into a discerning entrepreneur, sell their income producing asset because the accountant told them that now that the rental makes a profit it is no longer useful for tax deductions purposes. Go and buy another bigger and dearer property to make lots of losses to claim against your income.  
Doing so is like cutting your nose to spite your face. The money thrown to the wind is way more than what you can save in taxes. Unfortunately a lot of people turn to their accountant for business advise something the accountant is not trained for and he can only repeat hearsay.

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## pharmaboy2

> Bob, you may be big but your argument is not ...  (only joking OK?) 
> The definition of an asset is somehow flawed. Of course the ATO, Centrelink, the bank, the family man  and an entrepreneur all differ in their views for obvious reasons. 
> Tell the average Joe that he worked 20 years to pay off his family home only to own a liability and you will probably have an argument. 
> However that is exactly what an owner occupied property is. 
> Just like your car and your boat. No different.
> An asset is something that puts money in your pocket.
> A liability is something that takes money out of your pocket. 
> An investment property that makes a loss is a liability until it stops being one. A family home unless you can rent some of the rooms out or have a factory in it and make an income out of it will never be an asset. 
> A liability not only does not produce any income, it demands income to be diverted to it. The benefits of having a liability are mostly overstated for marketing purposes. If you watch TV you will see that owning a new home in that new suburb, a new car or a new kitchen mixer will transform your life into something out of this world ... 
> ...

  Mate, that definition of an asset is straight from Robert Kyosaki, who is an author and a charlatan - is not wealthy from business nor real estate but from selling books with a distorted view of the world.  No one with respect agrees with him. 
why? Well, simply because a household needs a place to live, so you either rent (ie pay someone else) or you buy.  Any sensible rational approach to that quandary can see that buying costs displace rent costs, and the costs of running the house is the net difference between the 2.  As an investor you surely also understand that rents are set high enough to garner a return on the asset plus cover all costs. 
also, consider looking up "fact" in the dictionary

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## Marc

PS, PS 
Ha ha.  :Rofl5:  
So a car is an asset because the difference between the bus ticket and the petrol is ... mm what? You can't be serious.  
But hei ... knock yourself out. If you think your own home is an asset then try to sell it and enjoy the profits. 
No skin off my nose. 
If you can not sell it because you need to live in it and must keep on paying to keep it then it is a liability and will remain a liability. If you downsize and go to live in Vietnam, then you may say you sold an asset, but what you did is reduce your liabilities and cash the difference.
But you must do and think what makes you happy. 
It is all relative. 
Of course there are intangible advantages to keeping a liability or no one would do it. Why keep a boat? Why buy a new car that depreciate horrendously? The home is very emotional issue because we live in it and we bring up our families. Moving every 6 month is not fun nor is it to need to ask for permission to hang a picture on the wall. 
But from an investment point of view, strictly speaking buying a home to live in it is a bad business decision. 
One is better off renting and investing in income producing assets. 
And that is why a lot of business rent and don't buy their premise, even banks.  It's called cost of opportunity.

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## ringtail

Businesses rent because the cost of that rent is deductible whereas if they bought their business premises the property then becomes subject to capital gains. The same as if you run a business from home and claim expenses to do so. A portion of your house then becomes subject to CGT. A business will only buy if they can sublet out space and produce income from their purchase to offset future CGT

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## Marc

That is another reason and there are many more in favour and against buying your business premise, but the largest is clearly cost of opportunity and not capital gain tax. After all an entity like a bank can stay in one place for a century and never pay CGT
MacDonald  is said to own more real estate than the catholic church and that such is their core business, so there are no hard rules.

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## woodbe

> PS, PS 
> Ha ha.  
> So a car is an asset because the difference between the bus ticket and the petrol is ... mm what? You can't be serious.  
> But hei ... knock yourself out. If you think your own home is an asset then try to sell it and enjoy the profits. 
> No skin off my nose. 
> If you can not sell it because you need to live in it and must keep on paying to keep it then it is a liability and will remain a liability. If you downsize and go to live in Vietnam, then you may say you sold an asset, but what you did is reduce your liabilities and cash the difference.
> But you must do and think what makes you happy. 
> It is all relative. 
> Of course there are intangible advantages to keeping a liability or no one would do it. Why keep a boat? Why buy a new car that depreciate horrendously? The home is very emotional issue because we live in it and we bring up our families. Moving every 6 month is not fun nor is it to need to ask for permission to hang a picture on the wall. 
> ...

  What a load of bull. 
A $100 note is an asset. A Car is an asset. Have a look at a balance sheet, you will see a list of assets and liabilities:   
A house is an asset whether you live in it or not. 
Does a house (or car etc) have an ongoing liability as well as being an asset? Of course it does.

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## Spottiswoode

I always thought an asset is the thing you own, liability is the running costs, incl loans on the asset

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## Marc

Bean counter wisdom. 
I clearly stated that there are different views on the matter depending who it is that does the thinking. 
Negative gearing has been used to con people into believing they are smart and doing good business by re agents and accountants. The con is so far reaching that you have now politicians waving their arms and saying look at me look at me, I will save you from this bad rich people who are pushing prices up, whilst the foreign buyers get a wink and a nod from the same moron.  
Writing off borrowing expenses is a legitimate tax deduction and no amount of political clap trap can change that. To make a loss in order to purchase something that will eventually make a profit is also perfectly legitimate. Many business make losses for years until they can conquer market share, have a command on the supply or both. 
Watch Woollies and their strategies. Oh yes, no politician tearing his shirt off in protest of Woollies making intentional losses to kill the small guy and bankrupt the farmer? No, didn't think so. 
Yet to believe that writing off 30 or at best 40% of a loss and throwing out 70 or 60% of the money is something that can be done for the purpose of "reducing tax liability" is naïve and myopic and to even talk about legislating against it is so dumb that is breathtaking.

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## woodbe

Is your car an asset or not, Marc? 
The cash in your wallet?

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## PlatypusGardens

> there are different views on the matter depending who it is that does the thinking..

  
...as seen in this thread   :Rofl5:

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## OBBob

> ...as seen in this thread

  
Just this thread??

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## PlatypusGardens

> Just this thread??

  
Well....

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## Marc

> Is your car an asset or not, Marc? 
> The cash in your wallet?

   Oh come on wood be, you know the answer to that.
Car is a liability all the way. Cost a bomb to keep on the road, loses value at an astonishing speed ... takes you from a to b? sure. A friend of mine has no car, and uses taxi everywhere. He says it is cheaper. 
Cash in my wallet is a means of exchange, or ... I like this much better ... "It is the means by which an intelligent person invoices another... definitely like that one. 
If invested properly it may be an asset. If in a saving account that pays 0.2% interest rate and charges $200 in fees, it may actually be a liability.

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## autogenous

Paul Keatings negative gearing policy has left investors with a purchasing advantage, well for the most part paying too much for homes.  A tax advantage means that houses are overpriced by the amount investors have the advantage.  
So what does the RBA do? They lower interest rates to try and counter the obscene borrowings by negative gear investors looking for the greatest loss.   
Negative gearing is best suited to those with more consistent high incomes.  But financial advisors are using negative gearing as a means to get people into an investment property who cant afford it. This is fine until housing starts to decline in price, and those on the edge start a race to sell off before they are left with the baby.  Those desperate to sell with negative gear properties actually cause much greater dips in the economy. 
So now we have large private debt, and RBA interest rate heading for negatives which is technically a 'depression'. 
We have established that the RBA has meant we are ahead on our mortgage by $15000 due to their strategy.  We are getting our mortgage down for any correction, and our money has not gone back into the economy like the RBA is expecting it too. 
If the RBA is forced to put up interest rates, it will be at 1% increments. Can you hear the screams?
Everytime the RBA drops interest rates, retires have less money to spend. 
In the back of his head, the RBA director is saying, f@$% negative gearing off before we all end peasants.  At 0%, the RBA has no more cards to play. 
In 1989 parents were saying to me, "Our kids will never afford a home" In 1990 houses in some suburbs dropped 30%

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## Spottiswoode

> Oh come on wood be, you know the answer to that.
> Car is a liability all the way. Cost a bomb to keep on the road, loses value at an astonishing speed ... takes you from a to b? sure. A friend of mine has no car, and uses taxi everywhere. He says it is cheaper. 
> Cash in my wallet is a means of exchange, or ... I like this much better ... "It is the means by which an intelligent person invoices another... definitely like that one. 
> If invested properly it may be an asset. If in a saving account that pays 0.2% interest rate and charges $200 in fees, it may actually be a liability.

  The car itself is an asset, it can be sold for cash. Yes, it is a depreciating asset (unless you've got an e-type Jag or GTHO Falcon) and a very poor investment choice if you want to increase your asset base. The running costs, including the depreciation are the liability. 
Cash is an asset, easily exchanged for goods or services. Your bank balance is an asset able to be spent on more assets, or frittered away on stuff like food and beverages.

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## autogenous

An while commentators are quick to say cheaper tradies equals cheaper houses, its far from the truth. 
The minute a house becomes $30000 cheaper, the price of land goes up $30000 overnight.  People borrow what they can afford, and that is what drives the market.  Property developers are the winners, not you. 
Cheap housing is why people spending a fortune on energy trying to heat and cool their homes today.  Houses have bigger windows because the glass company gives a full size window at same price to the project builder as a window half the size.  Hence some your expensive curtain and blind invoices, and horrendous cooling costs.  The windows of the past with 3mm glass have virtually no insulation properties which is why your power bill  is so high.
That is why the energy commission stepped in because houses were getting that bad, you may as well live in a tent with the zipper open.  And the government was going to have to build more power stations to climate control all the s@#!boxes. 
You thought it was about style didnt you.  Much cheaper to build all glass.
Project houses with big windows are cheaper and you are the loser.

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## woodbe

> The car itself is an asset, it can be sold for cash. Yes, it is a depreciating asset (unless you've got an e-type Jag or GTHO Falcon) and a very poor investment choice if you want to increase your asset base. The running costs, including the depreciation are the liability. 
> Cash is an asset, easily exchanged for goods or services. Your bank balance is an asset able to be spent on more assets, or frittered away on stuff like food and beverages.

  +1 
At least someone here is aware of the facts regarding assets.   

> Car is a liability all the way.

  A car is an asset, and it has costs associated with it: Running costs and repairs, loss due to depreciation over time. Liabilities like damage run up the costs and can wipe out the asset, like if you crash it into a Ferrari. lol. 
If everyone thought like you, they'd leave the cars in the street with the keys in the ignition hoping the liability disappears. lol. It's an asset!   

> Cash in my wallet is a means of exchange

  Sure, cash is a means of exchange. To exchange one asset for another. So take some asset out of your wallet, pass it to the vendor and walk away with goods (which are also probably an asset until they are consumed, like a stock of beer)

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## Marc

Yes, that is the general accountant consensus.  :Whatonearth:

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## woodbe

Accounting is not consensus. Its rules. 
Accountant's job is to apply the rules even if their customer ignores them.  :2thumbsup:

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## OBBob

> Accounting is not consensus. Its rules. 
> Accountant's job is to apply the rules even if their customer ignores them.

  Are you suggesting there's no flexibility in accounting? That's like saying lawyers can only argue the truth. Ha ha...

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## Marc

Yes, I suppose we have digressed a bit from the housing affordability fallacy. And understandably so. 
No one likes to take responsibility, and much less being told his assumptions and preconceived ideas may be, just may be a tad wrong. No one likes to be challenged in his way of thinking. No one celebrate other's success, and everyone claps at the sound of restrictions of trade for others. 
And yet some do, those are the one that do not scream blue murder when someone else makes money, those are the one that silently take notice and think ... and take the challenge and sometimes even succeed. 
Good luck to you if you are one of those. 
To your success :Biggrin thumb: 
Marc

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## woodbe

> Are you suggesting there's no flexibility in accounting? That's like saying lawyers can only argue the truth. Ha ha...

  Of course there is flexibility, but the basics are there. An asset is an asset. I don't think we can easily claim cash is not an asset unless you hide it under the bed and it never hits the books.  :Biggrin:

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## Bedford

I think people talking/complaining about Housing Affordability should really be comparing apples with apples. 
Roughly 40 years ago if you bought a new (standardish 3 bedroom) house you paid around $25k. (in my area) 
For that you got a 3 bedroom house on a block of land, no driveway, fences, curtains, carpets, heating, clothesline, garage, letterbox etc. 
A lot of folks got by with bed sheets as curtains and some borrowed furniture until they saved bit by bit to purchase the extras to make it into a home. 
These days pretty much all the missing things are included (plus more) and are able to be borrowed in the purchase price, thus tilting comparisons. 
As far as negative gearing is concerned for property investors, while it can be thought that this is robbing the taxpayer, it also provides considerable income to Governments by way of Stamp Duty on a purchase, Land tax while holding the property, and CGT when selling. 
They always show the Capital cities regarding lack of affordability, I'm not sure they're aware that this is a pretty big country and that there are actually other places to live. 
I realise there are other costs for the young ones these days that weren't a cost (as they didn't exist earlier) to me, I'm not sure what the answer to that one is. 
Personally I think interest rates should be around 10% for all this to work, it would have stopped/slowed some of the massive inflation of house prices as it would have kept a lot of "investors" out of the market, possibly making it easier for first home buyers. Sure a higher rate of interest than now but a lower purchase price could make it easier to handle. 
A 10% interest rate would assist retirees who were either self funded (or partly) from having to turn back to a Government pension, placing more strain on the overall economy. 
As others have said, lowering the interest rate is not working................. 
Disclaimer, I am a self funded retiree by residential and industrial property who never had the ability/earning capacity to negative gear. 
That's my 2p worth.  :Biggrin:

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## Spottiswoode

I'm sure lowering interest rates was meant to do something positive for the economy. Maybe it does, but us Aussies seem obsessed with buying property, so while the rates are low we've been madly buying property. Not sure if the other aspects of the low interest policy are working though. Lower rates means Bigger loans means bigger amounts to spend which means sellers want more money for what they are selling and there are more people with cash to sell to. 
when the banks changed their policy for investment loans to cost more the market slowed a little around here but it certainly didn't go backwards and didn't slow for long. Houses still selling really quickly locally.

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## toooldforthis

I think lowering the interest rates is more to do with the "carry trade" to stop too much foreign money coming in and pushing the Oz dollar up, and discouraging exporters.
To counteract the lower rates there should be more prudential policy on the go to stop excess borrowing going into residential property, for eg they could impose stronger LVR.

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## phild01

The interest rates are not an internal, check interest rates world wide.  It's a global thing and we all stay in step to be competitive. Australia is quite a safe place to park and the rest I have no idea about, pretty much like all the economists it seems.

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## SilentButDeadly

> Personally I think interest rates should be around 10% for all this to work, it would have stopped/slowed some of the massive inflation of house prices as it would have kept a lot of "investors" out of the market, possibly making it easier for first home buyers. Sure a higher rate of interest than now but a lower purchase price could make it easier to handle. 
> A 10% interest rate would assist retirees who were either self funded (or partly) from having to turn back to a Government pension, placing more strain on the overall economy. 
> As others have said, lowering the interest rate is not working................. 
> Disclaimer, I am a self funded retiree by residential and industrial property who never had the ability/earning capacity to negative gear. 
> That's my 2p worth.

  And raising it won't work either...since someone has to pay for it. To use Marc's language...that would be socialism for baby boomers (amongst others)! 
Whilst I would applaud that simply for the entertainment value it would create... methinks it unlikely. 
Ours is not to reason why. Merely to point and giggle.

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## Bigboboz

> Bob, you may be big but your argument is not ...  (only joking OK?) 
> The definition of an asset is somehow flawed. Of course the ATO, Centrelink, the bank, the family man  and an entrepreneur all differ in their views for obvious reasons. 
> Tell the average Joe that he worked 20 years to pay off his family home only to own a liability and you will probably have an argument. 
> However that is exactly what an owner occupied property is. 
> Just like your car and your boat. No different.
> An asset is something that puts money in your pocket.
> A liability is something that takes money out of your pocket. 
> An investment property that makes a loss is a liability until it stops being one. A family home unless you can rent some of the rooms out or have a factory in it and make an income out of it will never be an asset. 
> A liability not only does not produce any income, it demands income to be diverted to it. The benefits of having a liability are mostly overstated for marketing purposes. If you watch TV you will see that owning a new home in that new suburb, a new car or a new kitchen mixer will transform your life into something out of this world ... 
> ...

   So if you have an investment that's making money it's an asset, as soon as it turns south and you lose money, it flips to a liability? Then if it comes good again it's an asset again?  Wow.   I'm no accountant and frequently disagree with their view of the world but agreeing on what to call stuff really makes discussions far more productive!    
Anyway, still curious, if there is no gain when prices went up, does that mean there is no loss when prices go down? 
Rob (prefer Rob but BigRobOz doesn't work as well!)

----------


## chrisp

> .... agreeing on what to call stuff really makes discussions far more productive!

  I agree! 
It's an interesting thread - thanks for starting it Marc - however I do think that we need some definitions of the terms used or else we might actually be arguing about something we agree on. 
One thing I have noticed that hasn't been mentioned is the difference between a 'property investor' and a 'property developer'.   
My (very limited) understanding is that a 'developer' adds value by improving, rebuilding or subdividing, etc.  And that a (pure) 'investor' basically holds the title with minimum equity and depends upon capital gain (with some negative gearing along the way).  I've read about an 'investor' strategy that encourages using any increase in equity to further purchase more and more properties - all held with minimal equity on interest-only loans.  It sound very risky to me!

----------


## Bigboboz

> I've read about an 'investor' strategy that encourages using any increase in equity to further purchase more and more properties - all held with minimal equity on interest-only loans.  It sound very risky to me!

  Yeah, if you never sell you never pay capital gains tax.

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## PhilT2

> So if you have an investment that's making money it's an asset, as soon as it turns south and you lose money, it flips to a liability? Then if it comes good again it's an asset again?  Wow.   I'm no accountant and frequently disagree with their view of the world but agreeing on what to call stuff really makes discussions far more productive!    
> Anyway, still curious, if there is no gain when prices went up, does that mean there is no loss when prices go down? 
> Rob (prefer Rob but BigRobOz doesn't work as well!)

  I'm no accountant but the way I think it works is that the house is an asset; the mortgage is the liability. While the value of the asset exceeds the amount of the liability the bank will be reasonably happy. If the tenants stop paying the rent the value of the asset doesn't change much. Same with a car, boat, machinery etc, they are assets even if they are losing value or not used to earn money. They're just becoming a less valuable asset. The costs associated with them, fuel rego etc are costs to a business and like the depreciation of the asset may be tax deductable

----------


## Marc

> I agree! 
> It's an interesting thread - thanks for starting it Marc - however I do think that we need some definitions of the terms used or else we might actually be arguing about something we agree on. 
> One thing I have noticed that hasn't been mentioned is the difference between a 'property investor' and a 'property developer'.   
> My (very limited) understanding is that a 'developer' adds value by improving, rebuilding or subdividing, etc.  And that a (pure) 'investor' basically holds the title with minimum equity and depends upon capital gain (with some negative gearing along the way).  I've read about an 'investor' strategy that encourages using any increase in equity to further purchase more and more properties - all held with minimal equity on interest-only loans.  It sound very risky to me!

  The reason different people call things differently is because they focus on different things. 
From the accountant point of view, things are black or white. The accountant's view has value when it comes to spill the beans for the ATO. The problem arises when the aspiring businessman or woman, goes to the accountant for business advice. May as well go to the accountant for medical advice.  
The core purpose of a business is to create a strategy that yelds income. Anything that takes away from this is a liability, and whatever contributes to this is an asset. The accountant's definition is completely irrelevant and contributes to confuse the would be business person. 
As far as real estate investment strategies, they are many and varied, (no a developer is not an investor but a builder that may keep a property for himself if he manages to make a profit) yet it is good to remember that only 5% of property investors, that is those who hold a property they do not inhabit themselves, hold more than one, so the multiple property investor is a rare breed and has a minuscule effect on the market. Foreign buyers, immigration and fancy socialist first home buyer schemes have a massive influence on the market.

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## Micky013

You must have a pretty s&@t accountant Marc. From my experience they serve to minimise a clients tax not help the ATO. Technically an accountant isnt allowed to give financial advice anyway unless they have a financiers license. And a good one wouldnt be telling you to sell your positive geared property to purchase bigger and better but use the equity to do so.

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## pharmaboy2

> The core purpose of a business is to create a strategy that yelds income. Anything that takes away from this is a liability, and whatever contributes to this is an asset. The accountant's definition is completely irrelevant and contributes to confuse the would be business person.t.

  The reason you don't like accountants is you don't understand what they are saying because you have invented your own vocabulary. 
assets and liabilities are balance sheet items.  Income and expenses are from the income statement.  Whether an asset produces a net income or not is irrelevant, otherwise it would change year to year and on a whim. 
you can still converse with the rest of us in the real world by properly describing things - eg an income generating asset versus non income generating asset, or depreciating asset versus appreciating asset.  You may further differentiate on the liability side as deductible loans and non deductible . 
ultimately, perhaps the wisest strategy for someone on at least average FTE or above, is to rent while purchasing an investment property, so they are in the property market but gaining maximum taxation advantages.  Most people don't because renting in Australia tends to be short term so you can't really be settled as you can with your own property. 
a home to live in with a mortgage is non income or non productive appreciating asset, the loan is a private or non deductible loan - the English language is there to aid communication not to redefine in order to create a weak argument

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## Marc

Boy oh boy ...  :Rolleyes:  
The main gripe in this thread is the high price of property with allegation of different culprits. Stoning not yet proposed but in the wings.  
Clinging to the conventional wisdom does not help. The idea that your own home is an asset and that it makes good business sense to dedicate your working life to pay it off is a con that keeps banks, re agents and accountants in business.  
If the truth was more popular, if bean counters wisdom challenged more often, owning your own home wouldn't be seen as paramount and rental would be more common, lease agreement long term a matter of fact and everyone would be more relaxed. Property ownership wouldn't be such a good business and prices of rent and property way lower, just like it is in many parts of the western world.  
Your own home is a liability and a very heavy one to carry. Unfortunately this reality is not very popular and so we have people with under 100k income carrying debts over 500k justifying such absurdity with the "asset building" con.  Once this is in the collective minds it is hard to shake.
The only winners are banks, re agents and property investors.

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## PlatypusGardens

> The idea that it makes good business sense to dedicate your working life to pay it off is a con that keeps banks, re agents and accountants in business.

  
Um...so what's the alternative?

----------


## Spottiswoode

> Boy oh boy ...  
> The main gripe in this thread is the high price of property with allegation of different culprits. Stoning not yet proposed but in the wings.  
> Clinging to the conventional wisdom does not help. The idea that your own home is an asset and that it makes good business sense to dedicate your working life to pay it off is a con that keeps banks, re agents and accountants in business.  
> If the truth was more popular, if bean counters wisdom challenged more often, owning your own home wouldn't be seen as paramount and rental would be more common, lease agreement long term a matter of fact and everyone would be more relaxed. Property ownership wouldn't be such a good business and prices of rent and property way lower, just like it is in many parts of the western world.  
> Your own home is a liability and a very heavy one to carry. Unfortunately this reality is not very popular and so we have people with under 100k income carrying debts over 500k justifying such absurdity with the "asset building" con.  Once this is in the collective minds it is hard to shake.
> The only winners are banks, re agents and property investors.

  Maybe you need to find a new term. Your house is still an asset, however I agree with you that it isn't a good 'business' decision to buy your own, but that's not what it's all about. You are also right that if we had long term leases (decades) the market might be different, but us Aussies still like to adapt/renovate/design our home to our needs and landlords aren't always up for it. This forum is a great reminder of our penchant for making a house our home. There is also the big factor of owning your home sometime in the future and then when you stop earning you don't need to hope that the landlord doesn't up the rent, or suddenly want you out to realise his/her capital gain. 
business wise you are much better off renting and letting the tax man help buy into property via investments if you want to own property. 
At the end of the day when things go south you want some assets you can sell and no liabilities that others want their money from.

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## Marc

> Um...so what's the alternative?

  Not an easy question to answer and tied to individual situation. 
And no individual action will change the structure of the market.  However knowing the truth about what you are doing is a good first step. 
The rest depends from where you values are. Do you want to build an income producing property portfolio? You can but you will probably be hard pressed to do so with a large liability hanging from your neck.
Or you can accept the fact that you are paying to keep your home and settle in one place and are not really interested in the long slog that is to build a portfolio. No harm there.

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## autogenous

Your car is a depreciating asset and has running costs.  Your house is a depreciating asset and it has running costs. 
You land is an appreciating asset, most of the time. 
The thing is, many investors have an obsession with property, but only low interest rates have made property look barely profitable.  Wait till the RBA starts bumping interest rates at 1% at a time, and they do, and they will.  The only thing that has appreciated assets is the RBA lowering interest rates. 
Western Australia has seen a rapid correction, especially in mining towns where rents dropped a $1000 a month plus already. Imagine buying recently there. 
For many investors housing a freaking disaster especially when the tenants wreck and vandal the house which requires a complete gut and renovate.   

> +1
> At least someone here is aware of the facts regarding assets.
>  A car is an asset, and it has costs associated with it: Running costs and repairs, loss due to depreciation over time. Liabilities like damage run up the costs and can wipe out the asset, like if you crash it into a Ferrari. lol.
>  If everyone thought like you, they'd leave the cars in the street with the keys in the ignition hoping the liability disappears. lol. It's an asset!
>  Sure, cash is a means of exchange. To exchange one asset for another. So take some asset out of your wallet, pass it to the vendor and walk away with goods (which are also probably an asset until they are consumed, like a stock of beer)

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## autogenous

I had a mate when I was young who bought an older house. He rented rooms to 3 mates.  He paid his house off in 5 years. Home owner at 24 years of age. 
Many homebuyers now are only half owners with their partner.  They don't buy a house on their own.  The home is bought with a double income stream.  So why would youth expect they buy a house with a single income revenue stream? 
My parents bought a house with a 30 year mortgage on a single income stream.   We had nothing for decades.  We went know where.  We didn't eat out. I could count the visits to Hungry Jacks on one hand until I was 16. 
Do you ever see Land developers buy houses as an investment? No  Some investors are reaping such poor returns, its ridiculous.

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## autogenous

Young kids with $50 p/m mobile phone plans.  Thats frikkin insane!!!  $600 there 
Then they have a $70 p/m high speed connection at home  $840 there

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## Micky013

Go and apply for a home loan with one of the big 4 banks on one income and see what you get. Be lucky to get a one bedroom apartment 2 hours from the cbd

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## OBBob

> Go and apply for a home loan with one of the big 4 banks on one income and see what you get. Be lucky to get a one bedroom apartment 2 hours from the cbd

  LOL ... are there a lot of one bedders two hours from the city?  :Smilie:

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## Marc

Plenty ... they are called the shearers hut. Cheap to rent too ...  :Smilie: 
Everyone has something to say, and that is OK.  
Why would anyone go to any of the 4 without a couple of million dollar portfolio is anyone's guess but hei ... it's a free country!

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## Micky013

Haha bit OTT i know but i cant see single income loans being handed out

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## Marc

I could show you a few. All it needs is a good deposit a few years of steady income and a honest mortgage broker.

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## Micky013

All i know is i struggled on 55k to get anything over 200k and even with a second 100k income could only get 480k

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## PlatypusGardens

> Haha bit OTT i know but i cant see single income loans being handed out

  
We got ours on my partner's income alone.

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## PlatypusGardens

> Not an easy question to answer and tied to individual situation. 
> And no individual action will change the structure of the market.  However knowing the truth about what you are doing is a good first step. 
> The rest depends from where you values are. Do you want to build an income producing property portfolio? You can but you will probably be hard pressed to do so with a large liability hanging from your neck.
> Or you can accept the fact that you are paying to keep your home and settle in one place and are not really interested in the long slog that is to build a portfolio. No harm there.

  
I didn't say anything about a portfolio....just saying...in general....what alternatives are there to getting a loan and paying it off.
part from renting.

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## Marc

Mm ... you are probably asking the wrong question.  
As an individual, you either rent or you buy or you live with your parents ... well, you could also get a job as a ground keeper and get 'free' accommodation I suppose. Not for everyone.    
What happens is that the person or family own housing is shown into a false light. Instead of what it is, an expense,  everyone is shining on it this aura of businesslike mumbo jumbo, with big words and pompous adjectives worthy of Donald Trump.  
But it is not, you are humbly paying off what you want to keep for yourself because that is your choice and your personal reasons. The same way you carry you car with all it's expenses because you rather drive than taking the bus.
 In your case the ute is a tool of trade so bad example and since you work at home, you can consider part of your home a useful income producing asset and may be you don't have the bus as an alternative means of transport.  
But if you were 18 and single I would say save like mad the years you are at home with mum and dad, buy an investment you are comfortable with and when you have to move out rent a cheap place and keep on saving and buying more investments. And keep your eyes out for new things. I was so fixated with property that I missed Google and gold ... win some lose some.

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## PlatypusGardens

> Mm ... you are probably asking the wrong question.  
> As an individual, you either rent or you buy or you live with your parents ... well, you could also get a job as a ground keeper and get 'free' accommodation I suppose. Not for everyone.    
> What happens is that the person or family own housing is shown into a false light. Instead of what it is, an expense,  everyone is shining on it this aura of businesslike mumbo jumbo, with big words and pompous adjectives worthy of Donald Trump.  
> But it is not, you are humbly paying off what you want to keep for yourself because that is your choice and your personal reasons. The same way you carry you car with all it's expenses because you rather drive than taking the bus.
>  In your case the ute is a tool of trade so bad example and since you work at home, you can consider part of your home a useful income producing asset and may be you don't have the bus as an alternative means of transport.  
> But if you were 18 and single I would say save like mad the years you are at home with mum and dad, buy an investment you are comfortable with and when you have to move out rent a cheap place and keep on saving and buying more investments. And keep your eyes out for new things. I was so fixated with property that I missed Google and gold ... win some lose some.

  I'm still not quite sure what the hell you're talking about to be honest. 
Guess you bought a lot of properties back in the day and you're getting a good returrn from them, or something.
Good for you,  
Many people never have that option, or the know-how (I'm sensing a lot of smugness from your posts to be honest "Missed out on Google and gold" as if, you could have had that too) but whatever. 
I still think it's harder today to "get in to property" than it was 20, 30, 40 years ago.  
"Live at home and save money"
Sure, that's all good and well if there are good/decent paying jobs around.
I spoke to a kid the other day who's been looking for some sort of permanent job or apprenticeship for the past 2.5 years.
All he can get is labour hire jobs here and there.
A week here, 3 days there....he spends more time doing inductions than actually working.   
Hm 
Do people who keep buying investment properties make it harder for first home buyers?
I have no idea.
All I know is that there are a lot of hard working kids, as well as those who want to be hard working but can't get a job, who would love to own their own home.
But they can't.  
For whatever reason.    :Unsure:

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## Marc

No smugness at all PG, just a generic answer to a generic question, nothing personal. 
I say keep an eye out for new things. (wasn't even directed at you) 
Google was a new thing and I dismissed it as another .com bubble. Gold value shot up in 1970 and again in 2000 and I missed it both times because i was not looking at the right things. 
There are opportunities around if one is out looking for them. The one I mention are the one I experienced. Others may have catched on the organic fad or whatever else is there for them. No need to get sensitive. it's not a criticism to you nor anyone else.
I observe and I say how I see it. Many people miss out or are misled by bad information and the property one is particularly important because it's such a massive expense and it sucks up all the persons resources.

----------


## Bros

> I still think it's harder today to "get in to property" than it was 20, 30, 40 years ago.

  I believe you could be right but where is the problem? too high expectations wanting a new house, councils that require more and more from developers eg underground power I don't know.   

> Sure, that's all good and well if there are good/decent paying jobs around.
> I spoke to a kid the other day who's been looking for some sort of permanent job or apprenticeship for the past 2.5 years.
> All he can get is labour hire jobs here and there.
> A week here, 3 days there....he spends more time doing inductions than actually working.

  There are a lot of kids like that. I left school at Grade 10 and got an apprenticeship which was all that was needed then as Grade 12 kids were considered to old to be trained unlike what is wanted now. Kids who never made it at school were assured a job in the railway or councils who employed a lot of unskilled people.
I have never been to India but their railways employs a huge number of people that computers do here.
The government keeps harping on about young people getting a job or else but there are no jobs for them.

----------


## MorganGT

> Go and apply for a home loan with one of the big 4 banks on one income and see what you get. Be lucky to get a one bedroom apartment 2 hours from the cbd

   

> We got ours on my partner's income alone.

  We got the loan for our place on my income alone, and it's a fraction of what a lot of other people's income is. And it's a 4 bedroom brick house about 17kms, a 1/2 hour drive or a short walk to the station then about 40 mins by train to the centre of Melbourne.

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## Micky013

> We got the loan for our place on my income alone, and it's a fraction of what a lot of other people's income is. And it's a 4 bedroom brick house about 17kms, a 1/2 hour drive or a short walk to the station then about 40 mins by train to the centre of Melbourne.

  Im talking after gfc - if you're the same then maybe i was looking in the wrong place

----------


## PlatypusGardens

> No smugness at all PG, just a generic answer to a generic question, nothing personal. 
> I say keep an eye out for new things. (wasn't even directed at you) 
> Google was a new thing and I dismissed it as another .com bubble. Gold value shot up in 1970 and again in 2000 and I missed it both times because i was not looking at the right things. 
> There are opportunities around if one is out looking for them. The one I mention are the one I experienced. Others may have catched on the organic fad or whatever else is there for them. No need to get sensitive. it's not a criticism to you nor anyone else.
> I observe and I say how I see it. Many people miss out or are misled by bad information and the property one is particularly important because it's such a massive expense and it sucks up all the persons resources.

  
Ok, clearly some stuff is getting lost in translation here.   
You started this thread talking about how hard it is to make money on property
then went on to dismissing everyone's input, and saying you've "been ahead of the game for decades."  
so you've done ok in the property game (good for you) invested wisely, and disagree with what people in this thread call "asset and liability"  
still not sure what your beef/grief/issue is     :Unsure:        

> I believe you could be right but where is the problem? too high expectations wanting a new house, councils that require more and more from developers eg underground power I don't know.

  New house, old house, any house.
I think too  any people are tarring "young people" with the same brush = wanting everything for nothing  
Either way, I was more referring to "getting in to the property market" as in for investment purposes rather than owing one home        

> There are a lot of kids like that. I left school at Grade 10 and got an apprenticeship which was all that was needed then as Grade 12 kids were considered to old to be trained unlike what is wanted now. Kids who never made it at school were assured a job in the railway or councils who employed a lot of unskilled people.
> I have never been to India but their railways employs a huge number of people that computers do here.
> The government keeps harping on about young people getting a job or else but there are no jobs for them.

  ....but the thing is even kids who "make it at school" can't get a job.....  
...they can't even get a job pushing a wheelbarrow FFS.
All good saying that you need to study and get a well paying job (Yeh....Joe Hockey....) when there are no jobs.  
"Jobs and growth"
Easy to say as a politician during an election campaign.
Not something that can be guaranteed though

----------


## OBBob

> ...      
> still not sure what your beef/grief/issue is          
> ...

  Don't you get drawn into the game. These threads are all the same... sigh.

----------


## PlatypusGardens

> Don't you get drawn into the game. These threads are all the same... sigh.

   :Whatonearth:   :Flog Deadhorse:   :Handball:

----------


## Marc

> Ok, clearly some stuff is getting lost in translation here.

  Possible ... when a topic is emotional and lots of people with different political confessions and widely different experiences wade in each with his own agenda, clearly it is difficult to keep a straight line of thought for more than a page or two.  
I protest vehemently against government intrusion of any kind, including compulsory census and compulsory voting. I believe in small government, flat rate of tax, minimal regulation but regulation that is enforced not only for show and pretend.
The finger wagging and the blame of prices increase, against investors who need to use negative gearing in order to achieve their investment goals is pathetic, achieves nothing and is based on lies ignorance and extreme hypocrisy.
The limitation of the use of tax deductions would punish the wrong person, is dictatorial and probably unconstitutional. The funny part is that I don't use negative gearing, in fact I made my money by seeking positively geared properties in the eighties when agents took full page ads stating get the taxman to pay your investment. And I copped a lot of flack from the 'experts'. I never thought making a loss was very clever and I was right then and now. 
When popular beliefs are challenged, this is the type or responses you tend to get. You can not address them all and sometimes you may use the wrong words. not uncommon in an impersonal medium like this.
If there is one person I can say has integrity in this forum you are at the top of the list so the last person I want to offend is you.
If I inadvertently did so, I apologise.

----------


## sol381

> 

   :Lolabove:

----------


## chrisp

> They propose to legislate against a basic taxation principle that allows any business to deduct expenses from their earnings in order to exist.

  I recall several others asking, but I don't recall seeing the answer. What are the proposed changes to the taxation principle that you refer to?

----------


## MorganGT

> Im talking after gfc - if your the same then maybe i was looking in the wrong place

  It was post GFC, about 4 years ago.

----------


## Micky013

> It was post GFC, about 4 years ago.

  There you go. Must just be me and a select few that i know then.....

----------


## OBBob

> I recall several others asking, but I don't recall seeing the answer. What are the proposed changes to the taxation principle that you refer to?

  abolishing negative gearing ... and stuff ... IIRC.  :Smilie:

----------


## PlatypusGardens

> Possible ... when a topic is emotional and lots of people with different political confessions and widely different experiences wade in each with his own agenda, clearly it is difficult to keep a straight line of thought for more than a page or two.  
> I protest vehemently against government intrusion of any kind, including compulsory census and compulsory voting. I believe in small government, flat rate of tax, minimal regulation but regulation that is enforced not only for show and pretend.
> The finger wagging and the blame of prices increase, against investors who need to use negative gearing in order to achieve their investment goals is pathetic, achieves nothing and is based on lies ignorance and extreme hypocrisy.
> The limitation of the use of tax deductions would punish the wrong person, is dictatorial and probably unconstitutional. The funny part is that I don't use negative gearing, in fact I made my money by seeking positively geared properties in the eighties when agents took full page ads stating get the taxman to pay your investment. And I copped a lot of flack from the 'experts'. I never thought making a loss was very clever and I was right then and now. 
> When popular beliefs are challenged, this is the type or responses you tend to get. You can not address them all and sometimes you may use the wrong words. not uncommon in an impersonal medium like this.

  right    

> If there is one person I can say has integrity in this forum you are at the top of the list so the last person I want to offend is you.
> If I inadvertently did so, I apologise.

   Thanks...I guess  :Unsure:  
Anyway... 
I'm not offended...was just wondering what this was all really about. 
so...it's   

> The finger wagging and the blame of prices increase, against investors who need to use negative gearing in order to achieve their investment goals is pathetic, achieves nothing and is based on lies ignorance and extreme hypocrisy.

   that gets your goat?  
Just curious why you started this thread in the first place when all it's lead to (mostly) is you copping more flack....    :Unsure:

----------


## ringtail

> If there is one person I can say has integrity in this forum you are at the top of the list so the last person I want to offend is you.
> .

  Hey ! He's a landscaper. I'm a carpenter, like Jesus. I have way more integrity than him  :Biggrin:   :Biggrin:   :Tongue:

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## PlatypusGardens

> Hey ! He's a landscaper. I'm a carpenter, like Jesus. I have way more integrity than him

  
My balls are bigger 
And made from steel

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## Marc

It's government intervention that runs like a bull in a china shop. Call it live cattle export or Royal Commission in the NT or threats to negative gearing or look the other way of chinese buyers. 
The worst part is that all this things are not done based on principle, not based on personal ethical conviction, not even patriotism, but based on putting up a show to gain votes to keep their miserable jobs.

----------


## ringtail

> My balls are bigger 
> And made from steel

  Yep but you also have 3. You freak  :Biggrin:

----------


## chrisp

> abolishing negative gearing ... and stuff ... IIRC.

  perhaps he is pining for the return of TA?

----------


## Bigboboz

> an expense[/U],  everyone is shining on it this aura of businesslike mumbo jumbo, with big words and pompous adjectives worthy of Donald Trump.

  Bingo!  You have identified the word most use to represent costs rather than liability! EXPENSE! 
Anyway, I'm still keen to know if prices fall is it a loss? Come on Marc, it's a direct question for a third time!

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## Marc

If prices of what fall when and for whom?

----------


## Bigboboz

> You own home is not an asset but a liability. Fact.
> if you buy a house for 150k and sell it 20 years later at 500k you have not made a profit since you can not buy another for 150 since all have gone up. That is why capital gain tax is stealing. There is no gain, there is devaluation of the currency and there is increased demand for a limited commodity.

  Originally asked following this post. If prices had fallen in the above example, are you saying this is not a loss? 
Rob

----------


## Marc

The concept of profit and loss is relative to how you acquired the goods. 
Say you receive a house as a gift. At the time the house was worth 500,000 yet a crash occurred and your house is now worth 400,000. You can buy another equivalent property for 400,000. 
Have you 'made a loss'? Not really, the value of your property has reduced, that's all.
If you take out a mortgage for 500,000 and the price falls to 400,000, you still need to pay the bank so you are now experiencing a loss since selling your house will leave you with a debt. 
The argument against capital gain tax is that there is no gain. There is an increase in the price just like the price of petrol or bread goes up. No one can buy again at 1980 prices in order to sell at 2016 prices so the concept is flawed and the tax should be scrapped. The same way land tax should be applied equally to everyone regardless of the use of the property or number of property held. The land tax would then be a pittance and equally distributed rather than being a punishment for success.

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## Marc

> I recall several others asking, but I don't recall seeing the answer. What are the proposed changes to the taxation principle that you refer to?

  Considering that the opposition "leader" err ,coff coff, is on record saying that negative gearing must be abolished yet investors can still use positive gearing, it is clear that the puppets in front of the camera sing from a different hymn book and that some of the pages are missing. 
Taxable income is calculated as the result of your gross earnings minus your expenses incurred to earn that income. If you work for the boss the rules are slightly different than if you work for yourself but the principle is the same. Gross income minus expenses incurred to produce said income.
So if you have an ebay business and two rental properties and you make 100,000 gross nett on your business, 10,000 on one property and lose 15,000 on the other, what is your taxable income?
According to the ATO today, your taxable income is 100k + 10k - 15k = 95k, simple.
The left is screaming blue murder. Why can the rich do this? We can not !!! (Picture a picket around parliament with red flags walking in circle)
So the proposal is that the property making a loss is your tough luck. You make a loss too bad. your taxable income should be 110,000.
However every business under the sun here and o/s calculates earnings and expenditures in exactly the same way and furthermore, if earnings from this year are not enough to cover for the losses and if the 'income' is in negative territory, the ATO can today forward this losses for the next fiscal year. Fair?
May be not for you but for anyone in business that is fair.
And it is not possible to say that what one person can do with a fish and chip shop making a loss and a newsagency making a profit, can not be done by a person with a rental and a job. 
The pinnacle of idiocy for the so called leader of the opposition was to say with a magnanimous gesture that investors after being stripped from negative gearing could "still" have positive gearing ... aaaah lucky me, so he in his delusion is 'allowing' me to pay tax on my profits? How grand of him, I feel so grateful! 
May be someone else with some knowledge of how poor a compensation negative gearing is to offset a loss can post some figures for different tax brackets and show that the accountant and re agents have been lying to you for 30 years. I am getting tired.

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## woodbe

lol. Now we are talking about houses as gifts! This just doesn't get any funnier!  
Got any spare houses to give away Marc, I'll take one thanks!  :Biggrin:  
We are dealing with assets whether we live in them or not. If the value of the asset drops we have a loss. We only realise the loss if we actually sell the asset. 
Land tax is applied to any land other than your principal place of residence. They should increase land tax to claw back some of the negative gearing gift to those who are escalating housing prices and excluding the young from owning their own home.

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## pharmaboy2

Right, in other words the whole premise of the discussion is the policy of the opposition. 
umm, hang on, I'm sure the "government" was mentioned in the first page a few times....  Did you miss the whole of July Marc?  We had an election, the opposition remains so, so does changes to NG, but I'll remember when I sell my asset and get money for it, that it is in fact a liability. 
the world according to Marc

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## johnc

An asset is something we buy, if not an asset it is an expense it is not however a liability that is something you owe another person. Your house may well be a financial albatross around your neck but it is never ever a liability even if you descend into negative equity

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## Bigboboz

> The concept of profit and loss is relative to how you acquired the goods. 
> Say you receive a house as a gift. At the time the house was worth 500,000 yet a crash occurred and your house is now worth 400,000. You can buy another equivalent property for 400,000. 
> Have you 'made a loss'? Not really, the value of your property has reduced, that's all.
> If you take out a mortgage for 500,000 and the price falls to 400,000, you still need to pay the bank so you are now experiencing a loss since selling your house will leave you with a debt. 
> The argument against capital gain tax is that there is no gain. There is an increase in the price just like the price of petrol or bread goes up. No one can buy again at 1980 prices in order to sell at 2016 prices so the concept is flawed and the tax should be scrapped. The same way land tax should be applied equally to everyone regardless of the use of the property or number of property held. The land tax would then be a pittance and equally distributed rather than being a punishment for success.

  I get the argument, just not why it applies to investments.  Is your bank balance bigger than it was before?  You're not living there, so does it matter you can't buy the same again?  Investments can be constructed to pay no return, just capital appreciation, no capital gains tax would create a massive tax loop hole.  The CGT discount already does. 
At best you could argue inflation should be deducted of the gain. 
You can argue all you like that increased taxes on the rich is 'punishing success' but at the end of the day (and like it or not) they're the ones that can afford it.  My pet hate is what they spend the taxes on.  Focus should be on small government delivering the essentials, cut the bloat.  Every election both parties go out pork barrelling the marginal seats and expenses just keep ratcheting up.  Throw in some subsidies that do nothing to actually help those they're aimed at and we're on a downward spiral of deficits.

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## Marc

> I get the argument, just not why it applies to investments.  Is your bank balance bigger than it was before?  You're not living there, so does it matter you can't buy the same again?  Investments can be constructed to pay no return, just capital appreciation, no capital gains tax would create a massive tax loop hole.  The CGT discount already does. 
> At best you could argue inflation should be deducted of the gain. 
> You can argue all you like that increased taxes on the rich is 'punishing success' but at the end of the day (and like it or not) they're the ones that can afford it.  My pet hate is what they spend the taxes on.  Focus should be on small government delivering the essentials, cut the bloat.  Every election both parties go out pork barrelling the marginal seats and expenses just keep ratcheting up.  Throw in some subsidies that do nothing to actually help those they're aimed at and we're on a downward spiral of deficits.

  CGT is adjusted for inflation although only marginally. if CGT would be adjusted for the inflation in the housing market as it should, it would tax some small potential gain and be equitative. CGT as it is now is piracy. 
The only fair and equitable rate of tax is a fixed flat rate of tax. If you make 1,000 you pay 20%, 10,000 you pay 20%. Fair ... if you make 100,000 you pay 20%, fair. If you make 1,000,000 you pay 20%, fair again. I fail to see how one person has to carry another. That is what governments are there for. Collect tax and help the needy. A tapered rate of tax is not justice it's stealing, unless you consider earning more some form of personal flaw, a sin, a personality disorder that needs correcting. Perhaps you subscribe to the concept that the rich becomes rich at the expense of the poor? so Castro is your friend.
You wouldn't be alone of course, religion has been harping on that one for millennia. The concept of "affording" is ridiculous and makes overarching assumptions that do not compete the others or the tax department. And I don't think that it is debatable who actually uses more services.  
But I find it funny that the same locals who pounce on my post in the "global warming" thread waving their green and red little books are also here debating semantics without putting forward one good thought on the fallacy of negative gearing and the lies that generate it. Happy to parrot accountant's concepts and failing to see that accountants and re agents have lied to us for 30 years. 
But hei ... I don't really care if you believe your own home is an asset and enjoy debating semantics instead, and believe that the demand in the market has made you money. 
The only time you can actually make money with your own home is if the council mafia decides to change the zoning and you happen to be there and did not sell before the change to the councilors agents. then, yes then you will actually make a capital gain ... oh yea, but the CGT does not apply to home owners, they need protection from the bad rich taxes. only the fools building portfolios to be independent from welfare must be taxed. No surprises there.  :Whatonearth:

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## Spottiswoode

I dunno Marc, you seem to be arguing yourself round in circles, but you are obviously very passionate about this and sound like you are doing well financially. Good luck to you (or maybe I should say good planning)

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## woodbe

> But I find it funny that the same locals who pounce on my post in the "global warming" thread waving their green and red little books are also here debating semantics without putting forward one good thought on the fallacy of negative gearing and the lies that generate it.

  Hahahaha! 
Just like the "global warming" thread, you are ignoring the facts in front of you and spouting unsupportable opinion. 
Your car IS an asset. Money in your wallet IS an asset. Negative gearing IS impacting the ability of the young to buy houses to live in.

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## travelislife

I can't find the article but I read it a while ago.  It was a really interesting regarding the 'lottery of location'. Back in the 1970's/80's, in Melbourne to buy a 3 bedroom house it was generally pretty much the same cost across all of the suburbs in Melbourne (except for a very few minor variances such as Toorak/the inner east, large mansions), be it Port Melbourne, Hawthorn, Williamstown, Brunswick, it didn't really matter that much. It was also the era of the car and so things were pushing outwards at a massive rate. 
Come to today and the price growth difference across Melbourne based on sqm rates has huge variances based on location, which makes sense due to ease of access/amenity etc. But back when everyone was going to get around by car and congestion wasn't an issue as such a 3 bed house was a 3 bed house so people would just stay close to family/the areas they knew/work, etc. So the problem of not being able to buy a house where you grew up wasn't as big an issue. Today this is the massive issue. People can't buy where they have grown up.

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## toooldforthis

> CGT is adjusted for inflation although only marginally. if CGT would be adjusted for the inflation in the housing market as it should, it would tax some small potential gain and be equitative. CGT as it is now is piracy. ....

  
the current method discounts the amount tax is payable on by 50% to do that - to compensate for inflation and the time the "investment" was held.
prior to the current method tax was payable on the full amount with adjustments for inflation and time held. 
now you could debate that CPI is rubbish, which it is, cause it doesn't take into account housing. 
CG hasn't occurred in housing because the owners have improved the business. The CG has occurred because of speculative demand.

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## Bros

Sums it up pretty well https://barefootinvestor.com/the-rea...rs-are-making/

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## Marc

Yes, some words of wisdom for the ones getting started but that has nothing to do with the business of investment. And if the author has never seen couples buying a rental that pays for itself before saddling themselves with a liability that sucks most purchase power out of them, he has not been around much.     

> The CG has occurred because of speculative demand.

  Sorry Tool, but how do you define "speculative demand"? and how is it different from just plain old demand?

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## PlatypusGardens

> Sorry Tool,

  Pretty sure his name isn't Tool     :Rofl5:   :Rofl5:   :Rofl5:

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## Marc

*Yes, well, sorry Toooldforthis but I always read your name as Tool-for-this so abbreviated Tool, only now I see that it is too-old-for-this ... haha. So can I call you too old?  ... may be TOFT is better   
Table 4.3: International comparison of taxation regimes*  Interest tax deductibility Capital gains tax Land tax Investor Tax on imputed  Indirect tax rate    Owner Investor Owner Investor Owner Investor Negative gearing Depreciation rent on new houses (%)  Australia no yes no half rate no yes yes yes* no 10  Canada no yes no half rate yes yes yes* yes    France no yes no no* limited limited limited yes no 20  Germany no no no* no* limited limited yes yes no 16  Neth'nds yes na na na yes yes na no yes* 19  NZ no yes no no limited limited yes yes no   Sweden yes yes limited limited yes yes yes no    Switz. yes yes yes yes yes yes no yes* yes   UK no no limited yes limited yes yes no no   USA yes yes no yes yes yes limited yes no    
So the good old US of A has the dreaded speculative capitalist negative gearing also on your own home. Oh my .... and so does Sweden and Switzerland ... double oh my ... I thought Sweden was sort of socialist leaning. They have seen the light !  :Smilie:  And what's with the Netherland  n/a ? 
I wonder how good old Cuba is doing. After 50 years of trashing the housing sector with confiscations and  lunatic dreams of equality, they are now opening up to speculators from overseas ... oops, I mean investors (bastards) from o/s buying into a restricted and more expensive market. it's going to be interesting. A market to keep an eye out for.

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## phild01

So while chasing the deposit for a complete home package is hard to do, if possible stay at home and chase for a block of land, later land a house on it.  That way you have a chance of securing the 'asset' that gains the greater value.

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## pharmaboy2

> now you could debate that CPI is rubbish, which it is, cause it doesn't take into account housing.

  It does, it includes rent.  That's usually considered housing. It doesn't take into account interest rates because interest rates should effect rent, being a substantial input into investor costs.   
If if you just think about the problem, it doesn't take more than a minute to realise rent is the best measure - eg my cost of housing is rates only ATM, but by next year I will have a substantial mortgage - now how do you know what those funds were used for?  Answer, you don't, so mortgages aren't a good surrogate for housing costs across the economy

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## Marc

I bought houses for $60 to 80,000 in the eighties rented for $150 a week or therabout. 120,000 to 150,000 in the nineties rented for 130 to 160 a week. paid 240k in 2004, rented for 280 a week. 
Last year bought for 800,000 rented for 500 a week. 
The consumer index does not include the cost of buying a property because it is just a political tool. Anything that falls outside the very narrow bell and that is politically inconvenient is left out even if it is the price of onions.

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## Bros

> So while chasing the deposit for a complete home package is hard to do, if possible stay at home and chase for a block of land, later land a house on it.

  Not always possible. I get on better with one of my kids when we live apart even thought it is the same town.

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## OBBob

> So while chasing the deposit for a complete home package is hard to do, if possible stay at home and chase for a block of land, later land a house on it.  That way you have a chance of securing the 'asset' that gains the greater value.

  Or build a Tiny House.   :Biggrin:

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## toooldforthis

> It does, it includes rent.  That's usually considered housing. It doesn't take into account interest rates because interest rates should effect rent, being a substantial input into investor costs.   
> If if you just think about the problem, it doesn't take more than a minute to realise rent is the best measure - eg my cost of housing is rates only ATM, but by next year I will have a substantial mortgage - now how do you know what those funds were used for?  Answer, you don't, so mortgages aren't a good surrogate for housing costs across the economy

  yes fair enuff. I was being a little glib; lots of ways CPI is off the mark tho. 
but... 
it is pretty well accepted by researchers that rents are mainly driven by what people can afford to pay/wages.
then comes supply/demand.
mortgage interest rates don't really come into setting rents. tho owners like to try and put up rents when mortgage rates go up, I never see them offer a reduction when they go down.

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## chrisp

> I never see them offer a reduction when they go down.

   :No:  
Now look what you've done!  That's exactly the sort of left-wing, greenie-inclined, Castro-loving thinking that Marc has been campaigning against.  It's hard enough of multi-property owning landlords to make a really decent, well earned, over taxed profit without some radical lefty-leaning anti-capitalist suggesting that they could even think about lowering rents.  How dare you!!!! 
I very much doubt that you'll be receiving a Christmas card from Marc this year.   :Smilie:

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## PhilT2

> Now look what you've done!  That's exactly the sort of left-wing, greenie-inclined, Castro-loving thinking that Marc has been campaigning against.  It's hard enough of multi-property owning landlords to make a really decent, well earned, over taxed profit without some radical lefty-leaning anti-capitalist suggesting that they could even think about lowering rents.  How dare you!!!! 
> I very much doubt that you'll be receiving a Christmas card from Marc this year.

  You forgot to mention the lizard men and the Agenda 21, UN socialist plot for world domination.

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## phild01

> Or build a Tiny House.

  Those shows are a bit of fun to watch.

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## OBBob

> Those shows are a bit of fun to watch.

  Ha ha, I know... but actually there are a growing number of young people putting a Tiny House on their parents block to save for a larger house.

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## phild01

> Ha ha, I know... but actually there are a growing number of young people putting a Tiny House on their parents block to save for a larger house.

   Seems a sensible idea to me :2thumbsup:

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## Marc

> yes fair enuff. I was being a little glib; lots of ways CPI is off the mark tho. 
> but... 
> it is pretty well accepted by researchers that rents are mainly driven by what people can afford to pay/wages.
> then comes supply/demand.
> mortgage interest rates don't really come into setting rents. tho owners like to try and put up rents when mortgage rates go up, I never see them offer a reduction when they go down.

  Prices of property don't go up or down according the the price of money. The cost of rent relates to first of all offer and demand. Second the cost of the property.  
The push to increase rent comes most of the time from the RE agent who has an obligation as an agent to keep the rent inside the market. If it falls behind it is much harder to catch up. 
Interest rate increases may seem as a good excuse to increase rent but is mostly irrelevant to someone who has the property paid off. 
Most owners are well away that a $20 increase is a gamble that if makes the tenant leave will make a loss of one month that takes a year to recover. Not worth it the best of times.  
No one would offer a reduction in the rent to an existing tenant but it is very common to keep the rent unchanged for long periods of time whilst the interest goes down. The cost of keeping a rental is not limited to paying interest, and goes up even for the one who has no mortgage, so interest rate again is no true indication of nothing much at all, mostly the state of the economy. Low interest is a shot economy. Add to that a boom in building due to the state needing money and releasing land like mad, and you have the perfect recipe for run out cost of expenses yet lowest interest ever.

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## Marc

> So while chasing the deposit for a complete home package is hard to do, if possible stay at home and chase for a block of land, later land a house on it.  That way you have a chance of securing the 'asset' that gains the greater value.

   Yes and no. A block of land in an old suburb is an unproductive investment. Unless you can rent the land. A new development is sometimes a golden opportunity and the one buying before houses go up experience real value increases or true 'capital gain'. 
Kids living at home whilst saving for their own place is not for everyone. And that has no relation to interest rates or negative gearing, not even positive gearing  :Smilie:

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## Bigboboz

> CGT is adjusted for inflation although only marginally. if CGT would be adjusted for the inflation in the housing market as it should, it would tax some small potential gain and be equitative. CGT as it is now is piracy. 
> The only fair and equitable rate of tax is a fixed flat rate of tax. If you make 1,000 you pay 20%, 10,000 you pay 20%. Fair ... if you make 100,000 you pay 20%, fair. If you make 1,000,000 you pay 20%, fair again. I fail to see how one person has to carry another. That is what governments are there for. Collect tax and help the needy. A tapered rate of tax is not justice it's stealing, unless you consider earning more some form of personal flaw, a sin, a personality disorder that needs correcting. Perhaps you subscribe to the concept that the rich becomes rich at the expense of the poor? so Castro is your friend.
> You wouldn't be alone of course, religion has been harping on that one for millennia. The concept of "affording" is ridiculous and makes overarching assumptions that do not compete the others or the tax department. And I don't think that it is debatable who actually uses more services.

  Marc, are you going soft?  Even a flat percentage would lead to an inequitable outcome of some paying more than others!  Would have thought you'd suggest a flat rate dollar amount everyone pays, employed or not!  If they can't pay they're bludgers. 
Seriously, a flat rate of what you earn will lead to people on higher incomes paying more taxes, so as per your earlier statement they're being punished.  If you are actually ok with your flat percentage comment then you're only arguing the scale of the 'unfairness' if you're arguing against marginal tax rates not the concept of paying more. 
Concept of affording is not ridiculous, I definitely have more spare cash than my sister despite paying more tax than her because...drum roll...even after tax I earn more than her! Rocket science stuff!  Sure people's circumstances differ, more or less kids, health issues etc but a flat percentage tax doesn't solve that either. 
Rob

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## PlatypusGardens

Money sucks

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## Bigboboz

> Money sucks

  Don't shoot the messenger!  Even without money we'd need to find a way to divvy up resources... 
Even without personal ownership you would still need to have a way to do the same. Still going to get winners and losers leading to conflict...

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## PlatypusGardens

> Don't shoot the messenger!

  wasn't directed at you.....just a general statement. 
Actually it's not money that's the problem, it's greed
Bloody humans, we think we're so evolved and clever.
All we do is want want want. 
No other animal carries on like that.
They just "exist"    :Sigh:        

> Even without money we'd need to find a way to divvy up resources... 
> Even without personal ownership you would still need to have a way to do the same. Still going to get winners and losers leading to conflict...

  
See above

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## Marc

> Marc, are you going soft?  Even a flat percentage would lead to an inequitable outcome of some paying more than others!  Would have thought you'd suggest a flat rate dollar amount everyone pays, employed or not!  If they can't pay they're bludgers. 
> Seriously, a flat rate of what you earn will lead to people on higher incomes paying more taxes, so as per your earlier statement they're being punished.  If you are actually ok with your flat percentage comment then you're only arguing the scale of the 'unfairness' if you're arguing against marginal tax rates not the concept of paying more. 
> Concept of affording is not ridiculous, I definitely have more spare cash than my sister despite paying more tax than her because...drum roll...even after tax I earn more than her! Rocket science stuff!  Sure people's circumstances differ, more or less kids, health issues etc but a flat percentage tax doesn't solve that either. 
> Rob

  An inequitable outcome of some paying more than others? So as it is now we all pay the same? 
I am not sure what your point is. This is mine:  *Individual income tax rates (residents)*  *Financial year 2016-17*[4] Taxable income Tax on this income Effective tax rate  1 – $18,200 Nil 0%  $18,201 – $37,000 19c for each $1 over $18,200 0 – 9.7%  $37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000 9.7 – 21.9%  $80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000 21.9 – 30.3%  $180,001 and over $54,547 plus 45c for each $1 over $180,000 30.3 – less than 45%   
In plain english. If one earns $40,000 a year he will pay approximately 10% tax.
If one earns $80,000 he will pay 22 % overall tax
At 180 he pays 30%, 
at 360k he pays 38% overall tax and at 1,000,000 he pays a whopping 43 or 44%
That is direct percentages not marginal tax.  
Do you think that such is an "equitable" scale?
Of course it is not.
And if I tell you that 50% of those paying tax pay zero tax because they take it back in benefits, the scale is even more inequitable. 
Affordability is a concept that has no place in calculating a rate of tax. To say that the one on one million can "afford" to pay more makes assumptions that should not be made just like saying that the one on 80k can not "afford" to pay more. Tax should be a mathematical calculation, a flat rate with no consideration of individual circumstances in order to be fair. otherwise it is a competition of who cries the loudest. 
The only fair personal income tax is a plain flat rate of tax without any deductions possible of any description. 
We are talking mathematics here right? No arguments possible. 
Will it ever be implemented? Of course not. Political suicide.

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## chrisp

> An inequitable outcome of some paying more than others? So as it is now we all pay the same? 
> I am not sure what your point is. This is mine:  *Individual income tax rates (residents)*  *Financial year 2016-17*[4] Taxable income Tax on this income Effective tax rate  1 – $18,200 Nil 0%  $18,201 – $37,000 19c for each $1 over $18,200 0 – 9.7%  $37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000 9.7 – 21.9%  $80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000 21.9 – 30.3%  $180,001 and over $54,547 plus 45c for each $1 over $180,000 30.3 – less than 45%   
> In plain english. If one earns $40,000 a year he will pay approximately 10% tax.
> If one earns $80,000 he will pay 22 % overall tax
> At 180 he pays 30%, 
> at 360k he pays 38% overall tax and at 1,000,000 he pays a whopping 43 or 44%
> That is direct percentages not marginal tax.  
> Do you think that such is an "equitable" scale?
> Of course it is not.
> And if I tell you that 50% of those paying tax pay zero tax because they take it back in benefits, the scale is even more inequitable.

  I beg to differ! 
I'm actually quite happy to pay tax according to the progressive tax scale.  The more I earn, the more I can afford to contribute - and do - to the good of society. 
The only beef I have is those how artificially structure their tax affairs to join 'those paying zero tax' when they actually have a significant income.  The government's comment at most people claiming NG tax concessions are on less than $80k is nonsense.  They are on less than $80k _taxable_ income because they have structured their tax affairs as such! 
If the system needs changing, it should be all the concessions that should go first.

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## Marc

:Rofl5:

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## woodbe

Yep, that is called Progressive Taxation. 
What it means is that those of us that earn a better than basic income get to support those that don't. As it happens, that is something I have been contributing for my entire working life and I have no problem with paying extra to support those who are less well off. 
It doesn't mean all of my above basic income is taxed away, just some of it.

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## ringtail

Just to really fire it up how about we discuss what people get paid. See the ABS knucklehead gets over $700k pa. lawyers, dentists, doctors, corporate types, all get paid, as opposed to earn, excessive monies. I generally don't have an issue with high income recipients getting smashed by tax because most get paid well and truly above the odds for their jobs and they are also generally useless at living in the real world.  
Go.  :Biggrin:

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## chrisp

> Just to really fire it up how about we discuss what people get paid. See the ABS knucklehead gets over $700k pa. lawyers, dentists, doctors, corporate types, all get paid, as opposed to earn, excessive monies. I generally don't have an issue with high income recipients getting smashed by tax because most get paid well and truly above the odds for their jobs and they are also generally useless at living in the real world.  
> Go.

  I wouldn't let what others earn worry you.  In my opinion, as long as they pay a fair share of tax, then there isn't any real concern. 
I do take your point, that some seem to get money easier than others - it isn't a fair world. 
Anyhow, having lots and lots of money doesn't necessarily make someone any happier.  And speaking of being out of touch with the real world, look at Marc carrying on about how he thinks that he is being hard done by!   :No:

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## Micky013

> I wouldn't let what others earn worry you.  In my opinion, as long as they pay a fair share of tax, then there isn't any real concern. 
> I do take your point, that some seem to get money easier than others - it isn't a fair world. 
> Anyhow, having lots and lots of money doesn't necessarily make someone any happier.  And speaking of being out of touch with the real world, look at Marc carrying on about how he thinks that he is being hard done by!

  True that! As long as my kids have what they need and an all round fun time growing up im happy to have a bit less. Money is def not what life's about.  
Cant take it with you....

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## SilentButDeadly

Money is a necessary evil. Few of us are not tainted by it or our desire for it. Me included.  
Fortunately...my relationship with it doesn't seem to matter much in the grand scheme of things. 
I'd be happy with a flat rate of tax...33% on all wholesale and retail consumption (except Australian red wine). No income tax. No company tax.  How would that rate for a hippie fiefdom? 
Ours is not to reason why. Merely to point and giggle.

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## ringtail

Oh I so want to rant on this fine Friday  :Biggrin:

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## Marc

Interesting replies yet predictable. Some of you seem to be suited for social work, or charity work, may be missionary work. Good for you, however people that way inclined usually abstain from value judgment. 
I am perfectly content with where I have position myself and have some appetite left for climbing to the next step. I believe this to be a very healthy attitude.  
The so called 'progressive" taxation is all but progressive, rather regressive for the individual exposed to it. I have listened to thousands of people's opinions on this when I used to run personal development courses. The concept of having to pay more percentage of income as you earn more leans heavily on people's mind and creates resentment and the idea that it is not worth pursuing a career, apply for a higher position or work overtime. If you have never heard someone saying that it is not worth working overtime since you pay so much more tax, you don't live in Australia. 
Nowhere is this more evident than in Sweden. Perhaps PG can comment on this. 
A friend of mine went to Sweden for a conference and stayed in a very expensive Hotel yet was served cold fish as breakfast since no one worked in the kitchen outside standard hours. Too much tax. (No social workers in the kitchen there.) 
Any type of work regardless of occupation is measured by the time it takes to perform by the person doing the work. Employed, self employed, independent professional or businessman, everyone measures his effort with the clock and the calendar. 
And everyone works out in his mind how much time he needs to dedicate to work in order to have x amount of time off work and still have money to keep up his lifestyle. This is where the best definition of 'rich' comes from: The richest man is the one that can stay without work the longest without changing his lifestyle.  
So a taxation system that taxes our time higher and higher the more time you dedicate to work is unjust and creates the assumption that there is something wrong with working more and therefore earning more, and that is that much better to earn less and take a paycut on your lifestyle. Anti progress, regressive, anti prosperous, it is the wrong message all along. And it shows.  
Anywhere you ask questions about income and prosperity you get the same replies. It is wrong to earn more, rich people are evil, those getting paid more do not deserve it are morons out of touch, no one is worth that much and other stereotypes.  
I used to ask this questions in my courses all the time. How much is it OK for a person to earn? Note did not mention what this person did, just how much is it OK ... and the predictable answers came thick and fast. 
Is it ok to earn $50k? Sure! how about $100k ? yes ... 200$? wow, that's a lot but still may be ok ... 500k? wow, go away that is too much! ... so how about one million? Aaaaaah that is OBSCENE! no one is worth that much .... etc etc 
The interesting part is not to judge the mindset that produces such replies, but rather analyse and try to revert what leads a person to think that way, a way of thinking that works against that person's progress and wellbeing.  
But hei ... this is not my blog and I was only interested in venting my disappointment at the proposal of blocking investors from legitimate tax deductions, an action that would make Venezuela and North Korea proud.

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## PlatypusGardens

What kind of job is worth $500K/year......? 
(and why)

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## ringtail

I try and make the distinction between "earn" and "gets paid" for there is, IMO a massive difference. One could never say that the head of the ABS, the PM, Clive, or just about any other rich person actually earns their money. Like back breaking, hole digging, hammer swinging "earning" honest money. Most richy riches have shat on nearly everyone they have come into contact with in order to build their empire, that's life. I'd like to put the PM or Clive on the end of a shovel barrow mixing concrete in the sun for a day and pay him $20/hr. Then they would see what earning money is really like. Every polli and head of dept is overpaid at least $100k and most times $200 or $300k overpaid. CEO's, well, a pox on all their houses. There is an honest days pay for an honest days work then there is bloat, rort, jobs for the boys, secret handshakes and all the rest. I'm most certainly anti union and pro capitalism but most definitely anti white and blue collar wealth building at the expense of others. However wealth building is done, it must be honest, hard, gut churningly difficult and benefit others on the way.

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## woodbe

> The so called 'progressive" taxation is all but progressive, rather regressive for the individual exposed to it.

  Well, Marc. I have a solution for you.  Antigua abolishes personal income tax - News - JamaicaObserver.com   

> ST JOHN’S,  Antigua (CMC) – Prime Minister Gaston Browne  yesterday announced that, effective April, personal income tax will be  abolished in its entirety. 
> .. 
> “The cost of collecting PIT (personal income tax); the difficulty of  enforcement; and its unfairness, with most of the self-employed not  paying or not paying their fair share; make it sensible to remove the  PIT from our books,” said Browne who is also finance minister.

  Definitely sounds like your type of PM

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## Marc

Well, that Antigua news sounds a bit like giving up and not abolishing out of a justice principle, a bit like the GST on ebay purchases under $1000. Not cost effective.  
A just and sound tax system is the base for a good economy and good sustainable growth. Resentment against those who succeed and labeling all those who earn more than us crooks and overpaid is not conductive to anything positive for self or community.  
Pay structure for high ranking executives is usually tied in with performance either of shares or productivity of the company, and like a salesman on commission can be rather high. But what is high? And who decides? Many times a CEO gets paid based on a contract even if he did not perform. Clearly the contract was crap, a bit like when you quote a job too high because you don't want to do it and you get it anyway. 
Judging others on what we think they are paid or what we think they should be paid is nonsense and has a severely negative influence on the person. 
As far numbers, $500,000 a year is not very high in real terms. Any hard working GP can earn that, most specialist earn more than that, and so do Barristers and some solicitors. Marketing managers and purchase managers both can get those salaries and more since their job is linked to either earnings or savings for the company. Most CEO of any medium size company will have that salary, and bigger companies pay several millions to attract the right person. No one puts a gun to the board's head. They pay that because it is cost effective. If they could pay less let me assure you that they would pay less. Some business owners earn that figure many times over.  
To say that the CEO of Westpac should go and shovel manure for a day is nonsensical. We are not in the middle ages where the kings sits on the throne because of lineage. Everyone gets to his or her position through personal effort. Like it or lump it. Sure we are all aware of what political favours are and backroom deals. So? that is how things work in western society. Do you think that the east has the solution? Then Russia is your place to be. No corruption everyone is equal ... 
For those living in the west, the best you can do is celebrate other people's success rather than resent it or use the intellectual crutches of denigrating them for some illconcieved sense of ethics or moral on the line of money is evil or money makes you bad. Talk to someone involved in fraud prevention in the ATO. He will tell you who is the person most likely to defraud the system. You may get a surprise. 
No one that achieved a higher position in the payscale got there by believing that there is something wrong with it.

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## PlatypusGardens

I still think everyone could be equal without the need for it to be like Russia or other communist places.  
The CEO on half a mill/year wouldn't have a car to drive, clothes to wear, furniture to sit on if it wasn't for low paid workers.    
I don't hate rich people.
Good on 'em for going to school and learning stuff which gets them a job that pays them a lot of money.
It's the system that is flawed. 
Just look at what happened in Italy a few years back when the garbage truck drivers went on strike.
The lowest of the low on the scale of jobs, yet, without them, crap piled up in the streets and they were back in the dark ages.  
Doctors, nurses, ambulance drivers, police and firefighters (to mention a few) are severely underpaid, and deserves a lot more than any "boss" sitting in an office looking at a computer screen with numbers, IMO. 
.....solicitors.....charge $1000 to send a letter to another solicitor who charges their client the same to respond.
I've seen some of these $1000 letters....they're not worth it, trust me.   
and....
Don't get me started on politicians and their benefits and pension
Spend a couple of years pissing people off and stuffing everything up, then retire happily.   
Anyone saying there's no overpaid jobs/people out there, really needs a reality check and think about who is doing the heavy lifting in society.
(Pssst, it ain't the guys in suits.)   :Wink:

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## sol381

> I try and make the distinction between "earn" and "gets paid" for there is, IMO a massive difference. One could never say that the head of the ABS, the PM, Clive, or just about any other rich person actually earns their money. Like back breaking, hole digging, hammer swinging "earning" honest money. Most richy riches have shat on nearly everyone they have come into contact with in order to build their empire, that's life. I'd like to put the PM or Clive on the end of a shovel barrow mixing concrete in the sun for a day and pay him $20/hr. Then they would see what earning money is really like. Every polli and head of dept is overpaid at least $100k and most times $200 or $300k overpaid. CEO's, well, a pox on all their houses. There is an honest days pay for an honest days work then there is bloat, rort, jobs for the boys, secret handshakes and all the rest. I'm most certainly anti union and pro capitalism but most definitely anti white and blue collar wealth building at the expense of others. However wealth building is done, it must be honest, hard, gut churningly difficult and benefit others on the way.

  agree 100%, especially the first sentence..

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## Bigboboz

> An inequitable outcome of some paying more than others? So as it is now we all pay the same?

  My point is using a flat percentage say 20% still has higher earners paying more.  If you're on $40k you pay $8k in tax, if you're on $100k you pay $20k.  $20k is greater than $8k but you're fine with that.  So you're ok to pay more just not proportionately more? Feels like semantics. Either you think everyone pays the same dollar amount or you're accept higher earners pay more.  I know with the current system the percentage changes but the outcome is the same, earn more pay more.  In fact I may be paying more tax than you even though after your capital gains you're netting more than me. Would you call that a fair outcome?   
I get your point that after paying tax you can't buy the same but it's an investment, is your bank balance greater than before? If yes then you made a profit and you pay tax.  Conversely, make a loss on sale, write it off against other income. 
Besides, if the government suddenly dropped the current margin system and put in a flat system, I'd earn more but so would everyone else in my tax bracket and as soon as we all go out to buy a house (home or investment) because we're all now "richer" prices would jump to what we can afford and the only winner would be the seller.  So I'm no richer. 
Which is one of the reasons I hate subsidies.  Want to make something more affordable, do something on the supply side not the demand side. 
Rob

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## Marc

Mm ... earn more pay proportionately more, sure. 
That is what a flat rate is. One rate for all. Everyone in the same tax bracket no exceptions no subsidies, no deductions, nothing. 
Flaaaaaaat _________________ rate of tax.  :Smilie:  
What will the rate need to be to be revenue neutral? Not too hard to work out. Take total income tax, add all personal income and work out what is the percentage required. 
But it will never happen because it means the lower income will actually need to pay tax, and the higher earner will pay less yet will not be able to make any deductions so depending on circumstance he may actually pay more. 
But it's the only way to tax, everything else is social engineering and plain wrong.  
As far as what should other people earn, it's a moot point. Just as pointless as stating that houses are too expensive. It is offer and demand that determines the price of housing and it is offer and demand that determines the salary of an executive or the remuneration of a professional.  
So if someone is so useless and bloated and overpaid, why are the directors agreeing to pay him? They can hire someone else cheaper. Why not? A person can fool the hiring panel once, not all the time. 
The letter for $1000 is the same as the 10 minutes consultation with the specialist at $600. What about that operation at $35,000? Offer and demand. Unless there is coercion mafia style, we have nothing to complain about. It's the cost of living in a western country. Many go overseas for dental and cosmetics. Othes go and retire in Portugal. Offer and demand.

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## woodbe

So the people who are struggling on a minimum wage will pay more, and those well off will pay less. 
Predictable. Throw rocks and the poor and reward the rich. 
Already happens with all their negative gearing deductions etc. and their tax haven antics.

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## Bigboboz

> Mm ... earn more pay proportionately more, sure. 
> That is what a flat rate is. One rate for all. Everyone in the same tax  bracket no exceptions no subsidies, no deductions, nothing. Flaaaaaaat  _________________ rate of tax.

  Rich  still end up paying more with Flaaaaaaaaat rate of tax so I don't  understand why you're fine with that.  Apparently paying more than  someone else is theft isn't it?  Marginal rates just modify the concept of a flaaaaaaaat rate. Still pay more on higher income in either.

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## PlatypusGardens

> As far as what should other people earn, it's a moot point. Just as pointless as stating that houses are too expensive. It is offer and demand that determines the price of housing and it is offer and demand that determines the salary of an executive or the remuneration of a professional.  
> So if someone is so useless and bloated and overpaid, why are the directors agreeing to pay him? They can hire someone else cheaper. Why not? A person can fool the hiring panel once, not all the time. 
> The letter for $1000 is the same as the 10 minutes consultation with the specialist at $600. What about that operation at $35,000? Offer and demand. Unless there is coercion mafia style, we have nothing to complain about. It's the cost of living in a western country. Many go overseas for dental and cosmetics. Othes go and retire in Portugal. Offer and demand.

  
Rubbish. 
It's not like there's not enough solicitors and "specialists" of any kind.
We're not living in Asterix' village with one druid, one blacksmith, one fishmonger....   :Rofl5:    
Some things are the way they are because "they've always been that way" and nobody protests and questions why.

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## Marc

> Rich  still end up paying more with Flaaaaaaaaat rate of tax so I don't  understand why you're fine with that.  Apparently paying more than  someone else is theft isn't it?  Marginal rates just modify the concept of a flaaaaaaaat rate. Still pay more on higher income in either.

   Ha ha Bob, it goes like this:
If you earn 80,000 a year you pay 20% tax that is = 16,000
If you earn double 80k, that is 160,000, you pay double right? so should pay 32,000 right? Wrong you pay 48,000 or 30%.
That is theft.
Oh yes. and if the person earning 80k sells a house that allegedly made 100,000 capital gain he pays 10,000 in CGT
If the person that earns $160k a year sells the same house that allegedly made the same amount of "gain" he ( because he is a bastard) pays $24,000 in CGT.
If the same house that made the same "gain" is sold by someone earning $18,500 a year ... he pays NO capital gain TAX! (because he needs your assistance) 
A flaaaaat rate would guarantee that everyone pays the same rate. Not the same amount, that would be wrong but the same RATE.
Now tell me that our tax system is "equitative" !

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## Marc

> Rubbish. 
> It's not like there's not enough solicitors and "specialists" of any kind.
> We're not living in Asterix' village with one druid, one blacksmith, one fishmonger....     
> Some things are the way they are because "they've always been that way" and nobody protests and questions why.

  Not really PG, a lot of solicitors charge very little when they start and a lot of them struggle to make a clientele for a long time, and the same goes for a lot of other professions. I remember going to an Ophthalmologist in Haberfield that had just opened that took straight medicare. He actually bulk billed. 
A friend of mine that finished his degree in the Solicitors Admission Board, works half day pro bono, I went to a cardiologist once that charges like a roaring bull yet I noticed pensioners at the reception desk did not pay a cent. Specialist send letter of solicitation to GP all the time because they don't have enough patients, I used a newby solicitor for conveyancing for years. At the end he wasn't "new" anymore but still charged me a $600 flat rate.
I worked in a case with a solicitor that visited an inmate in Silverwater that charged the inmate $10,000 for one visit, and that was a long time ago.
Offer and demand is inevitable and no profession has a guarantee of payment.

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## pharmaboy2

Medical specialist fees are set, some by Medicare and the gap is set by their college or AMA.  It creation isn't supply and demand because people don't shop around - if a GP thinks they overcharge the pensioners, the GP will recomend someone else.  It's very close to a monopoly pricing system, where said specialist thinks they are worth x$ and charges x$. 
there is very little internal competition within various medical specialties. You are either in a speciality where a million p.a. Is the expected wage or you expect half that or less.  The downside is, the high paying specialities attract applications from those that think that's important (and are high performers).  It's also a 12 to 15 years of training that sorts them out as well.

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## Marc

You don't know what you are talking about.
The college has no power to set anything at all and neither has the AMA.
GP's can bulk bill of not, specialist can bulk bill or not. It's their choice and their call. How much they charge is also their call. Sure there are similarities and that is because of offer and demand.

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## woodbe

> Ha ha Bob, it goes like this:
> If you earn 80,000 a year you pay 20% tax that is = 16,000
> If you earn double 80k, that is 160,000, you pay double right? so should pay 32,000 right? Wrong you pay 48,000 or 30%.
> That is theft.

  That is not theft. What you are leaving out is that low income earners are on the tax threshold of $18k. High income earners get the same threshold. The more you earn, the more you pay. Even those scumbags pushing up housing prices and getting a tax discount. The top 10% of earners pay 50% of the country's income tax. Guess what, if we give them Marc's big flat rate discount then everyone else probably including Marc will have to pay MORE TAX! 
And if Marc is in the top 10% then good luck to him and stop whinging. Pay up  :Biggrin:

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## Bigboboz

> Ha ha Bob, it goes like this:
> If you earn 80,000 a year you pay 20% tax that is = 16,000
> If you earn double 80k, that is 160,000, you pay double right? so should pay 32,000 right? Wrong you pay 48,000 or 30%.
> That is theft.

  Your system ignores affordability.  Not sure if you don't understand the concept of affordability or if you just don't care.     

> Oh yes. and if the person earning 80k sells a house that allegedly made 100,000 capital gain he pays 10,000 in CGT
> If the person that earns $160k a year sells the same house that allegedly made the same amount of "gain" he ( because he is a bastard) pays $24,000 in CGT.
> If the same house that made the same "gain" is sold by someone earning $18,500 a year ... he pays NO capital gain TAX! (because he needs your assistance)

  Nope, if the guy earning $18.5k made a $100k gain on selling his investment (if it's an investment it doesn't matter if it's a house so lets call it what it is) he would be in the tax bracket for people earning $118.5k.  So he pays less tax than the guy earning $160k who also made a $100k on his investment but he still pays tax. 
In your world of no CGT the guy on $18.5 pays no tax.  Now that's theft!

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## Marc

> Your system ignores affordability.  Not sure if you don't understand the concept of affordability or if you just don't care.     
> Nope, if the guy earning $18.5k made a $100k gain on selling his investment (if it's an investment it doesn't matter if it's a house so lets call it what it is) he would be in the tax bracket for people earning $118.5k.  So he pays less tax than the guy earning $160k who also made a $100k on his investment but he still pays tax. 
> In your world of no CGT the guy on $18.5 pays no tax.  Now that's theft!

  Correct. My bad ... 80+100= 190 tax bracket / 160+100 = 260k tax bracket, 18 + 100 = 118 tax bracket. 
The point is that each pays a different amount of tax related to what they earn in a completely removed activity. The sale of the property has no relation to the person earnings so why is the tax different according to the person's pockets? 
If the state wants to consider inflation in the property market a windfall of $100,000, (an aberration in itself) that windfall is the same for the one earning nothing and for the one earning a million and should pay a flat rate of tax since the bank account of each of this hypothetical recipients of the windfall has no relation to what is being taxed.  
 So it is OK for a tax on selling a property to be proportional to earning that are completely removed from the sale of the house but it is not OK to take into consideration income when it is a loss as it is with "negative gearing". 
You can not have it both ways.
What is very clear from this thread is the high level of resentment against those earning more than you. It is a sad reflection of our society that at the same times tries to sell a facade of "I don't care about money" ... ha ha yea right!  :Smilie:

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## woodbe

> The point is that each pays a different amount of tax related to what  they earn in a completely removed activity. The sale of the property has  no relation to the person earnings so why is the tax different  according to the person's pockets?

  Bunk! 
You have an income, and if you sell a property, it adds to your income. If you have been negative gearing, you have been avoiding tax on your income, now you want to avoid the tax on the result? 
You can not have it both ways. 
Are you two people or one? You have one tax return, and it shows all your income.

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## Marc

> The top 10% of earners pay 50% of the country's income tax.

  Now we are talking. So do you think that is right? 
It is not. A flat rate of tax would see everyone paying the same percentage and the tax load would be spread over a larger base. If you add to that a ban on any deduction, the percentage would be lower than it is now. It's just mathematics without any confounded notion of pandering. 
Sorry did not see your previous post. Very useful by the way. So if I am one and the same when I sell and must add to my income, why am I not one and the same when I am making a loss? That is what the advocates of ban on negative gearing are saying. It is tax avoidance right?
You logis has no logic.

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## chrisp

Marc, It's very confusing trying to work out exactly what you are trying to argue in this thread.  All I can work out is that you feel that you should pay less tax but you seem to be struggling to make a coherent argument to support your wish.   

> What is very clear from this thread is the high level of resentment against those earning more than you. It is a sad reflection of our society.

  If anything, it seems to me that it is YOU that is putting yourself up as some sort of tax martyr. 
No one is holding you back - earn as much as you want. Some may resent it, but so what? 
However, you also need to contribute to society according to your capacity to contribute. You seem to be resenting this.

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## woodbe

> Now we are talking. So do you think that is right? 
> It is not. A flat rate of tax would see everyone paying the same percentage and the tax load would be spread over a larger base. If you add to that a ban on any deduction, the percentage would be lower than it is now. It's just mathematics without any confounded notion of pandering.

  So you are suggesting that high income earners with all the bells and whistles get a massive tax discount, and those that struggle are going to cop a massive tax increase. How nice of you!    

> Sorry did not see your previous post. Very useful by the way. So if I am one and the same when I sell and must add to my income, why am I not one and the same when I am making a loss? That is what the advocates of ban on negative gearing are saying. It is tax avoidance right?
> You logis has no logic.

  If you are buying property, you are a speculator. You are hoping that the value goes up and you become rich. You want the rest of the taxpayers to help you get richer faster, but you want to pay less tax. How nice of you! 
Are you aware that we are a community, a society? We have a large variety of people in our community. Some are smart, some are highly intelligent, some are suffering from many causes, some are pretty low intelligence, some have a variety of disabilities. Those of us who do well need to help those that don't. Apparently, you don't think that is a good idea. How nice of you! 
Big discount for high income earners would be paid by the rest of income earners, that would be the 90% of income earners. Talk about kicking those that are already down. Let them eat cake!

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## Bigboboz

> Correct. My bad ... 80+100= 190 tax bracket / 160+100 = 260k tax bracket, 18 + 100 = 118 tax bracket. 
> The point is that each pays a different amount of tax related to what they earn in a completely removed activity. The sale of the property has no relation to the person earnings so why is the tax different according to the person's pockets? 
> If the state wants to consider inflation in the property market a windfall of $100,000, (an aberration in itself) that windfall is the same for the one earning nothing and for the one earning a million and should pay a flat rate of tax since the bank account of each of this hypothetical recipients of the windfall has no relation to what is being taxed.  
>  So it is OK for a tax on selling a property to be proportional to earning that are completely removed from the sale of the house but it is not OK to take into consideration income when it is a loss as it is with "negative gearing". 
> You can not have it both ways.
> What is very clear from this thread is the high level of resentment against those earning more than you. It is a sad reflection of our society that at the same times tries to sell a facade of "I don't care about money" ... ha ha yea right!

  I don't have a problem with negative gearing. I have a problem with the market distortion that is created by different lending terms for different investment asset classes.  There is no other investment asset class with similar terms that you can leverage as high or cheaply as property.  Throw in the capital gain discount that lets you halve your tax and you got the perfect set up for price speculating. If you make money from the price rises, tax man halves your tax, lose money you get the full offset.  
Why would you go for an investment that yields income vs price speculation?  If they removed CGT all together, there would be plenty of companies that would pay zero dividends, just a combination of reinvestment and share buy backs. 
So you don't think affordability should factor into the tax system?

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## Marc

Yes, when logic fails bring out emotional calls. 
Tax should be a proportion of your earnings, the same proportion for all earnings. If you make $1000 a year you should contribute to society even out of principle even when that contribution may appear to have not much weight.  Because you are correct, we are in a society that has communal expenditures. Everyone uses them, everyone should pay. Each in his own capacity. No exceptions. If you earn $1000 pay out of principle, if you earn $1,000,000 pay just the same. 
The government is fumbling in the dark, does not know if it goes left or right and is grasping at any opportunity to make headlines. No mandate, lost a heap of seats and M.T a labour at heart is pretending to be all things to all people.  
My point in case you missed it is that deduction of expenses incurred to produce an income is a legitimate deduction. Negative gearing is a made up expression to promote precisely that, and is not tax avoidance unless you want to call tax avoidance deducting the running cost of a business truck against the income generated. 
If one year your business does not make a profit, you have a loss, zero income and a loss to be used next year. ABC of tax. 
Yet when it comes to properties, emotions run high. "Speculators" push up prices? Nothing illegal in owning more than one property. Unless we get Castro here, it is legal and proper. 
Just like complaining that Google and Apple don't pay their "fair" rate of tax. What is fair? There is no legislation defining fair. Apple and Google pay what they are legally obliged to pay. And do not pay what they are not supposed to and legally allowed not to 
If the government is too dumb to legislate properly too busy donating money to alternative energy scams or corrupt overseas government, that is too bad. No different with proeprty investment. If it is a problem then it should be illegal to own more than one property. That will be the day! ... until then, the rules are clear for any business be it a mortgage broker a fish and chip shop or a bunch of rental properties.   
As far as all the add on arguments, I did not bring them up you guys did. 
I am just replying.

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## Bigboboz

> Marc, It's very confusing trying to work out exactly what you are trying to argue in this thread.  All I can work out is that you feel that you should pay less tax but you seem to be struggling to make a coherent argument to support your wish.   
> If anything, it seems to me that it is YOU that is putting yourself up as some sort of tax martyr. 
> No one is holding you back - earn as much as you want. Some may resent it, but so what? 
> However, you also need to contribute to society according to your capacity to contribute. You seem to be resenting this.

  Completely agree. No one is asking the rich to be thrown into jail or hung till dead.  A higher tax rate doesn't make them poor all of a sudden. Defending the current system doesn't mean we resent the rich. 'Rich' is a relative scale but I would put myself in the 'rich' category and I don't resent myself nor the tax I pay. 
I resent a lot of the government expenditure on well meaning but ultimately pointless things and marginal seat pork barrelling but not the concept of a marginal tax rate.  Coming back to affordability.  Seems you resent poor people for being poor. Sure some are poor because they're slackers but plenty are due to circumstance or it's just the phase they're in and later they'll be 'over' contributing to the tax pool.  Right incentives need to be there for people to be productive contributors but a marginal tax rate is not what's holding people back from being successful and it's not punishment nor theft. 
When I was at uni and worked part time, I contributed sweet f all to tax, now heaps.

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## Bigboboz

> Yes, when logic fails bring out emotional calls.

  Hearing a lot of emotion from you when it comes to paying tax.  Emotional pressure point...

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## Bigboboz

> Yes, when logic fails bring out emotional calls. 
> Tax should be a proportion of your earnings, the same proportion for all earnings. If you make $1000 a year you should contribute to society even out of principle even when that contribution may appear to have not much weight.  Because you are correct, we are in a society that has communal expenditures. Everyone uses them, everyone should pay. Each in his own capacity. No exceptions. If you earn $1000 pay out of principle, if you earn $1,000,000 pay just the same..

  Seriously, do you get the concept of affordability or do you just not care?    

> Yet when it comes to properties, emotions run high. "Speculators" push up prices? Nothing illegal in owning more than one property. Unless we get Castro here, it is legal and proper. 
> Just like complaining that Google and Apple don't pay their "fair" rate of tax. What is fair? There is no legislation defining fair. Apple and Google pay what they are legally obliged to pay. And do not pay what they are not supposed to and legally allowed not to

  Housing is different to other asset classes because people have to live somewhere.  If you don't like the price a shares, don't buy them.  Doesn't impact you.  Don't like the price of a housing? Suck it up, you have to live somewhere.  Of course house prices are going to be an emotional topic for many. No mystery and completely rational.

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## Marc

> Completely agree. No one is asking the rich to be thrown into jail or hung till dead.  A higher tax rate doesn't make them poor all of a sudden. Defending the current system doesn't mean we resent the rich. 'Rich' is a relative scale but I would put myself in the 'rich' category and I don't resent myself nor the tax I pay. 
> I resent a lot of the government expenditure on well meaning but ultimately pointless things and marginal seat pork barrelling but not the concept of a marginal tax rate.  Coming back to affordability.  Seems you resent poor people for being poor. Sure some are poor because they're slackers but plenty are due to circumstance or it's just the phase they're in and later they'll be 'over' contributing to the tax pool.  Right incentives need to be there for people to be productive contributors but a marginal tax rate is not what's holding people back from being successful and it's not punishment nor theft. 
> When I was at uni and worked part time, I contributed sweet f all to tax, now heaps.

   

> My point in case you missed it is that deduction of expenses incurred to produce an income is a legitimate deduction. Negative gearing is a made up expression to promote precisely that, and is not tax avoidance unless you want to call tax avoidance deducting the running cost of a business truck against the income generated.

  ... Nothing else.
Speculators are running up housing prices is emotional claptrap. 
Sorry missed the affordability bit. Affordability is a relative concept as with different income there are different affordability levels. 
Again, the emotional claptrap tries to pin responsibility on the easy target. If there is a problem with housing, what is the government doing with all the tax collected? Every year we break the record. How about a call to state government to build affordable housing instead of banning the greyhound industry? That would make a difference for sure!
Nee it's easier to pin it on the bad speculators.
Hopeless. 
Prices too high? Where? Sydney inner city? The Rocks? I agree! 
Try this: http://properties.mitula.com.au/cheap-property-nsw

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## Bigboboz

> ... Nothing else.

  Don't have a problem with deduction of expenses.

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## woodbe

> Speculators are running up housing prices is emotional claptrap.

  I see. Speculators are not involved in buying houses then? 
If more than one person is interested in buying a house, then the price goes up. A speculator is a person interested in buying property for future gain. 
Claptrap? I can see where it comes from.  :Biggrin:

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## Bigboboz

[QUOTE=woodbe;1024753]If more than one person is interested in buying a house, then the price goes up. A speculator is a person interested in buying property for future gain./QUOTE] 
You forgot the bit where they're not involved paying tax on those profits, sorry gains.

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## PlatypusGardens

> What is very clear from this thread is the high level of resentment against those earning more than you. It is a sad reflection of our society that at the same times tries to sell a facade of "I don't care about money" ... ha ha yea right!

  
Meh, I just think some jobs/professions are grossly overpaid. 
People always have a go at you when you say "I don't care about money"
Well....I don't, not past being able to pay for necessities like food, fuel etc.
(and beer of course)  
I'd be quite happy not having to use money.
You catch some fish, I give you some firewoood so you can cook and you give me a fish, everyone's happy.
Of course that's never going to work on a large scale.....   :Sigh:    
Australia's obsession with owning property is quite interesting.
I've had a number of people look at me funny when I say I don't have any "investment properties".....   :Smilie:

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## Bedford

> If you are buying property, you are a speculator.

   

> A speculator is a person interested in buying property for future gain.

  "future gain", are you referring to capital growth, or?

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## Bigboboz

> Sorry missed the affordability bit. Affordability is a relative concept as with different income there are different affordability levels.

  Bingo, in fact, there is a positive correlation between the two. Plus as there is pretty much a min you need to live, the relationship is not linear.   

> How about a call to state government to build affordable housing instead of banning the greyhound industry? That would make a difference for sure!

  Wow that won't cost much, who pays for that? We do, not the government, it's just the conduit. What about if it wasn't expensive in the first place? 
If taxation is such or rort on housing as it is, why not look at other investment options?

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## Marc

> If taxation is such or rort on housing as it is, why not look at other investment options?

  Ha ha, good one. I don't think I need investment advice, I am simply pointing out an area of injustice, or as it seems potential injustice since Mr Turn ball has dropped that ball a while ago. 
Source of funding for new affordable housing? Easy. Sell all housing commision properties, and pay 100% of the rent to eligible tenants. No potential for complaints...OK may be 90% 
Eliminate one massive source of rort and expenditure and invest the revenues in building cheaper housing to sell to interested parties (and exclude the bad speculators). 
Cost? should be zero if done properly, the properties will be sold not given away, just sold at cost and designed cheaper. Architects could go in a competition to do that. They love left wing projects and will come to it like bees to honey. 
Can you imagine the left up in arms if the government sells the housing commision lock stock and barrel? Revolution!

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## chrisp

> Ha ha, good one. I don't think I need investment advice, I am simply pointing out an area of injustice, or as it seems potential injustice since Mr Turn ball has dropped that ball a while ago.

  I think everyone who has been posting has been pointing out the 'injustice'.  As others have explained, housing as an investment is receiving very favourable tax treatment - to the point that it is contributing to 'housing affordability' - the topic of this thread.  
It seems that the 'injustice' that you are worried about is the possible winding back of the favourable tax treatment.  
If I recall correctly, it wasn't the LNP that put the negative gearing and capital gains tax concessions issues 'on the table', however, they too are realising that these are 'hot topics' in the community as it is seen to be a driver in housing unaffordability.  As Smurf has pointed out, the writing is on the wall - regardless of who is in government.   
With a 1-seat majority, who knows what policies will get up and what 'horse trading' concessions will happen in parliament?

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## Marc

Chrisp, for the nth time it is not a special treatment for housing. For God sake it is a basic principle of taxation that applies to any commercial transaction under the sun!

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## woodbe

> "future gain", are you referring to capital growth, or?

  Could be capital growth, future development, rent, tax minimisation, etc, or the whole lot. 
A speculator is looking to buy something that will deliver a nice future gain.

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## Bigboboz

Remove the capital gains tax subsidy/discount and no one will care about negative gearing.  The concept of negative gearing is an artificial construct and a distraction to the real issues. The discount on capital gains and the cheap leverage only achievable for property are the main issues.

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## woodbe

> Chrisp, for the nth time it is not a special treatment for housing. For God sake it is a basic principle of taxation that applies to any commercial transaction under the sun!

  Housing absolutely should have special treatment to keep the wolves at bay. They're wrecking the housing affordability for the young.

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## Marc

> Meh, I just think some jobs/professions are grossly overpaid. 
> People always have a go at you when you say "I don't care about money"
> Well....I don't, not past being able to pay for necessities like food, fuel etc.
> (and beer of course)

  Ha ha PG, that is too funny. Of course you care about money, or you wouldn't care about who earns what and how much.   :Rofl5: 
PS
Not that there is anything wrong with it ...  :Smilie:     

> Remove the capital gains tax subsidy/discount and no one will care about negative gearing. The concept of negative gearing is an artificial construct and a distraction to the real issues. The discount on capital gains and the cheap leverage only achievable for property are the main issues.

  The left will complain about anything. Remove capital gain tax discount and they will say that speculators who never sell never pay tax so they should pay "provisional capital gain tax" as they go.
I agree that captial gain should be changed. More like abolished, it is piracy!

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## Bigboboz

> Ha ha PG, that is too funny. Of course you care about money, or you wouldn't care about who earns what and how much.

  I read PG's post as a comment on inequitable allocation of resources rather than money itself.  They're related but not the same.

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## PlatypusGardens

> Ha ha PG, that is too funny. Of course you care about money, or you wouldn't care about who earns what and how much.

  
No....you're missing the point of what I said. 
When I say "I don't care about money" I meant that I don't need money to be happy.
I need money to survive, sure, we all do, but I don't need a lot of "spare cash", if you like. 
My comments on what "some people" earn and my opinion of whether it's right or not, has nothing to do with jealosy, envy or anything like that.
I just think it's wrong. 
As I said before, there are plenty of other professions out there, more vital to our society than others, who should get paid more.
The balance is not right between who gets paid what for what they do. 
Hope that makes sense as I have now explained it 3 times.    :Smilie:

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## chrisp

iirc, this was the report that prompted much discussion during the election period on this topic - https://grattan.edu.au/report/hot-property/

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## woodbe

> iirc, this was the report that prompted much discussion during the election period on this topic - https://grattan.edu.au/report/hot-property/

  
Spot on, Chrisp!   

> The interaction of a fifty per cent capital gains tax discount with  negative gearing distorts investment decisions, makes housing markets  more volatile and reduces home ownership.  
>  The two measures in combination allow investors to reduce and defer  personal income tax, at an annual cost of $11.7 billion to the public  purse. Other taxes, which often drag more on the economy than a capital  gains tax does, must be higher as a result.  
>  And like most tax concessions, these tax breaks largely benefit the wealthy.  
>  The capital gains tax discount should be reduced from 50 to 25 per  cent, and negatively geared investors should no longer be allowed to  deduct losses on their investments from labour income.

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## Marc

Aah, now we get the Grattan institute, center for left ruddist thinking. 
I would say to have a peek at this. Eyeopener!  http://www.housingfinance.org/upload...astrosCuba.pdf

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## chrisp

> Aah, now we get the Grattan institute, center for left ruddist thinking.

  Yep, it's a 'think tank' - and uses formal analysis and data to support its position.  Much preferable to the 'oh poor me' emotional arguments!  :Smilie:

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## Marc

> No....you're missing the point of what I said. 
> When I say "I don't care about money" I meant that I don't need money to be happy.
> I need money to survive, sure, we all do, but I don't need a lot of "spare cash", if you like. 
> My comments on what "some people" earn and my opinion of whether it's right or not, has nothing to do with jealosy, envy or anything like that.
> I just think it's wrong. 
> As I said before, there are plenty of other professions out there, more vital to our society than others, who should get paid more.
> The balance is not right between who gets paid what for what they do. 
> Hope that makes sense as I have now explained it 3 times.

  Sure I 'get it' PG, it was just too much to let it go.  :Smilie:  
There is a lot more to be said in relation to personal remunerations and probably a good topic for a different thread. 
There is a massive amount of bias and preconceived notions of what is right and what is wrong in relation to money and how we make it. It is no surprise that everyone has a different opinion on it. 
Suffice to say that most ideas of what is right or not are values we acquire with no much say at age 10 or less and that govern our life for our benefit or detriment without we having much say in it ... unless we actually understand what is going on inside our head.  
Most people don't get that benefit in their lifetime.

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## Bedford

> Could be capital growth, future development, rent, tax minimisation, etc, or the whole lot. 
> A speculator is looking to buy something that will deliver a nice future gain.

     

> *What is a 'Speculator'* 
>         A speculator is a person who trades derivatives, commodities,  bonds, equities or currencies with a higher than average risk in return  for a higher-than-average profit potential. Speculators take large  risks, especially with respect to anticipating future price movements,  in the hope of making quick, large gains.
> Speculators are  typically sophisticated risk-taking investors with expertise in the  markets in which they are trading; they usually use highly leveraged  investments, such as futures and options.

   Speculator Definition | Investopedia 
So how do you trade rent? 
Not everyone buying an investment property is trading, not everyone intends to sell it. 
Not everyone has to pay CGT either if they bought it pre 1985. 
BTW 1985 was when Negative Gearing was removed, 1987 it was reinstated by the once World beer drinking record holder. 
For those people against Negative Gearing, you've had 30 years to do something about............... 
I don't know why some here persist with kicking the shiet out of Marc for something that is legal and any one can do it.

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## Bros

My ears hurt.

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## woodbe

Your Speculator definition is conveniently specific for everything except property. Try this one:   

> *a person who buys goods, property, money, etc. in the hope of selling them at a profit*

  speculator Meaning in the Cambridge English Dictionary 
You don't trade rent (well, I don't think you can trade rent)  :Smilie:  
You buy an asset as a speculator hoping for a good gain. There are many options. Maybe you buy a property backed onto commercial land and know how to get it re zoned as commercial, and then rent it as a medical clinic for high rent. Or you spruce a run down joint up cheaply and put it back onto the market for a massive profit. Whatever.  
Every buyer doesn't have to be a speculator. Did I say that every buyer was a speculator? Don't think so... 
I'm happy for people to engage in negative gearing, but I think the housing market should be off limits for negative gearing. Buy a warehouse or a shop or some other commercial real estate, or some other asset class. 
It's perfectly legal to stomp on the hopes of the younger generation, and it's perfectly legal to call it out. If Marc wants to be the poster boy for crushing those hopes then I guess he can take it. He's not the only one.

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## Marc

Bias and misconception. There is no more conservative and low risk investment than property. Calling it "speculation" is just to add to the prejudice a bit more flavour.  
Anyone can do it is so true, and probably the reason it is so irritating for some.
Other people's success can be so confrontational to some because in the person's own mind it reminds them of an apparent shortfall, even if it is not real but only percieved. 
The only way out of this feeling of guilt even if completely unwarranted, is by demonising either the person having success or the occupation or the industry. 
A classic line of thought is ... "Rich people are evil ... I don't want to be like those evil people so I will not try to do what they do" or words to that effect. A subconscious sabotage of anything with a chance of success may well be the unwanted result. 
This reasoning is by no means conscious and would attract a volley of protest from those doing this sort of thinking. No surprises, the reasons are deep in the root of each person's set of values.
Such may well be the topic for another thread, maybe ...this has probably run it's course as far as I am concerned. 
Yet it was fun ... I think  :Smilie:

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## Bedford

> Your Speculator definition is conveniently specific for everything except property. Try this one:   speculator Meaning in the Cambridge English Dictionary 
> You don't trade rent (well, I don't think you can trade rent)

  Didn't think so.   

> You buy an asset as a speculator hoping for a good gain. There are many options. Maybe you buy a property backed onto commercial land and know how to get it re zoned as commercial, and then rent it as a medical clinic for high rent. Or you spruce a run down joint up cheaply and put it back onto the market for a massive profit. Whatever.

  Yes, some speculators may do that.   

> Every buyer doesn't have to be a speculator.

   

> Did I say that every buyer was a speculator? Don't think so...

  This is what you said,   

> If you are buying property, you are a speculator.

   

> *a person who buys goods, property, money, etc. in the hope of selling them at a profit*

  Then I'm not a speculator as I never sell. I don't_ hope_ either! :Biggrin:  
Selling an income producing property would be like selling your job, you'd have to be pretty stupid to do that.

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## chrisp

> For those people against Negative Gearing, you've had 30 years to do something about............... 
> I don't know why some here persist with kicking the shiet out of Marc for something that is legal and any one can do it.

   
Hi Bedford, 
As far as I'm aware there are only a few countries that allow negative gearing like Australia does - i.e. the ability to offset the loss against another income.  Most countries that have negative gearing have restrictions on this.  I suspect, but I could be wrong, that Australia will eventually amend negative gearing and/or capital gains tax concessions to be more in line with the practices elsewhere. 
I don't think anyone has suggested in this thread that what Marc is doing is illegal.  Marc has opened this thread with a fairly strong diatribe against the 'government, the 'left', the 'media', and something about 'taxation principle'.  I think that he has invited 'robust response'!  :Smilie:  
In in fairness to Marc, I do suspect that he is not purely a property speculator as, from what I can gather from his posts on the forum, he does improvement works on his properties. 
I do appreciate Marc's contributions to this forum, on construction matters, as he brings a great deal of knowledge and experience. 
If my responses have caused him offence or have been taken to be a personal attack, I apologise. 
Do I retract my views on negative gearing and capital gains tax concessions? - No.  I do believe that these are distorting the housing market and making it a playground for investors and individuals looking to minimise their income tax - at the expense of a younger generation who are being priced out of the market. 
I certainly don't consider NG and CGT concessions to be the only reason for housing unaffordability.  Also, some first buyers do have unreasonable expectations.  However, house prices in Australia do seem to be unreasonably high to me.

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## ringtail

> No....you're missing the point of what I said. 
> When I say "I don't care about money" I meant that I don't need money to be happy.
> I need money to survive, sure, we all do, but I don't need a lot of "spare cash", if you like. 
> My comments on what "some people" earn and my opinion of whether it's right or not, has nothing to do with jealosy, envy or anything like that.
> I just think it's wrong. 
> As I said before, there are plenty of other professions out there, more vital to our society than others, who should get paid more.
> The balance is not right between who gets paid what for what they do. 
> Hope that makes sense as I have now explained it 3 times.

  Agree there PG. I think a lot of people choose a profession based on potential income rather than having a passion for it. Medicine and Law are good examples. Both are meant to help people in bad times yet both profit horribly from others misfortune. The lawyers are the only ones that win regardless of outcome and the medicos likewise. Both get paid ridiculous monies whether their client lives or dies ( metaphorically or physically speaking) Both are untouchable and answer to no one regardless of competence. If you are seriously interested in helping people rather than cashing in on people's circumstances then one should work for, hmmm, lets say plumbers rates  :Tongue:  and take satisfaction that you have made someones life better or longer. Maybe you only get to play golf once a month instead of 3 times a week. There should be no prestige attached to either law or medicine. Just honour. I see that most Unis are now slashing and burning the law faculties as there are no jobs for graduates. Awesome. Just what we need, a world with less frikken lawyers.

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## Bedford

> Do I retract my views on negative gearing and capital gains tax concessions? - No.  I do believe that these are distorting the housing market and making it a playground for investors and individuals looking to minimise their income tax - at the expense of a younger generation who are being priced out of the market.

  Not sure how a capital gain concession distorts the market, CGT is only triggered at time of sale, therefore the property is not held by the "investor" anyway.   

> I certainly don't consider NG and CGT concessions to be the only reason for housing unaffordability.

  What do you consider are the other reasons?

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## chrisp

> What do you consider are the other reasons?

  There could be lots of factors.  I suspect that the FHB grants simply push up the prices rather than help as intended.  Foreign investment probably pushes up prices too.  Relaxed enforcement of foreign investment rules may be a contributor too.  Others have mentioned the relaxed lending rules, low interest rates....

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## johnc

> Not sure how a capital gain concession distorts the market, CGT is only triggered at time of sale, therefore the property is not held by the "investor" anyway.   
> What do you consider are the other reasons?

   Negative gearing does distort the market in a sense, but the discussion shouldn't centre on that it should be does it advantage the overall economy while average Joe Blow can still afford to buy a house or pay affordable rent. It is complex it involves the competing roles occupiers, investors and foreign owners have. While we may well jump on Marc his was really a "woe is me why can't I do as I want" it should really highlight to all of it is the big picture we need to see before we can assess how we fit in it and of what use certain policies are. Our priority should be that the average Australian can get a job, buy a house and save for retirement and live a reasonable life while they are doing it. Our taxation and government spending priorities should reflect that while insuring we invest enough in infrastructure for our businesses to remain competitive

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## Bedford

> There could be lots of factors.  I suspect that the FHB grants simply push up the prices rather than help as intended.  Foreign investment probably pushes up prices too.  Relaxed enforcement of foreign investment rules may be a contributor too.  Others have mentioned the relaxed lending rules, low interest rates....

  Have you considered that 40 or 50 years ago a developer could buy a paddock, survey and subdivide it (bang a peg in each corner), submit the plan to council, have it approved, then build and sell? Council or the relevant authority did the infrastructure. 
These days the developer has to do all the infrastructure so all these costs are added to the price of a house that weren't previously. 
Have you looked into bank servicing requirements? 
Just because interest rates are low does not necessarily mean a home buyer can get a loan, whilst the interest rate might be 5% the banks may only lend if you can service 8%, low interest rates are not really helping. 
Have you considered what the councils do with the rates they collect when someone demolishes a house on a 1/4 acre block and builds 6 or 8 units on it, they certainly don't add anything for the community.

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## woodbe

Ok, so I didn't mean to say every property buyer is a speculator. But, there are plenty out there.   

> Then I'm not a speculator as I never sell. I don't_ hope_ either! 
> Selling an income producing property would be like selling your job, you'd have to be pretty stupid to do that.

  There's the rub. A lot of our negative gearers don't make positive income from property until they sell it.

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## Bedford

> Ok, so I didn't mean to say every property buyer is a speculator.

  No worries.  :Smilie:

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## Smurf

> There is no more conservative and low risk investment than property.

  Which means that property investors would logically expect a lower return than other investments due to the lack of risk and being conservative.   

> Calling it "speculation" is just to add to the prejudice a bit more flavour.

  Agreed there provided that the returns are coming primarily from rent on the property.  
But it's definitely speculation if someone is buying for investment purposes and their business model relies on the capital value going up without any improvements being made to the property. Such an investor is simply speculating that the price will go up, that being the means of profit and their reason for investing in the first place.

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## Bigboboz

> Aah, now we get the Grattan institute, center for left ruddist thinking. 
> I would say to have a peek at this. Eyeopener!  http://www.housingfinance.org/upload...astrosCuba.pdf

  We don't end up at this extreme by taxing profits...

----------


## Bigboboz

> Bias and misconception. There is no more conservative and low risk investment than property. Calling it "speculation" is just to add to the prejudice a bit more flavour.

  Tell that to the yanks. Plenty there that lost a tonne of money on property.  Plus some Australian mining towns.   

> Anyone can do it is so true, and probably the reason it is so irritating for some.
> Other people's success can be so confrontational to some because in the person's own mind it reminds them of an apparent shortfall, even if it is not real but only percieved. 
> The only way out of this feeling of guilt even if completely unwarranted, is by demonising either the person having success or the occupation or the industry. 
> A classic line of thought is ... "Rich people are evil ... I don't want to be like those evil people so I will not try to do what they do" or words to that effect. A subconscious sabotage of anything with a chance of success may well be the unwanted result.

  Never come across that classic line or to that effect.  I'm sure you can find someone in Australia that thinks that if you ask enough people but are you claiming the majority are thinking this that aren't rich?

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## autogenous

Hence the astronomical private debt in Australia.   
Wait till the RBA puts interest rates up 1% in one hit.  There will be a rush to sell, partly due to many investors cant afford the debt.   

> Ok, so I didn't mean to say every property buyer is a speculator. But, there are plenty out there.
> There's the rub. A lot of our negative gearers don't make positive income from property until they sell it.

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## autogenous

People drink high tax alcohol like its bottled water.  It compounds the expenditure.  
Baby boomers were paying 14% interest rates   

> Yep, it's a 'think tank' - and uses formal analysis and data to support its position.  Much preferable to the 'oh poor me' emotional arguments!

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## phild01

I was paying 18% at one stage.

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## Marc

> .....
> Never come across that classic line or to that effect.  I'm sure you can find someone in Australia that thinks that if you ask enough people but are you claiming the majority are thinking this that aren't rich?

  Ha ha, do you think it is coincidence that from all people only you picked that one?
Behaviour is the result of choices and choices the result of values. Find out the values and you understand behaviour. And if you think people will volunteer their _real_ values you have something else coming. Most don't even know themselves.

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## autogenous

When housing fell 30% in some suburbs.  I was referring more to the mean rates.  I do remember hearing Japan had 12% rates. I was like wow, imagine if we had 12% rates   

> I was paying 18% at one stage.

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## Bedford

Historical Home lending rates for anyone that's forgotten the pain.  HISTORICAL INTEREST RATES AUSTRALIA

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## PlatypusGardens

This thread still going.....?  
struth      :Flog Deadhorse:

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## Marc

May be worth remembering too is that the 'return' of Hong Kong to China produced a stampede of Chinese buyers that duplicated the price of real estate in Sydney in the eighties and created a massive bubble through 'me too' buyers and ended in the banana republic the recession we had to have and our beloved Capital Gain Tax. Ah the memories... if only all those pesky speculators went away right?  :Smilie:

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## autogenous

With bipartisan pig trough, negative gear wasnt going anywhere.  People are happy to choke on their own tax.  But the hole that has been dug trying to fix is big, real big.  Leaders are scared to change it because the bubble will burst. 
The RBA is just about run out of tricks.  When they get to zero we will be in depression.  But negative gear wont get the blame.  Even the RBA wont talk about it too much, but the RBA director wants it dismantled. 
When the RBA gets to zero, real decisions are going to have to be made by politicians.  That is a depression. 
Billions of dollars to feed the fire, we will run out of other peoples money.  Their only choice, is increase wages, or depreciate assets to stimulate economy.  What happened to all that gold Costello sold.  We have sold most the assets. 
Just cant keep spending money we dont have,    

> Not everyone has to pay CGT either if they bought it pre 1985. 
> BTW 1985 was when Negative Gearing was removed, 1987 it was reinstated by the once World beer drinking record holder.   
> For those people against Negative Gearing, you've had 30 years to do something about.

----------


## autogenous

Advisors are putting people in the investors market who cant afford it without negative gearing.  When houses become vacant as they have done in WA. there is a desperate rush to sell investment properties driving a decline in house prices.  WA has had a decline, but not the panic of the past. 
Changing negative gearing to new homes only would drive jobs through new construction, but those like the pollies with established negative geared homes will see a fall in price on their investment as the bubble bursts on established investment properties.

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## Bros

> I was paying 18% at one stage.

   Me to.

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## johnc

> With bipartisan pig trough, negative gear wasnt going anywhere.  People are happy to choke on their own tax.  But the hole that has been dug trying to fix is big, real big.  Leaders are scared to change it because the bubble will burst. 
> The RBA is just about run out of tricks.  When they get to zero we will be in depression.  But negative gear wont get the blame.  Even the RBA wont talk about it too much, but the RBA director wants it dismantled. 
> When the RBA gets to zero, real decisions are going to have to be made by politicians.  That is a depression. 
> Billions of dollars to feed the fire, we will run out of other peoples money.  Their only choice, is increase wages, or depreciate assets to stimulate economy.  What happened to all that gold Costello sold.  We have sold most the assets. 
> Just cant keep spending money we dont have,

  While interest rates are an indicator of economic health zero rates do not mean either a recession or a depression. That measure is two periods (quarters) of negative growth. Lets not get to excited or dress things in a different cloak, the risk of housing price decline is an associated decline in confidence and less spending but it also may mean more affordable housing for those previously locked out while those in the market may experience pain or none of that may happen at all. Our overseas borrowing to fund our housing price boom is our biggest risk followed by the amount people have borrowed to own a home, there is no guarantee it will end in tears either.

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## Bigboboz

> With bipartisan pig trough, negative gear wasnt going anywhere.  People are happy to choke on their own tax.  But the hole that has been dug trying to fix is big, real big.  Leaders are scared to change it because the bubble will burst. 
> The RBA is just about run out of tricks.  When they get to zero we will be in depression.  But negative gear wont get the blame.  Even the RBA wont talk about it too much, but the RBA director wants it dismantled. 
> When the RBA gets to zero, real decisions are going to have to be made by politicians.  That is a depression. 
> Billions of dollars to feed the fire, we will run out of other peoples money.  Their only choice, is increase wages, or depreciate assets to stimulate economy.  What happened to all that gold Costello sold.  We have sold most the assets. 
> Just cant keep spending money we dont have,

  Agree with all of that

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## Bigboboz

> While interest rates are an indicator of economic health zero rates do not mean either a recession or a depression. That measure is two periods (quarters) of negative growth. Lets not get to excited or dress things in a different cloak, the risk of housing price decline is an associated decline in confidence and less spending but it also may mean more affordable housing for those previously locked out while those in the market may experience pain or none of that may happen at all. Our overseas borrowing to fund our housing price boom is our biggest risk followed by the amount people have borrowed to own a home, there is no guarantee it will end in tears either.

  Zero rates doesn't mean things are good or normal. For those previously locked out, sure their rate is lower but the denominator is higher such that the relative affordability is pretty much the same as when rates were high.  Though the given the choice I would prefer unusually high rates, because when they fall, the mortgage becomes far more manageable in terms of payments and the mortgage itself is smaller relative to your wage.  In this environment, any small increases will smash new entrants.  
Counterpoint is, I can't see rates going north any time soon. Globally they're very low in the developed economies and future prospects of future growth looks bleak.  Any growth we're seeing is from stimulus and that button can't be pressed forever. 
So good news for new owners are, rates are going nowhere but down. The bad news is you may be unemployed but hey at least your mortgage rate is low (principal component won't be!).

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## johnc

I would suggest that when (and it is when) interest rates finally get off the floor and start to rise we may well run the risk of seeing a world of pain for those carrying high debt. There is everything to suggest that low rates have been a contributing although not the only factor in the rise of capital city house prices. At the moment those that can't continue to meet repayments can sell, pay out the mortgage and move on without it hurting the banks or hitting the bad debt lists. If as in 1990 we had a run of interest rate increases, a drop in confidence and a drop in house prices as a result it can only be bad news all round. Yes I would also prefer higher interest rates and lower debt but it is a runaway train now and ultimately it is simply a matter of finding out if we derail or simply run out of steam and slow to a halt and see markets rebalance. I suspect this scenario is keeping the reserve up at night as they realise lower rates are not a magic bullet and as Glen Stevens recently pointed out governments need to invest in their economies to have them return to health, pulling fiscal levers helps steer an economy but only investment drives it. For too long the world has relied on levers, it now has to work out, economy by economy how to get things going again providing sufficient employment for those of working age so they can pay the taxes that in turn provide us with healthcare and other social services. I don't think our house prices have a solid floor at all and forced sales are grossly under reported, the banks normally go to great lengths to ensure people sell their homes before the banks do as that provides the greatest chance for the mortgagee to get out with some cash and the bank fully paid without incurring large legal bills. A fall in house prices would cause some of these sales to fall short and suddenly we would see these sales become visible in the bad debt lists. We will have to wait and see, I thought the GFC would trigger an adjustment here and was wrong, I still believe there will be an adjustment but the form it may take is far from clear. Negative gearers are probably the most exposed and the ones most likely to experience pain followed by home owners up to the necks in debt.

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## Marc

*Keynes’s arrogance and self-confidence in his ability to manage and manipulate public opinion and public policy was expressed shortly before his death in 1946.* Friedrich Hayek once recounted a conversation he had with Keynes in the immediate post-World War II period.
Hayek asked Keynes if he was not concerned that some of his own intellectual disciples were taking his ideas into dangerous and undesirable directions.     _“After a not very complementary remark about the persons concerned he proceeded to reassure me: those ideas had been badly needed at the time he had launched them. But I need not be alarmed; if they should ever become dangerous I could rely upon him that he would again quickly swing round public opinion – indicating by a quick movement of his hand how rapidly that would be done. But three months later he was dead.”_*Politicians Hear Keynes’ Defunct Voice in the Air*
In one of the most famous passages in _The General Theory_, Keynes said,     _“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”_Eighty years after the appearance of _The General Theory_, many practical men of affairs and politicians in authority remain the slaves of defunct economists and academic scribblers. _The tragedy for our times is that among the voices they still hear in the air as they corruptly mismanage everything they touch is that of John Maynard Keynes._

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## Smurf

> When the RBA gets to zero, real decisions are going to have to be made by politicians.  That is a depression. 
> Billions of dollars to feed the fire, we will run out of other peoples money.  Their only choice, is increase wages, or depreciate assets to stimulate economy.

  If we get to that point then my expectation is that we'll see government borrowing and spending if the private sector can't or won't and the RBA "printing" money to pay for it. 
Asset that gets depreciated most? Cash. 
What to do with the money? It'll go into infrastructure largely. At first via private construction firms but give it a few years and we'll see a re-emergence of the concept of big government departments with thousands of blue collar workers doing things. Might take a while but eventually I think that will happen. 
The other thing we'll see is outright protectionism. 
Looking at politics, there's a small but growing trend in this direction becoming visible. The concept of privatisation and outsourcing is increasingly questioned as is the concept of free markets. At some point that trickle becomes a flood and then it happens, likely with some "trigger" event such as a financial debacle or war. 
There's the odd random economist or commentator starting to lean this way already. The same people who 5 years ago were outright in favour of free trade and that the private sector could always do things better than government. Slowly but surely their views are shifting as it becomes apparent that the path we've been on for the past few decades is coming to an end. Even in the US there's a few starting to call for big government-funded infrastructure projects and so on, things that in the recent past were either privately done or not done at all. Borrow and spend.....

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## Marc

Small people crave big government. "A friendly dictator" would be best they say. 
Small people have small ideas. 
Big government have big ideas.  
Give me small government with stupid ideas any day of the week. We may survive a small stupid idea. We may not survive a big stupid idea.

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## Bedford

> If we get to that point then my expectation is that we'll see government borrowing and spending if the private sector can't or won't and the RBA "printing" money to pay for it.

  Is there anything left they could use for collateral? 
Maybe the Public Servants Super Funds. :Biggrin:

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## phild01

> .... and the RBA "printing" money to pay for it.

   What my worry was back in my #58 post.  Maybe the rest of the world will do the same, the US gets away with this sort of thing better than the rest of us,

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## Bigboboz

> Ha ha, do you think it is coincidence that from all people only you picked that one?
> Behaviour is the result of choices and choices the result of values. Find out the values and you understand behaviour. And if you think people will volunteer their _real_ values you have something else coming. Most don't even know themselves.

   So if you don't comment on something we can assume you agree with it? Or at least can't disagree?  Sentiment of the comments prior to your post certainly didn't align with your comment. 
I get your second point and it's very true, that said you can't then make assumptions of what people are thinking...

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## Bigboboz

> Give me small government with stupid ideas any day of the week. We may survive a small stupid idea. We may not survive a big stupid idea.

  Nice one, agree with that

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## Smurf

> Small people crave big government.

  Smart investors simply position themselves to take advantage of opportunities in the market. :Smilie:

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## Marc

> So if you don't comment on something we can assume you agree with it? Or at least can't disagree?  Sentiment of the comments prior to your post certainly didn't align with your comment. 
> I get your second point and it's very true, that said you can't then make assumptions of what people are thinking...

  The study of how values acquired early in life determine people's behaviour is very unpopular and rejected by most outright for obvious reasons. No one likes to have a mirror showed in his face. It is only the lateral thinkers the inquisitive and the successful that show interest.So I assume you must be in that group.  :Smilie:

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## Bigboboz

> The study of how values acquired early in life determine people's behaviour is very unpopular and rejected by most outright for obvious reasons.

  Seems pretty self evident that's what happens. Why was it unpopular?  
Only people I know who don't think they're like their parents... don't like their parents...still doesn't mean they're different. Then there is that odd person that you think must have been adopted or something, goes off on a tangent.   

> No one likes to have a mirror showed in his face. It is only the lateral thinkers the inquisitive and the successful that show interest.So I assume you must be in that group.

  Not sure how the second sentence links to the first?

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## Marc

> Seems pretty self evident that's what happens. Why was it unpopular?  
> Only people I know who don't think they're like their parents... don't like their parents...still doesn't mean they're different. Then there is that odd person that you think must have been adopted or something, goes off on a tangent.

  Well ... it's not as evident as "I am not like my parents" sort of thinking. Values are way more hidden and deep rooted than any conscious principle. Most of the time people are unable to make a list of the very principles that govern their life and would write down what they believe others like their principles to be. 
A fascinating subject hated by the gregarious and loved by the individualist.

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## woodbe

> Values are way more hidden and deep rooted than any conscious principle.

  For some. Just look at the people who are shown the science in front of them, but they run off to denier sites and spout nonscientific bunk. 
Like the One Nation fossil fuel guy Malcolm Roberts on Q&A the other day who denied facts presented to him by Brian Cox, a well respected scientist.  Experts and Empirical Evidence | Q&A | ABC TV

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## Marc

Sure thing. That is why I always said that those in favour or against [write here whatever you fancy] choose side way before even knowing the details of the topic. 
But you knew that. 
Uhuu ... we are now quoting Q&A from ABC ....  :Roflmao:

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## johnc

> Sure thing. That is why I always said that those in favour or against [write here whatever you fancy] choose side way before even knowing the details of the topic. 
> But you knew that. 
> Uhuu ... we are now quoting Q&A from ABC ....

   not on the turps again?  This makes no sense at all

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## Bedford

Chrisp, have you considered any of this, comments?   

> Have you considered that 40 or 50 years ago a developer could buy a paddock, survey and subdivide it (bang a peg in each corner), submit the plan to council, have it approved, then build and sell? Council or the relevant authority did the infrastructure. 
> These days the developer has to do all the infrastructure so all these costs are added to the price of a house that weren't previously. 
> Have you looked into bank servicing requirements? 
> Just because interest rates are low does not necessarily mean a home buyer can get a loan, whilst the interest rate might be 5% the banks may only lend if you can service 8%, low interest rates are not really helping. 
> Have you considered what the councils do with the rates they collect when someone demolishes a house on a 1/4 acre block and builds 6 or 8 units on it, they certainly don't add anything for the community.

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## Bedford

For those who think Negative Gearing is disadvantaging the young, consider this, 
You have two kids, lets call them Jack and Jill. 
Jack buys a house and rents it to Jill. 
Jack can then claim any costs and negative gear it if he wants/needs to. 
Jill buys a house and rents it to Jack. 
Jill can then claim any costs and negative gear it if she wants/needs to. 
When they're financially on their feet they can then buy their own houses which would be CGT free, while still getting "filthy investors" "advantages" and the rent from the first houses.  
It would be best to keep it at arms length and use a RE property manager rather than managing it privately. 
It would also be best if Jill stays on the pill or it could all turn to shiet.

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## chrisp

> Chrisp, have you considered any of this, comments?

  Hi Bedford, 
I do think that the factors that you have raised probably also contribute to the cost of housing.    
Most reports on housing affordability (or unaffordability) mention the Australian taxation incentives available to property investors.  Reports do also mention the contribution of limited land releases and the high development costs too.   I'd be interested to find out how much each factor contributes to the overall costs. 
With regards the the 'rates', in theory the high density redevelopment should actually reduce the individual rates as rates are set to bring in a specific amount of funds to the local council and are supposed to be apportioned according to property values.  If there are more properties, the individual rates should be a little lower.  I suspect that it makes little difference to the individual rates, but will increase the rates-per-square-metre-of-land for the redevelopment.

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## woodbe

> For those who think Negative Gearing is disadvantaging the young, consider this, 
> You have two kids, lets call them Jack and Jill. 
> Jack buys a house and rents it to Jill.

  Except Jack has no significant assets and he cannot buy a house because the negative gearers have pushed the housing prices out of reach. 
End of story, until the problem is resolved.

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## chrisp

> For those who think Negative Gearing is disadvantaging the young, consider this, 
> You have two kids, lets call them Jack and Jill. 
> Jack buys a house and rents it to Jill. 
> Jack can then claim any costs and negative gear it if he wants/needs to. 
> Jill buys a house and rents it to Jack. 
> Jill can then claim any costs and negative gear it if she wants/needs to. 
> When they're financially on their feet they can then buy their own houses which would be CGT free, while still getting "filthy investors" "advantages" and the rent from the first houses.  
> It would be best to keep it at arms length and use a RE property manager rather than managing it privately. 
> It would also be best if Jill stays on the pill or it could all turn to shiet.

  So Jack and Jill can both 'claim any costs'.  Where does the 'claimed' money come from?  They're both claiming tax subsidies towards the housing cost therefore it's coming from consolidated revenue i.e. tax payers collectively.  And driving up house prices overall. 
Usually Jack and Jill live with mum and dad whilst buying an investment property. 
Mr Wolf (the real estate agent) also doing very well.

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## Bedford

> So Jack and Jill can both 'claim any costs'.  Where does the 'claimed' money come from?

  It comes from a reduction in income tax payable.    

> They're both claiming tax subsidies towards the housing cost therefore it's coming from consolidated revenue i.e. tax payers collectively.

  Yes, similar to those who speculate on Superannuation and salary sacrifice into it saving income tax and reducing government revenue.    

> And driving up house prices overall.

  Got proof of that?   

> Usually Jack and Jill live with mum and dad whilst buying an investment property.

  Do they?   

> Mr Wolf (the real estate agent) also doing very well.

  So what's wrong with that?   :Smilie:

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## Marc

The anti negative gearing club, is also a member of the anti prosperity club, and the anti high salary mob and the lynch the CEO mob, the let the refugees in association, the increase company tax society and the tax-the-hell-out-of-everyone-but-me college. Ban the greyhound/horse riding/cattle industry, shut the coal generators and erect a windmill anywhere but next to my house family. 
Also the new club of the ignore-the-chinese-buying-everything-at-any-price-illegally and if you mention it you are a racist.
Lots of friendly social clubs around us.
Meantime the offer and demand fuelled by scores of overseas buyers that win every auction they attend because they blast everyone out of the market until they buy at whatever price is dutifully ignored and makes the prices go north every day. Suits me. Eventually the chinese buyers will run out of money and start selling. And may be there will be a downturn in the price? Hard to say but plausible. 
I can see many people changing affiliation and joining the church of the martyrs and the doomed and singing in chorus "why oh why has the price fallen" hymn, and "what is the government doing about it" chorus.
Will be fun to watch. 
Oh yes, the houses will be more affordable then. The question is affordable for who?

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## johnc

If we have a valid argument we can discuss its merits in a factual manner, if we don't all we have his scapegoats and strawmen. If you take out the silliness of the clubs and mobs then the above post does have a little gem, the Chinese buyer. Official figures do show a very strong presence in recent times of buying by overseas Chinese based nationals (not to be confused with Australians of Asian appearance) I do not think the Chinese are going to run out of money however Australia may cease to be an attractive place to invest in which case the possibility of an exodus of previous buyers would be an extreme reaction but more likely an absence of buyers from that sector would remove some heat. It remains the case that negative gearing, foreign buyers and low interest are all contributing to current high prices. Governments are there to smooth markets and ensure they remain in balance, the housing market is out of balance so far government has done little for fear of creating a larger problem for themselves by frightening the voting public, one way or the other though out of balance markets correct usually with some pain. In any case those that support negative gearing as a single issue without looking at all the factors of a properly functioning housing market do so out of self interest not out of national interest.

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## woodbe

> The anti negative gearing club, is also a member of the anti prosperity club, and the etc...

  Nope. 
Just leave houses off the negative gearing, let the negative gearing investors invest in non residential anything so that the young have a possibility to own their own homes. I think we have seen it said here before, but the young are being pushed out of the home market, and largely because of negative gearing. Yes, there are other reasons but if we took negative gearing out there would be more affordability for the young. 
This thread is about affordability. It has been wrenched out of the hands of our young.

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## Marc

Ha ha John, I do love your posts.
 You remind me of a Physics teacher I had who could usually find nothing wrong with my essay and so would take to correct spelling or grammar for good measure. 
Yes, I mentioned one of the main reasons for strong price increase is Chinese buyers and also Chinese RE agents who only sell to foreigners and how both are breaking the law yet no one cares to mention it. 
To ban deductions from expenses as a way to reduce the numbers of buyers is like cutting your nose to spate your face. Besides being discriminatory against one particular market it is illegal and most likely unconstitutional, it shows how all this "protest" against housing prices and the emotional use of the "affordability" adjective is all but political and in the same line as many other social engineering proposals that would distort the market with yet another ill-conceived government intervention like pink batts and school halls. 
If there is one area the government should have intervene a long time ago, say 50 years ago, it is in the ban of foreign ownership. No residency, no right to purchase. Plain and simple, but no, it's too hard, it does not look good when you go to a cocktail party at the embassy. 
It's easier to blame the locals for owning one additional property to fund retirement since they have screwed up superannuation for the nth time and still going.

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## phild01

From what I can fathom, city land values appreciate mainly due to population growth and the need to live there.  Also, a house in a city like Sydney with 5 million people has more value than if it had 2 million.  Maybe a bit like a good old oil painting appreciating in value over time because there are more people who want it.
A problem with Australia is distance between major hubs, this for many reasons.  It is hard here in Australia not to live in a big city as there is not much in between that attracts people away.  And not much spare land around the capitals, like there once was. 
If governments focused more on moving people efficiently then I think that would go a long way to improve affordability.  The NSW libs are doing the right thing getting efficient light rail to the west.  About the only sensible thing Turnbull has said recently is that a workers commute should be no more than half an hour, yet we still have an antiquated train system that gives little priority to outer suburb travellers.

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## Marc

Sure thing, anyone coming to live here in any way shape or form contributes to the price increase. Even if they don't buy ever, even if land in housing commission it ads to housing pressure and directly or by elevation pushes the price up. 
Develop smaller inland hubs and move services would be the only way to go but it costs billions and we have to keep billions to show off in foreign aid and enviro rubbish payments not to mention the Rudd debt for pink batts and flat screen tv. We can't even start serious talk about a fast train for God sake! 
One day Phil, one day we may see some sensible action. We are at this stage only hoping for sensible _talk._  We have so little expectations ... sort of given up.

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## johnc

> Ha ha John, I do love your posts.
>  You remind me of a Physics teacher I had who could usually find nothing wrong with my essay and so would take to correct spelling or grammar for good measure. 
> Yes, I mentioned one of the main reasons for strong price increase is Chinese buyers and also Chinese RE agents who only sell to foreigners and how both are breaking the law yet no one cares to mention it. 
> To ban deductions from expenses as a way to reduce the numbers of buyers is like cutting your nose to spate your face. Besides being discriminatory against one particular market it is illegal and most likely unconstitutional, it shows how all this "protest" against housing prices and the emotional use of the "affordability" adjective is all but political and in the same line as many other social engineering proposals that would distort the market with yet another ill-conceived government intervention like pink batts and school halls. 
> If there is one area the government should have intervene a long time ago, say 50 years ago, it is in the ban of foreign ownership. No residency, no right to purchase. Plain and simple, but no, it's too hard, it does not look good when you go to a cocktail party at the embassy. 
> It's easier to blame the locals for owning one additional property to fund retirement since they have screwed up superannuation for the nth time and still going.

  Overseas foreign buyers can legitimately own Australian Property, while there is some illegal activity the government is finally making a half arsed attempt at forcing the sale of those properties. In a well regulated market making sure there is sufficient supply prices should remain at certain multiples of AWOL in the outer suburbs, certain premium suburbs will always be more susceptible to price rises due to desirability and low supply. It isn't social engineering it is the opposite it is about the smooth operation of markets not one where one overpriced commodity (housing) is weighing heavily on demand for other commodities which has an impact on our current zero wage growth and sluggish economy, people simply don't have enough remaining discretionary spending to stimulate the economy.

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## Bedford

Who uses negative gearing in Australia? Search the full list by occupation - ABC News (Australian Broadcasting Corporation)   

> Recent data from the Australian Tax Office shows  2,033,901 Australians owned an investment property in the 2013-2014  financial year compared with 1,967,000 in the previous year, but the  number of people negatively gearing their property dropped from  1,262,000 to 1,218,488. 
> The ATO said total claimed losses from investment properties had fallen from $7.9 billion in 2011-12 to $3.7 billion in 2013-14.

  Tycoon has 55 homes: you pay for negative gearing | The New Daily   Negative gearing and its impact on the housing market - CoreLogic RP Data Research Blog

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## PlatypusGardens

This topic is on the news right now.
Apparently many young people will never be able to own a home.  
(Must be all those coffees they keep buying  :Rolleyes:  )   
Spoke to a mate's daughter on the weekend, living in Sydney.
She reckons they're trying to buy a place near-ish the city and can't get anything under 1.2mil

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## Bigboboz

Mortgage Tilt, I knew the concept but didn't realise there was a name for it. The phenomenon of mortgage 'tilt' and why you may never end up paying off your house 
Completely slays the comments about how tough it was when interest rates were high.  I don't envy youf of today.  Still a bunch of whiners!

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## ChloeB

''(Must be all those coffees they keep buying  :Rolleyes:  )'' - Well, we do like our coffee...  :Blush7:  :Biggrin:   Jokes aside, what mate's daughter said seems legit. I'm newb but I've researched a little bit and found this price info https://www.lifull.com.au/house/new_...ey-dist/price/...  
And silly me was dreaming about my own home in Sydney..  :Doh:

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## Whitey66

Many young people could afford to buy a home if they were prepared to give up some of their luxuries.(Yes, we've all spoilt them rotten)
Has anybody mentioned the amount of money young people spend on their phones?
Many of them aren't happy to buy an el-cheapo car or not have Pay TV, or go without several coffees or cans of overpriced energy drinks a day.
A lot of them go on overseas holidays, eat out all the time and just generally live life to the fullest.
I'm not saying that's a bad thing, but you can't have your cake and eat it too.

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## PlatypusGardens

> Many young people could afford to buy a home if they were prepared to give up some of their luxuries.(Yes, we've all spoilt them rotten)
> Has anybody mentioned the amount of money young people spend on their phones?
> Many of them aren't happy to buy an el-cheapo car or not have Pay TV, or go without several coffees or cans of overpriced energy drinks a day.
> A lot of them go on overseas holidays, eat out all the time and just generally live life to the fullest.
> I'm not saying that's a bad thing, but you can't have your cake and eat it too.

  
I know/know of quite a few "youngsters" who don't do any of that, still live at home and would love to find a decent job let alone be able to even rent a place of their own. 
I think the argument that "they spend all their money on luxury items" is a bit wrong, when in reality the ones that do have shiny cars and flash phones etc are the ones who get it paid for by the parents.  
It's not 1930 any more.
The days of taking over the family business are long gone and kids in many places are really struggling to find a job.
Whether they have an iPhone or not....

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## Optimus

You simply can't generalize one way or the other.  
Everyone is different

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## Spottiswoode

> You simply can't generalize one way or the other.  
> Everyone is different

  Yes, We are all individuals.

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## PlatypusGardens

> Yes, We are all individuals.

  
Totally

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## pharmaboy2

> Mortgage Tilt, I knew the concept but didn't realise there was a name for it. The phenomenon of mortgage 'tilt' and why you may never end up paying off your house 
> Completely slays the comments about how tough it was when interest rates were high.  I don't envy youf of today.  Still a bunch of whiners!

  Ah, he misses an important point though, especially as it applies to the younger of us - wages do indeed grow for the young, most of use reach peak earning capacity in our 40's and that isn't related to inflation but to career situation/skills etc.  even relative to the average full time male wage, I earn twice what I did when I first entered the property market, as does my wife. 
the downside of course is for people waiting untill they have families in their 30's to buy a property - they already have got close to their maximum lifetime earning potential and so the above article can apply. 
more generally on this topic, the treasurer made a good point on the 7.30 report last night - anyone who thinks one thing is the cause or will solve the housing affordability question fails to have even a basic understanding of the situation. 
thats what drives me nuts about negative gearing , nothing more than a dog whistle call to enrol the ignorant in a false cause.

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## johnc

You miss Morrisons point, nothing on its own is the cause, negative gearing is one of the ingredients, to that you could add capital gains tax but you also need to factor in overseas investors, those who buy but leave the property empty, immigration into our major cities, land release and zoning, interest rates, bank lending practices, popular suburbs, public transport access, everything feeds prices so the minute you try to pull something out of the mix by calling it a dog whistle you are doing exactly what you blame others for, trying falsely to apply a simple rule to a complex problem. If you want to call out about enrolling the ignorant into a false cause maybe you should glance in the mirror whilst sending the spray.

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## pharmaboy2

Look in the mirror? 
why?, in spite of reading cover to cover the last productivity commissions report on this subject, I have no special knowledge nor understanding of the problems complexities. 
"ignorance more frequently begets confidence than does knowledge" - Charles Darwin

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## johnc

The productivity commission concluded "Interactions between negative gearing, capital works deductions, post 1999 capital gains tax provisions and marginal income tax rates have lent impetus to investment demand during the housing boom" There is no doubt negative gearing places upward pressure on house prices and puts owner occupiers at a disadvantage to investors during a period of high housing inflation such as we have recently experienced. One should always use healthy scepticism when reading reports from the productivity commission especially in how they apply their economic modelling as it does skew some reported results. There was one issued several years ago on the wheat industry which suggested it would be of benefit to fold our wheat industry here and import all our wheat needs. The weakness in that report was the impact on world prices if you removed a major producer, Australia. Generally they do contain a lot of good research, however in this case the report doesn't support your assertion that negative gearing doesn't influence prices.

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## pharmaboy2

> The productivity commission concluded "Interactions between negative gearing, capital works deductions, post 1999 capital gains tax provisions and marginal income tax rates have lent impetus to investment demand during the housing boom" There is no doubt negative gearing places upward pressure on house prices and puts owner occupiers at a disadvantage to investors during a period of high housing inflation such as we have recently experienced. One should always use healthy scepticism when reading reports from the productivity commission especially in how they apply their economic modelling as it does skew some reported results. There was one issued several years ago on the wheat industry which suggested it would be of benefit to fold our wheat industry here and import all our wheat needs. The weakness in that report was the impact on world prices if you removed a major producer, Australia. Generally they do contain a lot of good research, however in this case the report doesn't support your assertion that negative gearing doesn't influence prices.

  That would be a strawman.  I haven't asserted that negative gearing doesn't influence prices, I have asserted that it's complicated with many influences. 
there is always 2 sides to prices, supply and demand.  You frequently hear people exclaim they are not making any new land etc, but it's a misnomer.  The lack of supply of land in and around cities is most influenced by govt regulation - you do not have strong property rights in Australia, in various states in the US, there are very strong property rights and these associate with low real estate prices - these are the states where you can purchase some farms, build a golf course and put a 1000 lots roff und the golf course and it's the developers responsibility to supply infrastructure - the local govts get their cut through ongoing property taxes rather than restricting supply and topping up their income with fees from changing zoning (the model in Australia ) 
it would also seem that australians see property as priced by the mortgage payment, so more than anything, declining interest rates have pushed real estate asset prices upwards. 
if approved new dwellings exceed population growth, growth in prices will be held down, as will making it more difficult to borrow or increasing the costs of a significant proportion of the buyers. 
however, market interference needs  to be carefully considered, eg first homeowners grant, but prices are far more precarious than people think - the GFC saw 20% drops in property prices for a few months in my city - something known by people in the market at the time but turnover was so low it didn't reflect in grooms pricing information because it bounced so quickly - nevertheless it's a lesson in how much confidence is critical. 
a precipitous drop would be very bad for the economy - it needs managed long term considered actions, not simplistic hope

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## johnc

It would seem that low interest rates are one of the dominant drivers in price increases in our major cities. Certainly caused by demand and supply because it isn't the case in regional towns. I'd agree that the biggest risk we face is major deflation of house prices, a rise in interest rates or a sudden decline in the growth rates of our cities could easily create the environment for that type of fall. Property prices and land release could be managed a lot better, I just can't see the political capacity to do that.

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## pharmaboy2

> It would seem that low interest rates are one of the dominant drivers in price increases in our major cities. Certainly caused by demand and supply because it isn't the case in regional towns. I'd agree that the biggest risk we face is major deflation of house prices, a rise in interest rates or a sudden decline in the growth rates of our cities could easily create the environment for that type of fall. Property prices and land release could be managed a lot better, I just can't see the political capacity to do that.

  Holy @@@@, was that agreement?  Lol 
when confidence is the value of an asset class any trigger that impacts confidence can cause a fall.   
The advantage of state govt land release, rezoning, approval of higher density, is it promotes new construction, improves the overall housing stock and  can be made a policy of increasing dwellings at the same rate as pop growth, and thus removes long term growth of above inflation for non inner ring suburbs as a motivator. 
i prefer rezoning and supply side because it solves a housing shortage problem at the same time a small tackling the pricing problem.   Just concentrating on negative gearing is attempting to solve he problem by cutting demand, and hoping that investors will still invest in new dwellings because of tax benefits.   This will only work if tax benefits are a driving force for investing.   
I dont think this is the driving force ; its the expectation of capital growth that drives investment plus rents that grow at wages growth rates( as opposed to inflation)

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## johnc

Pick yourself up off the floor farm nipper, I think we both accept it's complex, with prices having moved so far my fear is an economic shock could create a sea of pain but also many are locked out of home ownership and affordable rents for low income earners are hard to find in the cities.  Go back though and have a look at that post of yours I objected to, I think your last paragraph probably didn't represent your view but it was the one I locked on to.

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## Spottiswoode

...and now we have high prices for housing, there wont be many people that are willing to sell at a loss. Investors having negatively geared are not going to sell lower and lose all the capital gain they bargained on, owner occupiers wont want to go out backwards either. Sure, the banks can take back possession and sell at whatever they can get for it, but that wont be lots of sales if interest rates remain low and people can still service their debts.

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## toooldforthis

> ...and now we have high prices for housing, there wont be many people that are willing to sell at a loss. Investors having negatively geared are not going to sell lower and lose all the capital gain they bargained on, owner occupiers wont want to go out backwards either. Sure, the banks can take back possession and sell at whatever they can get for it, but that wont be lots of sales if interest rates remain low and people can still service their debts.

  won't be any choice if income drops and you can't service the debt, low interest rate or not.
plenty of people in Perth in that boat these days. 
not to mention those who are forced to change from interest only to P&I 
or if a bank says value has dropped and to maintain LVR you need to stump up some cash.

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