I think I amde a comment earlier on negative gearing.
A long time ago the government deleted negative gearing but after about
a year, perhaps two, they had to hurriedly reintroduce it because rental
accommodation all but disappeared.

because rental
accommodation all but disappeared.
Bazz,
Doesn't that show you who's paying for it all ? Do you still think it's worth having NG ?

Indi, let's just assume they removed NG and houses devalued by say 20%.

Now while this may seam to make houses more affordable, it would also come with a new set of problems.

Firstly, the banks would be come more cautious and less likely to lend to anyone who needs mortgage insurance, effectively illuminating a large percentage of buyers. They would do this as there would be less buyers over all.

So, if a person could not afford say a $320K home, borrowing $300 (very small deposit) (which is the norm today) what makes you think they would be any better off if that house was now $256,000 but they needed $51K deposit, plus legals, stamps etc and in any case, assuming interest rates remained the same, they would only be $99 a week better off. Hardly a game breaker, I would say.

So How would that be more affordable to the masses.

Add to this the laws in place now that make landlords lift their game, and all of a sudden rents would go through the roof.

Now of cause the other effect (hypothetical) is that cashed up investors, ones that now have super, unlike thirty years ago, would buy up these properties just for the rent, gaining comfort in knowing that few new houses would be built given the tax incentives were gone.

Bazz, it was for a period of 2 years and rents in most major cities increased by about 25%. I can find a link if needed.

But, by far the largest risk in removing NG is the devaluation of the property market, along with strengthening of lending criteria, as combined they would make today's affordability look like a minor glitch in ones budgeting.

Be careful what you wish for I say.

Be careful what you wish for I sayrehchtub,
The scenario you pointed out would happen if we only introduced negative gearing by itself. Of course it wouldn't work, there'd need to be quite a few othe adjustments. A set of four wheels doesn't make a car, it needs brakes, fuel oil etc. A new tax system too requires periperals such as a national service, import duties, do away with tax havens etc. None of these would favour the greed mongers but it would favour the populace as a whole. I think necessity will bring about a new tax system because even the greed mongers don't want to live in a society that's morphed from a first to a third world country.
You need to stop thinking present by thinking of the results of the past & the possibilities of the future. Only then can things be sorted out.

Indi, you and I think alike when it comes to tax, as we both are of the opinion that no amount of tinkering around the edges with our current 'often very complex' tax systemS will work in the future. I agree that what's needed is a flat tax.

But, while you say a flat tax of 20%, that still taxes the wage earner and, it hugely favors the rich, as the poor often require in excess of 100% of their income, just to survive. That's why they often loose the battle.

It's long been my view that a very small tax on money, say 2%, would be a much better system because One, the most any one individual would ever pay is two cents out of every dollar earned, from dollar one, then Spent. It would even collect the tax if the money was banked, eg, EFT payment of wages. This would effectively leave the average wage earner with a whopping $15,000 per year extra to save, spend, either way, collecting tax.

Two, this type of cash injection into the economy would do wonders for stimulating same.

Three, nobody or entity could escape such a tax because even when money is shifted to off shore tax havens, it would be taxed. In fact, there is no reason why governments couldn't legislate that any money leaving our shores (apart from share related trades) could be taxed at a higher rate.

The difference with this tax is it taxes money. Say you spend $100 at the butcher, they then pay that $100 to a supplier, the supplier pay it as part of a wage, the wage earner buys goods with it. That same $100 could change hands thousands of times every day, collating tax ever time and not placing burdens of certain sectors of the community as does the current systems.

But, I can assure those against negative gearing, remove it at your peril as you will cripple the housing industry and drive many renters over the edge, not to mention make the dream of home ownership an even less realistic dream.

No one made the point that buying an investment house to rent out is
a business, just like any other business.
A company that borrows money to extend an existing manufacturing plant
can offset the interest charges against the income from the busines.

Why should anyone running a house for rent business be discriminated against ?