Deleted for attempting to subvert the word limit.

At the risk of boring lola 11:55 AM, negative gearing of property has been around for as long as I can remember (at least since the 60s) except for a brief period when the Hawke/Keating Government tampered with the rules with harmful results for renters in 1985 and quickly re-instated it in 1967.
Capital gains tax did not exist when I bought my first property in 1973 (introduced by Hawke/Keating in 1985), the house was in a dilapidated condition and the price was four times my annual salary at the time.

Who says everyone ought own their own house?

What is so wrong with leasing when the $$ numbers and regulations are stacked in favour of tenants?

From reading property owners forums, most owners would welcome long leases where tenants are reliable, especially where the tenants are prepared to take care of minor maintenance (usually specified in leases as the tenant's responsibility anyhow).

Many financial advisers recommend leasing in lieu of owning and putting the investment money to work elsewhere.

Social change (smaller households) and migration have contributed to the boom in housing that has been going on for many years. Arguably, home owners are much more prepared than investors to escalate prices because the latter expect some economic return (and yes that is taking into account the overstated benefit [or wisdom] of negative gearing).

In banking on future price inflation to cover historically low rental returns, property investors are taking very high risks, especially where these investors have been encouraged by spruikers to use the equity of their own home as security.

Although rental demand is presently high and this is reflected in property prices, interest rate hikes can easily produce a downwards spiral in demand overnight. Tenants represent a highly mobile population and there is a sizeable rump of young tenants and solo tenants who will move home or into group housing when higher interest rates have a cumulative effect on their various loans and credit card debt.

When this happens again, I think that institutional investors will achieve a greatly increased share of the market and tighter lending criteria will prevent intending home owners from entering the market.

All in all I would have to agree with the thrust of the article and say that the onus is very much on the individual to obtain informed advice and manage risks. Any government tinkering in the market however well-intended, will lead to tears as it always has done before.

Col Rouge, just a small correction. CGT was originally applied to the whole of the indexed gain. Later on, the indexing was dropped and the CGT is now only applied to half the gain. The result is similar, but the calculation is less complex.

I bought a block of land in 1980 for $16,700 and had a house built on it in 1983 for c$57,500. The house cost three and a half times the land. Victorian male average earnings were about $14,300pa in 1980.

I bought another block of land in 1999 for $88,000 and had a similar house built on it in 2001 for c$142,000. The house cost just over one and a half times the land. Victorian male average earnings were about $43,400pa in 1999.

Equivalent blocks of land in that second area now cost about $200,000. To build the same house as in 2001 would cost about $165,000. The house now costs four fifths of the land. Victorian male average earnings were about $60,000 in January 2007.

It costs less today relative to average earnings to build a house than it did c25 years ago, but the prices of decent-sized blocks of land have gone from just over annual earnings to more than three times average earnings.

There is great demand by those who want to live in flats and tiny houses with pocket-handkerchief gardens near the city. Why people do this when they could have a lovely third of an acre garden in the Shire of Nillumbik is beyond me, but it is nonetheless a fact. This demand for a limited range of properties pushes the price up. People compete for what they can afford. If they want to waste $600,000 for a two-bedroom flat because it is called an apartment, so be it.

Negative gearing applies to all investments, not just property. There is no reason for distorting the market by removing one investment from this arrangement, any more than there is a reason for banning other deductions necessary to the production of income.

The halving of capital gains tax, which also applies to all investments, is a different matter because it favours those who earn money by investing over those who earn money by working and is thus a distortion of the tax system.

Not everyone who has a mortgage has or wants a vulgar McMansion. It is not at all "irresponsible" to expect that if you have an above-average income that you can afford an average, or even above-average, home.

The big cities have, and Sydney in particular has, always attracted migrants. The idea that a growing population is a freakish aberration that needs to be stomped on is silly, Aime, and if extra people are the problem then there's only two words to say to you: bye bye!

The current government is in office because it made people feel that this aspiration was not unreasonable. Now that it appears to be unreasonable, we can be disappointed at being misled. It might be a mistake to believe that the Opposition will deliver cheaper housing without an economic collapse, but it's silly to blame people for not exercising whatever options are available to them - including a new government - toward realising their goal of affordable housing.