grputland, “because that policy would cause investors to PREFER freshly developed lots, on which they could readily EXPAND THE SUPPLY of accommodation”

Investors are individuals, they choose the type of investment which suits the sort of risk and return they want.

The notion that an investment has a less attractive disposal value because it will NOT attract a tax benefit

WILL IMPACT ON THE RETURN OF THE INVESTMENT

WHICH WILL ULTIMATELY REDUCE THE VIABLE PRICE SOMEONE WILL BE PREPARED TO PAY

OR

WILL INCREASE THE RENTAL INCOME COMPONENT OF THE TOTAL INVESTMENT RETURN (HIGHER TENANT RENTS).

OR

WILL TURN INVESTORS AWAY FROM HOUSING INTO DIFFERENT OPPORTUN ITIES, MAYBE “OFFSHORE”, WHERE THE TAX POSITION IS CLEARER, THUS DEPRIVING ALL DEVELOPERS FROM BEING ABLE TO FINANCE ANY SUPPLY.

AS FOR “means no taxes on capital or income from capital (land isn't capital);”

The Australian tax acts clear state (not verbatim), land, buildings, plant and equipment are “Capital” purchases, their use is not totally expensed in the year of purchase. Value of diminution, over time, is reflected by way of depreciation allowance.
Plant and equipment attracts differing depreciation rates, varying upon the expected life (I depreciate my computers at 33% pa for a 3 year life). Buildings, are assumed 40 years and for land, no depreciation allowances is available due to the nature of its continuing existence.

Land is, however a capital investment. Not withstanding its failure to attract depreciation allowances. The “Land” component of an investment, when it is disposed of, will still attract capital gains tax liability, just as any building which stands upon it.

As for http://homepage.ntlworld.com/janusg/coe/!index.htm

Some conspiracy theory dross. Pure propaganda published by someone looking to blame the world for his own shortcomings. Not worth a brass razzoo.

Unlike you, I do not rely on quoting psychotic conspiracy economics websites for my posts,

I prefer references to tax laws, accountancy practices and the professional maxim for records to reflect “a true and fair view”. The games I model and earn a significant income from are well the beyond the “amateur night lightweight league” you “dabble” in, sparky

Wiz, if owning a second existing property was illegal, who would finance rental
homes? Not everyone wants to commit to debt for years. Many young ones now
head off overseas or interstate, or prefer to spend every last Dollar on good living.
They don’t want those commitments and ties.

I remind you that it was Govts who warned baby boomers to save, as there would
not be an old age pension for them. So they have, many have bought houses. But
us baby boomers can’t take it with us. When we fall off the proverbial perch, we’ll
pass it on to you younger lot. You’ll just have to be patient, we are not quite ready
to go yet :)

As to your criteria, of 30 minutes being “reasonable”, if people stuck to that I can’t
think of a single resource project that would go ahead and farming would have to
shut down too. Its just totally unrealistic in today’s world. If you can achieve it
fine, but don’t think it “unreasonable” if you don’t. Most mining projects are now
fly in-fly out, guys don’t see their families for weeks. People move, marry interstate
or overseas. That’s just how life pans out.

There is heaps in your claimed “middle of nowhere”. I won’t even go into that
here, except to say that some people are just so conditioned by city living, that
they are often nervous in the country and just can’t see it.

AFAIK they are already going to apartments in places like Melbourne, so I’d say
that trend will continue. It makes for cheaper living in cities, but I personally could not handle
it. All a bit like the human zoo, if you ask me, but then I’m biased. I hated city
living, when I was forced to endure it for years. I know, we are all different.

I guess it makes sense for singles, who can’t compete with couples when it comes
to purchasing a home, to purchase a small apartment, then land
is not such an issue.

Referring to the significant fraction of vacant lots and boarded-up houses in the suburbs, Yabby asks "When those 10% are full, then what?"

Fair question.

Shifting the tax burden off productive activities and onto the holding of land would encourage land owners to use their land productively or to sell it or let it to someone who will. This would help to fill in the wasted vacant lots. But even after the wasted sites were built upon, the holding tax would make property owners intolerant of vacancies and would therefore strengthen the bargaining positions of renters and buyers relative to landlords and sellers.

Meanwhile, Col Rouge's confusion continues. He writes: "The notion that an investment has a less attractive disposal value because it will NOT attract a tax benefit..."

If negative gearing is available for (say) purchases of homes that have not been previously occupied, that "notion" will NOT apply to such purchases and hence will NOT discourage construction of homes, but rather will encourage construction in preference to mere acquisition, and will therefore boost supply. Hence the dire consequences that follow from that "notion" will NOT occur.

Col continues: "The Australian tax acts clear state (not verbatim), land, buildings, plant and equipment are "Capital" purchases..." Yes, and common law clearly states that buildings are land. But so what? The LEGAL meaning of "land" is one thing, and the defining ECONOMIC characteristics of land are another: whereas capital can be produced by private effort, land cannot. But the PRETENCE that land is capital for economic purposes is useful for undercutting the case for selective taxation of land, which is why it was invented.

He then says that the land component of an investment "will still attract capital gains tax liability, just as any building which stands upon it." Correction: ONLY the land will make a "capital gain"; the building will depreciate.

CONTINUED...

...CONTINUING

The history of the doctrine that land is capital is documented in http://homepage.ntlworld.com/janusg/coe/!index.htm , which Col Rouge describes as "Some conspiracy theory dross..."

A conspiracy theorist is one who takes the Christian doctrine of Original Sin far too seriously and applies it far too consistently (and/or who accepts the implications of Darwinian natural selection concerning the morality of inherited behavioral tendencies) to the point of believing that the behavior of an organization sometimes reflects the alleged sinfulness of its founders, benefactors, leaders, or members, and who thence is led to absurd conclusions -- for example, that organizations sometimes pursue the interests of their founders, benefactors, leaders, or members at other people's expense, or that the reasons given by organizations for their actions are sometimes less than candid. Crazy stuff.

Be that as it may, it doesn't take a conspiracy to produce concerted action. It only takes a large number of people with similar interests independently responding to the same stimulus. (When you shine a light on a photodiode, why do so many electrons suddenly jump out of their orbits and start conducting? Is it a conspiracy??)

Col concludes: "The games I model and earn a significant income from..." Are these economic models? If so, do they include location as a variable? If not, how can they have anything useful to say about property values? Besides, economic phenomena take place in space and time. When economic models include at least two spatial dimensions and one time dimension, the undersigned "sparky" will take them seriously.

--- Gavin R. Putland.

How’s that old Col Rouge back there calling folks “psychotic”? Check his post. Far-out.

Its odd how negative-gearing’s so necessary that every other nation gets on just as well (usually better) without it. And that 1999 50%CGTdiscount seemed so unnecessary before then.

grputland, OK-cool, um-interesting, remember don't -get-baited.

Now Yabby,

(just quietly..)

You say: “Obviously Yuppies and Dinks will be able to outbid most single income families with kids for prime city real estate” .

We’re not talking about “prime” - prime? I’m referring to whole districts in this city where a mix of wealthy & working class, young & old lived for generations, districts that are now slowly becoming a creepy-strange, part-gentrified, highly fogey-fied boutique retirement zones with schools, local clubs, traditional small businesses & local workers disappearing. All for the for the sake of a, fruitless, fools-gold bonanza that is nothing more than a monumental game of musical chairs - perpetrated (partly) at the expense of the ‘untimely investors’ that always get burnt. Except that this isn’t just investors, dot-coms or shares this one drags the entire housing market into the frame. This one numbers the young, first-home buyers & tenants among its victims & all for no good cause other than to render a windfall for some passive speculators, landlords & well-situated oldies.

I lived in one of those districts when low-income households could rent or buy (modestly but) easily. I remember how easy & affordable the lifestyle was - not anymore. That was real ‘prosperity’ not the current variety.

“Prime”? a lot of the places being bought by well-to-do couples were traditionally occupied by blue-collar families. They’re not ‘prime’ they’re a sow’s ear passed–off as a silk purse. Big income doesn’t buy the sort of property that it used to. The mini-yupps have settled for ordinary old assets with inflated values adding the imagination that it takes to pretend its all fabulous.

And this business about buying wisely & working hard to ‘renovate & add-value’. Around here renovations more often diminish value. The serious money seeks out heritage qualities & ‘original features’.

continues…

Re. your suggestion that: “when people buy houses these days, they worry about future values” & “in general aim to make every single Dollar that they can, when they sell”..

This presumes that “most people” share the so-called aspirational attitude towards housing. They don’t.

This familiar attitude is far from universal. The seriously rich have far too much in the way of assets & income to focus on using their home to gain advantage.
Most among the working & middle classes are mainly looking for a home – a suitable place to live. Many have lived in the same district for decades, sometimes generations & they are more interested in family & liveable communities than they are in “every single dollar”.

Did anyone else notice that the term ‘aspirational’ failed to appear in the election campaign? The “A” word got the big A. Little wonder.

Finally, the notion that:

“Inflation in the housing market is only greater, in areas where there is a shortage of land, when more people decide to live in a certain area. Otherwise house prices are governed by building costs, which are pretty similar to normal inflation”… is a beauty.

Polite words can’t begin to describe that. Nonetheless:

It has been reliably observed that over the last several years beginning in Sydney, house-prices in all districts in almost every capital city have risen by between 100 and 200% (conservatively averaged). Even in areas where prices have since fallen back marginally (10-50% below peak) they are still at least double what they were several years ago.

Now according to your suggestion this would mean that somehow more people (indeed a great many more people) have decided to live in every area in almost every city. Either that or we have suffered an annual inflation rate of somewhere between 13-20% plus.

Our official population & inflation statistics indicate that this is not the case.

Daggett could have been more gracious but he is right in suggesting that you’d do better to actually follow the thread rather than cultivate a cycle of futile repetition.

-Mr Smith