Who said anything about a "big stick" approach? All I've suggested is to reduce the size of the carrot available for those who invest in existing properties, and increase it for those who invest in new property developments, or invest elsewhere. If previous trials at modifying negative gearing didn't work, then try something different. I don't expect to see any legislation outlawing particular behaviour, nor would I envisage any net increase in government revenue.

If either you or Country Gal think that you'll ever be able to tempt a significant fraction of young first-home buyers out into regional areas, then good luck to you. Though I have to say, if there was a huge rush of 20 somethings towards your favourite little country town, you mightn't entirely be happy with the result. Young people do have different desires and motivations to their elders, for all sorts of reasons. To desire to be within a reasonable distance of regular destinations is eminently sensible - the benefits of reduced car dependence are considerable.

Our generation may have more opportunities, but some opportunities are far more worthwhile than others. Trading the opportunity to own a decent house in a decent location for the opportunities to own countless electronic gizmos and jetset to exotic holiday locations doesn't seem such a great deal to me. Further, there are only so many careers that one can be truly passionate about: I consider myself extremely fortunate that I happen to enjoy a job that pays very well. My youngest sister (7 years junior) has passions that are unlikely to ever equate to a truly well-paying job (though she gave up pursuing teaching because that paid even less!), and has accepted that she'll probably never be able to afford her own home, and moves about between rental properties and Mum's house on a fairly regular basis. She doesn't complain about it at all, but there really is no good reason why someone of her intelligence and determination shouldn't be able to do well enough in life to be able to afford a place to call her own.

Yeah-Right !!

- That AFIAK(?) Keating line is a complete lie, a really old, well-worn professional lie.
______________

(Smith continued-from-previous-post...)

While negative-gearing allows for rental losses to be offset against tax, the 50%CGT discount increases net gains. Henceforth the greater investor incentive has been in seeking in short-term capital gains rather than a profitable long-term rental investment.

Earlier this year: “ANZ chief economist, Saul Eslake said landlords managed to make profits on their property investments until 2000 when the federal government introduced a 50 per cent discount on capital gains tax”
(‘Tax Office reveals $4bn cost of negative gearing’ Financial Review 20/4/07)

The well-worn idea that negative-gearing increases the supply of rental properties - is remarkable only for the fact that it almost entirely preposterous.

It is very difficult to reconcile this notion with the tax office’s largest-ever negative gearing loss & a record-low vacancy rate both occurring in the same year – last year.

A tax concession can only increase supply in so far as it contributes to investment in new construction.
As previously mentioned, you can’t increase the supply of housing without building more houses.
In ownership terms there are only tenancies & owner occupied homes. Increased investment in existing homes merely redistributes ownership among the existing stock. It decreases the rate of home ownership.

_________________________

(For comic relief)

Country Gal

says:

“If negative gearing were to be removed from property investors, we should even up the playing field a bit by also removing capital gains tax from the houses/units when sold”

So, in return for giving up a tax rort that no-one else in the market receives anyway, millionaire speculators that produce nothing can live long & prosper tax-free.
How very productive! It sends a great message to tax-payers that actually work for a living.

Country Gal continues:

“That way the investors will be in exactly the same position as owner/occupiers, which is pretty fair”.

Except that owner/occupiers don’t make capital gains. They use the proceeds of their sale to buy their next home (as seen on p,11 of this thread)

(Groundhog day again)

-MrSmith

Col Rouge says negatively-geared landlords subsidize their tenants.

Now that really takes the cake. If the rent paid by the tenant is meeting (say) 60% of the landlord's cost of holding the property, why shouldn't the tenant get 60% of the capital gain?

Is it because the landlord needs compensation for the risk of a capital loss? No, because if the tenant got 60% of the capital gain, he/she would also bear 60% of the risk of a capital loss and would therefore, by the same logic, be entitled to 60% of the capital gain as compensation.

Is it because the tenant gets the benefit of occupancy? No, because an owner-occupant gets both the benefit of occupancy and the capital gain. It might be said that the owner-occupant needs the capital gain in order to avoid higher mortgage repayments on the next home. But by the same logic, the tenant needs the interest on 60% of the capital gain to cover the higher rent on the next home. If you are an owner-occupant, it is in your capacity as occupant (TENANT) that you need somewhere to live and "need" your capital gain in order to pay for it. But an absentee landlord, by definition, already has somewhere else to live and therefore doesn't have the same "need".

The property investment industry as a dirty big secret: tenants subsidize the capital gains of landlords.

This has implications for the rights and wrongs of bankruptcy. Most individuals who go bankrupt have been tenants for some of their lives, and in that capacity have been defrauded of more than enough capital gains to pay their debts. Yet bankruptcy is treated as a sign of moral turpitude on the part of the debtor -- so much so that the debtor is temporarily barred from standing for Parliament. That the landlord who pocketed the capital gain tends to be among the "wronged" creditors adds insult to injury.

Wiz, denying investors a legitimate business expense, but expecting them to
pay taxes on profits, is surely a big stick approach. The drop in CGT was
introduced to compensate for the removal of indexing, which Smithy
conveniently forgets. A Dollar invested 10 years ago, has lost a large %
of its value through inflation. People need to be compensated, or they won’t
bother saving in the first place. That’s exactly why we have such a low
savings rate in Australia and borrow so much from overseas.

Building new homes is linked to the price of established homes and to
rents. People will do it, if its worthwhile. At the moment rents are simply
too low to justify it.

You are quite negative about your sister’s potential to own a house one
day. If she shares with a partner and they bank one wage, live off the other,
you’ll be amazed how fast they can accumulate capital. She stands to inherit
one day, our generation can’t take it with us. Just a couple of solutions,
there are many more. Stop expecting life on a plate and there are solutions,
just as we had to find them.

Daggett, State labour Govts are free to build welfare housing, Homewest
still does. They own 39’000 houses. They also help people buy their
own homes, with shared equity.

http://www.keystart.com.au/key/home.htm

http://www.dhw.wa.gov.au/404.asp

If investment was not your concern and your house value dropped, why
were you concerned? You still had the same house to live in, as a
“consumable” as Smithy calls it. Clearly houses are an investment, he
just denies it.

Yes, people are obliged to inform themselves about decisions they make
in life. If they don’t, there is a price to pay. The nanny state cannot protect
them from themselves and their own stupidity. That’s how our society
functions. If you get pissed and prang your car, don’t blame society.
The same applies to other aspects of life. There is no shortage of information
out there these days, especially with the internet. Our society gives people
huge freedoms to choose, so chooser beware.

Yabby asked "If investment was not your concern and your house value dropped, why were you concerned?"

You seem completely lacking in imagination and unable to work anything out for yourself when it is convenient not to. Everything has to be explained to you down to the finest point of detail.

If the value of my house had dropped and the values of all houses had also dropped and remained low, that would have been fine. I would have been burnt once, and once only, by having paid too much initially for my house. However, our partnership ended and we were forced to sell when the market was down. By the time you factor in all the stamp duties, estate agent's fees, conveyancing fees, bank fees etc, we had lost tens of thousands. Of course since then housing prices have escalated once more.

---

Obviously state Labor governments 'can' build 'welfare' housing, but they choose not to because they are captives of property developers and land speculators. The Housing Trust of South Australia, as I already pointed out, and you have pretended not to have noticed, catered for all levels of South Australian Society and not just desperately poor. It did not cost taxpayers a cent.

If publicly owned housing can provide for everybody without us being forced to pay to support armies of landlords, property speculators, real estate agents, mortgage brokers, etc, then it is clear that we would all be a lot better off without the private property market.

Yabby I haven't stated anywhere what I believe the correct adjustments to current government policy are - the only outcome I'm interested in is seeing housing become mode affordable for first home buyers. That may well include lowering stamp duty and/or any taxes that work against housing developers, to offset any reduction of benefits to speculators in existing stock. I've no idea where you get the idea that rents are LOW from - it was you telling me a few weeks a go that high rents were proof that the main problem was a lack of housing stock!

BTW, re negative gearing: http://www.smh.com.au/articles/2003/08/24/1061663676588.html

As far my sister's potential to own a home - you're probably right, once our parents pass on, there should be some inheritance money to go around. Given my parents are both 60, and both have family backgrounds of longevity, that should be in about 25 years, by which time she'll be over 50. Now it's true I said she's accepted she'll "never" be able to afford her home, so I suppose in 25 years' time is better than "never".

And as I said before, saving enough for a deposit is not the issue - it's the fact that mortgage payments for even very basic houses in the sort of areas she wants to live (mostly "working-class" suburbs) are already greater than her monthly wage, and her partner earns even less, having only just graduated from uni. So sure, she could always dump him and pick a partner based purely on his ability to afford a mortgage. I'll be sure to recommend that to her when I see her next.