Grputland ”investors subsidize themselves.”

An investor must source the income to finance a negative geared investment from somewhere (lenders require the borrower/investor to prove it).
For most small investors that subsidy is from the disposable component of earned income, typically but not always, a ma and pa who both work and whose children are flying the nest, resulting in two pay packets, fewer mouths to feed and significant disposable income.

It is this source of disposable income which finances the loan which the investor uses to buy the property.

Hence, without the investor accepting a risk of future capital gains and funding that purchase by redirecting disposable income into the investment, there would be fewer rental properties for those seeking to rent.

I would note, not all folk who rent would want to buy. People working short contracts or seasonal work in particular areas may have property elsewhere and be seeking to rent near where they work. Migrants and foreign visitors may prefer to rent before committing. Divorcees may not be in a position to but whilst their own property in being resolved (I’ve been in the migrant and divorcee category).

Only a simpleton believes that all rental tenants actually want to buy.

A Reserve Bank conspiracy is as laughable as it is misguided.

Keating, you might be right, incompetence was maybe but a symptom. The twisted malevolence of Keating, is testimony to his “blind arrogance” which resulted in “messianic incompetence”.

Billie “not our Col so perhaps the subtlety of my arguement just floats past him.”

As subtle as a brick, Billie

The reason I am not holding investment real estate is part of a personal strategy which pays better returns.
Although, I presently have enough free cash resources with which to buy a house or two. Currently I want to see how this bunch of socialist meddlers jump before risking a hosing through the very sort of anti-negative gearing twaddle which this thread is becoming.

Changing tax laws for real-estate would make it a “special case”.

“Special case” is just a bad case dressed up to look half-way acceptable.

Yabby wrote: "Nobody has argued more forcefully then I have, that every woman on this planet should have access to family planning, many would have less kids if given the choice."

Is this the same Yabby speaking, who only in the previous paragraph wrote: "I have long ago realised that its pointless to stress oneself over the things that cannot be changed. If you do, you are the loser, the world will keep spinning with or without you."?

Presumably, then Yabby's 'forceful' argument for family planning has made a difference, otherwise he would not be 'stressing' himself "over things that cannot be changed", now would he?

So, perhaps he might care some time to explain precisely what difference he has made in this regard, or hopes to make.

Or, on the other hand, how can one treat as a serious advocate for population control a person who stridently advocates the maximum possible economic growth and the maximum possible immigration in order to make it happen?

Perhaps he has realised that paying lip service to family planning is a useful means to throw others off the trail.

If so, he would not be the first.

(continuedfromabove...) be an easy course to take embark upon, but we need to weigh up the choices rationally and not have the discussion sidelined by the hysteria and spin that you keep attempting to inject into the discussion.

(Yabby, if I appear to "have got out of the wrong side of the bed today", it may be as a result of your wanton abuse of this forum. As the "Why the Ruddslide?" thread has now been archived and as you yourself are in the habit of dragging red herrings across the trail, I think I am entitled this once to briefly stray off the formal topic here in order to conclude my point about your apparent willing participation in the destruction of our planet's ecology.)

So, Yabby, please leave aside your protestations that you are only going along with what cannot be changed and tell me what you yourself would like to see happen.

Do you prefer that Australia, along with the rest of the world, go on fuelling global climatic calamity, or would you prefer that we, together with the rest of the world begin to take steps to reduce the scale of activities that you yourself acknowledge are destructive?

2. That the Housing Trust of South Australia by providing decent affordable housing for all sectors of South Australian society at no cost to taxpayers is clear proof that our housing needs can be met far more cheaply without our dependence upon a private property market. That public housing has been largely abandoned (except for a few of the most desperately poor) is a result of Governments serving the interests of property speculators rather than the public.

The fact that very limited welfare public housing programs still exist which no longer meet the housing needs of all who require it as they once did, is completely beside the point.

Smithy, the article posted on OLO today, about the Swiss housing market, makes
for interesting reading. Renting is standard practise in many countries, with lots
of benefits, like flexibility to move when changing jobs. Perhaps we are a bit
obsessed with ownership.

I see a difference in this debate, between speculators and investors. Sure some
people would be trading, but given high stamp duty, selling charges, mortgage
set up fees etc for real estate transactions compared to the stock and commodity
markets, the latter would be far more attractive to speculators. Yes there are
lots of longer term real estate investors, but they include many mums and dads
who decide to buy a second home as security for their retirement and to leave to
the kids.

The present bubble no doubt was also influenced by so much cheap and easy
money around and people encouraged to borrow by banks and non bank sources.
The present US crisis will surely change that, plus perhaps some regulations are
needed to protect some people from themselves. Other options are making it
easier for first home owners to save up for their deposit, plus other incentives.

Disallowing a business expense for what is clearly a business expense, is a fair
old intrusion into good business practise. The fact that mum and dad investors
are buying houses, seems to me to be a good thing, not a bad thing.

Dagget-cacafonix, if I have any spare words on this thread I will gladly explain
my points of view, but they are not 3 lines answers, so you are free to start a
new thread and we can argue them point for point to your heart’s content.
The best you have done so far is to try and shoot the messenger, which won’t
get you anywhere. IMHO a course in anger management would not go
astray either :)

Fact is, the world is about to change, it is not about to stop. People will still
need nickel, iron, zinc, tungsten, gas etc. I am not a gloom and doom merchant
as you seem to be.

Col Rouge wrote that "without the investor accepting a risk of future capital gains and funding that purchase by redirecting disposable income into the investment, there would be fewer rental properties for those seeking to rent."

If that's supposed to mean that capital gains are a necessary incentive for investment, it is false. Buildings, vehicles and machinery all DEPRECIATE. Investment in such things is motivated solely by current income (realized or imputed). If the purchase price were low enough relative to the rent, current income would also be sufficient incentive to invest in housing.

Col continues to obscure the point that buy-to-let investors are not equally beneficent. Those who build new housing necessarily add to the stock available "to let". Those who merely buy existing housing take it either from other investors (a zero-sum game) or from prospective owner-occupants, at least some of whom are consequently thrown back onto the rental market, counteracting the investors' contribution to "supply".

Col writes: "I would note, not all folk who rent would want to buy."

All the more reason for ensuring that tax laws encourage the supply (i.e. CONSTRUCTION) of rental accommodation.

"Only a simpleton believes that all rental tenants actually want to buy," he adds. And who is this simpleton?

Presumably responding to me, Col writes: "A Reserve Bank conspiracy is as laughable as it is misguided." The conspiracy is not even a secret. Central banks routinely cite falling unemployment as a reason to raise interest rates. News reports of unexpectedly low unemployment numbers are routinely accompanied by commentary to the effect that it is bad news for interest rates. Central banks publish estimates of the "natural" or "inflation-safe" unemployment rate to guide monetary policy. Conservative employment policy is directed at reducing this "inflation-safe" rate by cutting wages (WorkChoices) or by exerting greater downward pressure on wages for a given unemployment rate ("mutual obligation"). Neither central bankers nor politicians have any intention of allowing unemployment to fall below the "inflation-safe" rate.

CONTINUED...

...CONTINUED

"Currently I want to see how this bunch of socialist meddlers jump before risking a hosing through the very sort of anti-negative gearing twaddle which this thread is becoming," says Col.

So is it "socialist" to require people to build housing before they can claim negative gearing? And does any sort of mutual obligation for negative gearers constitute "anti-negative gearing twaddle"? Build a house and you won't get hosed!

Reworking old ground, Col writes: "Changing tax laws for real-estate would make it a `special case'."

The tax laws per se would not make a special case of real estate if corresponding changes were made for other asset classes. Moreover, because access to real estate is a necessity of life, and because real estate includes land, which is immovable and fixed in supply, real estate is a special case whether the tax laws admit it or not. To pretend that real estate is just another asset class is to dress up speculation so that it looks half-way respectable.

For a change I'll pick on Yabby, who has just written: "Disallowing a business expense for what is clearly a business expense, is a fair old intrusion into good business practise."

For the purposes of public policy, what matters is whether the business practice is in the public interest. Profits made by creating wealth are more in the public interest than profits made by capturing wealth created by others. When rental accommodation is in short supply, building a house is more in the public interest than buying an existing one.