Dear rehctub,

Thanks for making me think far broader than
I originally did.

Well yes Rehctub, that is exactly what happened.
It is the old old story, the market sets the prices depending on what
the buyers have to spend, and the developers knew they had two incomes
and the loans available based on two incomes.
I don't know from personal knowledge but it would have been difficult
to buy a house on one income.

What was an unintended consequence was that women HAD to go to work as
if you borrow on two incomes you have matching double repayments.
Hence the large increase of working women and child care provisions.

It is known as the free market !

Small investors dominate, owning 1-3 properties apiece.

While some are aspirational mums and dads, many of the new investors who just as uninformed and financially naive as their parents were and are as easily led by over-optimistic entrepreneurs, are 'investing' in response to federal government demands that they provide for their own retirement. The latter group are likely to be renting themselves or still living at home, while they pursue their 'investing' in a renter. They trust the spin of entrepreneurs.

Subject to ATO rulings on such things as repair or replacement, all outgoings are claimable in the financial year in any event. To be able to have the taxpayer 'support' the investor, as the spruikers would have it, the losses must exceed all outgoings to be deductible from the tax on the 'investor's salary. In essence, to claim negative gearing the 'investor' must have deep pockets to cover the sometimes catastrophic losses resulting from the high risks of that form of investment.

Now honestly, if one can imagine the young investor trying to provide for her future old age or the mum&dad investor providing for children's tertiary education, it is highly unlikely they will be getting much 'advantage' from negative gearing anyway. When it runs at a profit they lose the negative gearing 'benefit'.

tbc

contd..

But in any event, these small naive 'investors' are the people who are being saddled by government with its welfare basket cases, while at the same time government makes it even harder for them through rental regulations that are heavily weighted towards the most 'vulnerable' welfare basket case. That is likely to be a drug using, alcoholic 'professional tenant' who knows every lurk and has the support of tenants' advocacy paid for by taxpayers including that mum&dad 'investor'.

Of course so-called 'investment' in rental housing is in a fragile state and for good reasons. A run from that form of 'investment' is on the cards.

As a test, how many tenants who post on this forum would put their own money, quality of life and free time on the line to provide a renter for someone else? 'Nah, they could trash the place and disappear owing thousands etc', would be the common reply.

Remember, the reason why government doesn't want to provide welfare housing itself is because it found it far too costly and impossible to manage. However government doesn't mind forcing those risks and more onto people who really are very vulnerable, especially to the regulatory change risk, but do not know that until the inevitable happens, or at best they have lived like church mice for years for squat.

Bazz/Rechtub in the case of the Australian market some investors say from China use us as a safe haven investment, an increasing pull on our housing market.
I still think a crash is something that we must watch for it can come without notice.

onthebeach, residential housing is the safest investment around, evidence being in the fact that most banks will lend the full 80%, even more with additional security, and/or mortage insurance.

Which brings me to another point, lowering if equity requirements.

This was a trend that happened in the 80-90's with the introduction of building societies, as it was they who allowed borrowings in excess of 70%, because prior to then, banks literally said, if you don't have a 30% deposit, we are not interested in lending you the money. Unfortunately, the banks caved in and started to relax their lending criteria to stay competitive.

As for young investors, I have often advised people to buy what they can afford, and rent where you wish to live because it's cheaper, mainly because the flash rental property has a 1-3% return on investment. Not as attractive when rates are low.

As for renters rights, I hear you loud and clear, that's why I have landlords insurance, however this is becoming expensive but it's also deductible.

Bazz
It's was difficult to buy a house on one income, I did it in 82, my first but, I did buy A HOUSE, whereas today, much of the affordability problems are caused through people wanting THE HOUSE, huge difference.

The latest boom, 2000-2005 started in Sydney, as do most and, to suggest wages increased by 300% in five years, in keeping with property prices pretty much blows your theory out of the water, because they didn't.