The population is increasing therefore the demand
for housing has to increase as well.

Of course there are overseas buyers who buy property to
take advantage of NG and they hold the proprties empty
until a substantial profit can be made.

I still believe that if negative gearing were removed altogether
house prices would either come down or not increase for an
extended period of time.

if there is no incentive for investors to build new homes (that is neg gearing) and our population is increasing, house prices will increase. Simple supply and demand.

One in 6 Aussies are employed in the building industry, stop neg gearing and very few new houses will be built and that means unemployed builders, carpenters, brick layers etc etc.

The government benefits from neg gearing, instead of government building houses (say $300k each) it is better for private enterprise to build the house and the government give $15k in tax deductions a year.

The state government collects Stamp duty, councils collect rates and fed government gets GST.

So, federal government pays $300k or allow negative gearing and all governments collect GST, Stamp duty, income tax and rates and levies.

Pay $300k or collect $100k plus and pay out $15k.

Both sides of politics understand the Government makes more out of Neg gearing than Mr and Mrs Smith buying an investment property.

So, it will never be abolished

A Labour government did remove Neg Gearing many years back but there
was a rush to sell investment houses and rents went well up so the
government had to do a backflip.

Government is relying on the private sector to fund, develop and manage the welfare housing that government itself refuses to provide.

I suppose you can't really blame government for wanting to shed the catastrophically expensive and impossible to manage government housing. Unfortunately for those who would 'invest' in rental housing it is a people management game and leftist governments, who would not provide the housing themselves, have set up structures and regulations to ensure that the most 'vulnerable' person on welfare has his 'rights' protected.

The bar is set very low indeed. Tenants know that and there is plenty of legal advocacy freely available to them to take advantage of those 'well-off', 'greedy landlords'(sic). -Which dramatically increases the overheads and repairs and vacancy costs. Few intending mums and dads investors are aware that rental tribunals depreciate the value of carpets, cabinetry and white goods much faster than the ATO. Repair costs can be crippling.

The risks and consequences for the landlord of the manufacture or use of certain drugs in the rental property? Drug busts are not unusual.

Intending investors in rental housing should look very carefully before they leap. Home owners should be very reticent too to lease out their pride and joy while on work postings or on extended holidays. It should be a sobering thought that few tenants would ever buy a rental property themselves if they had a windfall.

Most rental housing is owned by mums and dads 'investors' who have been sternly encouraged by government to forego lifestyle in order to provide for their old age. However the risks, especially regulatory risks and the hidden overheads are such that the goal of getting a reasonable return relative to the high risks is a kangaroo that continually hops away from them.

to be continued..

continued

Government has returned to the rental 'investment' cake many times (Howard too) to take bites out of the paltry returns. I would say that any more fiddling could easily lead a sustained and permanent flight away from it as a form of investment.

That would suit the idealism of Marxists who wage Class warfare.

It would suit the sharebrokers, investment advice and investment product industry too, who can see money going into shelter that should be going into their pockets.

I believe that many small investors, mums and dads, are skittish already about rental property. The motivational stuff from the white shoe brigade wanes after the first few contacts with the 'professional' tenants who know their way around the system and regularly make a meal out of seasoned property managers.

The only way ahead is for larger institutions like insurance companies to move into rental property. They have the clout and professional legal support. Of course the product will have to be more simple, compact and durable, and the rental returns much better to enable it to be run as an ongoing business.

With the greatest of respect Foxy, it appears you are il advised with regards to property investment.

Firstly, in order to negatively gear a property, one must first earn an income, or at the very least be preparing the property for rent. Holding it until the market increases is not what's happening. In fact, what is happening is that a fair portion of Chineese money being invested in property here, is dirty money.

They purchase a property for say $2 million, sell it later for $1.4 million which then makes the $1.4 million clean.

The other thing many forget with NG is that it was responsible for keeping rents lower than they would have been.

You see investors invest for two reasons, returns, and capital growth. The capital growth has been strong, but the returns have been much lower than they were pre negative gearing days however, negative gearing made up the gap. 4% return, 6% growth and a nice tax break. Besides, NG is only really beneficial when rates are high, as it's only the interest, costs and up keep that's a right off.

As for auctions, the clearance rates for auctions rarely exceeds 65%, and even than many of those sales end up being by private treaty as the properties were passed in, then a sale negotiated, with conditions, on the day.

Finally, auctions often see properties under sold, as to buy at an auction, one must only out bid the others, not pay their maximum price as very few buy with their upmost final affordable dollar. Buyers usually go in with a top end figure, yet rarely pay that full amount.