The demand for new homes need reducing to stabilise the building costs.
Take investers out of the used house market, and allow the market to find its own supply and demand.
There will always be houses available for rent, The market will be far better off, without investment inflation.
Negative gearing needs wiping out across the board. It creates a false market and is negative investment.

Y, you are forgetting that FHB can only obtain a grant for a new home, so few will be able to afford a used one and in any case I doubt the banks would be so keen to lend without a larger deposit and, as many second home buyers cash in on their first home, who is going to buy the first one?

I touched on older houses being purchased, then rented while the process of multi unit development is undertaken.

The advantage of NG gearing here is that it allows investors/developers to write off some of their holding costs during the often lengthy process. The pain being worth the gain as one dwelling often turns into twenty or so.

This will all be placed at risk. Are you sure you want this?

Shadow, you say the investors "will simply invest elsewhere". But just where do you think they will invest instead? There don't seem to be many good investment opportunities around at the moment.

I think a more likely outcome will be:
tax revenue - minimal increase
house prices - minimal decrease
rental property availability - minimal decrease [as more new rental properties will offset the effects of fewer old ones]
rental property prices - minimal increase
Wealthy investors - gradual change in portfolio
home owners - little to no effect
lower income renter - minimal cost of living increase or decrease [depending on how much new development there is in their suburb]

In a more general sense, it is good to reduce the amount of money going into land speculation (as that adds to the cost of production but does very little to increase productivity). Restricting negative gearing is not the best way to do this; imposing a broad based land tax is. But neither will restricting negative gearing have the harmful effects that you, rehctub and mhaze predict.

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rehctub, the FHB grant is a very costly scheme thats main effect is to increase the price of housing (probably more so than negative gearing). The banks will lend as long as they think they can make a profit.

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Yuyutsu, I agree the restrictions on the size of houses should be abolished. However allowing houses to be built from flammable materials in bushfire prone areas is inviting tragedy.

Reducing the incentive to procreate will not necessarily have any effect on the demand – it depends on the immigration rate. And why do you see increasing demand as a problem rather than an opportunity?

Yuyutsu, "On the demand side, though it is for the longer term, reducing the incentive to procreate will also reduce the demand for new homes"

If you are directing your remark at young Australian couples, you will have the instant, enthusiastic support of the culturally cringing leftist 'Progressives' for that. They are all for the high immigration that has for many years been putting pressure on housing, infrastructure, hospitals, welfare and on energy and water supply.

The leftist 'Progressives' and Labour in action in the UK and it is the same here,

How Labour threw open doors to mass migration in secret plot to make a multicultural UK

Labour threw open the doors to mass migration in a deliberate policy to change the social make-up of the UK, secret papers suggest.

A draft report from the Cabinet Office shows that ministers wanted to ‘maximise the contribution’ of migrants to their ‘social objectives’.
The number of foreigners allowed in the UK increased by as much as 50 per cent in the wake of the report, written in 2000.

Labour has always justified immigration on economic grounds and denied it was using it to foster multiculturalism.

But suspicions of a secret agenda rose when Andrew Neather, a former government adviser and speech writer for Tony Blair, Jack Straw and David Blunkett, said the aim of Labour’s immigration strategy was to ‘rub the Right’s nose in diversity and render their arguments out of date’."

http://tinyurl.com/ye7gjck

At the pleading of the scientific community and its scares (is that all it was?) about sustainability, the Australian population dramatically converted to Zero Population Growth (ZPG) way back in the Seventies somewhere and maintained it since.

Not so the migrants who come from the various undeveloped sh*tholes of the world importing their toxic political systems and medieval religions and violence. They just don't believe their women are properly occupied unless they are dropping a bunch of kids for the taxpayer to support.

The leftists' diversity tail (the 'diversity-Australia-has-to-have') constantly wags the immigration policy dog.

Immigration policy is the big sleeper for the coming federal election.

'Negative gearing' is a misleading term invented by 'white shoe' Real Estate salesmen and other spruikers eg frauds selling property 'investment' seminars, to flog property 'investment' dreams to trusting but numerically challenged mums and dads investors.

L'il Willie Shorten (Would YOU buy a used car from that man?) is waging Class War, attacking the fictitious, laughable, negative stereotype of the grasping landlord who makes millions out of real estate.

Of course Shorten and his crew. old warhorses left over from the failed Galah'd government (the multiskilled Galah'd played Class War and Gender War politics too) need continual distractions.

Shorten is an idea-free, policy-free zone. There is also THAT problem, Labor's cozy arrangement with the CFMEU and others, that still needs to be addressed.

Dear Rehctub,

I was not thinking of banks: if people were not restricted and required to put a whole house-plan in advance, then they could build a room here and a room there with whatever materials they have, possibly with their own hands, add concrete floors when they can afford, then live in their shack for free while they save for more and better rooms later. Or they could do so in the back-yard of a relative's existing house as they save to build their own.

If the problem is land, then spaces are plenty in the country - only the government does not allow building more than one house per title.

Just imagine - life with neither landlords nor banks!

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Dear Aidan,

First sorry, I was planning to respond to you on the other thread, but I was travelling and never got around to it and now that thread is closed.

Only a fool would build their home with flammable materials, that is unless they only plan to have it temporarily, for a short while while they save to build a bigger and better permanent home and won't shed too many tears if it burns down. So long as they understand the risk, that should be OK.

Similar to procreation, immigration should not be encouraged as it's not a good thing to have more people on earth and consume more resources. However, unlike others in this forum, I believe that even though we don't want them, we have no right to deny them entry to this continent. Immigrants should either build their own homes (in person or with the money they bring), rent caravans or hotel rooms or stay out in the cold: both they and babies may come if they like for we have no right to prevent them, but nobody here owes them anything.

Increasing demand means increasing prices and reducing affordability. If people were born at or below the rate they die, then young people could simply move to their grandparents' homes, that is if they haven't been living there already, caring for them.