I can afford a house

[Knobby22]

If they want housing to be more affordable then remove the tax breaks from exisiting homes. It is a distortion to the market and free marketeers would say it shouldn't exisit.

 

[tech/a]

If they want housing to be more affordable then remove the tax breaks from existing homes. It is a distortion to the market and free marketeers would say it shouldn't exist.

Knobby.
Who would then build high density affordable Unit apartment rentals?
This would simply exacerbate the situation.

I'm interested in how you can justify that housing could or would be cheaper/more affordable by removing tax breaks?
Just cant see how this can be applied as a benefit to new home buyers.

By the way in the US all interest on your housing loan even your place of residence was and as far as I know is tax deductible.
So rather than scrap the deductions just widen them!

 

[professor_frink]

If they want housing to be more affordable then remove the tax breaks from exisiting homes. It is a distortion to the market and free marketeers would say it shouldn't exisit.

That's the second time recently that I've heard this mentioned as a possible solution to the affordability issue.

It would be great to hear exactly how this would work. Didn't it get attempted in the 80's and was a big failure

 

[Shane Baker]

One way to slow down the growth in housing might be to introduce a sliding capital gains system on all housing including PPOR. It might take the line of tax free gains after ten years...thus making holding long term stock more attractive and possibly increasing the rental stock available. The capital gains tax would be at marginal rate until five years and then a sliding scale to nothing after ten or so years. This would reduce turnover and volume in the upgrading PPOR market (a major source of price increases rather than investors) and increase the long term availability of stock as investors would be more interested in improving their CGT situation by buying and holding rather than trading.

Cheers

Shane

 

[krisbarry]

Instead of the government setting up new accounts, just like super, why not use peoples exsisting super accounts. Payments made to super accounts that are voluntary payments only could be used to purchase houses. None of the 9% compulsory super could be touched only additional payments.

 

[tech/a]

One way to slow down the growth in housing might be to introduce a sliding capital gains system on all housing including PPOR. It might take the line of tax free gains after ten years...thus making holding long term stock more attractive and possibly increasing the rental stock available. The capital gains tax would be at marginal rate until five years and then a sliding scale to nothing after ten or so years. This would reduce turnover and volume in the upgrading PPOR market (a major source of price increases rather than investors) and increase the long term availability of stock as investors would be more interested in improving their CGT situation by buying and holding rather than trading.

Cheers

Shane

Some workable ideas here Shane.
I can see an issue however with available stock being held meaning a constant shortage of established property.
However the ideas above dont generally and directly benifit the 1st home buyer.

 

[nioka]

One way to slow down the growth in housing might be to introduce a sliding capital gains system on all housing including PPOR. It might take the line of tax free gains after ten years...thus making holding long term stock more attractive and possibly increasing the rental stock available. The capital gains tax would be at marginal rate until five years and then a sliding scale to nothing after ten or so years. This would reduce turnover and volume in the upgrading PPOR market (a major source of price increases rather than investors) and increase the long term availability of stock as investors would be more interested in improving their CGT situation by buying and holding rather than trading.

Cheers

Shane

The big drawback would be for someone who has to move and wants to sell and buy again. They pay out plenty in stamp duties, convevancing, moving exes, new loan establishment fees etc as it is and to have to pay CGT on top could make it impossible to buy back in somewhere else.

 

[nioka]

Instead of the government setting up new accounts, just like super, why not use peoples exsisting super accounts. Payments made to super accounts that are voluntary payments only could be used to purchase houses. None of the 9% compulsory super could be touched only additional payments.

Send that one off to Rudd and Howard. Good idea.

 

[Happy]

Send that one off to Rudd and Howard. Good idea.

With a safeguard for super-money including profit / loss, should the property be sold.

But 9% super is not enough in a first place, unless you just want to have some money for coffin and funeral arrangements.

 

[Knobby22]

Knobby.
Who would then build high density affordable Unit apartment rentals?
This would simply exacerbate the situation.

I'm interested in how you can justify that housing could or would be cheaper/more affordable by removing tax breaks?
Just cant see how this can be applied as a benefit to new home buyers.

By the way in the US all interest on your housing loan even your place of residence was and as far as I know is tax deductible.
So rather than scrap the deductions just widen them!

How it would work is very simple.

If you are building new buildings - such as high density apartments- then you would get the tax breaks. I wouldn't mind if they were enhanced! However you don't get the tax breaks if you are not (1) buying /off the plan or (2) the first person to buy the house/apartment off the builder.

This would (1) discourage investors buying up the best inner city property lowering demand and (2) would cause much more activity in the building sector which would greatly increase supply.

Simple. It would be good for builders. People who already have bought property under the existing arrangements could keep their negative gearing and other tax breaks.

Basic economics. We need new property, then the tax system should reflect this.

 

[tech/a]

How it would work is very simple.

If you are building new buildings - such as high density apartments- then you would get the tax breaks. I wouldn't mind if they were enhanced! However you don't get the tax breaks if you are not (1) buying /off the plan or (2) the first person to buy the house/apartment off the builder.

This would (1) discourage investors buying up the best inner city property lowering demand and (2) would cause much more activity in the building sector which would greatly increase supply.

Simple. It would be good for builders. People who already have bought property under the existing arrangements could keep their negative gearing and other tax breaks.

Basic economics. We need new property, then the tax system should reflect this.

Ok I'm an entrepeur.
I wish to build apartments through a builder and on sell them to first home buyers.OR keep some for a while after I cover initial costs.
This is where most of these developements come from---3 rd party not directly from the builder.
Where then would I fit?
What is the incentive for me to do a developement if my tax incentives are gone?

 

[Whiskers]

---youd have first home buyers using the equity in their 5% / Yr interest rate homes to secure IP's.----You'd have them buying a second home and renting the first for a profit.---

This had occured to me as I know people who do that now, because the requirement to live in the house for a certain period is fairly short.

In the case of a couple they both qualify for the scheme and first home owners grant, nominally live in own house for regulatory period, then as you say, move into one and rent the other. Set for life.

 

[Flying Fish]

What wage would you need to be on to make negative gearing worthwhile?

 

[numbercruncher]

Would depend of the value of the property being purchased, amount being borrowed as much as wage. just basically need to be paying enough tax to take advantage of the deductions.

 

[nioka]

What wage would you need to be on to make negative gearing worthwhile?

Negative gearing means getting a tax advantage for making a loss. Therefore your wage must be large enough for you to trade at a loss for that investment in the hope rising property prices will turn the loss into a gain in the future and the gain, after paying CGT exceeds the loss.

 

[Knobby22]

Ok I'm an entrepeur.
I wish to build apartments through a builder and on sell them to first home buyers.OR keep some for a while after I cover initial costs.
This is where most of these developements come from---3 rd party not directly from the builder.
Where then would I fit?
What is the incentive for me to do a developement if my tax incentives are gone?

The entrepreneur as he is funding the builder then will get the tax breaks.
The investor who buys it off the entrepreneur is the first buyer. You both can have the tax breaks. The next buyer after that is buying an established home and so doesn't get the tax breaks.

 

[robots]

hello,

people have to save more, to tax the interest earned on after tax savings is ridiculous to start with,

co-contribution's like super could help, but people have to save.

most people I work with on reasonable income live week to week, and I am sure wouldnt have the funds to replace the fridge if it blew up,

20yrs ago people had an atari or comm64, now people have a WI, Xbox, playstation 20 and so-on

the bigger issue is how to get the "average" negative gearer back into the apartment market because they have clearly gone, only people on 150k+/pa are now in the negative gear market

thankyou

robots

 

[tech/a]

the bigger issue is how to get the "average" negative gearer back into the apartment market because they have clearly gone, only people on 150k+/pa are now in the negative gear market

This is true.
I've never negatively geared (Other than my business) in my life.

Everything I do in R/E has to be positively geared or I wont be involved.
The use of proper negative gearing is indeed an art.

I had it explained to me by a CPA once who specialized in setting up these deals,I know him personally and as I listened I was gob smacked on how hard it was to actually negative gear given the tax breaks you could claim back.
What "Appeared" to be grossly negative once considered from a tax view was indeed damned inviting.
All you needed was the INITIAL capital to cash flow it till after tax.

Mr average can do it and do it well in some circumstances but you definitely need expert guidance to get the "Numbers" right----and the NUMBERS are all that matters!

 

[Shane Baker]

the bigger issue is how to get the "average" negative gearer back into the apartment market because they have clearly gone, only people on 150k+/pa are now in the negative gear market

thankyou

robots

This I always thought was the cleverest component of killing off the housing bubble that Costello devised. He removed the attractiveness of negative property from all except the most affluent...thus reducing participation in negative gearing, increasing tax revenues and deflating the bubble.


Cheers

Shane

 

[theasxgorilla]

This I always thought was the cleverest component of killing off the housing bubble that Costello devised. He removed the attractiveness of negative property from all except the most affluent...thus reducing participation in negative gearing, increasing tax revenues and deflating the bubble.

I totally agree.

So many people missed this effect. Investors drove up the market in the early days, back when top tax bracket came in at 50k, but as he kept rolling out more and more tax cuts the shift in ownership occured...investor to owner occupied. Yet prices stayed put...crash averted. Magic.