- Joined
- 21 June 2009
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Attaboy Satan ... living the dream man !!
Attaboy Satan ... living the dream man !!
Talk about **** covering by the RBA. They warned the public, so don't blame them if everything goes pear shape in the future, but they maintain there is no bubble.
As for the $, stop trying to manipulate something that you have little control over as has been shown. It will be back at parity soon.
AMEN ... If you read my posts previously you will see that it is part of the cycle. Still waiting for the March/April banks to want RoR on their endeavours ... nice call on the China default CanOz ... flow on effect will be banks claiming "higher cost of funding" in the near future and blame "global conditions" as their excuse. Beware the Ides of March .... also keep an eye on the bankruptcy rates for companies in Australia ... just my opinion of course.
How does this effect home prices ? Inflation is the reason
Inflation has continued to rise, signalling the beginning of the end for the record low cash rate.
The TD Securities Melbourne Institute monthly inflation gauge rose by 0.2 per cent in March and by 2.7 per cent in the 12 months to March - the same as in February.
The increase was driven by price rises for fruit, vegetables, meat, seafood, travel and accommodation and offset by falls in rents, petrol and audio, visual and computing equipment and services.
The March figures would bring little comfort to the Reserve Bank of Australia, TD Securities head of Asia-Pacific research Annette Beacher said.
"We suspect the recent and unexpected pickup in inflation has prevented the RBA from talking down the currency in recent months," Ms Beacher said.
"The RBA is increasingly seeing the glass as half full, with the turnaround in leading indicators such as job vacancies and building approvals suggesting that non-mining activity is recovering.
"Inflation pressures are clearly building up, neither due to `noise' nor proof that Australia's speed limit on growth is below three per cent.
Whaaaaaaaaaaa? "unexpected pickup in inflation" ..... blind Freddy could see the flow on effect from the low interest rates !! And these clowns are running our economy??
"Fairly benign numbers all round, whether you take them at face value or trim out some of the extreme moves," said TD's head of Asia-Pacific research Annette Beacher.
But she is expecting the Reserve Bank to increase the cash rate on Melbourne Cup day in November.
http://www.news.com.au/finance/real-estate/can-anyone-else-achieve-what-contestants-do-on-the-block/story-fncq3era-1226873141231Property records reveal an apartment bought by the Crazy John group from the first The Block series in Bondi in 2003 did sell for less two years after it was auctioned. The apartment sold in 2003 for $670,000, but according to RP Data sold again in 2005 for $560,500.
Another apartment in series two of The Block at Manly sold for $795,000 in 2004, and sold three years later for $820,000. It changed hands again during a low point in the market for $785,000 in 2012.
In the event that negative gearing was once again quarantined and a proportion of investment properties were sold, who does the HIA think they would sell to? That’s right, renters. In turn, those renters would be turned into owner-occupiers, reducing the demand for rental properties and leaving the rental supply-demand balance unchanged.
Losing negative gearing means that a very large proportion of investment properties would be dumped on the market to sell at the same time. For those properties negatively geared today, they will put them up for sale now. When interest rates go up (and they will at some stage) more and more properties will go onto the market. This will create a massive oversupply of properties on the market, as 1 in 3 properties are investment properties on average.
"Reports have emerged that the Government is seriously considering reforming Australia’s negative gearing rules, by grandfathering arrangements for existing investors and potentially only allowing negative gearing on newly constructed dwellings "
This bit here would still allow existing investors to keep thier properties and benefit from thier current arrangements. Since there has been very little growth in NG investment in new properties, the change may see some growth in this area.
Errmmmm I wonder if the writer of this diatribe has considered that when the investor buys that established property from Mr & Mrs Average that they go and purchase a block of land and construct a house thereon or purchase an off the plan apartment etc. Very narrow section of reporting IMO. Not all people who sell their house to an investor rents it back from them !! Yes some of them will buy an established property in either a better location or closer to the beach or downsize etc ad infinitum but I am sure that there would be a percentage that would build.
The other point that has been conveniently overlooked in this missive is that it is FIRB's policy that only newly constructed houses are to be purchased by overseas investors. Not part of the equation ?
I especially loved this statement:-
Ummmm they are called renters for a reason ie they cannot afford to buy property which is why they rent
A lot of assumptions here based on a wish list
It would be interesting. Many investors in established houses would kick the tenants out and put up a for sale sign. That would mean a very limited supply of rentals in established areas so rent would go up in those areas. It would also drive rentals to newer outer suburbs perhaps making them less desirable for owner occupiers. It would be a mess.
I dont think it will happen though. The govt wont be able to cope with all the families that will be kicked out.
For a rental property to be sold, you have to find a buyer. Whoever is buying the property has been able to afford the purchase price. If a FHB wasn't able to buy pre NG changes, it's likely they will have a better chance afterwards due to reduced demand by the specuvestors.
Probably prices would fall a bit if NG was at least quarantined and capitalised on the property since specuvestors would find it harder to fund the losses each month - recently they're at the 40%+ mark in terms of new loans. Bring in some MP like higher risk weightings for high LVR loans and you'll give prices another nudge down - RBNZ seems to think their MP initiative has reduced house prices by 2.5%
Lisa, a property investor, buys a unit for $300,000, putting in $50,000 of her own money and borrowing the remaining $250,000. The interest of 7% each year is $17,500 and the weekly rent is $300 or $15,600 a year.
Financial flexibility
Ongoing costs including rates, water, insurance, maintenance and depreciation allowance are $2600 each year. After expenses, income for the year will be $13,000 ($15,600 minus $2600), equivalent to a net rental yield of 4.3%. However, annual interest repayments are $17,500, so she has actually lost $4500 during the year ($17,500 minus $13,000 = $4500).
In this example, the investor can reduce the tax liability on her other assessable income by the investment property’s loss of $4500. If the investor is on the highest marginal tax rate of 46.5% (including the Medicare levy) this tax deduction would have the ultimate effect of reducing the real loss on the property from $4500 to $2408 ($4500 x 46.5% = $2092; $4500-$2092 = $2408). This is a good saving.
If an investor is on a lower rate of tax of 31.5% (including Medicare levy) the after-tax loss on the investment would be reduced from $4500 to $3083 ($4500 x 31.5% = $1417; $4500 - $1417 = $3083). The saving is still quite attractive.
Most people accept a loss in income because they believe it will be more than compensated for by a capital gain down the track. But you need the financial flexibility to fund a cash-flow deficit while the property’s gain accrues. You don’t want to get 18 months into a property investment to find the cash deficit is intolerable.
In the example above the difference with NG is a lousy $1417 per annum = $27.25 per week !! If this piddly amount is going to break you financially then you should not be investing in property.
Firstly, no need to be so patronising, Sydboy knows what negative gearing is.
Secondly, you are wrong in your above example.
The piddly amount you are referring to is $3083 per annum, which equals = $59.29 per week !!.
Dear GOD do I have to explain everything???????
The after-tax loss on the investment would be reduced from $4500 to $3083 = $1417 DIFFERENCE !!!!!!
Tax loss WITHOUT NG = $4500
Tax loss WITH NG = $3083
DIFFERENCE is $1417 per annum.
Apologies accepted anytime you like MacQuack
(providing the investor is on the lower rate of tax at 31.5%)
Stop lecturing f***ing everybody when you don't even know how negative gearing works.
The lower the marginal tax rate, the less the after-tax saving, so the higher the after-tax net cost.
In your example the after tax cost to hold the property is $3083.
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