What if you could only own a PPOR?

[Miss Hale]

There are many people who, for whatever reason, prefer to rent and as such landlords are providing a legitimate service by investing in residential property.

A classic example of someone I know. Lives in Melbourne but has spent the past 10 months working in Hobart, now returning to Melbourne. Needless to say, he rented a house since buying one for that length of stay would be just silly, as would spending that long in a hotel.

Agree. Even when people relocate permenantly they often rent for a year or so until they get a feel for their new location, the market etc. so as to make a better decision when they buy. We are renting at the moment for two reasons; one being the high property prices but also because we think we might move to a different city in a year or two so renting is a better option as it keeps our options open.

 

[numbercruncher]

Whoooooooooaaaaaaa dude ......... I have never advocted for nupties to invest in property at the height of a boom cycle. I have adopted the more measured approach. I also have covered this subject on many occasions that Lemmings will always fall off a cliff. Same people who invesed in Western Kingfish when it floated. WKL I think it was called ..... do the research. 8 million gone in less than 6 months.

Property is NOT for everybody .... I have been doing this for 23 years and I am still learning objective outcomes. I am not right on everything I say nor have I implied as such. It is a black science that I try and steer people through pitfalls and possible retaliations depending on circumstances. Not once have I tried to tell FHB to "rush" out and put a noose around their necks.

Easy does it

These property threads always get too frustrating to participate in as people swap from playing the ball to playing the whole property field in a couple of posts.

My point is that property in Australia on average currently doesnt look like a good bet - and it appears that you are agreeing with me with this talk of the height of a boom cycle - which I incidentially think this height is already behind us now ....

So as a property investor of some 23 years experience have you seen a few boom cycles ?

 

[trainspotter]

These property threads always get too frustrating to participate in as people swap from playing the ball to playing the whole property field in a couple of posts.

My point is that property in Australia on average currently doesnt look like a good bet - and it appears that you are agreeing with me with this talk of the height of a boom cycle - which I incidentially think this height is already behind us now ....

So as a property investor of some 23 years experience have you seen a few boom cycles ?

My position has not changed. I am not talking semantics, I am agreeing with you !!! Please read my posts over a three year period. I have not chanced my arm at any stage.

I repeat for comedy purposes only ....... "IN CERTAIN AREAS" it is still good money to be made with low risk. Not rocket science. Not putting it all on black at the casino.

WOW !!!!!!!! We might actually be getting somewhere !!

 

[Tink]

Great posts Ves and Julia, agree.

I dont think negative gearing is the main reason that people buy investment properties, a majority do do their facts and figures before purchase. Alot are setting themselves up for their retirement, or purchasing for a stepping stone in owning their own home.

Alot bought property through the GFC -- bricks and mortar was safe for them and their properties are working for them.

Agree trainspotter, about the banks lending you money when you repay loans, credit history works in your favour.

I also agree that there are areas that you can still make money, my opinion.

 

[numbercruncher]

I also agree that there are areas that you can still make money, my opinion.

Very true ! Some good deals from desperate venders and ruthless mortgagee in possession that ive seen in Qld - at some point we will start seeing a bunch of positive cashflow stuff im thinking ...

 

[wayneL]

Re negative gearing:

It is nothing more than writing off the trading losses of your accommodation business against other income. That is totally kosher IMO.

However in every other endeavour, to get the tax deduction there must be an intention and reasonable prospect of in fact making a trading profit.

For instance the agricultural pursuits of city businessmen that always ran at a loss had those deductions disallowed some time ago. (Queen St farmers etc)

There is also the rule that there must be a trading profit for a certain number of years out of every seven? (Can't remember the exact figures)

If the investment property cannot fulfill these conditions that other businesses must fulfill, then I am philosophically against the deduction. Losses should then be offset against future profits (trading or capital).

That's my opinion.

 

[Starcraftmazter]

We don't want to stop property investment - but we do want to stop property speculation. This should be done by removing government interferences in the free market of housing - things like negative gearing, stamp duties, urban growth boundaries, forcing developers to front the cash for infrastructure, capital gains concessions for property (or better yet get rid of the nonsensical capital gains tax altogether), FHOGs, planning restrictions, etc.

I am happy to let everyone in and outside of Australia to put their money into constructing new real-estate for people to live in - this is how the free market works, we we ought to embrace it instead of making it difficult for the real investors to do their job. And given we have a massive oversupply of property in Australia - if they want to contribute to it at their old peril then let them!

It would be good I think on the other hand if people were only ever allowed to invest in the construction of new property - and only owner occupiers were allowed to buy resold property. It's not really a proper investment if you are buying an already built property - because you are not contributing any way to the economy, and not creating and new capital. One exception might be buying a block of old houses and building a giant apartment complex, etc.

 

[Glen48]

So TS nothing has changed in 32 years?

 

[young-gun]

+1 on all the above comments.

Let's remember that many people who are renting have never done otherwise and have no hope/aspiration of owning a home. They live from week to week on their low incomes for a variety of reasons. They would never put together even the most minimal deposit to buy property.

Young gun, you're perhaps making the fundamental error of attributing your own initiative to the population at large. It just ain't so.

i guess i was giving them the benefit of the doubt, i havent completely lost faith in the masses just yet

 

[young-gun]

We don't want to stop property investment - but we do want to stop property speculation. This should be done by removing government interferences in the free market of housing - things like negative gearing, stamp duties, urban growth boundaries, forcing developers to front the cash for infrastructure, capital gains concessions for property (or better yet get rid of the nonsensical capital gains tax altogether), FHOGs, planning restrictions, etc.

i don't think the government has too much influence on it all, most of what they do is simply a pain in the **** more than anything. as with most things i guess.

 

[young-gun]

I dont think negative gearing is the main reason that people buy investment properties, a majority do do their facts and figures before purchase. Alot are setting themselves up for their retirement, or purchasing for a stepping stone in owning their own home.

im quite amazed at the amount of responses claiming they aren't in property for the tax breaks. are most of you older and bought quite some time ago? most people i know that have bought in the past 5 or so years have bought in the hope of offsetting their income, whilst owning an 'appreciating asset' that will help them towards and through retirement.

ive always been of the opinion that the quicker you can get cashflow positive the better, but there are most definitely alot of people out there that think differently.

i guess things are the way they are for a reason!

 

[Ves]

It would be good I think on the other hand if people were only ever allowed to invest in the construction of new property - and only owner occupiers were allowed to buy resold property. It's not really a proper investment if you are buying an already built property - because you are not contributing any way to the economy, and not creating and new capital. One exception might be buying a block of old houses and building a giant apartment complex, etc.

Isn't that why they bought in capital gains tax?

Do you see already listed shares and related securities as being different to this?

 

[Smurf1976]

Do you see already listed shares and related securities as being different to this?

If BHP (for example) shares double in price then that has no real impact on anyone who doesn't already own shares in BHP. Nobody has any need to invest in this (or any other) listed company other than as a means of making a profit. There's plenty of other financial investment options for those who miss out on buying shares in one particular company at a given price.

In contrast, housing is fundamentally utilitarian in nature. It performs a necessary social function in that people need a roof over their heads. There is thus a social need to keep housing affordable whereas there is no such need to keep the price of BHP (for example) shares within any particular limit.

The same could be said of basic food versus, say, vodka. Everybody needs food, so there's a social need for it to be affordable. But nobody actually needs vodka therefore there is far less of a social downside if the price of that increases. Etc.

 

[Ves]

I can see your point and I can agree to the point of the investment and other opportunities, but surely if BHP shares are struggling over the long-term it makes a measurable difference to our economy. Firstly, large cap stocks are held in industry and retail fund portfolios. Secondly, BHP is a large employer and a large tax payer... surely if the share price over the long term can be used as a proxy for their business performance it would be better for our economy if this did better?

Perhaps I am thinking about this too much. I think any form of investment, whether it be housing, shares, interest or other alternatives represents the creation (or even destruction) of wealth in a measurable sense.

 

[Starcraftmazter]

Isn't that why they bought in capital gains tax?

I don't know the official reason for the capital gains tax (indeed, one wonders how the government can justify such an idiotic tax), but I'm sure it's sole purpose is to give government money it does not deserve.

Do you see already listed shares and related securities as being different to this?

Shares and property are two different things, yes.

 

[im sparticus]

You guys sound like the biggest bunch of commies. your not allowed to buy more than one house, and it must be a ppor, investment properties must be new built your not allowed to speculate on certain things we will treat different types of you belongings and assets differently and tax them differently. Etc etc ect

 

[StumpyPhantom]

im quite amazed at the amount of responses claiming they aren't in property for the tax breaks. are most of you older and bought quite some time ago? most people i know that have bought in the past 5 or so years have bought in the hope of offsetting their income, whilst owning an 'appreciating asset' that will help them towards and through retirement.

ive always been of the opinion that the quicker you can get cashflow positive the better, but there are most definitely alot of people out there that think differently.

i guess things are the way they are for a reason!

I get the feeling the answer is buried deep inside these anecdotal observations. Given the significant startup and ongoing interest costs, any real 'investor' in property is probably looking at a 10-year horizon, whilst being in for only 5 years suggests some degree of 'speculating' to get out with a capital gain.

So negative gearing is needed to keep you in the game for longer than you otherwise could. But take it from me, it's really boring losing cash (which is essentially what -ive gearing is) year upon year even if the price of the property is rising, given you can't touch that until sale time.

How many of those that you know who bought recently were at property seminars where they spruiked -ive gearing and 'appreciating assets'? The focus on the latter alone suggests speculation. The price of the asset 20 years hence would be irrelevant unless you were looking to sell it soon.

The reality is that once you get positive cashflow, the tax breaks are still there in the form of depreciation etc. So the -ive and +ive gearing advocates tend to also split neatly into the speculative vs investor groups.

Except that for the next few years, there will be no capital gain (price will probably go in the opposite direction) to speak of. So no surprise that all the speculators out there have to get into investing mode quicksmart (or move in and live there themselves) or sell out at a heavy loss.

 

[maffu]

So where do all the renters go in your master plan? Especially the people that do not want to rent a place because they like the freedom of being able to move around when they like.

This is an important point.
I rent, and don't want to buy any time in the next 5 years regardless of price.
I want certainty in employment, which city I will be living with, and family planning kind of sorted before worrying about buying.

I could buy a 1 bedroom apartment in Western Sydney today, and then next year be working in a new location and have to suffer the large relocation costs. If I start a family, upsizing to a larger house would again suffer large relocation costs.

Its much better for me at the moment to rent a 1 bedroom place now, rather than buying a 3 bedroom place somewhere that I don't want to live, for spare rooms that I might not need for 5 years or more. Its cheap and easy to move with jobs, or upgrade in size when required.

Landlords provide a very valuable service. Getting the government involved to try and 'fix' the property market is one of the problems with the current price. Preventing investment properties, or limiting people to 1 would be a massive problem. I'd be happy if the government moved away from the property market completely (No First home owner grant, no negative gearing etc).