Should We Ban House Property Investors in Australia?

Tl;dr: Netherlands cuties considering a ban on investors snapping up properties and renting them out.

33% of recent home buyers are investors in Netherlands. Does anyone know how much % of recent home buyers are investors or occupiers?

https://nltimes.nl/2021/09/02/dutch-cities-want-ban-property...

Comments

  • +281

    Yeah nah. I think you'll find all of our politicians are property investors. That's why the bubble will never burst.

    • +23

      this guy gets it

      • +2

        So does the British Queen, if she is "allowed" then it is above board for all the pollies!

        These changes has to happen from the very top.

        • +14

          France 230 years ago and other countries showed that changes can start from bottom.

          • +14

            @afoveht: 230 years later and the wealth inequality does not seem to change at all..

            • +2

              @leiiv: True. It was a drastic change, but many understand that it was a transfer of wealth power rather than a reform of power.

              From a contemporary critique:

              The spirit which gave rise to the movement of ’89 was a spirit of negation; that, of itself, proves that the order of things which was substituted for the old system was not methodical or well-considered; that, born of anger and hatred, it could not have the effect of a science based on observation and study; that its foundations, in a word, were not derived from a profound knowledge of the laws of Nature and society. Thus the people found that the republic, among the so-called new institutions, was acting on the very principles against which they had fought, and was swayed by all the prejudices which they had intended to destroy. We congratulate ourselves, with inconsiderate enthusiasm, on the glorious French Revolution, the regeneration of 1789, the great changes that have been effected, and the reversion of institutions: a delusion, a delusion!

          • +6

            @afoveht: will you be willing to pay with your blood to make this change? If yes, will enough people also do it with you?

            • +6

              @sangohan: Revolutions so often elicit ideas of bloody battles because that's the narrative spewed out by those that don't want them.

              Will there be blood? Of course, there always is. Does it have to be a defining parameter? Certainly not. India is a fine recent example.

              Victories by violence are short lived because they do not revolutionise individuals.

              Persuasion is the ultimate revolutionary weapon. Questions should be the first shots fired. Revolution starts in the mind and heart, not with the hand.

              • +3

                @afoveht: Many billionaires forget that taxation was put forward as an alternative to the guillotine…

      • +4

        Gets what?

    • +29

      Which is why politicians & their immediately family that reside with them should not be allowed to own income producing or appreciating assets, even a bank account at 1% interest
      Remove all potential for conflicts of interest

      FYI, LNP pollies own more investment property, per capita, than that of One Nation or Labor or The Greens pollies - see ABC investment property article of 2016

      • +10

        The last report said that our pollies own on, average, 2.7 properties per pollie …

        However, it should be banning housing investment from overseas investors not local.

        • +11

          If you go party by party LNP are the worst. I define investment properties as anything that isn't their primary place of residence. One National Party pollie owns around 30 commercial properties

          • +2

            @Boogerman: Is owning properties an indication of success? Not defending LNP in particular but being smart, acquiring wealth and locking it down in property shouldn't be a condition, surly there is a better way to remove bias.

            • -1

              @lew380: You’re missing the point. If they go into politics, they must sell all said assets regardless of how many they own.

              • +2

                @Boogerman: What about investlemts in stocks or energy, they would be as conflicting if not more of a problem. You are offering a total solution to a small segment of potential corruption, not worth it imo. I think the larger picture is that the banks profit out of lending on interest, we are basically servants of the banks for 20-40 years of our life, that's a better place to start looking at corruption.

                • @lew380: My first post stated “… should not be allowed to own income producing or appreciating assets, even a bank account at 1% interest…”
                  ‘Investment in stocks or energy’ fulfils my statement

                  • +7

                    @Boogerman: Oh right, I misread that, that's a radical outlook of politics that will create public servants, rather than career politions, I can get behind that.

                    • +2

                      @lew380: Think no one will even think about contesting election, if these wealth creation avenues are banned for them. After 10 years, the Pollies won’t be any better than us mortal tax payers.

              • +8

                @Boogerman: So my wife and I have multiple investment properties which I have acquired through hard work and essentially giving up 5 years of weekends to renovate them so we would be setup for our retirement.

                And if I wanted to go into politics I need to sell these and cannot have any nest eggs for my future? Should my super also be removed, it might make money?

                What about items as well, some household items, e.g. a book collection or classic car may increase over time and might be a conflict of interest.better remove those too.

                Better yet, how about any public servants live in predefined houses, with pre defined items, just to be safe. Start our own brave new world…

                Have a good think about this, is this going to attract the people we need in these jobs? My guess is that you would end up in a worse position than the one you are trying to fix.

                As I have stated in previous posts on other threads, investors aren't the enemy, everyone invests to some degree. The lack of financial literacy and below standard education on the subject are.

                • @borrisz0r: Yes, you would have to sell your "income producing or appreciating assets".
                  Don't like it, don't go into politics

                  • +1

                    @Boogerman: Good stuff, glad we got that cleared up.

                    Let me know how that plan works out for you.

                    • +3

                      @borrisz0r: Most voters are intellectually & politically indolent. It won't change

                • +4

                  @borrisz0r: Being able to invest in property should be capped and heavily taxed beyond 2 properties imo.

                  Working hard should be rewarded, but when it's at the cost of raising the price of basic human right of shelter then there needs to be better policy enforced.

                  • -1

                    @corbz: If you look at what drives house prices, generally its owner occupiers paying because they are emotionally invested. Investors stop once the dollars don't make sense. (Especially outside of metro areas)

                    People like to have someone to blame, so why not investors… Keep on mind that there is a cohort of lower socio economic people who will not ever own a house, they don't have the means, drive or knowledge. It sucks, I agree, but it's where we are as a society and they still need somewhere to live. Public housing was pretty much outsourced years ago, simply removing investors will not fix this, it will cause serious problems with affordable housing for those with no means or drive to BUY a house.

                    Another interesting point, most people's super would be invested in Australian property… So we are probably all investors to some degree in the housing market, unless you specifically opted out. Should that all be canned as well?

                    A limit would never work, then people just focus on bigger houses worth more, e.g. I can buy a 3 bed house at Tamworth for 250k or I can buy one in Redfern for 3 million. You are going to have investors pushing for city dwellings and leave the regional and rural areas baron. Again, not all have the means of want to purchase.

                    • +2

                      @borrisz0r: Where can I look to see that 'owner occupiers' are the driving force for property prices increasing?

                      https://www.youtube.com/watch?v=FGwq0DWsNYM - This is a good start for a source on property prices being articially propped up within the Australian Government.

                      You went off on pretty insignificant tangents. The median house price in Melbourne and Sydney being over $1M is the problem, not a small small preportion of the population that 'dont have the drive'.

                      The constant policy of tax breaks and abandonment of negative gearing reduction leads to the housing market being ripe for investors and speculators that profit off of this rather than it being treated like a human right.

                      " investors aren't the enemy, everyone invests to some degree. "

                      "The lack of financial literacy and below standard education on the subject are."

                      Australia has 3 cities in the list of the top 10 least affordable cities in the world,

                      https://www.lendi.com.au/inspire/property/the-most-and-least...

                      • +3

                        @corbz: https://www.rba.gov.au/publications/submissions/housing-and-...

                        I don't disagree that the Gov aren't pulling the levers to keep the market high, but that's not necessarily linked to investors. They don't want to be left holding the can when a correction hits.Is working on allowing people to access super for a house deposit for investors? Not really, but it keeps the market moving upwards, and I think they will keep doing that at all costs.

                        The avg properties are not the issue, that is simple supply and demand. People want to live in the city, and so do lots of others, that's why the prices are that way. if you cannot afford a capital city house, you can always move further out and get a solid house for a quarter of that. Not sure if you live in a capital city, but I am from the regional areas. If people want their own properry and are driven, they will get it. This might be via starting with a unit in the city and scaling up, or moving out as mentioned earlier and working towards the city if that's the goal.

                        I think most people completely missed the up swing that is happening over the last 8 months, and i put it down to two main reasons from my research:

                        1. People realised work from home is here for the medium term at least and they need more space, so there was a drive out of units into semi and detached properties. Home office's being a driver. This need was significantly under estimated
                        2. People have been trapped at home and cannot travel etc, so everyone saved a lot more money, and as we know expendable income has always been a driver of house prices.

                        Both are drivers from OO, not investors

                        Up until April/may, the investors had abandoned the market fearing a correction, at least in my area. Houses were being pursued aggressively by OO who were paying stupid money for properties which drove prices up for 4 consecutive months before investors jumped back in.

                        Your milage may vary, but this has been my experience with the latest upswing.

                        • @borrisz0r: Home Builder program was introduced yet construction has come through the pandemic relatively unscathed.
                          Pollies gotta prop up their investment properties

                    • @borrisz0r: I agree. No rental properties no place for people to rent. How will this help people who move around, people who can’t afford to buy or people moving out there f home?
                      Banning investors will increase rents and make it harder for so many renters?

              • +1

                @Boogerman: This is literally the dumbest thing I have ever heard.

                Farmers would have to sell their farms?
                Inventors would have to sell their companies (or stock)?
                Owners of commercial premises would have to sell their factories? or move them?
                Or someone owns 1 IP which is like the majority of Australian investors (2.1Million people)?

                Put it into a blind trust - but forcing people to sell assets.

                • +2

                  @IHatePeople: Oh well, people like you complain about politicians while supporting the status quo corrupt system with your vote.
                  Or maybe you're the 'protest' One Nation voter? Vote records show they side with the LNP in the senate on over 80% of policies.
                  Ugh.

            • @lew380: idk if its smart or successful to wait for a bank loan from dad or his mates to buy properties on the condition that when they say jump you ask which law they want enacted?

          • @Boogerman:

            If you go party by party LNP are the worst.

            How many Investment properties does the leader of the ALP own???
            Its more than the average 2.
            And did he sell one and make over $1M?

            hashtag-BlueCollar (ok, ok hashtag-joke).

            • @IHatePeople: LNP politicians own more investment properties on average.
              No wonder they came out with the Home Builder program, despite construction being nowhere near as hard a hit industry as others - gotta prop up their property prices

            • @IHatePeople: Comparing an individual to a collective, smart..

      • +1

        I have always thought this with one exception, I feel like investing in government bonds would be ok.

      • +2

        Disagree completely. The problem with politics at the moment is that you get average graduates who are nowhere near the top of their game.

        You need to attract star politicians who can negotiate competitively with private enterprise (and not constantly get out manoeuvred) and give them salaries that would a) attract the big guns, b) mitigate them from corrupt practices.

        That's the strategy used to keep the judiciary independent. Try to get the top guns from law school remain impartial.

        If you put all these restrictions on politicians, you wouldn't get anybody with half a brain running for the job. They would also be as corrupt as possible if they have any power because they would want to make money some way or another.

        • Star politicians? Like, say, Donald Trump?

          • +1

            @Boogerman: Well he did question free trade agreements with China, who were manipulating the conditions around them in China's interest (like currency manipulation, State aid and cheap government backed (forgivable) loans, promising to buy Agri from US and then failing to do so, demanding technological transfers, stopping US company funds from leaving China, Promising market access and then regulating to prevent them from selling goods/services, demanding 50%/50% ownership with Chinese partner - even if the Chinese partner contributed nothing etc).

            You might say of course China is going to act in its interest, but US did give them a lot of room to maneuver because China was still 'developing'
            Certainly outplayed and outfoxed by Chinese negotiations.
            Trump did demand changes, and when he didn't get, actually did something about it by following up with Tariffs.

            • @IHatePeople: Talk about intellectually low hanging fruit - xenophobia. No wonder he gets the votes.
              While all along he wanted to gut mandatory healthcare (luckily certain Republican Senators turned it down)

              • @Boogerman: I guess just like its xenophobic to say the Whuhan Flu came from a Chinese lab in Whuhan, which is what the media was suggesting?

                Ok. Xenophobic it is.

                These guys are especially xenophobic:
                https://www.youtube.com/watch?v=sSfejgwbDQ8
                (one of the complete pos racists is called John Stewart - xenophobia!).

                Here's another racist film: https://www.youtube.com/watch?v=0E_Pa46Y0sU
                Not only are they in military style uniform - its a white Uniform! and they even cover their faces with ski masks.
                xenophobic 1,000% for sure.
                Look at the phallus shaped transport, and they look like sperm, so not only racist but sexist too.
                And Trump was in command of them - thats how far its xenophobia and sexism has infected everything!

                We are lucky to have people like you and me not to make any relevant rebuttals, but go for intellectually low hanging fruit by calling racist, xenophobic and sexists pos like John Stewart out for mentioning China. I mean Trump craped on EU/Germanys' policies as well… I guess Racist to white people, who only speak english as second language and learn it in school.

                • +1

                  @IHatePeople: Pity about all those local American businesses decimated by Trump’s trade tariffs

                  • @Boogerman: Yes I 100% agree.

                    Especially as he forced multinationals to take their supply chain out of the US and re-locate it in China, which was a real boon for American small businesses for 24 years or so.
                    I think it was his policy of rustbelt or something….

                    I guess by stopping china from dumping steel, etc, which was overproduced by state sponsored forgivable loans, subsidies and tariffs that was his xenophobic rust belt policy.

                    • +1

                      @IHatePeople: Yep, star politician. Especially as he had to learn on the job…!
                      Surprising he only got one term…

                      • @Boogerman: Upvoted.

                        Yes, well I guess you could say the US has got the star politician it deserves. Especially as he didn't have to learn on the job

                        he will probably get two terms…
                        am serious.

          • +2

            @Boogerman: Exactly the opposite. You want to land people who are smart, educated, who are willing to work from the ground up (like starting at the bottom of a organisation), and building their political skills in all the various departments.

            The reason these top graduates are willing to do that and not go straight to google or apple is because the pay would be competitive.

            What happened with Trump is the exact opposite. He is the example of the guy who has zero political experience, never worked in any part of government to understand the complexities who then runs with an ideology appealing to the lowest common denominator. To be honest, his win is more reflective of America than anything.

            What I'm suggesting is if you have star candidates who have been learning the ropes for years, you're likely to have the people needed to run government effectively.

            The problem is, why on earth would anybody join the government right now when you compare the remuneration to the private sector.

            All we complain about is how corrupt the private sector is, but the reality is that when there aren't the horses in government to compete, you just won't do a good job.

            There's a reason why big corporations can turnover game changing products in months and the government can barely tread water. Most of these guys are the rejects who didn't get the big time internship or management consulting gig. So they end up in government running the biggest pandemic in 100 years.

            • @alienurbanite: The Donald Trump example was sarcasm, demonstrating how ‘successful’ business people are utter dolts when it comes to politics. Hence I have very little interest in one’s business acumen in determining suitability for politics. One day people might get it into their thick heads that a CEO of a company does not equate to Prime Minister of a country. A CEO has a relatively narrow skill set

              • @Boogerman: The Donald is a con-artist and not a good CEO. If you look at his businesses they are supported mainly by debt and he's done very little to build business not associated with selling the "image of success". He was born into wealth and nothing suggests he is some genius executive.

                I'm not suggesting hiring a CEO with no government experience. I'm using private enterprise and how their CEOs typically move through their ranks making them good at what they do for their company.

                What I'm suggesting is remunerate the public jobs competitive to private sector jobs to attract talent that is willing to start from the ground and build up to be Prime Minister. Imagine a world where a Prime Minister is a top end graduate who start as an intern, moved through various parts of the government to gain experience, and eventually works their way up to the leadership.

                The reason this happens in private enterprise is that they get well paid and top guns from MIT, Harvard, etc aim for the big private companies and not your local MP job.

                We already do this in the judiciary and its a fundamental way to maintain judicial independence. Hire the lawyers who started off doing well in law school, got excellent clerkships, gain experience as barristers, then hire them with strong remuneration into the judiciary where they have the skills and intelligence to judge complex cases, but are also well paid enough that they are not easy to corrupt.

            • +1

              @alienurbanite: Like Bill Gates - literally starving, working in a mailroom to Billionaire.

              Or Julia Gillard - literally starving, working in the mail room for a union law firm to PM.

        • Agree with this completely.

    • -15

      Not just the Pollies.
      With Public Servants receiving indexed pay increases every year, it doesn't take long to get a substantial deposit together to buy a second property.
      The bubble is well and truly protected.

      • +11

        Average payrises for public servants for the last 10 years has been under indexed rate.

    • -10

      Don't need to ban, just TAX really heavily.

      If sold ( no matter if lived in there or not ) within X years % tax on capital gain
      1: 100%
      2: 90%
      3-5: 70%
      5-10:50%
      11-20:20%
      20+: 0%

      Additionally, each house/apartment generates a taxable value of 10% of purchase price independent if rented out or left empty ( If owner lives in it, no taxes are raised )
      So a House purchased for 900K, attracts 90K added to the Owner salary and taxed.

      This would stop everyone in investing in properties, and reduce the price.

      • +4

        i think thats a bit restrictive and realistically just tells people to buy and hold on for dear life (maybe even unoccupied, if in poor state, over selling).

        What's probably the fairest system is to remove the 50% CGT Discount for assets held for >1yr (but apply it only to residential property)
        and also limit/reduce the 6 year PPOR exemption to genuine circumstances for which the original legislation was designed
        (i.e resident Aussie moves interstate/overseas for a few years as part of project/secondment work but has always intended on returning).

        • +1

          That would achieve nothing, property investors would just move their purchases into a company structure. The only reason for the 50% CGT discount is because company tax is approximately half the top marginal rate. It is there for a reason.

          • @dave999: And companies get a 33.3% CGT discount for the same thing. Exclude that for residential and you’d get ideally the same outcome.

            Also moving to company excludes you from the PPOR exemption which is commonly used as well.

            I think it would achieve something and it’s definitely better than what the og commentor described

            • +3

              @JDMcarfan: I don't think that is correct, companies don't get any discount, they just pay the company tax rate. Super funds do get a 33.3% discount. Again this is to make it essentially the same total tax rate for each structure.

              • @dave999: ahh yes my bad! got mixed up there. look like the work around would exist then. I guess 25-30% beats 22.5% (45%/2), but yeah no material impact.

          • @dave999:

            The only reason for the 50% CGT discount is because company tax is approximately half the top marginal rate. It is there for a reason.

            Never thought of this. I thought it was there to stabilize the stock market and avoid excessive trading.

            ALP were going to reduce it to 25% if they got in last election.

        • If unoccupied, e.g. no income from rent, they still would have to pay tax on the "potentially generated income". That should be incentive enough to not let the estate vacant.

          tells people to buy and hold on for dear life

          Isn't that the purpose of a house. To live in it for the rest of the life. If you sell and buy something else, there is a system to take in account capital gain ( e.g. If you buy the same price house, there won't be capital gain as you reinvest ). If you downsize, you "only" pay capital gain on the difference.

          This in order to discourage people having more than 1 property. ( the one they live in )

      • Comrade!

      • The negs I receive are just showing why house prices always will go up. Lot of complaining about, but doing something …. never

        • +1

          Or you have a shit plan that incentivizes the wrong behaviours and outcomes.

      • +3

        That would just increase rents for tenants

    • +3

      Politicians and voting in their self interest is another matter. If politicians had to excuse themselves due to conflict of interest then both chambers would be empty.

    • OzBargainers too, hence why every discussion about property investing goes the way it does on these forums.

    • Is this the highest number of positive votes anyone has ever received? This is the first time I'm seeing so many votes on a comment.

    • So, it sounds like there needs to be a FEDERAL ANTI-CORRUPTION COMMISSION, to deal with pollies doing the wrong thing, generally, not just with investments. You know, like Morrison promised more than 1000 days ago. The corruption, rorts, inefficiencies and total slackness in dealing with imminent tragedies won’t end while these clowns are still in government.

  • +34

    … considering a ban on investors snapping up properties and renting them out.

    The people who can't afford to buy or people who just need somewhere temporarily - where would they live/rent?

    • +31

      Why, they would just get it for free of course!

    • +16

      where would they live/rent?

      That's a very Australian mindset. Overseas, social housing spending is quite high. Government provides a lot of that and private businesses have an incentive to pitch in too to develop communities.

      • +4

        So taxpayers should pay for even more stuff?

        • +64

          Taxpayers are already helping the investors via negative gearing.
          Negative gearing and acquisition of multiple investment properties is good for the individual, but not beneficial for society as it increases prices, shifts taxation funds, and privatised rental accommodation which makes rents more volatile.
          Obviously a blended version of private and public rental would look more like our current health system, and historically has existed in a number of states. The advantages of more public housing is clear, those less able to afford housing are not pushed out of the market. Secure housing being a major factor in mental health and children's attendance at school. These two area carry significant social costs, financial, medical and ultimately legal.
          So I guess, the use of social housing is relevant in a society.

          • +12

            @DashCam AKA Rolts: Negative gearing applies to all investment classes though, it's not targeted at property.

            What is so special about property that it should be exempt?

            • +5

              @Leiothrix: Most of these conversations seen to presume that these uber-rich investors are buying dozens of homes; and we must stop negative gearing to stop 'these' investors driving up property prices

              What most appear to miss is negative gearing typically only really applies on the first one of two properties. After that the loses on subsequent homes are offsetting the gains on the first few rather than offsetting PAYG income. In this way tackling negative gearing really only hurts 'mum and dad' investors. It makes limited difference to sophisticated property investors.

              But @leiothrix highlights another important detail. Negative gearing allows 'mum and dad' investors invest in any asset class to offset income against assets class loss. Excluding property, without increasing government investment in social housing, would disproportionately hurt both 'mum and dad' investors and lower income people who need access to rentals.

              • +1

                @jhaley3180:

                Excluding property, without increasing government investment in social housing, would disproportionately hurt both 'mum and dad' investors and lower income people who need access to rentals.

                'Mum and dad' investors have plenty of other options, that don't involve half the nation becoming a fat, lazy bulge of middlemen taking a cut without contributing anything to an essential need.

                • @crentist: Right so you would prefer they invest and use negative gearing in shares, bonds and other investment tools? Thereby leaving negative gearing in housing only to institutional and professional investors. That seems odd but the best way for you to contribute is by not investing in housing. Good luck.

              • +1

                @jhaley3180:

                negative gearing typically only really applies on the first one of two properties.

                Nonsense. By definition, negative gearing applies only to people wealthy enough to buy properties that are poor earners (don't earn enough rent to cover for their own mortgages) in the hope that the house price will increase enough to make it worthwhile in the long run.

                Rich people buying a bunch of poor earners is certainly not some rare edge case in the Australian property market, and is a key cause of this housing bubble that's crippling our whole economy (which is of course worse for the rich, too, though don't count on them to figure this out for themselves).

                • @ItsMeAgro: You don't really get how rich people 'get rich' do you? You do realize that within a period of time those so called 'poor earners' no longer stay 'poor earners' and they start making money. At this point you either start paying tax on them or they offset other loses. You do realize that negative gearing means you are… By definition making a loss…. Wealthy people don't stay wealthy if they only invest in loss making enterprises.

                  Hence I stand by my statement that typically the wealthy only apply negative gearing to PAYG income in the first couple of properties.

            • +10

              @Leiothrix: This. Everyone against negative gearing has basically no idea what it actually is.
              What will drive down house prices, building more housing, increase supply and prices will fall - get rid of restrictions and endless red tape in building new properties and build new infrastructure to make new areas more accessible and livable.

              • +7

                @dave999:

                get rid of restrictions and endless red tape in building new properties

                Red tape is necessary so new housing is built to a decent standard and is safe

                • @Quantumcat: Having homes that have contestant problems will mean lower prices though. Look at how apartment prices for new buildings in Sydney are falling because of the shoddy new constructions such as the Opal tower destroying confidence.

                • +2

                  @Quantumcat: That's not the red tape I'm talking about. There is a huge amount of red tape slowing down and stopping development at the planning level. Obviously standards of the actual buildings should be maintained.

            • -7

              @Leiothrix: Property is the only investment class that allows you to reduce your regular income (e.g. your pay)

              • +10

                @noone: No, negative gearing is applicable to all investments. It allows you to offset your expenses against your income.

                It works the exact same way when borrowing to buy a house to rent, when borrowing to buy shares that pay dividends, when borrowing to start your own business, or with anything that costs you money to generate income really.

                • @Leiothrix: I stand corrected, I always thought only property investment allows you to reduce your taxable income

                • +1

                  @Leiothrix: The issue with negative gearing in the property market is less to do with just negative gearing itself and more to do with the combination of negative gearing, the CGT discount, low interest rates, the high leverage loans available and the government pushing for constant growth in property. Though the fact all countries except for three abolished negative gearing does make it seem we are behind the rest of the world.

                  Negative gearing itself is not bad but when government intervention maintains constant growth in the market it becomes an issue. If the government propped up the share market it would also be an issue.

                  Personally I think interest on loans should be a capital expense, its literally an expense incurred in borrowing money. It would also probably fix the issue without getting rid of negative gearing or the CGT discount. but that's just my two cents

              • @noone: yes but if you remove that you only hurt mom and pop investors. You don't gain more taxes as the expenses are still written off against the asset on sale so instead of the discount now they get the discount when they sell. The only thing it does is make it much harder of an asset class for small time investors to get involved with and relegates it back to large investors.

            • +3

              @Leiothrix: Housing is essential. That's what makes it special. And most investors purchase properties, which artificially drives demand, without contributing to supply.

              It'd be kinda like investing in the water supply, by allowing everyone to pre-purchase as much as they want and then resell to others. You can't drink more than you can drink, but you can buy what others need to drink.

              • @crentist: So are you suggesting that because people need something you shouldn't be allowed to invest in it? There are political systems that work that way.
                You do know that companies do purchase and sell water right? CCA making a stunning amount of money on water. Similarly you do realize that mains water is not completely socialized and available to everyone in Australia. There are many rural and regional locations that must harvest their own water or purchase it from companies who make a profit.

                Getting back to the point, just because everybody needs something doesn't mean you should exclude it as an investment class. Everybody needs supermarkets, does that mean we shouldn't allow investment in Woolworths? What governments should be doing is investing more money in social housing so that those who cannot afford housing have an alternative. This would also likely take investors out of this section of the market.

                • @jhaley3180: That last bit would be a better approach, I think. Make sure that adequate housing is available, then allow investment above that. Just like with water. You can choose to buy bottled water or a nice house, but some adequate form of housing and water should never be too out of reach.

                  You mention other political systems that prevent investment in needs. But the failure of the old commies came from ultimately being unable to take care of their people. Unbridled capitalism has a similar issue if it allows wealthy people too much freedom to remove essentials from the lives of people below them. It means that instead of capitalism and development creating new wealth in society, like making cheap smartphones available to all, or luxury cars for a few, it starts to cannibalize existing wealth by finding ways to make some individuals spend more on what they already need to buy, simply so that others can fatten their pockets a bit.

                  That's where some level of socialised goods and intervention can come in, to ensure that power imbalances in the market don't undermine this political system too. When our supermarket duopoly has thrown their weight around too much around essentials, the government has stepped in (eg when they were dropping milk prices too much).

            • +1

              @Leiothrix: @Leiothrix

              "what's so special about property that it should be exempt?"

              I can't believe I have to explain this to people, but I guess it really speaks to how out of touch some people are that property is imagined as purely an investment for them.

              You can live in a house or apartment. You can't live in a share. You need a home to live, you don't need a share to live.

              • +2

                @jrowls: You don't need to own a house to live in it.

                Negative gearing is just offsetting losses against gains, where the "negative" part means that the losses outweigh the gains.

                Most people have no clue what that means or its implications, they just hear the word on the news and think it's something that evil rich people use to screw over everyone else.

                If you suddenly banned investing in property then you would have a lot of people on the streets. They can't afford to buy anyway, and now they have nowhere to rent.

                If you suddenly banned negative gearing on property only then it wouldn't make much difference to the amount of houses owned as investments, it would just screw over the small time investors.

                • @Leiothrix:

                  You don't need to own a house to live in it.

                  Of course not, but renting is a pain in the ass and means there's a lot of things you can't do, plus an inherent lack of security that people don't like - especially vulnerable people.

                  Negative gearing is just offsetting losses against gains, where the "negative" part means that the losses outweigh the gains.

                  I think most people understand this. What it means is that you get paid to afford to invest in something that you wouldn't be able to cover otherwise, to encourage investment in xyz. This might be appropriate to boost the economy, but I don't agree that it's appropriate for housing.

                  If you suddenly banned investing in property then you would have a lot of people on the streets. They can't afford to buy anyway, and now they have nowhere to rent.

                  There are other methods of housing construction - the government could provide housing using the money saved from negative gearing, or they could provide it through affordable housing providers. You're also assuming a lot about market elasticity. If housing prices came down, you might see renters move from renting to purchasing, and these new waves of homeless people as you suggest could then take over those cheap leases as their demand drops.

                  If you suddenly banned negative gearing on property only then it wouldn't make much difference to the amount of houses owned as investments, it would just screw over the small time investors.

                  … who would then have to sell at market rates - which would presumably be lower considering investor demand is removed - and likely sold to occupiers. I'm not seeing the problem here?

                  • +3

                    @jrowls:

                    I think most people understand this. What it means is that you get paid to afford to invest in something that you wouldn't be able to cover otherwise, to encourage investment in xyz.

                    Most people have no clue what the term "negative gearing" means. They don't know what the definition is and have no clue of its application or implication. Sorry, but that seems to include you.

                    You're not getting paid to invest in something, you're reducing your taxable income by the amount of any losses used to generate income. This applies whether your income is more than your loss (positive geared) or less than your loss (negative geared). It is still a loss, it's just less of a loss by whatever your marginal tax rate is. People understand tax deductions about as well as they understand negative gearing.

                    This might be appropriate to boost the economy, but I don't agree that it's appropriate for housing.

                    It's not about "boosting the economy", it's the perception of fairness; where the expenses required to generate an income aren't themselves taxed as income. It applies to all expenses used to generate income; whether it's property, shares or your home business.

                    If housing prices came down

                    That's a big "if". Why would investor demand be significantly lower? It's never clear when someone says "scrap negative gearing" as to what they mean.

                    It's either removing the ability to deduct interest expenses from income or all expenses from income, or some combination depending on the income:loss ratio. But either way property is still usually a good investment. Dependable income stream and you're betting on capital gains as well.

                    People understand that a house is a house, they don't really understand what a share is; which means that there is always a preference for property investing even though it has a much higher barrier to entry.

                    If housing prices came down, you might see renters move from renting to purchasing

                    It would have to be a massive shift, which has huge implications for anyone that currently owns a house to live in, especially if they're paying a mortgage.

                    the government could provide housing

                    Government housing? So you want to remove an income stream from regular people who are trying to be self-sufficient, dramatically raise government expenses and create a new welfare class at the same time?

                    • -1

                      @Leiothrix: Well I straight up disagree with most of what you've said so I'm just going to pick this out.

                      Government housing? So you want to remove an income stream from regular people who are trying to be self-sufficient, dramatically raise government expenses and create a new welfare class at the same time?

                      Social housing isn't 'creating a new welfare class', it's something that exists at a far greater rate elsewhere in the world, and in Australia historically. I suggested that you would use the money spent by the government on negative gearing and shift it into social housing, not 'dramatically raise government expenses'.

                  • +2

                    @jrowls:

                    Of course not, but renting is a pain in the ass and means there's a lot of things you can't do, plus an inherent lack of security that people don't like - especially vulnerable people.

                    You options for housing are either buy - not affordable to many, not wanted by many (eg if you are only somewhere for a few years etc) - or rent.

                    Your options for rent are private investment or government ownership

                    Changing to having 1/3 of housing in Australia to government ownership is a monumental, expensive and long term activity (since 1/3 of people rent)

                    Your shorter term benefit comes from changing rental laws not changing investment laws. Plenty of places with good quality renter protection results in many people renting (Germany being the most obvious)

                    • @dtc:

                      Changing to having 1/3 of housing in Australia to government ownership

                      Not nearly what I suggested, and I completely agree that that's a monumental task. I just think there's a gap to bring social housing provision up, to levels similar to what other countries run. At least similar to what Australia used to have anyway (I believe about 6% in the mid 90s, vs 3% now).

                      Your shorter term benefit comes from changing rental laws not changing investment laws. Plenty of places with good quality renter protection results in many people renting

                      I agree - rental laws need to be changed too. But that doesn't necessarily fix housing affordability, it just makes renting better. Housing affordability is so bad because property is being used as a speculative asset. If it was all about being income-producing assets, I have basically zero (within the neoliberal/capitalist framework, of course) problem with housing investment. My problem is when you have negative gearing exemplifying the fact that people are simply speculating. The asset value is lower than its ability to produce income, therefore it's an investment based on future value.

                      I'd be much happier seeing mum and dad investors/developers with a row of townhouses purchasing/developing at half the price things go for these days, and then profiting off of rents that are a bit more affordable. That seems like a much more sustainable model. Investors are still rewarded for building housing, but since the rental market is much more flexible, better priced and better quality offerings would drive the market much more efficiently than in a speculative housing market.