How to Stop Wealth Gap Growth (Real Estate)?

donkeydoc on 22/07/2022 - 12:30

With impending collapse of property markets, maybe 40% in 5 years time, how can we stop investors from buying up homes of the least fortunate defaulting home 'owners'? Would be a terrible outcome if wealthy investors expand their property portfolio, say from 15 homes to 25. What policies can help those that lose their homes to re enter at a fairer price?

There is a housing crisis and markets haven't behaved freely for the last 30 years. There needs to be a ban on residential property purchasing for anyone with $2M assets in real estate for the next 10 years. Capital gains and negative gearing are a joke.

Financial

Comments

  • Iwantthebestprice on 22/07/2022 - 12:38
    +4

    This was an interesting read and relates to this thread I believe.
    https://www.abc.net.au/news/2022-07-21/cap-capital-gains-tax…

    • markathome on 23/07/2022 - 23:11
      +32

      Vote me down if you want. But, while reducing capital gains or removing negative gearing might disincentivize property investors, it won't actually stop them buying more or increasing their portfolio.

      What the OP wants is monetary policy that aggressively raises interest rates. This will break the use-equity-to-buy-another-one pattern because although investors with large portfolios will have the equity for another place they won't actually have the income to service the loan.

      Outright buyers will be unaffected and policy settings for them revolve around ensuring foreign buyers have legitimate wealth and enter the market on fair terms.

      Stopping those with over $2 million in property buying property, would stop a wide range of wealthy people moving house - and would be a disaster. Stopping entities with over $2 million in investment properties buying investment properties, would stop corporations being landlords. Corporations are psychopathic little shits. But there is a very strong and legitimate argument that they are actually better landlords - not sweating the small stuff and working from a 'big picture' frame. Stopping individuals with over $2 million in investment properties buying investment properties until they incorporate, makes some sense but Labor isn't even prepared to walk away from the Coalition's tax breaks for high income earners.

      Don't get me wrong, there are a bunch of reasons why the Reserve Bank shouldn't aggressively raise interest rates including people losing their homes. But there are also a bunch of reasons why the Reserve Bank should never have allowed interest rates to get this low in the first place.

      Prediction: house prices will not fall 40% (or anywhere near that) at anytime in the next five years. And if markets are to be believed we may see interest rate cuts in 2023 or 2024.

      • cloud68 on 24/07/2022 - 10:39
        +6

        U ain't gonna get a vote down from me.

        People only want to hear what they want to hear. Welcome to capitalism. Yes its very sad but also true. At least we have medicare.

        • idonotknowwhy on 24/07/2022 - 13:14
          +8

          I'd prefer if nobody got downvoted for their opinions as long as they're not low effort or trolling

          • matt-ozb on 26/07/2022 - 06:45

            @idonotknowwhy: But there's some economic fundamentals in these arguments so they are not necessarily subjective opinions and hence just incorrect

      • od810 on 25/07/2022 - 10:47
        +2

        And having strong lending criteria i.e. stress test borrowing capacity at 8% 9%, remove negative gearing from assessment for investment loan. In the end not only do you want to reduce the equity but also the borrowing capacity.

    • johno3456 on 25/07/2022 - 16:30
      +2

      It is the standard bs report, trotted out every few years to try to justify taxing your primary residence. Of course home ownership and any associated tax benefits disproportionately benefits older ppl, since it takes long time to buy a home, it is costly to change homes, and ppl tend to downsize in retirement or after death of spouse, which happens when you are old.

      High prices is due to a lack of houses. Make it easier to build more, terrace houses, apartments etc.

      The video highlights it is a problem in many countries.
      https://youtu.be/4ZxzBcxB7Zc

  • freefall101 on 22/07/2022 - 12:43
    +23

    Definitely agree that negative gearing is a joke and protections are needed over property manipulation (it's happening a lot in the US, it's not your average investor but hedge funds purposely buying all houses and driving up prices in an area as a wider strategy, that should not happen here).

    But a 40% drop and any significant level of defaulting is unlikely. And many investors will lose their properties too if they're leveraged to the hilt. If prices drop 40% then you'll see a wave of first home buyers enter the market. With the bevy of government support, there's basically a floor at $600k, if anywhere decent comes in around that price people will snatch it up.

    There's simply too much demand and not enough supply for housing prices to drop 40% though and any major fall will happen more in the $5m+ market where it has little impact on average people reentering the market. Unless there's a major economic collapse of some sort, not just interest rates rising but wages dropping and unemployment growing significantly.

    • netjock on 22/07/2022 - 13:35
      +7

      But a 40% drop and any significant level of defaulting is unlikely. And many investors will lose their properties too if they're leveraged to the hilt. If prices drop 40% then you'll see a wave of first home buyers enter the market. With the bevy of government support, there's basically a floor at $600k, if anywhere decent comes in around that price people will snatch it up.

      OP been watching re-runs of The Big Short.

      The most likely candidates for default and massive price jobs are the city fringe locations where it was cheapest to buy for those who can lease afford it. Those are not locations most people who can afford anything better would want to live anyway. New estates built by volume builders with promise of schools that don't turn up and shopping centres that suddenly turn into more residential blocks and there is only one road in and out. The end result is it takes 30 minutes queuing just to get out of the estate (and back in probably).

      Like you say, blue chip suburbs would also hold up well.

      • Peck on 23/07/2022 - 12:47
        +1

        I agree. Infrastructure is missing in a lot of new developments. And older towns and suburbs that have houses knocked down & apartments built should have their infrastructure expanded.
        This should come from fees and taxes paid by developers. (I suspect that these are already being paid, but not put towards infrastructure)

        • Harold Halfprice on 24/07/2022 - 16:35
          +3

          It's ridiculous that developers can build an entirely new housing estate, whether it's in the outskirts or within already established suburbs - and get away with doing (profanity) all to the infrastructure.

          They create congestion and a hugely expensive problem that tax payers are inevitably going to have to pay for - whilst they get to walk away with their pockets full, only to repeat to process elsewhere.

          • cannedhams on 25/07/2022 - 13:32
            +3

            @Harold Halfprice: They already do. Just google "infrastructure charges". In Brisbane, for example, you're looking at about 50K per residential subdivision - thats just the infrastructure charges, the actual trunk infrastructure costs more - plus the DA fees on the original application.

            I realise its fashionable to bash developers, but the reality is that everyone in this country lives in a property that started life with a developer. And the reality is that all infrastructure charges flow through to the end customer in terms of increased property prices - actually, even more so, since the developer pays GST based on the final price which itself is made up largely of government fees.

            Part of the reason why your grand dad bought a house for 30K is precisely because he never paid infrastructure charges, and local governments funded themselves out of municipal rates. Now he gets the benefits of improved infrastructure paid for by charges that he never had to pay in the first place. And the intergenerational theft proceeds apace.

            • netjock on 26/07/2022 - 11:38

              @cannedhams:

              50K per residential subdivision

              30K in Melbourne to split an existing block. What there is to show for it from the local council is very little. Then there is council rates that forever goes up on top. The council double dip.

              I realise its fashionable to bash developers, but the reality is that everyone in this country lives in a property that started life with a developer.

              If you look at some of the bridges and tunnels engineered like 100+ years ago vs the stuff that is engineered for obsolesce you know what I mean. Developers then are not equal to developers now. If you developed cities now wave good buy to trams and have limited underground rail networks (unless if you live in China where the government will force relocate everyone to reach their state aim of some grand globally significant scheme)

              Part of the reason why your grand dad bought a house for 30K is precisely because he never paid infrastructure charges, and local governments funded themselves out of municipal rates.

              Exactly the NSW government is getting rid of stamp duty and putting in annual land tax. Problem right now is councils want to charge you a lot now up front (and not invest the money but spend it, with no recurring revenues). It is like net present value of getting $30k now and actually investing it into the share market and getting 3% dividends in perpetuity to invest (Norwegian sovereign wealth fund can only use the interest earnt every year is one good example). Rather council are probably spending the money like it will come again on general expenses.

      • juki on 25/07/2022 - 22:32

        no some people do double dip infrastructure, where i live they built it a couple of years ago and now they are tearing it down again to -hopefully- manage the traffic from population growth, lets hope they get it right the second or third time around…

        • netjock on 26/07/2022 - 11:40

          no some people do double dip infrastructure

          You mean taking money from your mates the developer at the beginning then few years later giving the job to another mate to do it all over again? Dishonest politicians, it is how they sow the seeds of revolt and let in authoritarian rulers.

          • juki on 26/07/2022 - 17:41

            @netjock: yeh, exactly, nobody seems concerned here so nobody is going to revolt, overseas people bare with much worse for much longer.

    • donkeydoc on 22/07/2022 - 13:54
      +3

      I take issue with the argument of a lack of supply of housing and if we take a close look at the demand side, there is largely unregulated sums of foreign investment entering Australia. We have become an international money laundering haven and this needs to stop.

      Couple this with capital gains staying at 50% for first 3-5 years (not 6 months if you occupy then sell with no tax on sale profit) and abolishing negative gearing on residential houses, prices should correct for these market influencing policies.

      I take no issue in seeing a highly leveraged investor reduce his 30 home portfolio to 15 if negative gearing is abolished.

      The main issue here is housing to Australian citizens. There needs yo be an active push to ensure all hard working, 2 income families can afford a home instead of living paycheck to paycheck.

      • freefall101 on 22/07/2022 - 14:44
        +8

        Foreign owners don't care about negative gearing, capital gains and anything like they. It's taxed in their home country if they're a truly foreign owner (plus there are limits in place on that kind of foreign ownership).

        By lack of supply I mean the housing market on a whole. Investment properties are usually income deriving (even if it's negative income) because you can't negatively gear an empty property. That means someone is living in it, even if it's not a PPOR, so if the property was sold then the people renting either need to find the cash to buy or rent somewhere else. If there are less investor owned properties the rental stock diminishes and pushes up rents which drives even more investors. The only way out is to increase the number of houses.

        I absolutely think we should limit/ban keeping an empty property (generally foreign owners) or airbnb. And it should be a whole lot more regulated as an industry, we have regulatory investment bodies coming out the wazoo yet nothing for the multi-trillion dollar housing market that represents far more value than even superannuation.

        • MrFrugalSpend on 23/07/2022 - 21:37
          +3

          freefall101 you are more on the right track. donkeydoc is not quite understanding where the real problem lies and falling into the good old tall poppy syndrome. I know many people who have investment properties, most of them are hardworking families who rent them out to other hardworking families who are not at the stage where they can buy themselves. However this helps housing, not hinders.

          Whilst I know some wealthier people that have two houses, where one sits empty at any one time, it's usually a city house and a small beach unit on some random coast within a 3 hour drive. Doesn't really solve housing issues near employment centres. I also doubt it would be common enough to make a huge difference to housing generally. I think tourism is important too so not sure about banning airBNB either.

          We are a free country, we shouldn't "BAN" anyone doing anything with their own hard earned cash and assets. We should make it freer and the market will sort out supply to meet demand. If you want to know where the real problem lies, take it from someone in the industry who is regularly hitting red tape trying to create more development. If we want to solve the housing crises, Councils need to back off on how hard they make it to build more density in so many areas to preserve existing suburban densities built around the car from postwar to 90s… town planning regulations and a mass of red tape are a big part of the problem. We have a huge suburban NIMBY culture in this country - and that is why we have a housing crises. In faster growing places like cities in Asia, they don't have the luxury of clinging to character precincts and 700m² blocks in urban footprints so they allow the redevelopment to high densities and build infrastructure to foster public transport use.

          That's the trade off - no one wants units next to their single unit dwelling, but we've got to get over ourselves and realise the landscape needs to become denser if the population is growing. It might upset people, but it is a hard truth.
          "Banning" things is just a temp diversion from where the real problems are. People need to be allowed to build what is needed - but trust me, there's a lot of over-regulation, delays, costs and red tape that drive the prices up significantly. You'd be amazed how long the approvals processes take, the tens to hundreds of thousands you have to spend on reports, fees and charges that need to be paid are mind boggling in many jurisdictions - and then there's the 'don't even bother applying, we aren't going to allow that', and flat out refusals of proposals as well.

          • Antikythera on 25/07/2022 - 10:41
            +4

            @MrFrugalSpend: enforce a blanket 5 story development approval within 1km of every train station.
            stop councils getting in the way of increasing density.

      • netjock on 26/07/2022 - 11:44

        I take issue with the argument of a lack of supply of housing and if we take a close look at the demand side

        Proven over and over again there is demand and lack of supply of housing where people want to live. You look at expensive suburbs. An old 60yo house on a regular size block for $1.5m. Replacement cost of house is $350k so land is worth $1.2m, how is that different to $300k piece of land on city fringe? It doesn't grow grass of gold.

        The floor on city fringe house prices is cost to put in infrastructure to the block, build on it and profit. So there is a natural floor on prices (whether that is affordable is a question), then there is price people are willing to pay for a crap house on a block close to amenities.

        It is like people paying $1.5m to be in a suburb public schools vs $650k living city fringe. How much is private school fees? Is present value of said school fees $850k?

    • AustriaBargain on 22/07/2022 - 15:31
      +11

      Negative gearing should be limited to one property, if any at all. For most people negative gearing should mean they don't qualify for any more credit for more properties anyway, if they are technically operating at a loss.

      • SlickMick on 23/07/2022 - 09:28
        +2

        Writing off losses in theory should be the same for property investments as for any other investment i.e. you can only write it off against like activity.

        However, the ATO acknowledges that just buying some investment properties or doing some share trading doesn't mean you're running a business, therefore it's all just included as individual income.

        I guess if they scrap negative gearing, they'd have to allow all business deductions. e.g. travel for inspections etc.

    • reactor-au on 23/07/2022 - 09:50
      +4

      I think NZ scrapped negative gearing since COVID, but lets be honest, the AUS gov is never going to scrap it.

      • Peck on 23/07/2022 - 12:51
        +2

        Labor had a great idea. Grandfather current negative gearing, and restrict future n.g. to new properties. But just like Tax Reform, even people who wouldn't lose were/are scared.

        • amsaini15 on 24/07/2022 - 14:57

          Australians don't support change. Everybody thinks what's in for me rather than looking at bigger picture. Now you have to wait another 10-20 years for some party to come up that idea again.

  • Mechz on 22/07/2022 - 12:45
    +10

    You won't stop it, best option is to be budgeting for 15% interest rates if you have/want a mortgage.

    Too many politicians with real estate portfolios will mean no real change.

    • idonotknowwhy on 24/07/2022 - 13:17
      +1

      You can't even buy a studio apartment (at current prices) with a 20% deposit if you budget for 15% interest payments.

    • Elfarol on 25/07/2022 - 10:49
      +2

      There is a role for 'investors' in the property market, and outside of Australia (think Europe, South American, South-East Asia, Middle-east - which is where I am personally familiar with), its not uncommon to see property ownership as a nuisance, where you have to deal with maintenance, upkeep and government fees. Our system, which is quite unique due to its peculiar set of laws and incentives, incentivizes property 'investment' for the purpose of capital gains (rather than rate of return on rent), which is a massive mis investment of personal and national resources for no productive outcome. Investors here, as a result are non-professional land-lords who fail to see good tenants as 'customers' to maintain. The divorce of property investment from rental returns, here is a form of 'market failure'. Eventually this will slow (maybe in the next five years, maybe in a few decades) and it is really going to bite us in the ass when that capital growth disappears (even if house prices remain high) - its perhaps at that moment that political reform might become feasible. And don't blame the politicians, every time capital gains/gearing reform has gotten mentioned, people have struck that party out. The greed of the 'dream' of being property rich (which is a 'dream' since its an unrealised return) has always won.

  • Trying2SaveABuck on 22/07/2022 - 12:49
    +40

    • Increase tax on those who own multiple properties i'd say anyone who owns more then 2-3 properties should be subject to massive annual taxes

    • allow people who PPOR to claim the interest as a tax deduction like investors do with there investment properties

    • change the mentality of investors offer better tax conditions for investing in Stocks/Bonds etc

    • allow the older generation to down size without being punished by an our dated tax system

    • improve public transport and access outside of the major cities

    • job creation away from the major cities

    • (unpopular) get rid of 1st home buy schemes and all that crap because all it does it add fuel to the fire instead

    • get rid of stamp duty for an annual land tax making 'hording' properties less favourable (make this a progressive tax ie 1 property you pay barley anything 10 properties you pay LOADS of tax)

    • crack down on dodgy builders and scammers

    • Crack down on banks and remove any financial barriers and red tape from changing home loans (refinancing)

    • ihbh on 22/07/2022 - 18:50
      -8

      Increase tax on those who own multiple properties i'd say anyone who owns more then 2-3 properties should be subject to massive annual taxes

      some stupid ideas.

      do we do the same if someone owns more than 2-3 shares or businesses?

      • donkeydoc on 22/07/2022 - 18:54

        The context here is housing (un)affordability.

        • ihbh on 22/07/2022 - 19:07
          +2

          if we taxed shares/businesses as proposed for housing, they would be more affordable.

          • Sm91 on 25/07/2022 - 08:07
            +3

            @ihbh: Except there isn't a shares/business crisis that's forcing people into lifetimes of debt to live within 90 minutes of their work… what a ridiculous comparison.

      • Trying2SaveABuck on 22/07/2022 - 20:26
        +5

        do we do the same if someone owns more than 2-3 shares or businesses?

        there is a difference between a commercial and residential property

        as for shares i dont know what you are talking about - shares are 'investments' residential houses arent….

        • ihbh on 22/07/2022 - 21:00
          -2

          So renting out a property isn't an investment? You earn an income called rent vs dividends with shares.

          Also, what about companies owning thousands of properties for rent - e.g Meriton?

          • Trying2SaveABuck on 22/07/2022 - 22:00
            +4

            @ihbh:

            So renting out a property isn't an investment? You earn an income called rent vs dividends with shares.

            it is but it shouldnt be….you are missing the point about 'stopping' the wealth gap.

            Investing in Property shouldn't be a lucrative venture esp compared to shares or starting ones own business - anything 'much' greater then inflation and the gap grows

            the issue has been for the past 2 decades investing in property has out paced more 'risky' investments due to generous tax breaks and population growth pressures in major cities mainly Melbourne and Sydney.

            • ihbh on 22/07/2022 - 22:15
              -2

              @Trying2SaveABuck: What about companies that own thousands of investment properties and I own shares in it?

              • Trying2SaveABuck on 22/07/2022 - 22:18
                +1

                @ihbh: they would be forced to pay a hell of a lot more tax

                • SlickMick on 23/07/2022 - 09:36
                  +2

                  @Trying2SaveABuck: This same forum with so many crying about living in a nanny state, want government control instead of letting the market take care of itself.

                  I can't think of anything more valuable than land. To say it's not an investment is a joke. People will outbid each other to get the prime land, and that is never going to change. Unless of course we pass laws to try to stop supply & demand from doing it's thing.

                  • Trying2SaveABuck on 23/07/2022 - 09:54
                    +1

                    @SlickMick:

                    I can't think of anything more valuable than land. To say it's not an investment is a joke.

                    this mentality is why Australia is going no were when mining dries up….

                    People will outbid each other to get the prime land, and that is never going to change

                    of course it has 'value' it always will no one said this wasnt the case, i think what you dont understand is land going up for 20-30 percent pa is not a sustainable way to run an economy and it stifles innovation. All we are doing is 'creating' debt and more and more of it for generations to come….

                    there is no benefit in someone owning 30 houses if you see housing/shelter as an essential commodity - OZ-bargain is pretty 'anti' free market this place is full of left wingers and i generally disagree with most of the ppl here but there is an argument that housing needs to be reined in

                    • SlickMick on 23/07/2022 - 09:59
                      +2

                      @Trying2SaveABuck: You're right, I don't understand. My read is "the market doesn't work, we need to control the market".
                      I don't see that ending well.

                  • leiiv on 23/07/2022 - 18:14

                    @SlickMick:

                    I can't think of anything more valuable than land.

                    Bingo! And it only becomes valuable because the right is guaranteed by law and enforced by the government. So it only fair for the government to create a policy that discourages investing in prime land. Instead of number of properties, which means nothing, the metric should be the total size of land, normalised by the population density in the area.

                    • SlickMick on 23/07/2022 - 22:00

                      @leiiv: That is not what makes property valuable.

                      location, location, location

      • smartazz104 on 23/07/2022 - 17:43
        +3

        do we do the same if someone owns more than 2-3 shares or businesses?

        No because that is a stupid analogy.

      • cannedhams on 25/07/2022 - 13:34

        we already do this. Land tax kicks in (from memory) in Qld once you own above 550K of unimproved land value, unless its PPR.

    • Thaal Sinestro on 23/07/2022 - 18:38

      How about an annual capital gains tax on All properties owned (50% of the capital gain paid as tax). That would reign in our overpriced housing and fund public housing. Retirees could take out reverse mortgages if they don't have enough cash assets to pay.

      • SlickMick on 23/07/2022 - 22:02
        +1

        You realise the only way to make a capital gain is to sell, right?

      • derrida derider on 24/07/2022 - 09:17

        This is a classic tax - it is an old and surprisingly influential idea (see https://en.wikipedia.org/wiki/Georgism ) It is a heavy tax on the "unearned increment" ("unearned" because it is not a product of either labour or of productive capital investment).

        It is one of those taxes that are incredibly fair and which promote, rather than hinder, useful investment and useful work - but which cannot raise much revenue in practice because they can be avoided by the better off (like death duties).

    • kaleidoscope on 24/07/2022 - 08:22

      i'd say anyone who owns more then 2-3 properties should be subject to massive annual taxes

      you must be joking right? end of the day you pay tax on your taxable income, not on how many houses or higher yield investment vehicles you own…

      there is an additional land tax for people that own total lands worth of x amount. i would not say this is a massive amount.

      • Trying2SaveABuck on 24/07/2022 - 10:10

        that is the issue we 'tax' income not wealth…

    • amsaini15 on 24/07/2022 - 14:58
      +1

      Mate you make lot of sense. But unfortunately Australia is not ready for it.

  • chmod on 22/07/2022 - 12:53

    Central banks to stop printing/creating base currency. More currency chases fewer goods.

    • netjock on 22/07/2022 - 13:35

      I guess central banks also tightened the supply of oil too and launched the invasion of the Ukraine.

      • chmod on 22/07/2022 - 13:48

        Central banks can't tighten the supply of oil. They can't taper a ponzi scheme.

        They were driving 100km/hr, and now they're driving 50km/hr, they're still continuing to print/create base currency out of nothing whilst posturing that they're tightening. All they are doing is driving fear, and many people buy into it.

        • netjock on 22/07/2022 - 14:18

          they're still continuing to print/create base currency out of nothing

          You people have been saying this since 2009/10 when there was the GFC bail out and QE. Never gets old.

    • Tleyx on 24/07/2022 - 19:18

      They printed lots in 2009 and we didn't have inflation

      It's not causing it this time either . It's supply side, Ukraine

  • verio on 22/07/2022 - 13:21

    While I agree that negative gearing is a joke and should be removed, banning allowing or disallowing further property purchases based on income seems a bit crazy.

    • netjock on 22/07/2022 - 13:36
      +4

      In the UK the banks will only lend for investment properties if rent is 145% of repayments (repayments based on current rate + 2%). UK property market is still going up as they are hiking rates.

      • Kangal on 24/07/2022 - 21:54
        +1

        I've thought about it, and the only solution is to remove the incentive for making profits. Anything short of that is just a temporary relief, or focusing on symptoms, or actually furthers to make the market worse.

        The best course of action is for the government to step in, and put a halt to ANY rent raises for 5-years. This will get rid of bad-actors in the industry. Some good people will get burnt, but, chances are they were being greedy or negligent in the first place. And that's life, you will never find the "perfect compromise".

        As demand dries up, prices will plummet which will hurt the investors the most AND the bankers, but the citizens will thrive. The next course of action is to make rent-price raises to be below the rate of inflation, and you could draft that a year behind. For instance, rent freezes 2020-2025. In 2025 year, inflation hits 7% thus allowing landlords to increase rents by 6%. And as this goes on, the incentive to own multiple property becomes bad for wealthy people, so they put their money into stock market, goods, services which grows the economy.

        Before anyone can say it's impossible, read up on some history. Japan was in a bad position after WW2 and half their economy was controlled by a powerful oligarchy (Zaibatsu). The government enacted laws, confiscated land, money, and other goods, and broke the monopolies up. It left these trilionaires as multimillionaires, with a great lifestyle, and out of prison. And from those reforms, in the late 1950s Japan was able to compete in the International community. By the early 1990s they were a powerhouse. And this helped their citizens, instead of a divide between the haves versus have-nots. All because they decided to keep their capitalist economy booming, and added more resources to it, which was held hostage. Fun fact, most of these oligarchs come from the daimyo (samurai) period from a year ago, and they're still thriving today, such as Mitsubishi, Nissan, Hitachi, etc etc.

        • netjock on 24/07/2022 - 22:01

          The best course of action is for the government to step in, and put a halt to ANY rent raises for 5-years

          Good luck. If the last 2 years taught us anything is people don't even like been told to put on cheap face masks.

          It left these trilionaires as multimillionaires, with a great lifestyle, and out of prison

          Trillionaires, Billionaires maybe because they will have a lifetime or more of money to continue to live off.

          For our circumstances where do you want to draw the line?

          The report found that the average Australian property investor, earns “a taxable income between $60,000 and $80,000” and that “50 to 64 year olds are the most likely to own an investment property”. link here

  • tsunamisurfer on 22/07/2022 - 13:24
    +6

    People who have worked and saved and waited for the right time to buy will naturally be rewarded with value in their purchase.

    Would be a terrible outcome if wealthy investors expand their property portfolio, say from 15 homes to 25.

    Why would it be terrible? We don't tell people how to spend / invest their money.

    What policies can help those that lose their homes to re enter at a fairer price?

    None, the market always sets the right price. It is up tot he individual to not lose their homes in the first place.

    There needs to be a ban on residential property purchasing for anyone with $2M assets in real estate for the next 10 years.

    Where did you get these figures from? $2m is not that much in some markets. This is a stupid proposal.

    Capital gains and negative gearing are a joke.

    The last time NG was removed, it got put back within a year due to the negative impacts on rent.

    The last time Labor proposed even a cutting back of NG provisions they lost the election so bad they said they wouldn't do it again.

    The Wealth Gap is normal and is a function of the natural differences in humans.

    Some people want more in life will study, work hard, save, and strive for a better life.

    Some want to drink alcohol, sniff petrol and glue, break the law and live off government handouts.

    • burningrage on 22/07/2022 - 16:08
      +1

      Hear hear!

      Fits to the word "Antipathy". Unhappy in people's success / hard work.

    • Lunarboogie on 22/07/2022 - 16:25
      +3

      Not sure I agree with your poverty is a choice line. For many, it’s been the result of unwise decisions, information or worse, trauma. Agree with your other points.

      • tsunamisurfer on 22/07/2022 - 22:56
        -4

        For many, it’s been the result of unwise decisions

        Decisions THEY made.

        They might not wake up and say I want to be poor.

        They do wake up and hit the goon bag and sniff glue, that is a choice / decision, that leads to poverty.

        • p3nf0ld on 23/07/2022 - 17:31
          +7

          Wow that certainly is a simplistic view of choices.

    • npnp on 23/07/2022 - 20:46
      +3

      Agree with most of what you said except for the last bit, unfortunately that's a very poor choice of words (Poverty isn't a choice for majority. You got that wrong very bad and it's sad. But the rest, well written).

      • tsunamisurfer on 23/07/2022 - 23:02
        -4

        I literally said they do not say they want to be poor but actively make choices that lead to that end.

        • [Deactivated] on 25/07/2022 - 05:45
          +7

          Yeah, nah. This is true in some cases but not all the time. Some people are just born into better households, families or countries, thus having a better start at life and are setup for success better. Kids born into a family where they are beaten, have mental trauma, taught bad habits, weren't given a proper education and their parents are the ones sniffing glue or hitting the goon bag didn't 'have a choice'.

          Heck, you are even at a greater advantage depending on which generation you are born into. Saying people are poor purely because of their own choices and nothing else is a pretty simplistic asinine view.

      • zephyrfox on 24/07/2022 - 09:29
        -7

        But the majority of unemployed or low income earners it is largely THEIR CHOICES that have caused the situation. The crappy strawman argument everyone uses is those with mental health issues or disabilities. yes that's sad, yes it's not their fault, but they also are the minority of poorer people so using them as the argument is a terrible way to make a point.

        You can get unemployment handouts or study assistance, do a 3 year degree with virtually no entry requirements, in an industry that needs staff, say teaching. walk out into you 75k starting salary (https://au.talent.com/salary?job=teacher).

        Don't make bad choices like writing off large parts of your life partying or having kids when you're a teenager. Go to work, buy a house, stop complaining.

        • Mr Haj on 26/07/2022 - 11:44

          So spend 3 years getting a degree, get taxed $18,500 (including HECS/HELP repayments), leaving you with $56,500 p.a. Average rent in Sydney for a unit is $495 per week (a measly $25,740 p.a.). Then you need to buy your food and everything. God forbid you have a family. At best it will take you 10 years to save for a deposit… and who knows how expensive a house will be in Sydney in 10 years.

          Sure it can be done but definitely depends on your circumstances. 200k is a lot of money for a deposit.

          I live in the country so I am fortunate that house prices are somewhat affordable for first home owners.

    • idonotknowwhy on 24/07/2022 - 13:20

      waited for the right time to buy

      Easy when you have a crystal ball or hindsight

  • MrThing on 22/07/2022 - 13:36
    +23

    "market collapse of 40%" thats where i stopped reading

  • netjock on 22/07/2022 - 13:42
    +5

    If I bought a property in 2000 for $300k and now worth $1m. Say I ave $1m of equity. Goes down 40% which leaves me with $600k property. Go for a remortgage and get $480k. Which would allow me to buy another 2 more properties.

    I'd say that unless you come from wealth or some how already making a lot of money with a lot of free cash flow there isn't much of an opportunity to add a lot very quickly. You'll need to wait until the market picks up.

    OP's question is easier said than done. Negative gearing has to be positively geared at some point or else you're on the perpetual negative gearing machine and it just eats away at your free cash flow. Don't forget if you are on 40% tax PAYG will take the 40% from you first then you will need to pay the bank all year until you get your tax refund. Negative gearing is helpful but not that helpful.

    I remember interest rates at like 7% in 2008 and then went down pretty much ever since. Not everything can be explained by interest rates. It is just people who want to spent their whole pay check that is pushing up property prices. We all know saving 40% on an item here at OzB can lead you to spend the saving on other stuff not pocketing the saving. That is the problem with people.

  • JimB on 22/07/2022 - 14:24

    "Would be a terrible outcome if wealthy investors expand their property portfolio, say from 15 homes to 25"

    Terrible isn't it, greedy.

    I only want 20, not 25.

  • DrRalph on 22/07/2022 - 14:51
    +6

    'With impending collapse of property markets'

    Incorrect.

  • capslock on 22/07/2022 - 15:10
    +11

    Letting the market do its thing should help. No more first home owners grant, building grant, stamp duty grant, superannuation for homes, etc, etc. Stop feeding the demand side with government grants.

    • idonotknowwhy on 24/07/2022 - 13:22

      Letting the market do its thing should help.

      This is what I found crazy about the LNP. They say one thing (hail free markets, free speech, fix the ALP debt, etc) and then do the complete opposite.

  • brendanm on 22/07/2022 - 15:22
    +11

    With impending collapse of property markets, maybe 40% in 5 years time

    Hahaha

    • AustriaBargain on 22/07/2022 - 15:35

      OP must be young if he thinks a bursting housing bubble means no more housing bubbles.

    • SF3 on 22/07/2022 - 16:19
      +10

      WTH and it is OK for OP (wife) to spend $1000 on hair service. and think there is a Wealth Gap Growth honestly….

      Unbelievable.

      • donkeydoc on 24/07/2022 - 10:28
        -2

        What does a regrettable decision recommended by family services to spend money on something nice for yourself have to do with a growing wealth gap?

        -Proud kmart clothing buyer

  • boomramada on 22/07/2022 - 15:52

    Capital gains and negative gearing are a joke

    Question, if there is no negative gearing, who going to build ever demanding houses ?
    By removing negative gearing, you think 800k house going to be reduced to 100k so people can start building houses?
    Or government need to build houses (similar to Singapore) ?

    How is the house price go down when every one want to be in CBD? want a house with a land, increase of cost of living, lack of tradies ?

    • Vote for Pedro on 22/07/2022 - 20:55
      +4

      Kinda like when the miners threatened to not invest in WA because of their resources tax and rules. McGowan called their bluff and guess what, they’re still investing.

      You know why? Coz there’s still money to be made.

  • 7ekn00 on 22/07/2022 - 15:58

    It's part of the 2030 agenda, Blackrock and Vanguard will own most the properties and citizens will own nothing and be happy ;)

    • burningrage on 22/07/2022 - 16:08

      That's what they said 10 years ago and now is 2022 and it didn't happen.

      • plmko on 22/07/2022 - 22:20
        +1

        Blackstone just bought up Crown, Melbourne's most premier real estate and money printing machine. The shake out of the economy has already started but guys like you are too busy kicking your neighbour when they're down to even notice.

  • Drakesy on 22/07/2022 - 16:31

    40%? no i dont think so, we're not set up like the American mortgage system, although a correction of 20% would be in order given rates need to rise drastically.

    But yeah, the 60% of 'investors' in homes that are actually losing money are the quiet majority that the media doesn't talk about.
    Before long every Australian thinks they can retire early and make a killing on property when in reality its the opposite when it ends up trapping you in an asset that has depreciated significantly.

    Also the fact that some 10% of properties in Australia are vacant is making it hard for everyone.

    • TilacVIP on 23/07/2022 - 11:16

      Which would still be slightly higher than pre-covid prices, so basically evening out to some degree.

      I agree, they won't fall by 40%, but a slow and steady decline, then a % or 2 here and there for a very long time.

      In other words, it is still going to be very expensive to get into the market.

    • tekisei on 26/07/2022 - 15:55

      That 10% vacancy figure is completely misleading.

      In 2016, 11.2% of dwellings were vacant on census night (vs 9.6% in 2021).

      Of those vacant:
      43.6% - occupied but occupant happened to not be there that night
      10.6% - were on the market available for rent
      5.0% - were on the market available for sale
      5.3% - were newly completed dwellings awaiting fit out / certification / furnishing etc
      4.5% - were dwellings undergoing repair or renovation
      1.5% - were dwellings to be demolished

      22.8% - were holiday homes (I guess a middle ground between permanently vacant and occupied)
      6.7% - unknown

      Actual vacancy is more like 0.7% to 3%, not 10%.

  • trapper on 22/07/2022 - 17:06
    +2

    When people will already be being forced to sell their house for a loss, you want to further erode the price by reducing the number of buyers?

    • donkeydoc on 22/07/2022 - 18:09
      -5

      Bankruptcy and try again on a reduced loan.

      • trapper on 22/07/2022 - 18:44
        +8

        You want to bankrupt people… 'to stop the wealth gap growth' ?

        • donkeydoc on 24/07/2022 - 10:30

          Hopefully no, as it'll be the most vulnerable citizens that would default first. I do feel for those who just purchased a house before the rates rise.

        • netjock on 24/07/2022 - 22:05
          +2

          and putting people into bankruptcy so they can go out there to compete in the rental market. OP must be having a laugh. I hope people aren't going to entertain their hubris.

      • miwahni on 22/07/2022 - 22:02
        +3

        Good luck getting a loan - reduced or otherwise - if bankrupt. Will need to have dropped off your credit file before you'll be considered - so you will be waiting 5 to 7 years before you can look at getting back into the market. Wonder what house prices will have done in the meantime…

  • vikvance on 22/07/2022 - 17:21
    +14

    I like how OP says "markets haven't behaved freely for the last 30 years" and then in the next sentence demands even more free market restrictions through a "ban on residential property purchasing for anyone with $2M assets".

    • donkeydoc on 22/07/2022 - 18:08
      -5

      A correction measure until price restabilises

  • Oneguyinmelb on 22/07/2022 - 18:00
    +1

    Abolish negative gearing on existing builds, new builds would be exempt (to stimulate supply)… though realistically a 'cap of 5-10K' would be a starting step.

    Remove 50% discount on capital gains for selling existing homes, though allow new builds to be exempt

    Pensioners with a PPOR of $1.5M+ should have their pension cut and the government should provide a reverse mortgage.

    • Brianqpr on 23/07/2022 - 14:19
      +6

      Labor took something similar to this (the negative gearing part) to the 2019 election and a scare campaign linked to it led to Morrisson winning against the odds. The policy itself was entirely sensible but greed won out.

      I'd liken this to the "carbon tax" scare campaign when Gillard was PM, leading to it being reversed and us now being about 15 years behind Europe in emission reductions. Again, greed won out over the longer term good.

      CGT is difficult because it would not be seen as fair to change it for one assets class (property) vs another (e.g. shares). Change both and both suffer. That effects most people, even if its just their super balances. Therefore a very hard sell and potentially political suicide.

      We are not a country where socialist or wealth sharing values are seen as a good thing, even among those they would probably benefit. Hence modern Labor being basically LNP lite because its the only way they can get elected.

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