Should Rents Be Capped?

Lhawkshead on 29/12/2022 - 11:33
Last edited 29/12/2022 - 15:58

I dont really understand finance, so there's probably some big brain banker who thinks different.

Why is my rent going up because my landlord's mortgage is going up?
I didn't take out a loan on a home I won't live in. I'm not getting more house, im not getting better services? they havn't improved the house in any tangible way.

I think if rents were capped based on objective features of a house like rooms, amenteties, idk water efficiency? like actual tangible definable things it would be good for people.

I get that might mean that investors can't afford their mortgages, but why are we basing housing on the reckless financial decisions of investors? if you can't afford that 2nd or 3rd property maybe you should just sell it? and not make tennants pay for what you can't afford.

The banks and landlords have had decades to tackle homelessness and they havn't. Maybe their way isnt actually good.

Maybe this would just have aweful consequences though. So apart from rampant greed what would go wrong with capping rents?

(EDIT) I really appreciate the perspectives and comparisons between attempts in other parts of the world as a way to explain things. Keep em coming.

Poll Options expired

  • 89
    Cap rents based on objective features of a property
  • 601
    Don't cap rents based on objective features of a property
  • 11
    Cap rents based on things like income amounts
  • 13
    Don't cap rents based on things like income amounts
Financial Rent

Comments

  • boomramada on 29/12/2022 - 11:40
    +34

    How does this gonna fix the supply and demand?

    • gromit on 29/12/2022 - 14:17
      +110

      It would complete remove the supply issue as supply would disappear completely so renters can sleep in the streets.

      • Scrooge McDuck on 29/12/2022 - 18:16
        +24

        If no one has anything, we'll all be equal!!

      • boirganz on 29/12/2022 - 22:01
        +11

        It wouldn’t if it included capped percentage increases coupled with other structural changes from government. Ie further investment into social and affordable housing, regulated percentage of said affordable housing per new development, removal or significant reform in negative gearing and capital gains discount, more targeted and limited immigration rates, empty house penalties, proper governance over housing belonging to actual Aussie residents.

        Many countries have regulated rental, no no-fault evictions etc and don’t have supply issues. Sometimes incentive is needed, but the long term abuse of capital gains and negative gearing has skewed the market away from affordable rental and owner occupier to set home property as an asset class and speculative wealth creator instead of what it should be - a bloody home for someone to live in.

        Mind you, to achieve that reform you need a government with the ability to sell that message well to cut through and the desire to actually implement long term reform and see beyond the next election…

        • Chong on 01/01/2023 - 03:43
          +4

          What comparable countries have these policies that "have regulated rental, no no-fault evictions etc and don’t have supply issues"?

          For Australia, the investment is really into a decent higher than 60km/h train network, and a better bus service is required. At least for the main capital cities, if you can commute door to door under an hour, less concern if you live 50km+ away.

          The last time one of the main party went with a financial reform (which we needed) to election, they got their asses handed to them.

      • Talonparty on 30/12/2022 - 15:44
        +3

        What would happen to the houses? Are they being held empty? Being sold? Destroyed to spite the renting class? Vanished into thin air?

        • gromit on 30/12/2022 - 17:47
          +3

          sold or become holiday or air bnb rentals where they can make the money. knock on effect is reduced new builds and less rental supply.

          • Tleyx on 03/01/2023 - 17:45

            @gromit: When they are sold what happens?

      • nurbsenvi on 01/01/2023 - 21:40

        There is nothing in the desert and no man needs nothing.

    • HeWhoKnows on 30/12/2022 - 08:06
      +17

      Landlords have increasing costs as well.
      They have have a right to increase rents (prices) like everyone else.
      Remember that rents are a landlords income.
      So they are facing both cost of living cost increases like you and also rising property costs!

      And furthermore, all price caps do is increase demand for something that is scarce.
      This is what happens in socialist countries…
      Price caps but you can't buy anything.
      Just makes problems worse.

      With rent caps Everyone gets angry because they cant get a property in which to live.
      Investors cant get a decent return so they are angry too and get out of property, so less supply.
      Or just dont maintain the property.
      Just makes the problem worse

      Allowing rents to move up and down with the market lets the market sort things out naturally.

      • xylarr on 30/12/2022 - 19:37
        +10

        From the layout, I though this was going to be a poem.
        Disappointed.
        <sad face emoji>

        • idonotknowwhy on 30/12/2022 - 19:49
          +52

          Landlords face rising costs,
          Like everyone else, they pay.
          Rents are their source of income,
          But prices and property costs also rise each day.

          Price caps may seem like a solution,
          But they only increase demand for what is rare.
          In socialist countries, this is clear,
          Price caps lead to frustration, as nothing is there.

          Rent caps bring anger, as people struggle to find a home.
          Investors can't find a decent return,
          So they leave the property market, causing a shortage to form.
          Or they neglect the property, making the problem worse to earn.

          The solution is not easy to discern,
          But anger and frustration will only make it worse.
          We must find a way to make things fair,
          So that everyone's needs can be met, and not just a few's.

      • juki on 31/12/2022 - 09:28
        +1

        cps would just mean you'd end up renting worse sh!tholes than you do now - the qualitative aspect would be even worse with absolutely nobody wanting to pay a cent extra towards their property

      • filmer on 31/12/2022 - 15:53
        +3

        Strange, over the last 5 years as interest rates dropped, their investment's ongoing costs were lower, yet they charged 1.5-2x the rent.

        They then used the magic equity they had due to the inflating house prices (thanks to stupidly low interest, resulting in lower ongoing costs). They bought more properties, but at newly inflated prices and now interest in coming back to normal they have to increase rents again because they made a poor business decision.

      • Kangal on 03/01/2023 - 03:29
        +1

        It is a "captive market".
        So the usual libertarian arguments about a fair and open market don't apply. In fact, housing is one of the worst places for a society to extract profits from that even economists themselves have given it a term: rent-seeking behaviour. A system such as Australia is ripe for ripping-off the populous by the minority, ergo slumlords.

        Most OzCitizens feel like housing is over-priced. The data backs this up too. Even with exorbitant interest rates in decades past, the cost of living was considerably more manageable, and housing is the main culprit (other being stagnation of incomes) of the change.

        So we either just put up with it, or we change the system. For better or worse depends on the person. Rental caps is for-worse if you are in the top 10% of citizens, it is unsubstantial for those in the top 40-10% of citizens, it is for-better for those in the top 99-40% of citizens.

        Personally, I am empathic. I want people to get their fair-share, and not have a society that is split between The Haves and the Have-Nots. So I am in favour of fiscal policies to right this imbalance. They can achieve this in several ways; negative-gearing, council rates, higher taxes on secondary properties, etc etc. However those mentioned solutions are imperfect, since negative-gearing is actually a good thing (balance for Capital Gains Tax), and Higher Council Rates affect Single-Owner citizens, or the fact that ANY unfavourable cost increases to landlords are simply passed down to the tenants. Also it is not good for the government to simply print more money (fake) and throw it at the problem, hoping it sorts itself. Those funds seem to find their way into deeper pockets before they trickle down to the affected people. The root of the problem is High Rents, that is what is fuelling the market, and raising Property Values. As an example, if the government put a 5-Year Ban on Rent Increases from 2020-2025 we would've seen those insane 2019 prices start to cool off. But we instead saw the privileged use newly minted funds, more properties were bought, prices soared even further, and now the investors are pushing their costs unto the tenants. The majority of Australians own their own property, but there is a segment of the population which owns 3+ properties as investment vehicles or Stores of Value.
        …but CAN we do anything about it?
        Doubtful. We do not have the political willpower to do so. The people with the responsibility are unwilling to sacrifice for the greater good, despite themselves preaching that same concept to the masses.

        So personally I've lost hope. The system is bad, and it's getting worse. This means we should prepare for an increase of crime and violence around the nation. That also comes with the erosion of your individual rights and freedoms. There are things we already know about, just by studying the successes (or failures) from other nations. Sometimes the solution is simple, but what is complex is the human condition.

        • Quantumcat on 04/01/2023 - 19:52

          Rental caps is for-worse if you are in the top 10% of citizens, it is unsubstantial for those in the top 40-10% of citizens, it is for-better for those in the top 99-40% of citizens.

          Not right, rent caps might make it cheaper once you're in a property, but you need to get one first.

          It will just mean that 1) there will be less investment and even less supply than there is now, and 2) demand will be greater as more people can afford to rent more of the houses

          More people will end up homeless

          It won't be for-better for anyone. Not for any of the renters, not for the investors, not for the government. The only thing that will help is more houses, however than can be achieved

          • Kangal on 05/01/2023 - 10:24

            @Quantumcat: All this theoretical "less investment" is a scare tactic that politicians and businessmen use. It's akin to yelling Think of the Children. All talk without actual evidence.

            Whereas a rental cap is a practical working solution to a known problem. It's a sobering action to balance a grotesque shortcoming. In a perfect world, rental caps would never be a consideration, but we don't live in a Utopia.

            Also more houses are not the solution if those houses are unsafe, unfit, or they're priced unreasonable. Those conditions just make the symptoms worse not better, because they rob the opportunity that was afforded… more money can be "created" but land is based in reality, it is a finite resource.

            • Quantumcat on 05/01/2023 - 10:47

              @Kangal:

              Whereas a rental cap is a practical working solution to a known problem. It's a sobering action to balance a grotesque shortcoming

              But it isn't - the reason rents are high is because there aren't enough houses for the number of families that want them. Rent caps will do nothing to address this. It will be great for the people that have a house but many won't be able to find one. People already can't get a house even stretching to the top of their budget, with 30 people coming to any inspection.

              All this theoretical "less investment" is a scare tactic that politicians and businessmen use

              Why would developers want to build apartment blocks if the rent is capped?

              • Kangal on 05/01/2023 - 23:13

                @Quantumcat: What part of captive market don't you understand?

                Rent caps, as a temporary measure, will remove the incentive to treat housing as an investment. For single-property owners it changes nothing. For renters it means their cost of living doesn't keep increasing. It's only bad for people having multiple properties or treating other people's income to fuel their own equity.

                …they would because it's still their trade, and they are still making money from it. Remember we don't have any rental caps at the moment, there was someone who posted here recently that their rent going up substantially.

                If rental caps alienates a minority of the populous, it would mostly be a good thing. It can take the bad actors out of the market. You wouldn't know how corrupt (yes, in Australia) the whole property development market is. These people lie to themselves and the public, that they do a service to the community, but they're actually benefiting from the system in an unfair manner.

                That's why I gave the hypothetical scenario. Imagine having Rental Caps in Major Cities starting in 31 Dec 2019, and lasting until 31 Dec 2025. We could see a drastic improvement in Australians Quality of Life, higher health standards, better education, new innovations, higher activity by the creators/workers, etc etc. By all metrics it can be positive; but as soon as some billionaires lose a few million dollars you have everyone preaching about the faltering economy. It's because we don't measure and count the things that matter.

                Remember, we do not live in Utopia. People are going to people. That's why we have laws, law enforcers, checks and balances. As an oxymoron, sometimes having restrictions leads to more freedom. Less is more, sometimes. And what is natural is not good.

                • Quantumcat on 06/01/2023 - 00:30

                  @Kangal:

                  Rent caps, as a temporary measure, will remove the incentive to treat housing as an investment

                  This is a bad thing. Companies that develop properties will stop building or go under due to projects they've started that have already cost money to invest but the return will not be what is projected.

                  If it is so temporary that it doesn't make a long term impact on development activities, then it doesn't achieve what you want it to.

                  It will increase demand on existing places as more people can afford each one. Renters will find it impossible to secure a rental and there will be more homeless people. There are already lots of people who are sleeping in their cars or bunking with friends or family, even though they can afford the going rents, cause they keep getting knocked back at every property they apply for as there are just so many people applying. How are rent caps supposed to solve this? It would just make the problem worse - if the existing properties are cheaper even more people will apply to them.

                  • Kangal on 06/01/2023 - 02:05

                    @Quantumcat: We are not changing the supply, so your assertion that people won't be able to find a place is fundamentally flawed. The increased demand is also flawed. We aren't cloning people, and we aren't destroying properties on a large scale. Supply and Demand are largely the same.

                    We're simply removing bad faith actors from a market which is in Maslow's Pyramid. By removing incentives for people to get (very) rich off other people. There's still money to be made, honest pay for honest work. But what we're establishing here is to "cool the market".

                    Sometimes you only need a temporary solution. If we implemented this, and it worked, then we removed it, and things slowly shifted back. Well, we can always look into other solutions. Potentially making it illegal to own more than 2-3 properties (exlc. business stores). Simply taxing those people might have the undesired effect that they merely pass those costs down to the tenants, and now we're worse off.

                    I do alot of volunteer work in my community, so I'm quite familiar with the issues with homelessness. What you're suggesting is fiction, that is not how the real world operates. Many of these people have issues that requires counciling, education, and health concerns. The context of what we're discussing is not that, we're looking at the broad picture. Majority are functional adults, working and paying their rents, and being squeezed financially by the banks (via landlords).

                    Some people suggested, why not just give the renters money? Well, that doesn't address the underlying problem. With more money the renters will feel better very briefly, but then landlords will increase rents in a quick reaction. So if anything it makes things worse. The term for that is called inflation.

                    Housing is primarily used for… housing. In Australia we have it backwards. We use it for investments first, then as an afterthought we treat it as housing. That's the real issue and what I've suggested we fix. Unfair rents or prices is bad for people, real people trying to live in the real world. Also it makes our financial system very vulnerable. How? Well if our nation stagnates but we keep inflating this property-bubble, it increases the chances of a crash. This can come from many stimulants like war, famine, embargo, or a combination of things. The other point comes from financial instabilities, like remittance or defaults like we saw in 2008.

                    The bigger the bubble, the worse the pop. You should look into Iceland and how they were devastated by the GFC. The vikings were the only nation in the world to do a proper audit, send some bankers to prison, and change their financial system. As a result, they've been the only nation in the world to bounce back from the crash stronger and to weather the pressure from the pandemic.

                    In the cases where the market is utterly broken, where there are twice the number of people, compared to the supply of housing. In that case would Rent Caps work? Well it would have some benefits but it would not fix the underlying problem. The solution would be to have fewer people, or increase housing. However, you need to understand that it is not a mutually exclusive form. You can increase housing supply AND put in Rent Caps. Obviously I am not married to the idea, I don't care who's idea it is, if it produces the best (overall) result for the people, that is what I care about. I am not biased towards people who benefit from an unfair system.

    • leiiv on 01/01/2023 - 16:49

      No one wants to fix the supply and demand, at least no one who has power to do so for various reasons. The most obvious way is to increase supply, that is, building more homes. It is hard, expensive, and takes a lot of time to do that. And if there are oversupply, lots of empty unsold homes, who wants to take the hit? Even the Greens won't support obvious policies like zoning more land for residential, increasing urban densities, allowing tiny houses, etc.
      Policies like rent cap etc only try to fix the symptoms.

  • SmiTTy on 29/12/2022 - 11:43
    +194

    I hear what you're saying, but Isn't that a bit like saying "why do I need to pay more for my groceries? It's not my problem that all those other supply chain costs have gone up. They're the ones trying to run a business not me. The quality of the produce hasn't improved. "

    • Jimothy Wongingtons on 29/12/2022 - 12:10
      +98

      I dont really understand finance,

      I guess at least op acknowledged in first sentence haha

      • Seraphin7 on 29/12/2022 - 17:27
        +6

        Yep, didn't need to read any more after that.

        • StalkingIbis on 30/12/2022 - 12:44
          +20

          op is happy to receive info. to complement his incomplete understanding and current opinion. rare these days!

      • HeWhoKnows on 30/12/2022 - 08:09
        +1

        What has this go to do with not understanding "Finance"

        Surely OP undertsands when prices go UP it costs more to live.
        And you have less to save in your bank account.
        This is simple arithmatic. Not Finance

      • infinite on 31/12/2022 - 18:53

        Bingo.

    • CyberMurning on 29/12/2022 - 12:49
      +2

      $11 lettuce here we go

      • Jimothy Wongingtons on 29/12/2022 - 13:25
        +13

        I legit miss the lettuce cabbage mix in my zinger burger tbh

      • HeWhoKnows on 30/12/2022 - 08:16
        +7

        Yep, Cap lettuce at $3 and see how many you get when there are none to go around.
        See if farmers are encouraged to plant more lettuce when thier crop has been destroyed.
        They will just throw thier hands up in the air and say "Its not worth it"
        and then you have NO LETTUCE @ $3
        Brilliant socilaist controls

        • earthqauke on 31/12/2022 - 09:09

          Yeah but for people on low income there was effectively no lettuce at $11 as they could not afford it. the supermarkets that received $11 for the lettuce likely had season contracts with farmers to provide lettuce at $3. so the supermarket made a super profit for doing nothing. and rich people bought the $11 lettuce for likely doing nothing as they were probably also receiving super profits as well hence why they are wealthy. if you think in capitalism the hardest working or most intelligent people win, then think again.

          • infinite on 31/12/2022 - 18:59

            @earthqauke: There's 100's of vegetable choices out there, they all raise and drop in price, in a cyclic nature through the year. Having a low income makes no difference in regard to that, it simply means you choose a more affordable alternate. Lettuce is one of the least nutritious vegetables available, it's of little to no consequence for anyone's health or well-being if it has the occasional price spike.

        • buckster on 01/01/2023 - 10:36

          Except that the farmer probably only gets 10cents tops per lettuce.

          The supermarket on the other hand…

      • JohnSy on 29/12/2022 - 14:17
        +19

        Input costs of food production: Higher interest on business loan, higher wages, greater spoilage due to weather etc.

        Input costs of investment property: Higher interest on investment loan, higher wages on property repairs, higher costs of insurance etc.

        Higher input costs = Higher breakeven cost.

        The landlord likely bought this investment property as an investment and is unlikely to be running a charity.

        If the tables were turned and you were the property owner would you be wanting to increase rents to cover your increased costs???

      • GrueHunter on 29/12/2022 - 15:51
        +11

        I think its different as there's costs associated with the production that are increasing

        you're this close to getting it

      • Nucleus Acumbens on 29/12/2022 - 17:49
        +6

        Initial costs associated with the home might have happened, but maintenance and other overheads (such as insurance, management, servicing, levies, rates) is ongoing and similarly increases in cost with time.

      • CalmLemons on 30/12/2022 - 00:29
        +5

        Please review history and go look at what happened in England when the government tried to interfere with the private housing market.

        It reduced the availability of rentals and renters has nowhere to live.

      • HeWhoKnows on 30/12/2022 - 08:21
        +5

        You can benefit from an increasing income but your landlord cant ????
        You forget that the landlord has the same cost of living increases as YOU, except they also many more increasing costs!
        They have higher loan repyments, strata levies, council rates, water rates, insurnance premiums, land tax, income tax (due to removal of some tax deductions), tradesmans repair and maintenance costs, renovation costs etc. all paid on behalf of the tenant!
        And the cost of building has gone up 20% to 30% so if you want more rental stock then higher rents go part and parcel with that

    • supersabroso on 29/12/2022 - 15:19
      +7

      Lol, this is exactly what the OP needs to hear. Less complaining, more action. If you don't like renting, simple, go and take out a mortgage.

      The interest repayment on a mortgage is generally cheaper than the rent you are paying. Furthermore, your interest repayments generally go down every year so it gets cheaper and cheaper to mortgage a house as time goes on. During this entire process, your house is also going up in value every 5 years (often dramatically).

      • monkeyfood on 29/12/2022 - 16:07
        +2

        At the moment repayments are going up (interest rates) house values also going down so the last sentence is true generally but not at the current time, in 5 - 10 years time maybe

      • HeWhoKnows on 30/12/2022 - 08:26
        +1

        Correct

        With renting your rents go up over the long term

        With a mortgage your repayments stay the same or go down over the long term
        (yes they move up and down in the short term with interest rate chnages)

        • xylarr on 30/12/2022 - 19:39

          Mortgage payments do not go down in dollar terms.
          What happens is that due to inflation and to your increasing pay packet, the proportion of your salary that you pay towards your mortgage goes down. So I would agree that your repayments go down in real terms - somewhat spectacularly so if inflation stays relatively high (joking, we don't want that).

      • Sinnerator on 30/12/2022 - 08:58
        +8

        YES EVERYONE… STOP BEING POOR !!!

    • payless69 on 30/12/2022 - 07:58
      +1

      U love comrade
      U pay 4 comrade
      just like 1+1=2

  • AustriaBargain on 29/12/2022 - 11:44
    +39

    Government should do something. It's crazy that housing is an investment bubble and not just houses for people to live in. Surely by the year 2022 we should be able to invent something else for people to invest in so we can leave houses alone. Crypto was a bust, but I dunno maybe people could invest in businesses or something. What if we made it so there's less incentive to buy more than one house that you live in. Government could also decentralise our cities a bit more, make working from home a bit more normal and give us all good internet to make it possible for office workers at least.

    • Ugly on 29/12/2022 - 13:03
      +40

      They could start with an increasing tax scale on properties - the more properties you have, the higher the tax you pay.
      Make owning multiple properties (say, more than 2 or 3) less attractive versus other investments.

      Also, ban foreign ownership of residential property. Only Citizens or permanent residency holders should be able to buy residential property.

      • JohnSy on 29/12/2022 - 13:40
        +5

        It sounds like you are describing Land Tax - which already exists.

        • Ugly on 29/12/2022 - 16:10
          +10

          Land tax is not at an increasing scale. If the land tax on a 3rd property was say 10% higher than the 2nd, and a 4th was10% higher again etc etc, then owning more properties becomes less and less attractive. (Eventually you would end up at 100% tax - so zero returns to you).
          And you would be competing with rents on other people’s 1st or 2nd investment properties, so you couldn’t pass all of the costs on - no one would want your property at an uncompetitive rent.

          • JohnSy on 31/12/2022 - 01:13

            @Ugly: "Land tax is not an increasing scale". Well, it is what you could descibe as an increasing scale in Victoria. In general, you could argue the more properties you hold, the higher the total taxable value of land held, and hence the higher the % used in the calculation. https://www.sro.vic.gov.au/land-tax-current-rates

        • orangetrain on 29/12/2022 - 19:44
          +1

          That 1% land tax that comes with exceptions? lol

          • dave999 on 30/12/2022 - 10:25

            @orangetrain: As of 2022, the amount of land tax property owners have to pay in NSW is $100 plus 1.6 percent of the land value above the threshold, which is currently $822,000, up to the premium rate. Properties that fall into the premium rate band threshold of $5,026,000 will pay $67,364 plus 2 percent of the land value that goes beyond the threshold.

            There are no exceptions I am aware of.

      • hawkshead on 29/12/2022 - 14:03

        But how many of these costs will just be passed on to tennants? like its currently being done.

        • gromit on 29/12/2022 - 14:18
          +7

          all costs get passed onto tenants, as should always be the case. why should the owner of the home subsidize you be that a land lord or the government?

            • gromit on 29/12/2022 - 14:25
              +11

              @Iwantthebestprice: that isn't a subsidy, they are a business and like any business you don't pay taxes on losses and if you want to see rental prices really take off then remove their ability to tax deduct losses as then the renters will need to make up the difference.

            • Tonyh87 on 30/12/2022 - 21:44
              +1

              @Iwantthebestprice: That is like saying that if you got a pay cut, the government is subsidising you because you dont have to pay as much income tax.

          • cobknob on 29/12/2022 - 14:34
            +1

            @gromit: Thats how capitalism is fickled now. Investor buys and thinks in the first x years that the house should be returning profits. That's not how you make porridge money on housing. Everyone wants fast ROI money.

            The owner should always bears some cost early. End of day u own the property. The tenant stays for short duration and pays part of your mortgage, and naturally u get tax concessions. The land is the value. The house is simply temporary. When owner sells they make money unless you want tax system changed to pay dividends to renters lol

            • boirganz on 29/12/2022 - 22:06
              +3

              @cobknob: “Short duration” is part of the structural problem.

              Give a family a lease for 5 years, or exclude no fault evictions with a set percentage increase in rent each year and you’ve got the benefit of long term tenants, known fixed returns, and “happy” tenants.

        • JohnSy on 29/12/2022 - 14:33
          +1

          Whether you realise it or not, all input costs of the investment property are passed on to the tenant either directly as a listed cost, or indirectly inside the rental price for items such as land tax. If all investment properties were loss-making (over both the short term and long term), in terms of both capital growth and income, then they would not be called investments and almost no one would want to own them.

          If this was the case there would be almost no rental properties at all.

          • cobknob on 29/12/2022 - 14:41
            +1

            @JohnSy: Emphasizing that large appliances and renovations are paid over many weeks years.

            Many investors/owners/landlords/humans have only really short term thinking capacity.

          • Iwantthebestprice on 29/12/2022 - 14:52
            +10

            @JohnSy: But as started above by cobknob, an investment is usually for X period of time, shares say 7 years and housing 10 years etc. After 10 years of owning the property, and yes you may have incurred loses during this time, but upon selling the house you make a very large profit, so you basically want the profit and all loses paid for by the tenant and government during the investment period? No wonder property is so stuffed in this country.

            The sooner any government follows all other advanced economies (I.e US and UK) and gets rid of tax concessions for investors on property then we might finally as a country be able to find a way out of this mess which has been created solely by property investors looking to make a quick buck.

            If you think Australia will never get rid of the tax concessions because of whatever reason you are mistaken, the US and UK did just that after the number of renters and sole homeowners started to overtake the number of investors and the government knew that going to an election with a new tax policy was suicidal.

            I will say give it another 5 to 10 years..

            • gromit on 29/12/2022 - 14:55
              +2

              @Iwantthebestprice: Except apart from the last few years you really DON'T make a very large profit on reselling the house. Generally the profit is far below other investments and hence you cannot wear long term losses in the hope that one day in the future your investment will come good.

              • Iwantthebestprice on 29/12/2022 - 15:01
                +4

                @gromit: From what I read most people make a healthy amount of money from buying the property then selling it after 10 years, and even more after 20 years:

                From 2002-2012, average house prices rose by 92% for houses and 40% for flats, shutting many first home buyers out of the market.

                Source: https://www.acoss.org.au/wp-content/uploads/2016/04/Fuel_on_…

                That’s a VERY healthy profit. And that’s after holding the property for only 10 years. Name any other investment which has returns that good that also guarantees decent tax deductions and also has very minimal risk (unlike shares or bitcoin etc)

                • gromit on 29/12/2022 - 15:46
                  +9

                  @Iwantthebestprice: 92% for 10 years is a 7% return per year. hardly awe inspiring. at 40% it is less than 3.5% per annum.

                  • brendanm on 02/01/2023 - 12:33

                    @gromit: You've completely left out the fact that the landlord didn't pay anything more than the deposit for the house, the renter paid for most/all of the mortgage. So in reality the return is much higher, as the initial money invested is much lower.

              • cobknob on 29/12/2022 - 15:12
                +1

                @gromit: Do you live under a rock. Land prices have gone up all the time. Yes occasionally they go down but then up again.

                • gromit on 29/12/2022 - 15:42
                  +1

                  @cobknob: of course they go up, just far less than other investments like shares.

                  • cobknob on 29/12/2022 - 15:47
                    -1

                    @gromit: Hindsight…

                    Buy in the right area a decade or so ago and you'd make double today. Shares are much harder to make double - timing is crucial and risk is far greater. Let's not talk crypto cause that's just roulette.

                    • gromit on 29/12/2022 - 15:52
                      +3

                      @cobknob: again that isn't hindsight, it has been that way for decades. making double in a decade or so is not an impressive return. Average rate of return for shares is over 8%, whereas property is around 7%.

                      • cobknob on 29/12/2022 - 16:08

                        @gromit: For stupidly great returns you need luck and knowledge with shares. Otherwise hindsight. You know people lose money too on shares - it's not a savings account with a fixed return on x amount.

                        Making double on a house, profit wise is an excellent return. I use the term profit quite absolutely! 500k$ profit on a 500k$ purchase is MASSIVE! For 10 years. Most can't save this in 20+ years on avg salary - and not the stupid ref the gov uses from the abs which is skewed by the wealthiest. So the avg wage isn't really 72k/y it's less.

                        • gromit on 29/12/2022 - 16:12
                          +5

                          @cobknob: NO you do not, you invest in the index, it is easier to do better out of the sharemarket then ganble that you are at the right end of a housing bubble. making double is NOT an excellent return, it is an ok return. What you should be doing is calculating your annual rate of return, it is a mistake many investors fail with. that is a modest profit for a decade, not bad but definitely nothing exciting and definitely not one you can sustain losses through low rent.

                          where property can outperform shares is when heavily leveraged as you can generally leverage property at higher percentages with lower rates than shares. so as long as the interest rate doesn't outpace the rate of return you can come out way ahead.

            • Dogsrule on 31/12/2022 - 09:45

              @Iwantthebestprice:

              The sooner any government follows all other advanced economies (I.e US and UK) and gets rid of tax concessions for investors on property then we might finally as a country be able to find a way out of this mess which has been created solely by property investors looking to make a quick buck.

              I don't think that is true in the US. Everything I've been able to find says that interest repayments for investment property loans are tax deductable as a business expense, even if the property is positively geared. That is even more attractive than our interest deduction concession that can only be claimed if the property is negatively geared:

              https://www.stessa.com/blog/is-mortgage-expense-for-rental-p…
              https://www.baselane.com/resources/the-landlords-guide-to-de…
              https://www.credible.com/blog/mortgages/rental-property-tax-…

              Aside from that. all the other usual tax concessions are also available i.e. repairs, maintenance, insurance premiums etc.

              • JohnSy on 31/12/2022 - 09:54
                +1

                @Dogsrule:

                That is even more attractive than our interest deduction concession that can only be claimed if the property is negatively geared

                In Australia, interest deductions are deductible regardless of whether the property is positively or negatively geared. In the case of positively geared property, there is just no loss to deduct against other income. The interest has still reduced the total income derived from the property that was added to the tax return though.

        • juki on 31/12/2022 - 09:32

          i suppose the idea is that after a while they would not be competitive if the increases are "greed" related and then forced to lower their price if wanting to rent, the rest of costs past on would be the "bare minumum" (even if it can be a lot in the current situation)

        • morse on 02/01/2023 - 06:34

          You realise landlords rent out properties to make money right? If they don’t make money, there’s no incentive for them to rent it out (or even own it to begin with). Then you have no where to live.

          I guess if your suggestion was implemented and landlords no longer had a financial incentive to rent out properties they’d sell, flooding the market, making prices cheaper to buy. That would also mean that there would be less investment in housing all together so eventually supply would be an issue for buyers. Supply would be an issue for renters immediately.

          Though in reality a) this would never happen (too many invested people both in and out of gov who would resist this change) b) people would just find alternatives, ie change it to holiday letting (then all the renters would have to move from place to place with no security and pay cleaning fees etc).

      • Nucleus Acumbens on 29/12/2022 - 17:53
        +8

        I agree with you here. I think that only Australian citizens should be able to buy residential property in Australia.

        • st1ng on 29/12/2022 - 21:03
          +2

          As a temporary visa holder who has lived here twelve out of the last 14 years here, why shouldn't I be able to buy property the same as Australian citizens?

          • ajr5k on 29/12/2022 - 21:23
            +14

            @st1ng: The answer lies somewhere between the first 5 words of your comment.

            • boirganz on 29/12/2022 - 22:08
              +2

              @ajr5k: Perm residents also.

              Either way there should be a residency test somehow. Out of the country for x/y years ? Property has to be rented or sold.

          • Mantzy on 30/12/2022 - 12:46

            @st1ng: I mean, you could ask "why don't you commit to the country and get permanent residency? Or PR and citizenship as you clearly want to be here".

            • GandalfTheCheap on 01/01/2023 - 18:16

              @Mantzy: It's not just about commitment.

              Not everyone on temporary visas can just decide to become citizens tomorrow.

    • supersabroso on 29/12/2022 - 16:47
      +10

      All they need to do is get rid of negative gearing. It's ridiculous that we are spending our tax dollars to assist rich people with their "losses" paid at 100% of their tax rate. However, capital gains are only paid at 50% of their tax rate when they sell after making a million dollars. If they were smart, they'd move houses before they sold for a few months and pay zero tax on the million dollars they made whilst having enjoyed tens of thousands of dollars in negative gearing the whole time.

      • Needausername on 29/12/2022 - 17:48
        +11

        "If they were smart, they'd move houses before they sold for a few months and pay zero tax on the million dollars they made whilst having enjoyed tens of thousands of dollars in negative gearing the whole time."

        shows that you don't understand the tax system.

        • barratttc on 30/12/2022 - 07:47
          +1

          Doesnt work like that. CGT is pro-rata for period rented.

          • Needausername on 30/12/2022 - 12:20

            @barratttc: And also remember 6yrs rule.

            • filmer on 31/12/2022 - 15:59
              +2

              @Needausername: for the 6 years rule, you can't have another owner-occupied primary residence. If you do, the period you claim for the 6-year on property A rule is subject to CGT on the other property B, even though you were living in property B.

      • Peanut money on 30/12/2022 - 07:22

        Luckily for the tax payer no-one along with their tax accountants are smart

      • johnmatrix on 01/01/2023 - 09:52

        If a loss can't be deducted, they'll increase the rent to make it break even, or make it positively geared and profitable, as an investment should be.. That will not help renters, they'll be paying more as a result.

      • hawkshead on 01/01/2023 - 10:47
        -2

        dude if you dont like the tax system just go run for government instead of only voting.

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