Can New Investor Negative Gearing Be Based on Only New Built Homes? Will It Be More Help with The Housing Crisis ?

oneone001 on 14/01/2024 - 20:38
Last edited 15/01/2024 - 02:16

just a simple exercise for myself . just a what if and want to see what the pros and cons are ?

*post thoughts
all those mega 3 digits earners will need to have negative gearing or risk excessive tax or am i missing something. As soon as some investor sell and book the 50% discount, the new buyer would either need to be a homeowner or an investor that thinks the property is positively geared / that it will appreciate in value over time.
so homeowner rate will probably increase plus a reduced demand and price decrease follows.
on the other side, those who really need the negative gearing get an incentive to build new dwellings. Maybe even create a rich club and build townhouses and apartments in bulk.

Financial

Comments

  • Typical16-bitEnjoyer on 14/01/2024 - 20:47
    +1

    Lol

  • mskeggs on 14/01/2024 - 20:54
    +4

    Of course. But many landlords have made poor investments in older homes and would like tax offsets to carry them, hoping for capital gains they can book with a 50% discount.
    And they will say like a scooby doo villain “without taxpayers paying for my losses I might cease to be a landlord!” As if that didn’t mean houses would be more affordable.

  • AustriaBargain on 14/01/2024 - 21:04
    +1

    It's sensible policy imo. Though I reckon the serious house investors positively gear so they can borrow more to buy more houses. Think of all the headlines about how proud a young person is to "own" 30 houses.

    Pumping up the value of existing properties is terrible policy. We need more houses and we need to update rentals that are unliveable because they were built seemingly before the invention of insulation and mold deterrent design. If there was an investment rush on new houses on new lots then we could end up with more houses. Investors favour existing properties I guess because there's no risk, the area is already established so values can only go up.

    What I don't understand is how trillions per year of value can be added to existing properties. That's money on paper, nothing new is being created or added, no extra human work is needed because the house would still exist and still be rented out whether the value went up or down.

    Honestly I think crypto is good idea if it means people pump money into that instead of existing houses. The government should invent something out of thin air for people to invest in that won't ultimately cost renters more money. The owner of my house wants the median rental value from it despite the fact the house should be condemned. The area is high land value but the house is disgusting, it traps heat better than a greenhouse, pretty sure my feet get swollen because of mold under the decades old carpet, tiles peeling off the wall in bathroom, find huge wasps in the kitchen. He wants the median area value without wanting to spend a single cent improving it before he ultimately sells the land for a million bucks and it gets bulldozed. Property investment is a mental illness.

    • Malik Nasser on 14/01/2024 - 22:36

      The reason why people invest in properties is because it is profitable for them to do so. If it was not profitable, then people would not invest.
      People would still buy houses, as they are an essential good that is required to live.
      Historical government policies as well as our current financial system has created our current housing predicament.
      When talking about the price of housing, one of the many reasons for rising prices that is mostly overlooked is the devaluation of Australian Dollars (fiat currency). As money is created out of thin air whenever someone takes out a loan, it devalues existing money.
      See Australian M3 Money Supply since the 1960's. It has grown exponentially, as per housing prices.

      Regarding other areas where people can dump their money, there is also share markets, bonds (government and corporate), gold, etc…. Crypto is also there, but is insignificant in size when talking about the amount of money involved.
      Most wealth is built whilst holding assets, not cash (as cash loses value as per above expansion in money supply, so wealthy people do not hold much of it).

      Yes more needs to be done to make housing affordable.
      Firstly immigration needs to slow down to allow time for new dwellings to be built.
      But more than that, current incentives that make investing so profitable need to be rolled back. In the short term it will create a lot of pain to investors (which will also have far reaching consequences), but it is a required 'evil' to help restore housing to a more normalised state (not an investment).

      It is a complicated topic, where any changes will also have a lot of unintended consequences. But it is clear the current system is not beneficial to most ordinary Australians.
      To me, it is up to the government to ensure essential goods and services are readily available to ordinary Australians. When essential goods become investible assets those with the knowledge and ability milk it for all it is worth, making it more difficult for everyone else.

  • randomusername2017 on 14/01/2024 - 21:06
    +1

    You might be on to something here… put all the content in the title🤔

  • Drakesy on 14/01/2024 - 21:15

    100% with you on that one. Although it may be a double edged sword, with international investors washing their money through new investment properties it may just play straight into the developer's hands.

  • Stewardo on 14/01/2024 - 22:31

    It would create an incentive to knock down existing housing/buildings in affluent areas and little incentive to invest in regional existing housing which would create ghettos and ghost towns, could also increase regional rental crisis.

    • mskeggs on 14/01/2024 - 22:53

      If regional existing properties were less desirable investments, they would be more affordable to owner occupiers.

    • AustriaBargain on 15/01/2024 - 01:21

      Could make a max weekly rent amount to qualify for the incentive.

    • oneone001 on 15/01/2024 - 02:22

      will percentage based negative gearing solve it ? , livable old dwellings, unlivable old dwelling, new land? making them into new ones will have different results?

    • redfox1200 on 15/01/2024 - 09:23

      there is an incentive to knock down existing houses, its called profit

  • Dollar General on 15/01/2024 - 08:22
    +3

    Labor under Bill Shorten took this policy to an election that was almost impossible to lose & they lost. Could have lost for other reasons but doubt you will see this policy back again in the next 3 or 4 elections.

    • ThithLord on 15/01/2024 - 10:26

      Labor under Bill Shorten took this policy to an election that was almost impossible to lose & they lost.

      Yep. But the big brains trust ultra-progressive types all say Labor should just scrap negative gearing/CGT discount now, anyway, even though that would guarantee them opposition for another decade.

      No idea why they think Labor should just fall on their own sword for this dumb-a## country.

  • WreckTangle on 15/01/2024 - 09:01

    Its a really good idea and i can’t believe its not government policy (not the “post thought” bit)

    • Dollar General on 15/01/2024 - 10:38

      Because the libs hate this policy and Labor lost an election with this as a policy, that’s why it’s not policy

  • redfox1200 on 15/01/2024 - 09:22

    holy crap he's solved the problem!

  • RockyRaccoon on 15/01/2024 - 09:25

    So investor buys the new build gets negative gearing, but investor does it to get capital gain, thats what negative gearing is all about.

    But when they want to sell no other investor wants to buy because they cant get negative gearing benefit, so the pool of investors to rebuy is less, thus, supply and demand, means price is lower. Meaning less potential gain for original investor.

    These offset the benefit of the negative gearing strategy as proposed.

    All issues that would need sorting out.

    Like all ideas sometimes there could be unintended consequences. Thats what threads like this can flush out.

    • OrangeBJ on 15/01/2024 - 11:31

      But when they want to sell no other investor wants to buy because they cant get negative gearing benefit, so the pool of investors to rebuy is less, thus, supply and demand, means price is lower. Meaning less potential gain for original investor.

      Good point!

      … less potential gain for the original/first investors so they reduced the offer price for the new builds, then less profit for developers, then less incentives for developers to build, then less housing supply.

      What if making negative gearing benefit inversely proportional to the ages the home. Eg, new builds = 100% negative, 10 year builts = 50%, >20 year = 0. Just my two cents.

      • RockyRaccoon on 15/01/2024 - 12:30

        What if making negative gearing benefit inversely proportional to the ages the home

        That would work better, longer term, however there are the immediate negative's….

        Politicians and Media want simple solutions that sound good. Mainly because Joe Public wants instant answers.

        Also there are other solutions that could go hand in hand.

        Supply and Demand works with two levers with housing at the moment.

        Increase supply or reduce demand.

        Problem with increasing supply, is that its a function of many parts of the supply chain. Land/Zone availablity, Physical material, Labour and Capital.

        All these at the moment are expensive.

        Alternative is to reduce demand. With around 2000 a day entering the country as new residents this is the biggest factor at the moment. Limit this and demand decreases.

        While these can be skilled labor which helps, they are only one part of the supply issue, plus with more other support requirements are created - hospitals roads etc etc

        Unfortunately many dont like this because it will affect their families so they are ok if they can have their family/friends but none else 😀

        Anyone wanting to be a Pollie?

        • OrangeBJ on 15/01/2024 - 13:03

          The Aus economy can only grow by importing people (aka "skilled immigrants") and exporting dirts. So all politics are around extracting the most money from that to benefit themself/their mates, pay ongoing gov bills, and then throw the left over to Joe pulic to earn votes.
          Hard truth it would never function without.

          Question is whenever the majority Joe public want:
          1. never ending housing price increase with mass immigration (cannot give any other country as example as none can match with Aus level)
          2. never growing housing price with reduced population (like Japan)

          I cannot tell which option can bring better quality of life for Joe, or neither.

  • Duckie2hh on 15/01/2024 - 09:30
    -2

    Reduce red tape on new dwellings and construction. Remove zoning restrictions and therefore housing can be built on any zones. Look at Japan as an example. Plenty of properties.

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