http://www.macrobusiness.com.au/2016/04/reiq-joins-the-negative-gearing-liars

After conducting a statewide survey of its 14,000 members, the Real Estate Institute of Queensland (REIQ) has argued that changing negative gearing would have a “crippling effect” on Queensland’s property market by lowering dwelling values while magically raising rents. From The AFR:

Quote:


Let’s evaluate Mr Honeycombe’s key points.

First, why would housing investors rush for the exits when Labor’s negative gearing policy grandfathers negative gearing for existing investors and would only affect new investors in existing dwellings from 1 July 2017? Surely the vast majority of investors would remain in the housing market and retain their negative gearing benefits, especially if rents were to also rise, as argued by the REIQ, which would make their investments even more profitable?

Second, the so-called $130 billion loss of value for the residential housing stock sounds like a lot but represents a price fall of only 2.2% – hardly significant and hardly “a crippling effect on house values“, particulary in light of the massive capital growth that investors have enjoyed.

Finally, why would Labor’s policy cripple the rental market? The ABS data clearly shows that 93% of property investors purchase existing dwellings rather than new construction, so they are merely substituting homes for sale into homes for let (see next chart).



Under Labor’s policy there would indeed be less “investment” (read transfer of ownership) in existing dwellings, but those homes would not magically disappear from the supply-demand equation. Rather, those homes would be purchased by an owner-occupier, thus reducing demand for rental properties by the same proportion as the fall in rental supply.

More importantly, because Labor’s policy would channel negative gearing towards new builds, dwelling construction would increase, as will the supply of rental accommodation. And this extra supply would lower rents, other things equal.

It is also worth pointing out that Labor’s ‘new homes only’ negative gearing policy is entirely consistent with the state government’s changes to first home buyers’ grants, which were shifted to newly constructed homes several years ago in order to boost supply. It is also consistent with the Coalition’s rules on foreign investment, which bans investment in existing dwellings in a bid to channel investment into new builds and boost rental supply and economic activity.

So, the REIQ’s claim that Labor’s policy would choke rental supply and force-up rents clearly does not pass scrutiny. If anything, the outcome would be the opposite: increased dwelling supply and lower rents.

Like the Turnbull Government, the REIQ has chosen to run a scare campaign in a bid to scare voters away from voting Labor and to line the pockets of its members. In the process, it has completely abandoned common sense.

Why would it cause a rise in rents?  The mortgage repayments would still be the same, and the bank won't be dropping the mortgaged amount because property value fell.....

Someone can't do primary school maths up there.... in Queenslund, you mark my words...

Grappler Truth Teller Feller wrote on Apr 29^th, 2016 at 3:49pm:


Have you ever crunched the numbers Grapples ?

Just for a simple exercise just suppose that ol' Grapples borrows a million bucks from one of the big four just so he can participate in this so called scam.

At 4.95% pa on $1 million the interest payments are $49500 pa.
A typical million dollar house in my modest suburb of Sydney fetches around $900 pw.
49500 - ( 900 x 52 ) = $2700
Add another 5 grand for rates, maintenance and periods of no tenant.
Total loss = $7700
Grapples is a pretty wealthy guy and pays the top marginal tax rate of 47c in the dollar.
The tax rebate is worth 7700 x 0.47 = $3619
3619 / 52 = $69 per week.

If you believe that the landlord won't try and recoup this by raising the rent from $900 pw to $969 pw you belong in the asylum with Nails.

crocodile wrote on Apr 29^th, 2016 at 11:51pm:


So where is there in all that any change in mortgage that would justify a price hike in rent, created by tossing negative gearing out?

The actual costs remain the same.... why would an investor who could now NOT use NG raise his income level through rent so as to ensure he paid more tax?  No amount of extra rent is going to change the fact that he will pay tax on income.

The abolition of negative gearing would bring the market to reality - with the investors having their turn of taking the pain that so many have taken in paying rent in a market where they are out-done and cannot get into their own HOME, by those who ply interest-only loans to get a property in the expectation of garnering a profit in time instead of seeking Home Ownership.

Again - the banks won't lower mortgage payments.... which leaves us with your proposition - that ONLY negative gearing is an inducement to invest.

Since negative gearing means paying less tax on your income.. why then should the rest of the taxpayers subsidise your investments?

That seems to me to be the nub of the matter.

It will take pain for this grossly distorted market to return to sanity... and that pain will be borne by the same investors who've already had their share of the handouts.

Sorry 'bout that.......

crocodile wrote on Apr 30^th, 2016 at 12:13am:


I see - so you are advocating that a business that earns no profit should be subsidised by tax concessions that ordinary people do not get, purely because it provides some 'social benefit' in allowing other people to pay for it?

Where did that idea come from?

Sounds like business-speak to me.....

crocodile wrote on Apr 30^th, 2016 at 12:28am:


The thing is - if it is engineered to garner no profit.... why should it be propped up?  It's one thing to only pay tax on profit.... it is another to deliberately go into a business that does not secure a profit, and then expect to reduce one's personal income tax liability as a result.

I once produced a stage play - I did not go into that with the intention of losing money... and thus expecting that a tax loss should accrue to my personal income.... I was hoping that it would turn a dollar and make me rich.... on its merits and not on the opportunity to dodge tax.

When it is a deliberate thing... I ask again... why should it be subsidised?

Everyone KNOWS in advance that when they go into property investment, they will lose in the short to medium term..... but gain in the long term.....

I ask again... why should the ordinary mum and pop taxpayer subsidise such business insanity?

Mattyfisk wrote on Apr 29^th, 2016 at 3:46pm:

crocodile wrote on Apr 29^th, 2016 at 11:51pm:


What about renters who get chucked out onto the streets when the landlord wants to flip the property for a quick buck ? How come landlords are only sympathetic to renters when it comes to an impending rent increase due to the abolition of NG and not when they throw them out onto the streets ? How come ? LOL