{"id":20001,"date":"2018-01-24T01:00:17","date_gmt":"2018-01-23T14:00:17","guid":{"rendered":"https:\/\/www.realestatetalk.com.au\/?p=20001"},"modified":"2018-01-24T01:00:17","modified_gmt":"2018-01-23T14:00:17","slug":"negative-gearing-cops-it-again-patrick-bright","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/negative-gearing-cops-it-again-patrick-bright\/","title":{"rendered":"Negative Gearing cops it again \u2013 Patrick Bright"},"content":{"rendered":"

It is a shame that we have to talk about the pros and cons of negative gearing again as it comes under attack from the federal opposition.\u00a0 It is as if this is an evil capitalist strategy to make the rich richer.\u00a0 Patrick Bright<\/strong> points out that it is a common strategy used in all forms of business and investment and it is misleading to attach it to property investment alone.\u00a0\u00a0 What would happen if Labor gets its way?
\nTranscript:<\/strong>
\nKevin:\u00a0\u00a0<\/strong>Well, here we go again, more talk about negative gearing, the pros and cons of it. A man I\u2019ve spoken to about this off-air and on-air on a number of occasions is Patrick Bright from EPS Property Search.
\nPatrick, thank you for joining us today on the show, and good to be talking to you again.
\nPatrick:\u00a0\u00a0<\/strong>A pleasure. Thanks, Kevin.
\nKevin:\u00a0\u00a0<\/strong>Let\u2019s talk about negative gearing. Demystify it a bit for me, because a lot of people think that it\u2019s really only big, fat, greedy investors who benefit from this, Patrick.
\nPatrick:\u00a0\u00a0<\/strong>It\u2019s interesting, this gearing thing. It exists in all forms of investing \u2013 business, shares. I look at property as a business, and sometimes you do make a short-term loss for a long-term gain. The policy, I guess, exists to encourage investment. That\u2019s why they created it in the first place.
\nIn businesses, you generally make a loss for a few years before you turn a profit, and then you pay tax on that, and it\u2019s good for the economy. What\u2019s really the difference with property is it was encouraged to investors to help fund construction of housing that the government doesn\u2019t want to supply, and then people who become self-funded retirees can do it by helping to get ahead and maybe get off the pension.
\nAnd then you turn around and you have the government starting to want to change and tinker around with it. I\u2019m not sure why \u2013 if it\u2019s so successful \u2013 they don\u2019t actually expand it?
\nKevin:\u00a0\u00a0<\/strong>I think it\u2019s a very emotional issue, and it\u2019s politically a bit of low-hanging fruit, I guess, a popular bandwagon to get on, particularly with the Labor opposition who say that they\u2019re going to do it to help with housing affordability. If they were to do away with negative gearing, what\u2019s your opinion on what impact it would have on affordability, Patrick?
\nPatrick:\u00a0\u00a0<\/strong>I\u2019m not an economist, but if you summarize what a lot of the economists are saying, then it will turn people away from investing. They won\u2019t retrospectively do it, as they\u2019ve said, so everything in place is in place. But in the future, that means it\u2019ll probably be a disincentive for people to invest. They might turn to shares more or businesses more, because the negative gearing benefits will still be attached to those areas of investment. And so that\u2019s going to have a knock-on effect, isn\u2019t it?
\nLet\u2019s think the policy through. If you discourage investment into the housing sector and let\u2019s say we\u2019re not building enough to support the population growth, therefore you\u2019re going to have less construction of housing. That\u2019s going to cause a greater supply and demand problem and put more pressure on prices down the track, not actually relieve pressure.
\nIt\u2019s also then going to have a knock-on effect of construction in your economy. Retail, people have to put washing machines and carpet and all that sort of stuff in these new properties, so if fewer are built because the demand is not there, because the investment is not there, you\u2019re going to have a short-term maybe political gain to get elected, because it\u2019s the populist thing attack, but long-term, really detrimental impacts on the economy.
\nIf the government was serious about helping affordability, the truth is immigration and foreign investment are the real culprits. It\u2019s absolutely out there and factual. Immigration is at record levels and foreign investment is at record levels, and these things are impacting the supply and demand equation. You just have to look at housing growth in all capital cities tracks immigration, and it\u2019s also risen steadily quite strongly off the back of added foreign investment.
\nPre-2008, before Rudd changed the foreign investment policy, only a few percent of foreigners were investing in Australia. This is not tracked accurately even today, but there are studies \u2013 you can Google NAB Bank and things like that who do studies and research and look at the sales and transactions. And I know Westpac Bank do it as well.
\nBut upwards of the 2016\u201317 financial year, we had between 30% and 40% of foreign investors buying up new property. 30% to 40% of new property was going to foreign buyers, whereas it was a few percentage points a decade ago. So to think that\u2019s not having an impact, you have rocks in your ear. It does.
\nThat\u2019s where they should be attacking, that area, tightening that up if you want to increase housing supply to locals.
\nKevin:\u00a0\u00a0<\/strong>\u00a0I just want to pick up on another point that you made earlier too, Patrick, and that was about providing a disincentive to investors who provide this rental stock that is so greatly needed. Not everyone wants to buy a property; there will still always be a number of people who want to rent.
\nIf you do take those investors out of the market, someone is going to have to supply those rental properties, and it would likely have to be the government. In my opinion, they don\u2019t have a very good track record of doing that sort of supply.
\nPatrick:\u00a0\u00a0<\/strong>No, they have a very ordinary track record. And it\u2019s very capital-intensive, and they don\u2019t want to do it, which is partly why they have policies in place that make it somewhat attractive for investors to enter the property market and supply housing for people who don\u2019t want to buy their own home or can\u2019t afford to buy their own home. But why let foreigners do it and reap the financial benefit? They should shut that door.
\nMaybe expand negative gearing. If it\u2019s that good and it\u2019s that attractive, and that many people get into it, and yes, okay, you make some short-term gains and carry forward your losses to offset your profits down the track that you pay tax on \u2013 same in business, same in shares \u2013 why not expand it and help more Australians become more self-funded retirees rather than attacking and making it harder for them?
\nKevin:\u00a0\u00a0<\/strong>So, the bottom line, Patrick, leave it alone, find other ways to improve affordability.
\nPatrick:\u00a0\u00a0<\/strong>There are simpler ways to do it that would have much quicker impact \u2013 in my view \u2013 than doing away with negative gearing. I\u2019m not saying you can\u2019t tinker with it and improve it, but just taking it away may not be the answer. Expanding it in some areas in some way, incentivizing it in areas may actually be a better answer.
\nKevin:\u00a0\u00a0<\/strong>Now, there\u2019s a good thought. We\u2019ll take that further in some other chat. My guest has been Patrick Bright from EPSPropertySearch.com.au.
\nPatrick, thank you so much for your time.
\nPatrick:\u00a0\u00a0<\/strong>A pleasure, Kevin. Have a good year.<\/p>\n","protected":false},"excerpt":{"rendered":"

It is a shame that we have to talk about the pros and cons of negative gearing again as it comes under attack from the federal opposition.\u00a0 It is as if this is an evil capitalist strategy to make the rich richer.\u00a0 Patrick Bright points…<\/p>\n","protected":false},"author":176692471,"featured_media":20002,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[34,10,11,13,36,22,25,27],"tags":[101],"class_list":["post-20001","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-research-topic","category-sponsored-channels","category-trends-topic","tag-podcast"],"yoast_head":"\nNegative Gearing cops it again \u2013 Patrick Bright - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/negative-gearing-cops-it-again-patrick-bright\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Negative Gearing cops it again \u2013 Patrick Bright - 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