{"id":20798,"date":"2018-04-10T01:00:54","date_gmt":"2018-04-09T15:00:54","guid":{"rendered":"https:\/\/realestatetalk.com.au\/?p=20798"},"modified":"2018-04-10T01:00:54","modified_gmt":"2018-04-09T15:00:54","slug":"negative-gearing-negativity-on-the-nose","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/negative-gearing-negativity-on-the-nose\/","title":{"rendered":"Negative gearing negativity on the nose"},"content":{"rendered":"

By Simon Pressley, Head of Market Research, Propertyology<\/em><\/strong>
\nIt appears that negative gearing negativity is here to stay.
\nAnd it also appears that the majority of naysayers don’t understand what they’re talking about.
\nIf some politicians were to be believed, negative gearing is nothing but a cash grab by greedy investors, who sit around in baths full of $100 notes laughing maniacally at how the government is paying them to get rich.
\nWhat a load of codswallop!
\nShelter statistics
\n<\/strong>
\nFirstly, let’s consider who provides the majority of rental accommodation in Australia.
\nGovernments provide a mere a 2.9 per cent of dwelling stock, which is a figure that has been reducing year after year.
\nWhy should they dip their hands in their pocket filled with taxpayer’s money to provide housing for the disadvantaged when investors are doing it?
\n
\nAs such, it falls to everyday Australians to fund the acquisition of shelter for others in our society \u2013 and that’s not at all to say that everyone who rents is doing so because they can’t afford to buy.
\nThat supply by investors equates to nearly 2.9 million dwellings.
\nThe question, of course, becomes what motivates investors to spend $300,000 to $650,000, as well as the potential risks, to put roofs over other people’s heads?
\nThe answer is they buy properties because of the expectation that \u2013 over time \u2013 the asset increases in value and so does their financial situation.
\nSociety wins from that, too, because it means there’s less strain on taxpayer revenue from aged pensions and that, in turn, means more funds for essential services provided by our public servants plus more infrastructure.
\nAged pensions is easily the single biggest line item in Australia\u2019s biggest profit and loss statement. In spite of the fact that the average Australian has 45 years in the workforce (aged 20 to 65), very few have managed to become financially independent. Consequently, we spend more money each year on aged pensions than health or education. It\u2019s a time bomb waiting to explode<\/a>!
\n
\nTime in the market costs money<\/strong>
\nFor most people starting out on their initial investment journey, retirement is still a gazillion years away.
\nRental income is rarely anywhere near enough to cover costs every year.
\nWho can afford that? Who wants to wait all of those years for a return?
\nThe solution dates back some 80 to 100 years ago.
\nBack then the government had the same challenge as today, which was how does our nation fund the supply of sufficient dwellings for its growing and ageing population?
\nTo encourage everyday Aussies to fund shelter for others, the then-government \u00a0afforded them the same tax benefits that were in place for other income-producing assets such as businesses, farms, retail shops, factories, and share portfolios.
\nOver the years, the term “negative gearing” was adopted for investment in residential property, however, the concept is no different to tax policies for these other income-producing assets.
\nAnd while investment in myriad asset classes are eligible for negative gearing, it is residential property investors who always bear the brunt.
\nThis was especially so at the height of Sydney\u2019s property boom (2013-2017). Naive commentators tried to blame investors for driving up prices.
\nPropertyology is far from convinced that either side of government has reflected on the importance of the decision that their predecessors made 80 to 100 years ago.
\nReading headlines over recent years, it would seem that a century-old national tax policy was the root cause of property price rises in two capital cities, Sydney and Melbourne. These same na\u00efve people failed to mention that prices actually fell in two other cities for three consecutive years (Perth and Darwin) and that four other cities recorded only modest growth.
\nHow can a tax policy that is applicable to an entire country have such an influence on just two cities? Where did these people get their education?
\nThe axing of negative gearing was firmly on the political agenda before and (sigh) still after the 2016 Federal Election, but no one could correctly forecast the potential impact on property prices if it was diluted or scrapped.
\nAnd while negative benefit “handouts” are often hot media topics, no one seems to mention the amount of tax revenue that all levels of government receive from investors.
\n
\nIn fact, while residential property investors wrote $3.719 billion off their taxable income in the 2013\/14 financial year, CoreLogic estimates that investors paid Capital Gains Tax on $51.2 billion of profits made from dwelling resales over the 2015 calendar year, which contributed to the $45 billion in property-related tax revenue collected by the state and local governments.
\nThat’s right \u2013 $45 billion in property-related tax revenue.
\n
\nMarkets move in mysterious ways<\/strong>
\nAs illustrated in our chart, there are dozens of factors that influence fluctuations in property prices with tax being just one of them.
\nIt’s the sum of all these many factors that matter, which means there is no way to calculate what impact the scrapping of negative gearing would have.
\nTo those who say it will make housing more affordable for first homebuyers, I ask how?
\nFor starters, negative gearing has no bearing on a person’s financial discipline to save a deposit.
\nAnd to those who try to justify it by claiming housing will become cheaper, how does falling property values benefit the 70 per cent of Australian households who’ve already done the hard yards to save a deposit and buy a home?
\nPersonally, I don’t care whether negative gearing stays or goes. People will always need to invest and Australian real estate will always be the most popular vehicle<\/a>.
\nHowever, it’s only fair that any change must be applicable to ALL income-producing assets, which means that authorities must first thoroughly assess the broader implications on our financial system as well as society in general.
\nFailing to do so would be gross negligence!
\n
\nIf you\u2019d like to know more about Propertyology\u2019s services, here\u2019s how you contact<\/a> them.
\nPropertyology<\/a> is a national property market researcher and buyer\u2019s agency. The multi-award-winning firm\u2019s success includes being a finalist in the 2017 Telstra Business Awards and 2016 winner of Small Residential Agency of the Year in REIQ Awards For Excellence. Managing Director Simon Pressley is a REIA Hall Of Fame Inductee and a three-time winner of the REIA and REIQ Buyers Agent of the Year award.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

By Simon Pressley, Head of Market Research, Propertyology It appears that negative gearing negativity is here to stay. And it also appears that the majority of naysayers don’t understand what they’re talking about. If some politicians were to be believed, negative gearing is nothing but…<\/p>\n","protected":false},"author":176692471,"featured_media":20800,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[13,20,25],"tags":[70],"class_list":["post-20798","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-story","category-propertyology","category-sponsored-channels","tag-featured"],"yoast_head":"\nNegative gearing negativity on the nose - 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-negativity-on-the-nose\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Negative gearing negativity on the nose - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"By Simon Pressley, Head of Market Research, Propertyology It appears that negative gearing negativity is here to stay. And it also appears that the majority of naysayers don’t understand what they’re talking about. 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