{"id":4528,"date":"2015-05-25T01:00:16","date_gmt":"2015-05-24T15:00:16","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=4528"},"modified":"2015-05-25T01:00:16","modified_gmt":"2015-05-24T15:00:16","slug":"why-so-negative-on-negative-gearing","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/why-so-negative-on-negative-gearing\/","title":{"rendered":"Why so negative on negative gearing? – Michael Yardney"},"content":{"rendered":"

 
\nAlways around budget time, there\u2019s lots of talk about negative gearing \u2013 whether or not it should be there, and if it\u2019s all about greedy investors getting richer. Let\u2019s get another perspective on this.
\nMichael Yardney<\/b><\/a>,\u00a0from Metropole Property Strategists,\u00a0<\/b>is our guest today.
\n <\/p>\n

Transcript:<\/h4>\n

Kevin:\u00a0 <\/b>Always around budget time, there\u2019s lots of talk about negative gearing \u2013 whether or not it should be there, and if it\u2019s all about greedy investors getting richer. Let\u2019s get another perspective on this, because there has been a lot of discussion this year about it. Joining me to discuss this is Michael Yardney from Metropole Property Strategists.
\nMichael, welcome to the show. Firstly, I thought it might be handy for you to give us a bit of an overview about what negative gearing really is.
\nMichael:\u00a0 <\/b>Thanks, Kevin. A property is negatively geared when the cost of owning it \u2013 in other words, the interest on the loan, the bank charges, the maintenance, repairs, and depreciation \u2013 exceeds the income you\u2019re getting. A property itself isn\u2019t a negatively or positively geared property; it really is a function of how you finance it.
\nThe concern for some people is if you are negatively geared, you can actually write it off other income. Some would argue that less-fortunate taxpayers therefore help property investors meet the costs of them running their property investment business.
\nKevin:\u00a0 <\/b>We talk about that you should approach property investing like a business. If that is the case, why would you go into business to lose money?
\nMichael:\u00a0 <\/b>Well, you don\u2019t. And if you do go into a property investment with the main aim of getting tax benefits and depreciation<\/a>, you\u2019re likely to make a mistake. You\u2019re right, Kevin. Generally, it\u2019s done because property investors hope that the income loss will be more than offset by the capital gains when they eventually refinance or eventually sell the property. In Australia, of course, that\u2019s not taxed, so there is clearly a tax benefit if you own the right sort of investment property.
\nKevin:\u00a0 <\/b>One of the major criticisms of negative gearing is it\u2019s the richer getting richer, but you and I know that that\u2019s not necessarily the case, don\u2019t we?
\nMichael:\u00a0 <\/b>When you look at the tax office statistics of who negatively gears, the vast majority \u2013 more than 80% of them \u2013 are ordinary Australian taxpayers, what some people would call battlers, people who have actually taken the trouble to save a deposit, to invest, to take a risk to secure their financial future. It\u2019s not ugly, rich investors<\/a> who do that.
\nKevin:\u00a0 <\/b>What surprises me, Michael, is that there are some very educated people who are very critical about negative gearing without necessarily taking into account the fact that investors are actually providing a very valuable service.
\nMichael:\u00a0 <\/b>Kevin, when we grew up, a lot of the public housing in Australia was provided by the government, as it is in other countries overseas. In particular, in Melbourne and Sydney, you\u2019ll see Soviet-style concrete high-rise towers where people used to have to live because that\u2019s all the government could afford.
\nBut today, just like private hospitals, schools, and public transport is shared between the private sector and the public sector, so is public housing, and that\u2019s what ordinary investors like you and I are doing. We\u2019re providing a service. We are running a business in the process of providing that service, and we\u2019re just looking for the same tax incentives that anyone else who runs a business gets from the government.
\nKevin:\u00a0 <\/b>Ken Raiss is a good friend of ours, of course, from Chan & Naylor. He was very adamant about his criticism of any fiddling with negative gearing and what impact it would have on rental prices.
\nMichael:\u00a0 <\/b>Ken Raiss is only one of the many who remember way back in the 1980s when negative gearing was removed and rents went up. There are other factors involved in that, as well. I know there\u2019s a lobby out there \u2013 usually those who\u2019ve missed out on the recent property boom or who can\u2019t get into property at the moment \u2013 saying, \u201cJust get rid of negative gearing, and that\u2019s going to solve all the problems.\u201d That\u2019s a simplistic argument in my view. I agree that it\u2019s likely in the short term to raise rents, because as an investor, I have to get my return somehow or other.
\nKevin:\u00a0 <\/b>Yes, indeed. In that case, Michael, does negative gearing actually push property prices up?
\nMichael:\u00a0 <\/b>Negative gearing allows investors to buy property and get into the property market. I\u2019m not sure that it actually pushes up values of it, because it\u2019s really meant to be the cream, just the little bit that makes it doable.
\nWhat pushes up property values is the fact that still, in general, 70% of properties bought in Australia are owner-occupiers. They\u2019re the ones who investors have to compete against. They\u2019re the ones who are pushing up property values. The argument that properties are unaffordable is probably a moot one, in my opinion, because other than New South Wales, where currently about 50% of people buying are investors, most properties are still bought by homeowners.
\nKevin:\u00a0 <\/b>You\u2019ll have a view on this, no doubt, so let us know through the website if you\u2019d like. We\u2019d love you to join the conversation. Just send a comment into us. It\u2019s very easy to do that; it\u2019s on the homepage. If you have any questions or comments for Michael Yardney or any of our experts on the show, we\u2019d love to hear from you.
\nMichael Yardney is from Metropole Property Strategists. Michael, once again, thank you so much for your time.
\nMichael:\u00a0 <\/b>My pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  Always around budget time, there\u2019s lots of talk about negative gearing \u2013 whether or not it should be there, and if it\u2019s all about greedy investors getting richer. Let\u2019s get another perspective on this. Michael Yardney,\u00a0from Metropole Property Strategists,\u00a0is our guest today.   Transcript:…<\/p>\n","protected":false},"author":176692471,"featured_media":4529,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,13,25],"tags":[101],"class_list":["post-4528","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-latest-story","category-sponsored-channels","tag-podcast"],"yoast_head":"\nWhy so negative on negative gearing? - Michael Yardney - 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\/why-so-negative-on-negative-gearing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why so negative on negative gearing? - Michael Yardney - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  Always around budget time, there\u2019s lots of talk about negative gearing \u2013 whether or not it should be there, and if it\u2019s all about greedy investors getting richer. 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