Gotti sheds crocodile tears for Millennials

 

By Leith van Onselen

Baby boomer wolf, Robert Gottliebsen, has donned sheep’s clothing in his latest negative gearing attack, claiming that Labor’s policy will actually hurt millennials:

We have just been through a residential property boom partly created by negative gearing, but the main force was loose bank credit often using inflated borrower incomes and unrealistically low expenses. The big winners from the boom have been parents and grandparents who bought dwellings at much lower prices decades ago.

But in the last three years a large number of millennials borrowed to the hilt and bought dwellings at the peak…

While the house prices fell, millennials wanting to own a home were in theory no better off because their borrowing ability was reduced…

The ALP danger is that its negative gearing policy is now coming at the same time as a credit squeeze…

And guess who will suffer most? The millennials and their guaranteeing parents who bought dwellings during the boom. Higher rents will send many other millennials back to live with their parents.

Longer term this is good policy for those wanting to increase home ownership but bad for renters because rents will need to rise to make property investment worthwhile.

Why would rents “need to rise to make property investment worthwhile”?

Instead, as investors bail on existing dwellings (replaced by first home buyers), prices will fall, sending rental yields higher. Eventually, these higher rental yields will entice investors back into the market.

As Gotti himself admits, the surge in property prices was caused, in part, by generous tax policies (i.e. negative gearing and the CGT discount).

Therefore, curbing these lurks will unambiguously assist Millennials currently locked-out of achieving the Great Australian Dream.

unconventionaleconomist@hotmail.com

 

SOURCE:  https://www.macrobusiness.com.au/2019/04/gotti-sheds-crocodile-tears-millennials/