HI-RISE HARRY WRITES NEGATIVE GEARING ATTACK … WRONG!!

WHAT * Harry has omitted to mention are the Chinese Government Capital Controls … too much Renminbi/Yuan  was leaving their shores to be laundered in Australian Real Estate … that is what really brought about the reduced Chinese interest in our Real Estate … however as recently as October 2018 the SCOMO Govt exempted the Real Estate Gatekeepers from the Anti-Money Laundering Rules … hm …

ON Negative Gearing …

 

View these links to find the facts and/or search for more!

Negative Gearing What It Means for Renters

https://caanhousinginequalitywithaussieslockedout.wordpress.com/2019/05/11/negative-gearing-what-it-means-for-renters/

Landlords in Sydney’s richest postcodes make biggest negative gearing claims: ATO

https://caanhousinginequalitywithaussieslockedout.wordpress.com/2019/04/23/why-labors-negative-gearing-policy-will-enhance-australias-economy/

Grattan Institute Calls Out Property Lobbyists “Scare Campaign” on Negative Gearing

https://caanhousinginequalitywithaussieslockedout.wordpress.com/2019/04/18/10412/

WENTWORTH COURIER ONLY. Harry Triguboff in his office at Meriton. Picture: John Appleyard

Photo:  Wentworth Courier Only.  Harry Triguboff in his office at Meriton. Picture: John Appleyard

Harry Triguboff: Wrong time for Labor’s negative gearing changes

The property development industry is one of the largest employers in Australia. It employs around one in four people in NSW and provides substantial income for the government through stamp duty, land tax, GST and employment taxes that fund the services and infrastructure that we need.

At this point, I wouldn’t be ­surprised if many of those people ­involved in the business are concerned about job security, particularly in the residential development sector and in major capital cities where no residential projects of any substance are starting.

Only infrastructure projects are keeping us going, and those in turn are reliant on the money generated from the property business, meaning that they are in jeopardy, too.

These concerns are further heightened by the possible changes to negative gearing and capital gains tax proposed by the ALP.

This is not necessarily because they have developed a wrong policy, but because now, when the market is weak, is the wrong time to bring it in.

Implementing Labor’s proposed changes now means that the policy won’t achieve its intentions while still imposing negative consequences for everyone.

*The present downturn started in July 2017 with the introduction of significant foreign investor surcharges. These were followed by the banking royal commission, restrictions on access to finance, political uncertainty with a number of state elections and now the federal elections — and don’t get me started on the planning system. But these measures have now had their desired effect, and much more in my opinion, so now is time for certainty and stability.

CAAN:  LOOK at the following …. and question!
View the links above for the facts on Labor’s changes to Negative Gearing.

The proposed policy of removing negative gearing is based on the need to reduce house values while at the same time generating more government income. It should definitely make homes cheaper if that’s what is needed, but won’t generate more money unless the market is strong.

Instead, what we will see is it will make a weak market even weaker, reducing supply and likely increasing property prices.

Labor’s policies, if implemented now, will be bad for everyone as it will exacerbate and prolong the downturn we are currently experiencing

Housing construction in Sydney is down at least 40 per cent from its peak and that a severe residential supply shortage is looming, says developer Harry Triguboff. Picture: AAP

The time to abolish negative gearing would be when prices are going up. But if we do it now, the construction of housing will fall even further, meaning that prices will probably go up as we will not build enough.

We already know that construction in Sydney is down at least 40 per cent from its peak and that a severe residential supply shortage is looming. Any policy changes should be supporting growth.

Fewer people will buy investment properties because negative gearing will not be allowed on old properties. Even if it helps with new properties, any gains will now be taxed more so they will have less incentive to purchase investment properties — whether old or new.

Even if someone buys new to get the negative gearing benefits, they will know full well that these benefits will not be available to the next ­person which reduces the attractiveness, not to mention additional ­capital gains tax.

This will also mean the many ­people who rely on the building industry will lose their jobs and businesses.

If the market is not strong, the ­assumption that more money for government will be generated will not occur. Treasury will lose the money to fund hospitals, schools, roads and rail they have promised the voters.

It is not only these statutory payments that are threatened. It is also the extras we have to give like affordable housing, extra payments, parks, roads and so on that councils and state governments want when we supply the additional housing that they need.

Our population continues to grow so it’s not like we don’t need the housing. A shortage as early as 2021 in Sydney has been identified. We need migrants because they are essential for our workforce.

If we need migrants and foreign workers, we need more housing. Abolishing negative gearing which assists investors will ensure that the economy will suffer because fewer housing units will be built.

There is, of course, talk about build to rent (BTR), but we are already blessed with our own BTR scheme where individual mums and dads can invest which provides the housing and helps them secure their future. This is facilitated by negative gearing.

Labor’s policies, if implemented now, will be bad for everyone as it will exacerbate and prolong the downturn we are currently experiencing, which would risk tens of thousands of jobs and substantial government revenue that comes from a productive property industry that pays for services and infrastructure we require.

We are seeing signs of recovery in the market and providing apartments is becoming more attractive.

Negative gearing benefits should be kept as is as they encourage investment in housing which will provide the housing, jobs and the money the government and the economy needs.

If we do anything to put the brakes on this recovery, any improvement will be short-lived.

Harry Triguboff AO is the founder and managing director of Meriton

SOURCE:  https://www.dailytelegraph.com.au/news/opinion/harry-triguboff-wrong-time-for-labors-negative-gearing-changes/news-story/cea8c3c8d09bc54b879b917113adfc18

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NEGATIVE GEARING & WHAT IT MEANS FOR RENTERS

HAVE YOU SEEN THIS?

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Changing negative gearing: what it means for renters

And find out who has really been benefiting?

 

Despite all the talk about negatively geared nurses and property baron police officers, 90% of taxpayers do not use it.

The professions who do use it most are those at the top end of the income scale. This is reflected in the fact that half of the value of negative gearing concessions goes to the top 20% of income earners, while for the capital gains discount, 80% goes to the top 10%.

 

 

CHANGING NEGATIVE GEARING:  WHAT IT MEANS FOR RENTERS

 

Reforms to the negative gearing and capital gains tax rules will improve housing affordability for renters, says Professor Hal Pawson at UNSW Built Environment.

 

Image: Shutterstock

Distress for renters is likely to ease over time under the proposed changes. Image: Shutterstock

 

 

The federal election campaign has reignited a debate that began back at the 2016 election with Labor’s proposed reforms. T

Tax breaks on investment properties is a point of difference between the two major Australian political parties, so here we revisit the basics.

Belinda Henwood: What is negative gearing?

Hal Pawson: In Australia, revenue losses on rental property can be used as a tax shelter for other earned income, which means taxpayers can decrease or minimise their taxable incomes and therefore their tax liabilities.

It is this aspect of the existing rules that is controversial – partly because it means that higher income investors in higher tax bands inevitably reap greater benefits.

The current rules for rental investors are arguably much too generous compared with those for people investing in employment-generating enterprises that contribute more to economic productivity.

At least over the medium term, rental property acquisition is generally far less risky than is often the case for ‘true business investment’, and therefore less deserving of tax subsidy on this basis.  

BH: What is Labor proposing?

HP: Labor is proposing to remove the scope for rental investor negative gearing for established dwellings acquired for rental use from 1 January 2020.

Landlords who already own investment properties will be exempt from the changes, as will those acquiring newly built homes for rental from 1 January 2020.

Encouraging aspiring rental investors to choose new, instead of existing, housing is consistent with the idea that maximising new housing supply is an important part of any sensible strategy to ease housing unaffordability.

It’s also consistent with the longstanding rules on Australian residential property acquisition by foreign investors – a policy that’s accepted across the political spectrum and recently copied by New Zealand.

 

New Zealand has banned most foreigners from buying homes as it tries to tackle runaway housing prices.PHOTO: New Zealand has banned most foreigners from buying homes as it tries to tackle runaway housing prices.  (AP: Mark Baker)

 

Labor also pledges to halve investors’ capital gains tax discount – from 50% to 25% – for all properties acquired for rental use after 1 January 2020.

BH: Who gains the most from the existing system?

*HP: The Grattan Institute’s Danielle Wood says: “Despite all the talk about negatively geared nurses and property baron police officers, 90% of taxpayers do not use it.”

*The professions who do use it most are those at the top end of the income scale. This is reflected in the fact that half of the value of negative gearing concessions goes to the top 20% of income earners, while for the capital gains discount, 80% goes to the top 10%.

These tax subsidies are regressive, because they disproportionately benefit higher income earners and fuel inequality – which is already a growing problem in Australia, and one that government policy should be seeking to moderate, not exacerbate.

BH: What will be the housing market and budgetary effects of Labor’s plan?

HP: Under Labor’s reformed tax rules, property values will run 1–2% below the level at which they would otherwise have sat, according to the Grattan Institute. This will be a situation where – in effect – investors lose some of the advantage they have enjoyed when bidding at auction against aspiring first home buyers for existing properties.

 

Negative gearing changes will affect us all, mostly for the better

 

Under the proposed changes, the federal government’s budget bottom line is expected to be increased by $32 billion over a decade (Parliamentary Budget Office), although only by relatively small amounts in the early years because of grandfathering for existing rental investors.

Apart from costing an estimated $11.7 billion per annum, current negative gearing and capital gains tax discount subsidies do nothing to encourage investment in rental properties that will help to ease housing unaffordability by having rents affordable to low income earners.

Over time, the proposed plan would enable the federal government to redirect support to genuine good-quality affordable rental housing through Labor’s plan to incentivise the construction of 250,000 discounted rent units by 2030 (at a cost of $6.6 billion over the period covered by the forward estimates).

Shorten places housing at the centre of the 2019 election

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WHY LABOR’S NEGATIVE GEARING POLICY WILL ENABLE THE PROPERTY SECTOR!  

HERE is further proof of what the Unconventional Economist, Treasury and others have been revealing … contrary to the misleading reports of Josh and Joe …

LABOR’s policy will grandfather established property investments while encouraging investment in ‘new builds’

-this should open up the established housing market for Australian First Home Buyers

HOWEVER … a downside to this with the NSW Berejiklian Guvmnt … Medium Density Housing Code … is that ‘family developers’ will landbank our streets for terraces to flog off overseas!
 
THAT is why it is imperative that ANTI-MONEY LAUNDERING LEGISLATION for the Real Estate Sector (Tranche 2) must be enforced!
 
-the Scomo Govt exempted this sector in October 2018!

Related Article:

BIG MAJORITY SUPPORTS LABOR’s NEGATIVE GEARING REFORMS

https://caanhousinginequalitywithaussieslockedout.wordpress.com/2019/04/23/10574/

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Landlords in Sydney’s richest postcodes make biggest negative gearing claims: ATO

Landlords in some of Sydney’s most expensive suburbs have been reaping the biggest benefits from negative gearing, according to new ATO data which reveals the size of claims by each postcode.

AIDAN DEVINE
APRIL 23, 2019

Landlords in affluent Darling Point make the biggest negative gearing claims in Sydney.Source:Supplied

 

Landlords have been claiming negative gearing losses of more than $20,000 a year in some of Sydney’s priciest suburbs, tax office data has revealed.

Among the suburbs where landlords were claiming the biggest annual losses on their properties were up-market eastern suburbs Darling Point and Vaucluse.

The losses were measured by the gap between expenses, such as mortgage repayments and maintenance, and income generated by rents.

MORE: Biggest gamble Aussies make with home

Buyers quickly swing into action

Under current tax rules, property investors are permitted to claim these losses against their taxable incomereferred to as negative gearing.

Just under 500 landlords in Darling Point were negatively gearing their properties and the average loss claimed was $29,264, according to the Australian Taxation Office.

The bulk of Sydney’s biggest negative gearing claims were made in the eastern suburbs.

The bulk of Sydney’s biggest negative gearing claims were made in the eastern suburbs.Source:News Corp Australia

 

The median price of a Darling Point house is more than $7 million — nearly seven times the average price of a house across Sydney as a whole, CoreLogic data showed.

Nearby Vaucluse had 817 landlords using negative gearing and making an average loss of $21,739. The average loss for landlords in Bellevue Hill was $15,000.

 

The average loss in the suburb of East Melbourne, an affluent inner city area, was $20,717 across more than 800 landlords.

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In Peppermint Grove, Perth’s priciest suburb, and Toorak, Melbourne’s priciest suburbs, the losses were about $15,000 annually.

Some of the biggest losses in the country were also claimed by Tasmanian landlords.

The 118 negatively geared landlords in the postcode 7215, which incorporates a large scantly populated area on Tasmania’s east coast, claimed an average loss of $58,366.

The Australian Taxation Office figures released by the Treasury included only tax claims submitted over the 2016/17 financial year.

The data followed an earlier report by the Grattan Institute that showed about 50 per cent of the tax benefits from negative gearing went to the top 10 per cent of income earners.

The taxation office also recently announced measures to crackdown on rental deductions, including doubling the number of audits of landlords.

Negative gearing has become a hotly debated topic in the lead up to this year’s federal election, with the Labor Party promising to restrict the benefit to newly built properties if elected.

The Coalition has pledged to retain the tax benefit, labelling Labor’s policy a potential risk to the economy.

 

CAAN:  Liberal Party rubbish!

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WEALTHY AUSTRALIANS THE HEAVIEST USERS OF NEGATIVE GEARING

TAX OFFICE DATA reveals … with Neg Gearing … the highest average losses are occurring in POSTCODES with the BIGGEST INCOMES and that those on higher incomes tend to be the KEENEST USERS  of NEGATIVE GEARING …  

AND not Teachers, Ambos … those on less than $80K p.a. …

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Wealthy Australians the heaviest users of negative gearing

 

By Leith van Onselen

The Grattan Institute’s Danielle Wood says she is not surprised by tax office data regarding negative gearing losses.

The data reveals that the highest average losses are occurring in postcodes with the highest incomes, with Wood noting that those on higher incomes tend to be the keenest users of negative gearing. From The Australian:

Property investors in some of Australia’s wealthiest suburbs are racking up negative gearing losses that average more than $20,000 a year, new taxation ­office figures show.

A breakdown of rental income deductions by postcode, released by Treasury under freedom of ­information laws, reveals the largest average negative gearing losses are in the nation’s highest income postcodes…

“The geographic spread of the losses doesn’t surprise me,” Ms Wood said… “We’ve previously found that 50 per cent of the tax benefits from negative gearing go to the top 10 per cent of income earners — assessed before rental loss ­deductions”…

Suburbs highlighted by ATO data include Sydney’s Darling Point, part of the Wentworth electorate formerly held by Malcolm Turnbull, and Melbourne’s Higgins, which was until recently held by former financial services minister Kelly O’Dwyer.

So here’s yet more evidence debunking the Coalition’s and property lobby’s incessant lie that negative gearing is used primarily by ‘ordinary mum and dad’ middle-income earners.

 

Fact check: Do two-thirds of negative gearers have a taxable income under $80,000?

josh frydenberg's claim is misleading

 

Indeed, ABC Fact Check last year also showed that negative gearing is used primarily by higher income earners:

The graph below shows that people who earn a total income before negative gearing of above $80,000 receive 61.8 per cent of the net rental losses, despite representing only 47.7 per cent of negative gearers.

It also shows that the 52.3 per cent of negative gearers below $80,000 only account for 25.9 per cent of the benefit of reduced tax. The 47.7 per cent above $80,000 account for 74.1 per cent.

Once again, as the thresholds increase, the disparities between the share of negative gearers and the net rental loss and tax benefit increase.

The 9.5 per cent of negative gearers above $180,000 account for 19.1 per cent of the net rental losses, and 26.2 per cent of the reduction in tax paid.

And above $245,000, 4.5 per cent of negative gearers account for 12.4 per cent of the net rental losses, and 15.8 per cent of the reduction in tax paid…

Experts and academic research have broken down this topic in different ways, showing that negative gearing disproportionately benefits higher-income earners…

Curtin University academics Helen Hodgson, Alan Duncan and Rachel Ong ViforJ, along with Griffith University’s John Minas, calculated earlier this year that the mean or average tax saving due to negative gearing for the highest-earning 25 per cent of negatively geared investors is a figure more than four times that of the lowest-earning 50 per cent.

Another negative gearing lie blown-out of the water. As was the case with the lie claiming abolishing negative gearing would force-up rents.

Fact check: Did abolishing negative gearing push up rents?

 

Treasurer Joe Hockey says scrapping negative gearing pushed up rents in the 1980s.

 

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unconventionaleconomist@hotmail.com

 

SOURCE:  https://www.macrobusiness.com.au/2019/04/wealthy-heaviest-users-negative-gearing/

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BIG MAJORITY SUPPORTS LABOR’s NEGATIVE GEARING REFORMS

 

AND so they should support LABOR’s negative gearing reforms … because 50 per cent of the TAX BENEFITS from negative gearing go to the top 10 per cent of INCOME EARNERS!

 

News.com.au Landlords in affluent Darling Point make the biggest negative gearing claims in Sydney.Source:Supplied  

BIG MAJORITY SUPPORTS LABOR’s NEGATIVE GEARING REFORMS

By Leith van Onselen

 

Despite the vicious scare campaign launched by the Coalition and the property lobby, Labor appears to have little to fear from persisting with its negative gearing and CGT reforms, with the latest ABC Vote Compass – based on 223,533 respondents – showing that more voters support Labor’s policy than oppose it:

Almost half of voters agree there should be fewer tax breaks on investment properties, Vote Compass finds, but 20 per cent are neutral and 29 per cent disagree…

Voters across the income spectrum are more inclined to support winding back investment property tax concessions than to oppose them.

A clear majority of voters – 61% – also favour more taxes on the wealthy:

 

La Trobe University associate professor Andrea Carson, also a member of the Vote Compass advisory panel, says the results suggest Australians are relatively egalitarian and “want an economy where the tax burden is shared across the population, including the wealthy paying their share”.

On the face of it, Labor’s inequality agenda is an election winner, whereas the Coalition appears to have backed a loser in supporting existing inequitable tax concessions and lavishing tax cuts for higher-income earners.

 

Big majority supports Labor’s negative gearing reforms

 

We’ll find out for certain on 18 May.

unconventionaleconomist@hotmail.com

 

SOURCE:  https://www.macrobusiness.com.au/2019/04/big-majority-supports-labors-negative-gearing-reforms/

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Australia’s ageing army of landlords

By Leith van Onselen

The Australian reports that the proportion of investors who are aged 60-plus rose from around 15% to about 23.5% between 2000 and 2017, whereas the number of negatively geared investors also surged from 631,000 to about 1.3 million over the same period:

The statistics show that between 2000 and 2017, the most recent year for which data is available, the number of individuals negatively gearing their portfolios has more than doubled, from about 631,000 to about 1.3 million.

Over the same period, the number of investors breaking even or making a profit has climbed by a relatively modest 60 per cent, from about 532,000 to about 856,000.

…the number of landlords who had six or more properties and a taxable income of below $18,200 skyrocketed from 1246 to 3008 over the same period, after touching a peak of 3981 in 2008.

Over the same period, the proportion of investors who are 60 or older increased from about 15 per cent to about 23.5 per cent.

The below chart, which comes from the ATO taxation statistics for the 2016-17 financial year, shows the massive lift in the number of negatively geared investors:

Who are claiming an average of $8,771 in rental losses:

While the ongoing decline in investor mortgage rates has tempered losses:

This has been more than offset by weakness in rental growth:

Until Labor gains office and implements its negative gearing reforms, Australia will remain a nation of loss-making landlords.

unconventionaleconomist@hotmail.com

 

SOURCE:  https://www.macrobusiness.com.au/2019/04/australias-ageing-army-landlords/

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GRATTAN INSTITUTE CALLS OUT PROPERTY LOBBYISTS ‘SCARE CAMPAIGN’ ON NEGATIVE GEARING

 

The Unconventional Economist pulls the SQM Report apart:

‘As we all know, Labor’s policy will redirect negative gearing tax benefits into newly constructed dwellings, which would make new dwellings relatively more attractive to would-be investors, thereby helping to increase construction and lower rents (other things equal).’

READ MORE:

SQM CRASHES AND BURNS IN LABOR NEGATIVE GEARING ATTACK 

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IN FACT Labor is doing more for ‘Renters’ with this policy to enable them to become Home Owners …

 

 

Property lobbyists accused of ‘scare campaign’ on renters

Chris Bowen
The negative gearing policy of shadow treasurer Chris Bowen is being attacked. Photo: AAP

 

Renters have become the targets of a new property industry ad campaign described by experts as “cheeky” negative gearing scare tactics.

The Real Estate Institute of Australia has joined forces with the Property Investors Council of Australia to wage war, via a series of online videos, on Labor’s proposed changes to negative gearing before the election.

*As part of an ongoing campaign, the two industry lobby groups this week posted a video targeting tenants on social media alleging that the changes will result in increased rents, lower vacancy rates and higher unemployment.

But the Grattan Institute’s Danielle Wood has hit back at the video, saying the independent think tank’s in-house modelling shows the impact on tenants will be minuscule.

 

“It’s clearly a scare campaign and they’re massively overstating the effects. If it had an effect on renters, it would be over the long term and it would be so small,” she said.

“If you’ve got fewer investors in the market, they aren’t selling to investors – they’re selling houses to home buyers, so you’ve reduced the supply and demand of investment properties.

“Fewer investors does mean fewer rental properties, but those properties don’t disappear – home buyers move in, and so there are also fewer renters.”

The price of rent would only be affected if the policy reduced new housing supply and those effects would be small, as around 90 per cent of investment lending is for existing houses, and Labor’s plan leaves the tax write-off for new homes, argues Ms Wood.

“It’s cheeky to run a scare campaign directed at people who aren’t getting the tax concession. When there is a tax concession in place, everyone pays.”

**Labor’s proposal would result in negative gearing being restricted to newbuilds but it would be grandfathered for people using the tax break on existing homes.

It would be implemented alongside a 50 per cent reduction in the capital gains tax discount from January 1 if the party forms government after the May 18 election.

REIA defends position

Standing by the video, REIA president Adrian Kelly told The New Daily that there were “a number of studies showing the impacts on prices and rents”.

Pointing to a contentious report by SQM, Mr Kelly said the research showed that rents are expected to increase by between 8 per cent and 15 per cent on a weighted average for the capital cities for 2020 to 2022.

“This is in contrast to the current situation where we have the lowest annual increase in rents for two decades,” Mr Kelly said.

That report was described by the Labor opposition as “ridiculous” and “irresponsible”, but Treasurer Josh Frydenberg backed the research, saying it proved rents would rise under the policy.

“Reducing the number of investors in the market also pushes up rents,” he said.

“Investors often accept lower rents in the expectation of future after-tax capital gains when they sell.”

Rents a key election battleground

The March election survey from rent.com.au showed that:

*more than two-thirds of Australia’s seven million renters were undecided about who they would vote for in the election and 80 per cent of them felt ignored by the major parties.

* View CAAN’s intro which refutes this from rent.com.au

A targeted campaign based on rent hikes and less housing options could be enough to sway some of those voters.

“We have all major parties talking about their potential changes,” rent.com.au CEO Greg Bader said.

“Yet they do not seem to be able to articulate clearly how this will affect renters: Will there be more choice? Will prices go up or down? These are the things that the renting and wider population would like to know.”

 

SOURCE:  https://thenewdaily.com.au/money/property/2019/04/17/negative-gearing-campaign-reia/?utm_source=Adestra&utm_medium=email&utm_campaign=Morning%20News%20-%2020190418

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MORE AFR NEGATIVE GEARING FAKE NEWS

More AFR negative gearing fake news

By Leith van Onselen

 

The AFR’s shameless lobbying against Labor’s negative gearing policy hit another low over the weekend with another attack on the estimated savings from Labor’s policy:

More evidence has emerged that Labor has seriously underestimated the extent of investment in newly-built housing and therefore overstated the revenue that might be raised by its plan to end negative gearing on established property.

Tax depreciation company MCG Quantity Surveyors said nearly half of its 4000 clients use negative gearing for new property…

His data of 4001 investors shows 25.12 per cent of investors buy brand new buildings that haven’t been lived in and another 17.67 per cent buy homes that have been built brand new for them – leaving roughly 57 per cent for existing housing.

Did The AFR ever bother to think that MCG Quantity Surveyors’ clientele and data is heavily biased towards new builds because this is where the overwhelming majority of depreciation allowances lie?

An investor buying an old established house cannot claim much if any depreciation deductions, therefore they are unlikely to engage a quantity surveyor. This is especially the case after the 2017 Budget limited plant and equipment deductions to actual outlays, which are most prevalent with off-the-plan homes:

Most importantly, the Budget savings weren’t estimated by Labor, but by the Independent Parliamentary Budget Office (PBO). The PBO based their assessment on their own analysis of the data, not Chris Bowen’s figures, and reportedly estimated that 22% of negative gearing went into new builds.

Moreover, even if we heroically assume that MCG Quantity Surveyors’ data is reflective of the overall market, and the share of investor mortgages into newly constructed dwelling is much greater than the PBO’s estimate, then this directly undermines the property lobby’s and Coalition’s claim that Labor’s policy will be catastrophic for the housing market, since negative gearing will be maintained for these new dwellings. In turn, the impact on the housing market would be significantly reduced.

unconventionaleconomist@hotmail.com

 

 

SOURCE:  https://www.macrobusiness.com.au/2019/04/more-afr-negative-gearing-fake-news/

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There’s a boom in negative gearing stupidity

By Leith van Onselen

 

One of my favourite things to do on a Sunday morning is to search the term “negative gearing” and then read the various special pleadings and scare campaigns.

This weekend delivered the goods in spades, with a veritable smorgasbord of stupidity served up.

First, we got Realestate.com.au claiming that first home buyers (FHB) are urging Labor to reconsider its negative gearing plan based on the testimony of one victimised FHB couple:

Sisters Brooke and Jade Miller are fresh off buying their first home in the Penrith area and claim cuts to negative gearing would be “devastating”.

The pair are planning to put their home up for rent next year to help take the sting off their repayments for a while, but the removal of the concession on January 1 as proposed by Labor would make a significant dent in their finances.

“We work hard. We were hoping negative gearing would give us a leg up into the market,” older sister Brooke said.

The 25-year-old added that buying their home was a challenge. She was only able to afford the purchase by working two jobs, one in a High School office and the other at ANZ stadium on the weekends.

The sisters also had to get help from their parents who went guarantor on the loan for their $510,000 house in Cambridge Park.

They were planning to live with their parents when they temporarily rented out the home, but leasing out the property next year will mean they will miss the deadline for Labor’s proposed grandfathering of exsiting negative gearing arrangements and will not get the benefit…

The Miller sisters said they didn’t agree with the assumption that those claiming negative gearing concessions didn’t need the help. “We had to put a lot of effort into saving because you have to build a really big deposit to be able to buy property these days. It took us quite a few years.

The sisters were planning to live in their property for the first six months to qualify for the NSW government first homebuyer concessions. The concessions offer an exemption on stamp duty payments for first home buyers properties prices under $650,000.

“You’ve got to do whatever it takes to make it work,” Brooke said.

Earth to Brainiacs: if you want to obtain negative gearing benefits under Labor, there’s a simple solution: rent your property out before the 1 January 2020 implementation date.

Further, did you ever stop to think that one of the reasons why you spent so much on your property in the first place was because you had to compete against investors? If this investor demand didn’t exist, you wouldn’t have had to struggle so hard. So why should future FHBs also be forced to struggle?

Next we had News.com.au interviewing two industry mouthpieces nonsensically warning of impending doom under Labor’s policy:

[Labor’s policy] is expected to weaken investor demand, pushing down prices but pushing up rents.

“Unless investors buy property, rents will end up rising because it’s a simple supply and demand problem,” [BMT Tax Depreciation’s Bradley Beer] said.

Real estate author, academic and investor Peter Koulizos said that in 1985, when Labor previously “fiddled with negative gearing and introduced capital gains tax”, property prices dropped by 10 per cent and construction fell 27 per cent.

Mr Koulizos forecast property to fall again if Labor was elected, but not by as much because most cities were already in downturns.

“I understand they’re trying to make property more affordable, but making it affordable is code for property prices coming down,” he said.

Mr Koulizos suggested investors buy established properties before January 1. “Even though buying a new property has greater depreciation benefits, its capital growth isn’t as good,” he said.

Bradley Beer obviously has never bothered to look at the housing finance data, which shows that 90% of investors buy established dwellings:

Therefore, if investors stop buying these dwellings under Labor’s policy, there will be minimal (if any) impact on rents as these homes will be purchased by FHBs, resulting in a corresponding decrease in rental demand.

Peter Koulizos’ claim that the temporary abolition of negative gearing in 1985 (and the implementation of CGT) caused dwelling construction to crash is similarly asinine. The fall in construction can be explained by the sharp rise in mortgage rates, from 11.5% in March 1985 to 15.5% in September 1986 to June 1987 (circled below):

Indeed, the decline in construction, which bottomed out in March 1987, was one of six corrections over the last three decades that all closely followed, or were simultaneous with, rises in mortgage rates.

Koulizos also failed to mention that the stock-market bubble would have attracted funds away from property, or that the ensuing “crash of ’87”, would have caused a flight back to property. Pretty basic stuff.

Also, why would Koulizos recommend “investors buy established properties before January 1” if Labor’s policy will cause prices to fall? How is that rational?

Finally, we got the national personal finance writer for NewsCorp, Sophie Elsworth, penning a ridiculously self-serving article painting property investors as innocent victims of Labor’s policy:

I am a property investor and I am certainly not rich…

In most instances property investors are honest, hardworking Australians who are trying to plan for their future and have a good investment vehicle working for them.

But it’s bugging me how property investment has become the new superannuation.

The fat cats in Canberra are putting their grubby mitts all over property investors when they would be better to leave them alone…

I purchased an existing property, a two-bedroom unit on Brisbane’s northside back in 2012… What concerns me is that if I go to sell it, why would a property investor buy my property or any existing property over a new build under the new proposed rules?.

If I was an investor I would want to take advantage of the negative gearing tax deductions that will only come with new properties if Labor’s new legislation gets in from January 1.

Labor is also going to halve the capital gains tax discount from 50 to 25 per cent for any investment gains made from purchases after January 1…

Renters too will be hit as more investors pull out of the market. Why not just leave the whole thing alone?

Nice contractionary analysis there, Sophie.

On the one hand you say “If I was an investor I would want to take advantage of the negative gearing tax deductions that will only come with new properties”, which necessarily would result in more housing supply and lower rents. But then on the other you say that Labor’s CGT changes would cause investors to “pull out of the market” hurting renters. So what is it?

The property market may no longer be booming, but bullshit analysis of Labor’s policy most certainly is.

unconventionaleconomist@hotmail.com

APRIL 2019: COALITION USES ESSENTIAL WORKERS AS BUDGET HUMAN SHIELD

Coalition uses essential workers as Budget human shield

By Leith van Onselen

 

For years, the Coalition has used nurses, teachers and police as a human shield against Labor’s negative gearing reforms, arguing that they would be hurt most if negative gearing concessions were removed. For example, here’s what Treasurer Josh Frydenberg said in October:

About two-thirds of those with negative geared properties have a taxable income of less than $80,000… No doubt many of those are among the 58,000 teachers, 41,000 nurses and 19,000 police and emergency service workers who negatively gear property…

Never mind the fact that the occupations most likely to negatively gear are surgeons and anaesthetists, nor that according to the ABS, the top 40% of households accounted for 61.8% of all housing investors in 2015-16, comprising 38.4% in the highest income quintile and 23.4% in the fourth income quintile:

Now the Morrison Government is playing the same card in relation to Labor’s tax cut proposals, claiming that these same essential workers would be hurt most. From The AFR:

Opposition Leader Bill Shorten is under pressure to give better tax relief to ease cost-of-living pressures for workers on average incomes – such as senior teachers, some nurses, police and labourers –- after the Coalition government ramped up attacks on Labor’s higher taxes.

An average full-time worker receiving $87,000 today would earn about $100,000 in 2024-25, assuming 3 per cent wage inflation…

Treasurer Josh Frydenberg accused Labor of neglecting the aspirational class whom former Labor prime minister Paul Keating once championed.

What rot. The primary beneficiaries of the Coalition’s future planned tax cuts aren’t ordinary ‘mum and dad’ essential workers, but very high income earners. That is, by removing the 37% marginal rate, dropping the 32.5% to 30%, and lifting the top income threshhold for the 45% to $200,000 from $180,000, the progressiveness of Australia’s income tax system will be badly undermined with the benefits flowing primarily to the top end.

Indeed, according to The Australia Institute“62% of tax cuts benefits go to highest income earners”, whereas “just 7% of the benefit goes to the 30% of Australians on the lowest wages”:

This tax cut is a fundamental change to our income tax system. It is not simply an income tax cut; it will move Australia to a flat tax for over 80% of workers…

The jewel in the tax system is the progressive nature of our income tax. It means those who can afford to pay more do so. Moving from a progressive system to a flat tax system means a big tax cut for those at the top and very little for those at the bottom. In fact if this tax cut is implemented in full, then those on low incomes will be paying a bigger share of total income tax and those at the top will be paying a smaller share…

Someone earning $40,000 per year will get a tax cut of $455 per year while someone earning $200,000 will get a tax cut of $7,225 per year. Some might say that of course someone on $200,000 will get a bigger cut; after all they pay more tax. But while someone on $200,000 earns five times more than someone on $40,000, their tax cut will be 16 times larger.

Labor is justified in its pledge to unwind the Coalition’s slated tax cuts.

unconventionaleconomist@hotmail.com

 

 

SOURCE:  https://www.macrobusiness.com.au/2019/04/coalition-uses-essential-workers-budget-deflection-shield/

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