Society/Culture Australian Property Prices to Crash?

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Taylor

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There is nothing wrong with your stance, however my point is Investors should not be given financial benefits (via tax breaks etc) to buy additional properties when someone buying their first home does not get these benefits.

Why should someone who already has wealth, be given benefits to create more wealth over someone who doesn't?.

It makes ZERO sense.
I agree with you but I'll take a devil's advocacy position for the sake of debate.

It makes sense if we are thinking of utilizing surplus means above the base cost of living into something that benefits others in the wider community, reducing their cost or risk or access because they either can't afford or otherwise can't secure the lending to get in.

The current cost of buying a house is roughly $100,000 cash and then $600 a week in mortgage payments. That's quite a threshold to jump, but if someone else takes their $100,000 and puts it into the house for you and you paid them $600 a week in rent then they've subsidised your access to the property for the cost of them receiving the future gains.

They take the risk, all the risk. The renter can walk out on short notice relative to the time property is held with nothing hanging over them. Their own employment security isn't as vital because they aren't servicing a debt.

Plenty of investment advisors promote the idea that renting and investing the difference can leave you better off, but we know the reason that doesn't work for so many and why their own home is usually the primary and only serious investment people make in their lives is because it's effectively forced savings.

But allow me to raise an alternative. Owning an investment property doesn't make you money. Think of how much you pay on a mortgage over thirty years, do we really expect property to triple in price from here?

The entire concept is money making from banks and other lenders that secure your payment of multiples of your house price over decades, the employers keep you working because you have to.
 

HirdyLannister

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We're looking at signing paperwork to build a 3rd property, 250sqm block and will put a low maintenance house on it. Probably be all in at 500k or less
Rent it out claim depreciation, still early 30s and earn less than six figures.


Done rough calcs on my super too, very conservative I'll have 6 million if I work for another 30 years but I don't trust the government,they'll see everyone having millions and they'll fu** us somehow with super in 20-30years.
 

Madas

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I agree with you but I'll take a devil's advocacy position for the sake of debate.

It makes sense if we are thinking of utilizing surplus means above the base cost of living into something that benefits others in the wider community, reducing their cost or risk or access because they either can't afford or otherwise can't secure the lending to get in.

The current cost of buying a house is roughly $100,000 cash and then $600 a week in mortgage payments. That's quite a threshold to jump, but if someone else takes their $100,000 and puts it into the house for you and you paid them $600 a week in rent then they've subsidised your access to the property for the cost of them receiving the future gains.

They take the risk, all the risk. The renter can walk out on short notice relative to the time property is held with nothing hanging over them. Their own employment security isn't as vital because they aren't servicing a debt.

Plenty of investment advisors promote the idea that renting and investing the difference can leave you better off, but we know the reason that doesn't work for so many and why their own home is usually the primary and only serious investment people make in their lives is because it's effectively forced savings.

But allow me to raise an alternative. Owning an investment property doesn't make you money. Think of how much you pay on a mortgage over thirty years, do we really expect property to triple in price from here?

The entire concept is money making from banks and other lenders that secure your payment of multiples of your house price over decades, the employers keep you working because you have to.
Spot on ๐Ÿ‘
There is a need for rental accommodation, I canโ€™t say for sure what % of the population needs it but itโ€™s there.

Property investment is a huge capital outlay and a massive yoke around oneโ€™s neck so a perfect mechanism to keep people working , paying taxes and banks making huge profits.
I look at it as forced saving and the tax benefits somewhat negate the massive amount you are paying back in interest over the life of the loan.
Definitely smarter ways to make money but some of us donโ€™t have the capacity or understanding to undertake them .

I guess incrementally, share trading can be done in smaller portions with quicker returns if done wisely.
 

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Frank Grimes

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I have an investment property myself. Despite that I am actually in favor of the removal of negative gearing (admittedly easy for me to say seeing I'm positively geared). When I invested I personally wasn't even thinking of negative gearing. I was just thinking of holding the property long term for a continuous income.

I don't think it's removal will have a major impact on property prices as others may think (Gratten Institute research suggested it would only drop prices by 2% based on Labors policies last election). However I'm against it for two reasons:
1/ the idea of someone deliberately making a loss to reduce their taxable income from their working wage doesn't sit right with me.
2/ I think it is just waste of tax payers money in general. The money gained by it's removal would be better used on something else.
 

HirdsTheWord

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I agree with you but I'll take a devil's advocacy position for the sake of debate.

It makes sense if we are thinking of utilizing surplus means above the base cost of living into something that benefits others in the wider community, reducing their cost or risk or access because they either can't afford or otherwise can't secure the lending to get in.

The current cost of buying a house is roughly $100,000 cash and then $600 a week in mortgage payments. That's quite a threshold to jump, but if someone else takes their $100,000 and puts it into the house for you and you paid them $600 a week in rent then they've subsidised your access to the property for the cost of them receiving the future gains.

They take the risk, all the risk. The renter can walk out on short notice relative to the time property is held with nothing hanging over them. Their own employment security isn't as vital because they aren't servicing a debt.

Plenty of investment advisors promote the idea that renting and investing the difference can leave you better off, but we know the reason that doesn't work for so many and why their own home is usually the primary and only serious investment people make in their lives is because it's effectively forced savings.

But allow me to raise an alternative. Owning an investment property doesn't make you money. Think of how much you pay on a mortgage over thirty years, do we really expect property to triple in price from here?

The entire concept is money making from banks and other lenders that secure your payment of multiples of your house price over decades, the employers keep you working because you have to.
Firstly, i'm not sure what state you live in but in NSW its almost Triple that amount just for the deposit.

Secondly Owning an investment Property DOES make you money, in the long term. I have no issues with this if you can afford it. But I disagree anyone should be getting tax benefits to do so, unless First Home Buyers also get tax benefits on their properties.

Thirdly, have you been under a rock? from 2020-2021 alone properties on avg jumped 20%-30%. In some suburbs it has been as much as 47%.\

Fourthly, the reason people rent is because they cant afford to buy. if prices were lower likely alot of renters would become home owners.

in 1990 (30 years ago) the avg House price in Sydney was around $184,000....Today it is $1,500,000. That's 8 x Growth rate over 30 years.

You reckon in 1980 they expected properties to rise eightfold in value?

The current trajectory of housing in Sydney 100% is on pace to triple within another 30 years, if not more. This is why something needs to be done right now. otherwise we are completely ******* over future generations.

Conclusion? There is ZERO need for housing investment schemes in this country any longer. They need to be removed now in order to ensure future generations can buy.
 

Jafa

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We're looking at signing paperwork to build a 3rd property, 250sqm block and will put a low maintenance house on it. Probably be all in at 500k or less
Rent it out claim depreciation, still early 30s and earn less than six figures.
I have two commercial properties and one rental - all rented. I find the commercial properties to be a much better option. The rent is higher, customer pays all the rates and insurance. The rental just covers expenses and the small interest amount.

One of the commercial rentals is in my super fund - the other we are moving across to a unit trust in the super fund. In 8 years I retire and the rent will be tax free. If you are worried about the government and your super - that might be a strategy to retain value.

Edit - I also have a some land in my super fund that I am developing with the money in my super fund. Its cheaper because the money is taxed at the lower rate. I cant live in it (until I retire) but I could rent it out if I wanted to. For us its our retirement location but for someone younger it could be an investment strategy. Doesn't have to be residential - if you had enough coin in there it could be a commercial venture.
 
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HirdsTheWord

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I have an investment property myself. Despite that I am actually in favor of the removal of negative gearing (admittedly easy for me to say seeing I'm positively geared). When I invested I personally wasn't even thinking of negative gearing. I was just thinking of holding the property long term for a continuous income.

I don't think it's removal will have a major impact on property prices as others may think (Gratten Institute research suggested it would only drop prices by 2% based on Labors policies last election). However I'm against it for two reasons:
1/ the idea of someone deliberately making a loss to reduce their taxable income from their working wage doesn't sit right with me.
2/ I think it is just waste of tax payers money in general. The money gained by it's removal would be better used on something else.
That's because labors policies were watered down.

Negative Gearing should be removed for EVERYONE. Labor only suggested it be removed from future policy, IE all those who had existing negative gearing could keep it. Get rid of it entirely and you are looking at a much larger drop.
 

Gigantic

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I don't think it's removal will have a major impact on property prices as others may think (Gratten Institute research suggested it would only drop prices by 2% based on Labors policies last election). However I'm against it for two reasons:
1/ the idea of someone deliberately making a loss to reduce their taxable income from their working wage doesn't sit right with me.
2/ I think it is just waste of tax payers money in general. The money gained by it's removal would be better used on something else.
100% agree with you here. We're effectively incentivising loss making with negative gearing.

There's a terrible culture of tax minimisation where people ask how they can reduce how much tax they pay, rather than how they can increase their after-tax income. You may end up at the same spot, but the attitude is different.
 

Madas

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I have an investment property myself. Despite that I am actually in favor of the removal of negative gearing (admittedly easy for me to say seeing I'm positively geared). When I invested I personally wasn't even thinking of negative gearing. I was just thinking of holding the property long term for a continuous income.

I don't think it's removal will have a major impact on property prices as others may think (Gratten Institute research suggested it would only drop prices by 2% based on Labors policies last election). However I'm against it for two reasons:
1/ the idea of someone deliberately making a loss to reduce their taxable income from their working wage doesn't sit right with me.
2/ I think it is just waste of tax payers money in general. The money gained by it's removal would be better used on something else.
I mentioned this earlier in The thread but itโ€™s just another way of circulating money into the economy.
Thereโ€™s nothing intrinsically wrong with it in principle.
Itโ€™s an easy target hence people get fixated on it .
If it works as a stimulus to get young people into the market and has them saving for retirement itโ€™s a good thing. Keeping them working once yoked is another way of the government ensuring a steady income of taxes.

For those who didnโ€™t get in the super train early enough and went property instead , they are hoping for a passive income in their retirement.
If thereโ€™s any left after that then their kids and grandkids may get the benefit of an inheritance, but retirement and old age is expensive so not necessarily going to happen.
 

HirdsTheWord

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100% agree with you here. We're effectively incentivising loss making with negative gearing.

There's a terrible culture of tax minimisation where people ask how they can reduce how much tax they pay, rather than how they can increase their after-tax income. You may end up at the same spot, but the attitude is different.
I don't have an issue with minimizing their tax, lets be honest. The government does a pretty shitty job of spending it. however when tax breaks cultivates expressed housing growth that's when it becomes an issue.
 

Frank Grimes

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That's because labors policies were watered down.

Negative Gearing should be removed for EVERYONE. Labor only suggested it be removed from future policy, IE all those who had existing negative gearing could keep it. Get rid of it entirely and you are looking at a much larger drop.
I don't have any research on what it would have been if it applied to everyone, but I still don't think it would have had a major impact on house price wise.

The biggest impact of removing negative gearing would be on those who purched the investment property before it's removal. The investors who purchased their investment property 5, 10, 20 years previous would have less and less impact on them over time because the property would be less negatively geared or even positively geared as time goes by.
 

Madas

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I don't have any research on what it would have been if it applied to everyone, but I still don't think it would have had a major impact on house price wise.

The biggest impact of removing negative gearing would be on those who purched the investment property before it's removal. The investors who purchased their investment property 5, 10, 20 years previous would have less and less impact on them over time because the property would be less negatively geared or even positively geared as time goes by.
No the impact would be that if you have everyone flooding out of rentals into their own homes then there would be one hell of an almighty market crash where people with investment properties default on their loans .
Not going to happen.
One Tear in this tightly wound fabric holding this thing together would send it crashing down spectacularly.
 

HirdyLannister

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Property investment is a huge capital outlay and a massive yoke around oneโ€™s neck so a perfect mechanism to keep people working , paying taxes and banks making huge profits.
I look at it as forced saving and the tax benefits somewhat negate the massive amount you are paying back in interest over the life of the loan.
I call a mortgage self imposed prison, once you have one you need to work for X amount of years and chained to the one place.

I have two commercial properties and one rental - all rented. I find the commercial properties to be a much better option. The rent is higher, customer pays all the rates and insurance. The rental just covers expenses and the small interest amount.

One of the commercial rentals is in my super fund - the other we are moving across to a unit trust in the super fund. In 8 years I retire and the rent will be tax free. If you are worried about the government and your super - that might be a strategy to retain value.
I should look into commercial properties more, I hear capital growth is less than a free standing home. I wonder if my standard agent can manage commerical too.
 

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Madas

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I do enjoy this discussion as itโ€™s meaningful and generous in its intent.

Not trying to bring and end to it ( in fact the more I read the harder it is to think that there are any answers at all ) , but can I encourage participants to list what they think would be genuine, realistic measures that both governments and individuals could do to assist this problem.
My thoughts:

Individuals
โ€ขDonโ€™t borrow the maximum affordable , live within your means and donโ€™t get in too deep .
โ€ขChange the culture of ownership particularly multiple properties
โ€ขSpread the load of retirement investment between super , shares and property so you donโ€™t have all your eggs in one basket .

Government
โ€ขremove incentives for multiple existing housing ownership but retain for creating new housing
โ€ขImplement policies to try and limit housing bubbles being created
โ€ขSpend in infrastructure to decentralise large urban areas
โ€ขProvide infrastructure, incentives and education to encourage people into regional areas .
 

00Stinger

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We're looking at signing paperwork to build a 3rd property, 250sqm block and will put a low maintenance house on it. Probably be all in at 500k or less
Rent it out claim depreciation, still early 30s and earn less than six figures.


Done rough calcs on my super too, very conservative I'll have 6 million if I work for another 30 years but I don't trust the government,they'll see everyone having millions and they'll fu** us somehow with super in 20-30years.
$6m in super in 30 years but earning less than $100k?

Unless you have the properties as part of a SMSF or you have some ridiculous amount of salary sacrificing going into super that seems impossible
 

HirdyLannister

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$6m in super in 30 years but earning less than $100k?

Unless you have the properties as part of a SMSF or you have some ridiculous amount of salary sacrificing going into super that seems impossible
Been paying super for 16 years already

After 20 years of work it'll be 3 million and if you calc the last 10 years at 10% average without 12% contribution or compounding total each year it jumps 300k a year.
 
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Bombermania

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Emphasis the point even further sorry .
The point is that someone who isnโ€™t even funny has got $8m to spend on a shell .
If he was smart he would wait 2 years when the price of that place comes back down 20% plus .
The Media is a clinky group and Andy Lee falls into that group of comedians that get more than their fair share of TV time.
 

Madas

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So you are saying in 4 years you will have $3m in super?
๐Ÿค”
I hope Hirdy isnโ€™t a math teacher because something isnโ€™t adding up here . ??
On average contributions after 16 years a super balance would only be around $400k
Even adding another 17.5% in personal contributions only brings it to $850k ?
 

HirdsTheWord

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I don't have any research on what it would have been if it applied to everyone, but I still don't think it would have had a major impact on house price wise.

The biggest impact of removing negative gearing would be on those who purched the investment property before it's removal. The investors who purchased their investment property 5, 10, 20 years previous would have less and less impact on them over time because the property would be less negatively geared or even positively geared as time goes by.
If they got rid of negative gearing they wouldn't just remove it.

it would need to be phased out.

if they got rid of it overnight it there would be a housing crash of almighty proportions.
 

HirdyLannister

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I hope Hirdy isnโ€™t a math teacher because something isnโ€™t adding up here . ??
On average contributions after 16 years a super balance would only be around $400k
Even adding another 17.5% in personal contributions only brings it to $850k ?
Do the math, I have 30 years of work till early 60s

230k with a flat 10k a year contribution an average increase of 10% a year.

Some years will be lean an other boom like this year at 20%, so I did an average percentage per a year.
 

Madas

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Do the math, I have 30 years of work till early 60s

230k with a flat 10k a year contribution an average increase of 10% a year.

Some years will be lean an other boom like this year at 20%, so I did an average percentage per a year.
Hmm
The way you worded it sounded like it was $3 mill after 20 years

even still put it in a calculator
After 47 years with 10% employer contributions and 17.5% personal it still only adds up to $1.8m

You are doing the righty though mate thatโ€™s all that matters ๐Ÿ‘
Play the long game
Donโ€™t get too bedazzled by the numbers
 

HirdyLannister

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Hmm
The way you worded it sounded like it was $3 mill after 20 years

even still put it in a calculator
After 47 years with 10% employer contributions and 17.5% personal it still only adds up to $1.8m

You are doing the righty though mate thatโ€™s all that matters
Play the long game
Donโ€™t get too bedazzled by the numbers
Should be more than that, are you not adding super growth each year. Unless I'm totally fluffing this

10k - each year contribution without inflation

1.1 - 10% yearly super fund growth on average

(230k+10k)*1.1 = 264k

(264k+10k)*1.1 = 301.4k

That's the next two years unless I'm ballsing this up
 

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