Property Boom over

[SolidTiger]

Article in the Herald Sun Today:

http://www.news.com.au/heraldsun/story/0,21985,23266297-661,00.html

Here are my general predictions for the market (though I'd admit I'm no expert.):

-I think until inflation is in check and interest rates start to fall again we won't be seeing another property boom. Once interest rates begin to fall all the first home buyers and the investors we come back to the market. Particularly with the pent up demand as a result of the first home buyers saving while the interest rates were rising.

-Property prices are going to staganate or even fall slightly for the next few years because the interest rates will put first home buyers off from buying and deter investors. The only people who will tend to sell and buy are chose who already own a home and moving into a new one. Investors and those who have large loans will not sell because they would not want to go into negative equity.

-Rents will increase at a steady rate. As mentioned in the above investors will be put off buying in the mean time which means less rental properties on the market. Also the first home buyers will be put off due to interest rate increases which means that they will be renting for longer. The rents will increase in order to cover the costs due to interest rate rises.

 

[Deej]

Here's my thoughts, I think the govt should make it a squillion times harder for investment properties to be viable for people renting them out. They should make a special tax ruling for people buying houses or units and renting them out, they can't be negatively geared and any capital gains should be taxed at 95%. Make it near on impossible for people to make money off them. I think property is a cheat's way of making money.

 

[SolidTiger]

Here's my thoughts, I think the govt should make it a squillion times harder for investment properties to be viable for people renting them out. They should make a special tax ruling for people buying houses or units and renting them out, they can't be negatively geared and any capital gains should be taxed at 95%. Make it near on impossible for people to make money off them. I think property is a cheat's way of making money.

Believe it or not, there are a lot of people who prefer to rent rather than to buy a house. The main reason is because the rent is cheaper than paying the monthly mortgage repayments. Some people also simply can't afford a property and renting is the only way they can afford a roof over their heads.
If the government does what you suggest then there will effectively be no rental properties on the market and these people will be forced to live a lifestyle they don't want to and pay more for a roof over their heads (if they can't afford a house then they would be without a roof over their heads at all).
The perception that landlords are extremely wealthy fat cats is wrong. Many landlords are retired people making an investment to fund thier retirement lives or Mum and Pop investors in general.

 

[Traces of Nuts]

Here's my thoughts, I think the govt should make it a squillion times harder for investment properties to be viable for people renting them out. They should make a special tax ruling for people buying houses or units and renting them out, they can't be negatively geared and any capital gains should be taxed at 95%. Make it near on impossible for people to make money off them. I think property is a cheat's way of making money.

Urine extraction......

 

[Guido]

Was at an mortgagee auction for a CBD apartment yesterday - estimated to go for $620K, with a ridiculous $8Kp.a. in body corporate alone.

Barely room to breathe given the number of people in attendance, sold for $756K.

Wait for a bit more evidence of a trend rather than basing predictions on auction clearing rates for one arbritrary weekend.

 

[Guido]

Here's my thoughts, I think the govt should make it a squillion times harder for investment properties to be viable for people renting them out.

they can't be negatively geared and any capital gains should be taxed at 95%. Make it near on impossible for people to make money off them. I think property is a cheat's way of making money.

You really think stifling investment in property is going to improve things?

If there was no advantage to investing across the last 20 years, thousands of residential developments would never have come to fruition, making for a true housing shortage crisis. In that kind of market, the sheer demand for any roof over a head would make even renting only for the wealthy. No need to manipulate an otherwise efficient market.

As for it being a "cheat's" way of making money, I don't understand how it's any worse than owning a business or investing in shares.

They should make a special tax ruling for people buying houses or units and renting them out,

It's called land tax. Works exactly as you stated above. Just not to the ridiculous levels you're suggesting.

But in Victoria if anyone gets to owning, say, 10 properties worth $500K each, they're in for a ~$100K p.a. land tax bill (on top of their normal tax). Even for the very well off, I reckon being forced to pay $10K p.a. per property just for the sake of owning it is a fair whack, don't you?

 

[Rob]

Here's my thoughts, I think the govt should make it a squillion times harder for investment properties to be viable for people renting them out. They should make a special tax ruling for people buying houses or units and renting them out, they can't be negatively geared and any capital gains should be taxed at 95%. Make it near on impossible for people to make money off them. I think property is a cheat's way of making money.

The problem with that is it would result in rents going up, probably substantially. When tend to hit the people in society that can least afford it.

However, perhaps there's the potential for progressive land tax rates depending on the number of properties you own - i.e the more you own the more land tax rises. It could discourage the people that horde properties from the market - i.e contribute to demand but not supply.

But i'm always wary of any policy that f**ks around with the market. When you do that, you generally end up being counter productive.

 

[FIGJAM]

Was at an mortgagee auction for a CBD apartment yesterday - estimated to go for $620K, with a ridiculous $8Kp.a. in body corporate alone.

Barely room to breathe given the number of people in attendance, sold for $756K.

Wait for a bit more evidence of a trend rather than basing predictions on auction clearing rates for one arbritrary weekend.

Can I ask which building Guido??

 

[bunsen burner]

Here's my thoughts, I think the govt should make it a squillion times harder for investment properties to be viable for people renting them out. They should make a special tax ruling for people buying houses or units and renting them out, they can't be negatively geared and any capital gains should be taxed at 95%. Make it near on impossible for people to make money off them. I think property is a cheat's way of making money.

So who will buy property? Wh will build property? Where will the increasing population live? And given the small supply, how will people afford rents?

Didn't think that one through, did you. And it's not as if you haven't had this very thing explained to you before. Maybe you're slow?

 

[bunsen burner]

Urine extraction......

Unfortunately he's come out with this stuff on previous threads.

 

[Damp Squarie]

Heres a tip.
Its not over in The Iron Triangle (Port Pirie, Port Augusta, Whyalla)

With the expected Roxby Downs Expansion, prices have gone through the roof here in Port Pirie.

The airstrip in being lengthened to cope with the flyin flyout population.
Check out 2007 house prices over here

Its not over. its just beginning.

 

[bunsen burner]

Article in the Herald Sun Today:

http://www.news.com.au/heraldsun/story/0,21985,23266297-661,00.html

Here are my general predictions for the market (though I'd admit I'm no expert.):

-I think until inflation is in check and interest rates start to fall again we won't be seeing another property boom. Once interest rates begin to fall all the first home buyers and the investors we come back to the market. Particularly with the pent up demand as a result of the first home buyers saving while the interest rates were rising.

-Property prices are going to staganate or even fall slightly for the next few years because the interest rates will put first home buyers off from buying and deter investors. The only people who will tend to sell and buy are chose who already own a home and moving into a new one. Investors and those who have large loans will not sell because they would not want to go into negative equity.

-Rents will increase at a steady rate. As mentioned in the above investors will be put off buying in the mean time which means less rental properties on the market. Also the first home buyers will be put off due to interest rate increases which means that they will be renting for longer. The rents will increase in order to cover the costs due to interest rate rises.

I think you will find:

Blue chip property close to the CBD will continue to rise because:

a) It's scarce and population is rising
b) Lots of young professionals want life style close to cafes and restaurants in trendy inner suburbs. Richmond and South Melbourne will continue to rise as hot spots for young 20-30 year old professionals.
c) Rents are rising still. This will prompt this demographic to buy
d) It's likely that interest rates will peak sometime this year and either steady or maybe decline.

I'm tipping inner suburbs will be largely unaffected.

 

[bunsen burner]

Heres a tip.
Its not over in The Iron Triangle (Port Pirie, Port Augusta, Whyalla)

With the expected Roxby Downs Expansion, prices have gone through the roof here in Port Pirie.

The airstrip in being lengthened to cope with the flyin flyout population.
Check out 2007 house prices over here

Its not over. its just beginning.

Whyalla has been going mental for a while now. There maybe be growth left but I reckon its risky. 6-12 months ago would great. Getting too risky of being close to the peak for me.

I'm still liking Adelaide (the triangle between City, West Lakes, and Glenelg). It's had plenty of growth last year but it's prime land in a major capital that is still well behind Perth and Brisbane price wise). These areas will show huge growth in the next 5 years.

 

[HighettBomber]

I think you will find:

Blue chip property close to the CBD will continue to rise because:

a) It's scarce and population is rising
b) Lots of young professionals want life style close to cafes and restaurants in trendy inner suburbs. Richmond and South Melbourne will continue to rise as hot spots for young 20-30 year old professionals.
c) Rents are rising still. This will prompt this demographic to buy
d) It's likely that interest rates will peak sometime this year and either steady or maybe decline.

I'm tipping inner suburbs will be largely unaffected.

I agree completely. What most people don't seem to realise is that less than 50% of houses in Australia are mortgaged, and the better established the suburb the lower the percentage that is directly affected by interest rates. Add to this that the economy is strong and wages remain high, there is no reason to think there will be a reduction in demand in affluent suburbs.

The mortgage belts are another matter. High petrol prices, poor local infrastructure and large numbers of highly geared households with lower incomes. These areas may well suffer in the short term.

 

[serpico66]

Here are my general predictions for the market (though I'd admit I'm no expert.):

I think this says it all

 

[Tim the Toolman]

Here's my thoughts, I think the govt should make it a squillion times harder for investment properties to be viable for people renting them out. They should make a special tax ruling for people buying houses or units and renting them out, they can't be negatively geared and any capital gains should be taxed at 95%. Make it near on impossible for people to make money off them. I think property is a cheat's way of making money.

You may want to research why negative gearing was brought out in the first place (during the depression) and also research what happened when Labour ditched it in the 80's and until then, never stray into this thread again!

 

[Scratcher Gillespie]

You may want to research why negative gearing was brought out in the first place (during the depression) and also research what happened when Labour ditched it in the 80's and until then, never stray into this thread again!

Not arguing for an abolition of geared share properties (disallowing deductions over rental earned would be my preferred way), but you should probably recheck your understanding of history. The common misconception that rental prices rocketed after negative gearing was abolished is a furphy. Some parts of Sydney and Perth rocketed (afterwards found to be unrelated to the negative gearing abolition) while most of the rest of Australia had slightly decreasing rents.

 

[Magnum]

I think you will find:

Blue chip property close to the CBD will continue to rise because:

a) It's scarce and population is rising
b) Lots of young professionals want life style close to cafes and restaurants in trendy inner suburbs. Richmond and South Melbourne will continue to rise as hot spots for young 20-30 year old professionals.
c) Rents are rising still. This will prompt this demographic to buy
d) It's likely that interest rates will peak sometime this year and either steady or maybe decline.

I'm tipping inner suburbs will be largely unaffected.

Agreed. I think the outer suburbs will be affected more with a slowdown or drop but I also think the crazy bidding frenzies and the cases of people paying 50% more than expectations will substantially decrease across the board. We'll still see growth in the quality suburbs though.

Still, I'm hoping to sell and upgrade sometime soon so any slowdown that helps shrink the gap will help so I'm hoping for a slowdown, even at the expense of my house dropping in price.

 

[Tim the Toolman]

Not arguing for an abolition of geared share properties (disallowing deductions over rental earned would be my preferred way), but you should probably recheck your understanding of history. The common misconception that rental prices rocketed after negative gearing was abolished is a furphy. Some parts of Sydney and Perth rocketed (afterwards found to be unrelated to the negative gearing abolition) while most of the rest of Australia had slightly decreasing rents.

Not wanting to get too much off the net so here's Wikipedia's take:

[edit] Political Matters
In July 1985 the Hawke/Keating government quarantined negative gearing interest expenses (on new transactions), so interest could only be claimed against rental income, not other income. (Any excess could be carried forward for use in later years.)

The result was a considerable dampening of investor enthusiasm. The new capital gains tax shortly afterwards (September 1985) may have contributed too. With fewer landlords, rents rose. But house prices rose or continued to rise too, apparently because less new construction for investors kept the market tight (the factor of fewer investors competing with owner-occupiers to buy was apparently overwhelmed).

As of 1 July 1987 the present tax treatment was reinstated. The immediate effect however was only further house price rises as investors returned to the market before new construction could catch up.

The political result of this exercise was to put the subject of negative gearing practically off-limits to both major parties ever since. Neither wishes to be seen as contemplating any change to the system, for fear of what it may do to the rental market and/or the property market or building industry.

My family was involved with Government housing in the 80's (Building homes) and I can assure you, the demand for government housing in the late 80's made my family a lot of money and set up our family business for life. As no government is doing much towards public housing today what do you reckon will happen to low-income families and their shelter if negative gearing were to be abolished in the 21st century?

 

[Scratcher Gillespie]

Not wanting to get too much off the net so here's Wikipedia's take:

[edit] Political Matters
In July 1985 the Hawke/Keating government quarantined negative gearing interest expenses (on new transactions), so interest could only be claimed against rental income, not other income. (Any excess could be carried forward for use in later years.)

The result was a considerable dampening of investor enthusiasm. The new capital gains tax shortly afterwards (September 1985) may have contributed too. With fewer landlords, rents rose. But house prices rose or continued to rise too, apparently because less new construction for investors kept the market tight (the factor of fewer investors competing with owner-occupiers to buy was apparently overwhelmed).

As of 1 July 1987 the present tax treatment was reinstated. The immediate effect however was only further house price rises as investors returned to the market before new construction could catch up.

The political result of this exercise was to put the subject of negative gearing practically off-limits to both major parties ever since. Neither wishes to be seen as contemplating any change to the system, for fear of what it may do to the rental market and/or the property market or building industry.

My family was involved with Government housing in the 80's (Building homes) and I can assure you, the demand for government housing in the late 80's made my family a lot of money and set up our family business for life. As no government is doing much towards public housing today what do you reckon will happen to low-income families and their shelter if negative gearing were to be abolished in the 21st century?

Again, from my research an unfounded myth - though I was 2 years old in 1985 so don't have any anecdotal evidence.

It is useful to examine what happened when negative gearing was abolished for the 2 years between 1985 and 1987. During this period, there were large rental increases in parts of Sydney. However, in the rest of Australia there was no real (after inflation) increase in rents. In many cities there were real decreases in rents.[51] Is what happened in Sydney due to the abolition of negative gearing, or some other factor? It is not possible to answer this question with any certainty.

However, given that there is strong (albeit theoretical) evidence that in the long term negative gearing does lead to rents being lower than they otherwise would be, does this justify negative gearing being maintained? The unequivocal answer is no. If the government wants to encourage an increase in housing construction to keep rents down then the best way to do this is through a government grant given to purchasers of newly constructed housing. As discussed earlier, this will increase the supply of housing while not carrying with it the huge disadvantages of negative gearing.

http://www.austlii.edu.au/au/journals/DeakinLRev/2002/17.html

 

[Traces of Nuts]

Unfortunately he's come out with this stuff on previous threads.

I was (an still am) convinced he must surely be taking the piss.

Anyway, he tried to get rid off the ball.... play on....

 

[HighettBomber]

Here's my thoughts, I think the govt should make it a squillion times harder for investment properties to be viable for people renting them out. They should make a special tax ruling for people buying houses or units and renting them out, they can't be negatively geared and any capital gains should be taxed at 95%. Make it near on impossible for people to make money off them. I think property is a cheat's way of making money.

Short of bringing in Communism, there is no way you will make housing affordable to everyone. Taking away -ve gearing will lead to less investors in the market, which will lead to less building activity. This won't be good because there are already shortfalls in supply in many parts of Australia. If you started taxing capital gains at 95% there would be no new development of higher density housing (which is generally lower cost) and very little medium density, how could this be good?

What the Government should do is give first home owners more assistance. More assistance for stay at home parents would also be helpful as a lot of the households who struggle are the ones with kids and only one wage earner.

 

[Ripper]

Well I have just discovered an impediment to rentals in Qld.

We are in the procees of buying a property to go and live in in about a year and rent it out until then.

The difference in stamp duty for buying to live in and buying to rent out is about $8k.

So we are just going to lock it up and not rent it as all of the rent will in effect just go to the State govt.

 

[Traces of Nuts]

Am doing the exact same thing, but in NSW, where the duty is about $4k in my case for "investor".

I am getting around this by telling the bank the purpose of buying the property is to live in (which it ultimately is); and will make sure rates bills and the like are sent to the address (and get the tenants to forward to me). Possilby sneaky but fk em.

I also want the best of both worlds of course, as I'm going to rent out / negative gear it, which is through the fed tax sytem and has no connection to the states (in theory!).

you may want to look at the tax implications, as you may save >$8k in income tax if you rent it out rather than lock it up. Will depend on your own circumstances.

 

[Tim the Toolman]

However, given that there is strong (albeit theoretical) evidence that in the long term negative gearing does lead to rents being lower than they otherwise would be, does this justify negative gearing being maintained? The unequivocal answer is no. If the government wants to encourage an increase in housing construction to keep rents down then the best way to do this is through a government grant given to purchasers of newly constructed housing. As discussed earlier, this will increase the supply of housing while not carrying with it the huge disadvantages of negative gearing.http://www.austlii.edu.au/au/journals/DeakinLRev/2002/17.html

Unfortunately with the grant that you are referring to you will find that in most instances this is being devoured by developer greed and hence just raises prices of product otherwise people are using it for purchasing materialistic items rather than giving themselves a chance of a good healthy start in life i.e. the baby bonus