SHOULD NEGATIVE GEARING BE ABOLISHED?
by Andrew Unterweger | 5th May 2016
With the release of the Australian Budget earlier this week, we have seen much of the negative gearing discussion put to bed…for now. Should negative gearing be abolished? Should it be changed and only allowed on new properties? What would be the impact of such a change.
This debate may be something we would need to consider if the Australian Labor Party were in government, however, that is not the case and I think sufficient common sense prevails in the Turnbull Government so that we can safely put this back into the closet until this time next year.
One of the largest independent research houses in the sector, BIS Shrapnel, have prepared a detailed report in relation to the Labor Party’s proposed negative gearing changes. The Labor Party has outlined that its policy:
• is to halve the 50% capital gains tax discount for investors to 25%
• to limit all new negative gearing to new homes from July 1, 2017
• will raise $32 billion over 10 years and generate an extra 25,000 construction jobs annually because of the demand of new housing.
The BIS Shrapnel Report claims Labor’s negative gearing plans :
• will increase rents by an average of 10 per cent, or $2600 a year,
• depress new home construction by 4% ,
• shrink gross domestic product by $19 billion a year,
• lead to 175,000 fewer jobs over 10 years,
• shrink government tax revenues by $1.65 billion a year, and
• put 70,000 households into rental stress.
Obviously, this is not a positive outcome for the Australian public and must be taken into consideration by the Labor Party. As property investors, it’s important to remain vigilant and plan appropriately to allow you to build your property portfolio over time without taking on unnecessary risk.
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“We haven’t had much action from cutting from 4.75 per cent to 2.5 per cent, so I’m not sure what a 0.25 per cent improvement is going to do,” he told Smart Property Investment's sister publication Real Estate Business. “Certainly the Reserve Bank had to act – it’s really the only tool in the box that we’ve got left.” Pricing gaps across product types and capital cities are widening by Cameron Kusher 30 January 2015 The cost of Sydney housing relative to other capital cities is widening and the cost of buying a house as opposed to a unit is increasing as a record number of units commence construction. The cost of Sydney housing relative to other capital cities is widening and the cost of buying a house as opposed to a unit is increasing as a record number of units commence construction. According to median selling prices over the three months to December 2014 published in the CoreLogic RP Data Home Value Index report, the gap between capital city house and unit prices has never been greater. As at December 2014, the capital city median house price was almost 20% higher than the capital city median house price. In dollar value terms, median house prices are $100,000 greater than unit prices. read more...
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Sydney property bubble to pop when rates rise, says HSBCWednesday, 11 Feb 2015 | James Mitchell 0 · · A fresh round of cheap credit is further inflating Sydney’s investor-driven property prices. In a research note released yesterday, HSBC economists Paul Bloxham and Daniel Smith predict strong national housing price growth to continue at seven to eight per cent, driven by record-low mortgage rates. “We see Sydney prices rising by 9 to 10 per cent in 2015 and expect that, when rates do eventually rise, there is now a high risk that Sydney will see price falls,” the economists said. “Although we do not see a national housing bubble, we believe that growth in Sydney housing prices is currently running at an unsustainable pace and that any further growth is likely to be met by housing price declines in future years, when interest rates do begin to rise,” they said. A signal of the growing risk of overinflation in the Sydney market is the high level of investor demand, according to HSBC.
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Commonwealth Bank posts 8pc half-year profit rise to $4.5b By business reporter Michael Janda Updated 11 Feb 2015, 5:49am
PHOTO: The Commonwealth Bank has posted its half-year results. (ABC News: Nic MacBean, file photo) The Commonwealth Bank has reported an 8 per cent rise in half-year profit to $4.54 billion. The bank's preferred cash measure of net profit, which adjusts for some accounting items, also rose 8 per cent to $4.62 billion. CBA said its improved profit came on the back of a 5 per cent increase in revenue, despite subdued conditions in the lending market. It also said it had lowered its cost to income ratio by 70 basis points to 42.2 per cent, as productivity initiatives continued to contain business expenses.
http://www.abc.net.au/news/2015-02-11/cba-half-year-profit-result/6084926
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Negative Gearing – Should it Be Abolished?
