Tax and legal advice

Removing negative gearing would cause 50pc rental hike

By Staff Reporter

Despite critics of negative gearing claiming that scrapping the scheme would save the government $5 billion in one year and free up housing, a wealth advisory firm has painted a much bleaker picture of what would happen if the mechanism was removed.

Chan & Naylor, a national accounting and wealth advisory group, this week said that removing negative gearing would cause market consolidation and rental increases of 50 per cent plus – which in turn would lead to wider economic uncertainty and social dislocation.

The group said 96 per cent of public housing is currently provided by the private investment market, “the majority of which is owned by ‘mum and dad’ owners who enter the property investment market thanks to incentives such as negative gearing to assist them in the early years”.

“Currently, the Australian rental market is controlled by mum and dad investors, not commercial landlords, and as a result the Australian domestic housing market remains akin to a ‘public co-operative utility’ with rental properties available at varying levels of affordability,” Ken Raiss, managing director of Chan & Naylor said.

Mr Raiss argued that if the tax concession is taken out of the equation then the vast majority of stock which us currently owned by those with one property (73 per cent) and two properties (18 per cent) will inevitably be purchased by commercial landlords who will demand higher rental yields on par with their commercial portfolios.

“Like any other public utility, as soon as they enter private and more entrepreneurial hands then prices will go up, and in the case of public housing this could lead to a rental price hike of as much as 50 per cent over time, resulting in the government having to shoulder the weight of providing a much larger percentage of housing for tenants and social dislocation for those unable to receive government housing,” he said.

Mr Raiss contended that negative gearing has been inaccurately portrayed as a “tax rort” rather than a rightful business-loss mechanism available to residential property investors – 70 per cent of whom earn under $80,000 per annum, according to Chan & Naylor.

He said this perception was largely due to first-time investors who buy speculatively and overpay, therefore using negative gearing for “longer than appropriate”.

Mr Raiss said even small-time investors must treat their purchases as a business and be able to recoup their losses.

“Small business owners wouldn’t invest in a new or start-up business if they couldn’t claim their losses, so there is no reason why property investment should be any different,” he said.

Mr Raiss said there needed to be greater collaboration between government and business in order to create “an atmosphere of enterprise”.

“Increasing productivity will enable more Australians to share in the growing property pie and reduce their dependency on government funding.”

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

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    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1194 (52) {
  ["id"]=>
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  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
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  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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