Tax and legal advice

Abolish negative gearing to address housing affordability: Grattan

By Lucy Dean
housing affordability, negative gearing

The current crisis of housing affordability has been the result of the actions of “neglectful” governments in the last 20 years, and it has been predicted that it could be solved, in part, by removing negative gearing, according to the Grattan Institute.

John Daley, chief executive of the Grattan Institute, said on Sunday that it has taken “neglectful governments” two decades to establish, what he considers, the “current housing affordability mess”.

Pointing to a high capital gains tax discount, negative gearing and a limited age pension assets test as problem areas, Mr Daley said that if states were unwilling or unable to reform their planning systems, the next step would be to consider pulling back on Australia’s migrant intake.

Mr Daley said that the Commonwealth governments have for 20 years preferred to make the easy choices that “merely appear to address the problem”.

“The politics of reform are fraught because most voters own a home or an investment property, and mistrust any change that might dent the price of their assets,” the CEO said.

“But if governments keep pretending there are easy answers, housing affordability will just get worse. Older people will not be able to downsize in the suburb where they live, and our children won’t be able to buy their own home.”

What do they propose?

In its latest report, Grattan Institute researchers Mr Daley, Brendan Coates and Trent Wiltshire argued that by building an extra 50,000 homes a year for a decade, Australian house prices would be 5 per cent to 20 per cent lower than they otherwise would be.

“Affordability will only get a lot better if governments ensure more homes are built. State governments should fix planning rules to allow more homes to be built in inner and middle-ring suburbs of our largest cities,” Mr Daley said.

“More small-scale urban infill projects should be allowed without council planning approval. State governments should also allow denser development ‘as of right’ along key transport corridors.”

In addition to supply-side levers, the Grattan researchers argued that by reducing the capital gains tax discount to 25 per cent, abolishing negative gearing and including owner-occupied housing in the age pension assets test, demand would also be reduced.

In terms of negative gearing, they suggested that wage and salary income be quarantined so that investment losses can only be written off against income from other investments.

Broader state land taxes, which included owner-occupied housing or an additional uniform $2 levy for every $1,000 of unimproved land value for owner-occupied housing, were also touted as potential demand-side levers.

Further, the government should formulate an “explicit population policy”.

The researchers said: “Develop a population policy, which articulates the appropriate level of migration, given evidence of the impact of migration on the wellbeing of the Australian community, accounting for both actual and optimal infrastructure and land use planning policies.

“If planning and infrastructure policies do not improve, consider reducing Australia’s current migrant intake.”

This proposal follows weeks of debate around Australia’s migration policy.

On the supply side, Grattan said that state governments should set targets for local government areas and use “carrots and sticks” to make sure local councils actually meet them.

Continuing, they argued that by making renting and higher-density living more attractive, supply-side pressures would be alleviated.

“All levels of government should build the public case for increased density. State and local governments should change planning processes to allow more medium-density housing in established suburbs that are close to jobs and transport,” the researchers said.

Downsizing, first home buyer incentives bad ideas

The researchers called out the policy of pushing jobs or people to regional areas in “the name of housing affordability” as a bad policy, which it doesn’t recommend.

Further, shared equity schemes, financial incentives to encourage downsizing for seniors and additional stamp duty concessions for first home buyers were also listed as poor policy ideas.

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  ["title"]=>
  string(51) "Boost for investors as app sets up off-site bidding"
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  string(55) "boost-for-investors-as-new-app-sets-up-off-site-bidding"
  ["introtext"]=>
  string(144) "

Property investors are now able to identify and bid on auctions remotely using a new live-streaming functionality launched by Gavl.

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Called “Request an Auction”, the new functionality enables users to watch and bid on any Sydney or Melbourne auction remotely.

Through Gavl, prospective buyers are now able to register to bid on their preferred auction. The platform will obtain permission from the listing agent and confirm within 48 hours.

Vendors can also request to have their auctions broadcast to a larger buyer audience.

Co-founder Joel Smith said that auctions streamed on Gavl attract 47 per cent more viewers than traditional ones.

He said that Request an Auction will be valuable for remote buyers.

“Buyers are able to have Gavl attend any auction they nominate, so they will never have to miss out on an opportunity due to logistical complications in physically attending the auction.

“Vendors, too, have the opportunity to directly book an auction with us, so they can open up their event to buyers all around the world. With more potential buyers, they’re giving their property the chance to receive more bids and maximise their sales result.”

Mr Smith said that prior to the Request an Auction app, buyers were limited to what they could achieve through the Gavl technology.

Gavl is a live-streaming and bidding platform for real estate auctions.

Mr Smith said that it has streamed more than 6,000 auctions, which have achieved 3.5 million views from 50 countries.

Gavl’s Request an Auction function is currently being offered in Melbourne and Sydney only.

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Boost for investors as app sets up off-site bidding
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Having to split her time between Hong Kong and her original base of Sydney has not slowed Julia Tita’s goal of building a high-performance Australian property portfolio. Instead the resulting alterations to her strategy have positively impacted her investing success.

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Having recently purchased her 6th property, Julia joins host Tim Neary to discuss her journey, share her ups and downs over the years, and reveal her thoughts on why some properties are better than others.

Julia also explains why she no longer makes a move without the help of a buyer’s agent, why working with a strong team of specialists is extremely important and discloses her long-term property ambitions.

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!

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AREAS MENTIONED:

Eagleby
Charters Towers
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["secure"]=> int(0) ["page_description"]=> string(11) "sample desc" ["page_rights"]=> NULL ["robots"]=> NULL ["access-view"]=> bool(true) } ["initialized":protected]=> bool(true) ["separator"]=> string(1) "." } ["displayDate"]=> string(19) "2018-06-18 03:15:56" ["slug"]=> string(72) "18171:how-a-move-to-hong-kong-impacted-julia-s-australian-property-goals" ["catslug"]=> string(28) "45:smart-property-investment" ["link"]=> string(92) "/investor-stories-1/18171-how-a-move-to-hong-kong-impacted-julia-s-australian-property-goals" }
How a move to Hong Kong impacted Julia’s Australian property goals
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  ["title"]=>
  string(88) "‘Common’ referrer practice of being paid on both sides of the fence coming to an end"
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The practice of property investment firms sharing undisclosed kickbacks among the supply chain involved in development sales will be outlawed in NSW on 1 July this year under the Real Estate Reform being handed down by regulators in NSW.

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Property commentator and valuer, Suburbanite’s Anna Porter, said the reform will address conflicts of interest.

She said they arise when a mortgage broker, accountant or financial planner receives part of the commission from the property firm, who receive their fees from the developer or seller.

“This puts the broker into a position by which they are being paid on both sides of the fence,” she said.

“Until now this has been a grey area and there was nothing stopping this practice.” 

Ms Porter said this has been a common practice in the industry.

"Some well-known mortgage broking firms openly admit to receiving $5,000–$10,000 per referral in their pocket.”

She also said this process has been going on for decades.

"Property investment firms commonly pass some of their commission on to the mortgage broker, accountant or financial planner as a reward to them for passing on the referral. This means that many brokers or financial service providers are making significant amounts of money just to refer on to a property firm, often totalling hundreds of thousands of dollars a year," Anna Porter said.

Ms Porter said the Property, Stock and Business Agents Amendment (Property Industry Reform) Bill 2017 will be in force from July this year, and will prohibit this practice unless the broker or referring partner also holds a real estate industry license.

"Under the new laws, if the broker takes a referral fee from the property firm, they will have to be a licensed real estate agent and also hold a corporation’s license,” she said. 

“Subsequently, every transaction that they receive a referral fee from, they will be putting their license up against the transaction and taking full liability for the conduct, practices and outcome of that transaction, even if they have little to do with the transaction; they are a party to it financially and therefore take as much risk as everyone else in the transaction.”

Mr Porter said where a referrer holds a real estate license, and receives a part of the sale commission, they may find themselves in breach of the ethical requirements under the act.

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‘Common’ referrer practice of being paid on both sides of the fence coming to an end

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