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Time to axe negative gearing?

Discussion in 'Real Estate' started by wdongli, 25th Apr, 2011.

  1. wdongli

    wdongli Well-Known Member

    31st Mar, 2010
    A article with a title "Time to axe negative gearing" appeared in The Australian shot at Negative Gearing furiously but pretend rational and justified. Time to axe negative gearing

    It was claimed by Saul Eslake, the author that "The property market would look a lot healthier without it?" I do wonder what his background in any investment and whether he understands if no negative gearing, why the moms and dads would cost their capital for a definitely no winning investment? what the costs if the government takes the parts to provide the rental houses to their society, much less or much lower than the cost of the negative gearing? all of us need the roofs and somebodies have to provide the roofs. No any governments around the world would not subside the house sectors and the wide spread holding of the houses in private hands actually make the government quite slim in Australia. How much money needs to support the bureaucracy of the public houses?

    In the market, the market force will play the part. The author seems don't understand the market in any trustful sense. If investment could not make the investors feel they could get profit goal for long term or there are other assets could provide the profit for long term, they would sell. Does the Australia real estate market has given the long term profit not too worst than others? What make it possible? The grass-root investors hold their houses widely in Australia is a critical reason. They count all to service the loan and they put most of their savings to the equity of the houses. What's the wealth effects if 70% of Australians found their houses just lose too much money? It would be a exploded bomb could trigger a crash if played as the author suggested.

    I don't believe this author could understand the cyclic feature of the house market. At the boom time the bubble would be generated. He seemed have not known what dismal the property market was in 1990s generally even with the negative gearing. After I bought three houses in the desperation of the Perth property market in 1994/1995, its price just stayed there for nearly five years! Affordability is not because negative gearing mainly but the market sentiment and the relationship between the supplies and demands.

    The author should get some lessons why all of other advanced economies without negative gearing could have the house price crashes and the grave bad impacts to the market and economies. Personally I don't really mind his suggestions about negative gearing since my houses are in positive gearing for quite long time. However Labor and a lot of its members are populists and tend to pretend they are the mouths of the public. They are not since they mislead the public and make the economies worse. The author don't understand the system and reality, which make his article sounds rational but very risky.

    All in all if demand is higher than supply the price would be up. Who could increase the supply? The government or investors? What's most economical way to increase the supply? You reduce the motivation for investors to increase the supply, government have to spend more for this supply. If government wants to kill the goose or hurt the goose for eggs to everyone as the author hopes, less eggs would reduce the supply. When supply is greatly reduced, a opportunity would be there. Rental increase is necessary until the return much higher than it should since everyone would be fearful the stupid government would be much more stupid until the government could be changed or the government correct its mistakes by giving better conditions!

    Stupidity of the policy maker give the opportunities of the wise and intelligent investors as always if no one wants to drag sky down. The author seems not brave enough but think too much in the ivory tower!
    Last edited by a moderator: 27th Apr, 2011