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House prices to keep rising for years

Discussion in 'Business, Investment and Economics' started by moses, Feb 15, 2008.

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  1. cutz

    cutz

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    It's all part of the illusion, just like the Myer float, private equity buys it out, dresses it up, hots it up then offloads it back to the mug.

    Sorry off topic, but you know what i mean.:confused:
     
  2. Vizion

    Vizion

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    I am :D.

    Removing negative gearing means that the rent may go up bit, more likely it means that the value of some properties go down, cashed up investors will no longer regard them as so appealing an option. If their sale value goes down through a correction, then required rental return should go down, plus some people who would be renting can finally buy so the demand for rental properties goes down too.
    Its a huge distortion that the already-haves get these tax breaks on second, third and fourth properties, whilst those who cannot afford even one house get held out of the market by the artificial demand created.

    A person having a valuable primary residence doesn't affect me or you, unless of course your bidding on the same place as a PPOR. An investor though buying up the medium-value property in an area to use as investment/rental properties does. All concessions for these types of purchases should be scrapped IMHO. If it produces a bit of a correction, so be it & all the better for the vast majority of the people in this country. There are now, what is it? 54% in home ownership in the age bracket between 29 & 39, down from 62% or so. There is nothing socially responsible in any government which does not its level best to house its own population as the last few have not done.

    As for when it comes to investing in shares, it's a risk. Why should you get a tax break because you stuffed up and leveraged yourself to the hilt at 75% plus thinking the only way was up? Its about time people stood on their own two feet and took responsibility for their actions. If you have investments you should be watching them & practising risk management. Not everyone who had shares took a bath.

    Cheers
     
  3. cutz

    cutz

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    Yeah do away with negative gearing on everything, is it not enough that you get a tax break on investment earning ?

    The fact of the matter is the person caught up in the above scenario borrowed too much, perhaps the incentive was to negative gear, perhaps encouraged by some silly accountant.

    Agree with Vizion on this one, get rid of the routs and let property find it's own level.
     
  4. Beej

    Beej

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    As others have alluded to: One could also ask how do inflated share prices help the economy?

    Vizion makes some pretty good arguments I think. However the economic benefit of investors participating in the rental market is pretty clear - the provision of privately funded rental accommodation, taking the burden for that off the government (ie less public housing required).

    PS: Vizion, in terms of falling home ownership rates in the 29-39 year old bracket, there could be other reason for this, including the trend for people to marry and have kids later than in the past, meaning less "need" for the added security of home ownership. Plus the (related) tendency of that generation to have spent their 20s living it up, traveling the world extensively (which previous generations didn't do anywhere near as much), and as consequence saving a lot less than previous generations did at this stage of their lives. These factors have resulted in the desire/need for home ownership to be deferred until later in life.

    By the way I also see these demographic shifts/factors as a big part of the reason why there is currently so much pent up demand for home ownership in Australia, as the current batch of 29-39 year olds are all currently busy getting married, having lot's of babies and so forth, as evidenced by the mini baby-boom that has been going on for the past few years.

    Cheers,

    Beej
     
  5. MrBurns

    MrBurns

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    What have shares got to do with what I said ?
    Nothing.
    It's just your way of deflecting things.

    The statement was made that booming house prices are good for the economy and I asked , how ?
    The truth is that that statement is pure and utter BS like a lot of the property bull propaganda in this thread.
     
  6. Beej

    Beej

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    No such statement was made that I can see?? Looks like all you did was build a nice straw man argument there? Here's the quote you responded to:


    So all Robot's was pointing out is that negative gearing can be used to offset financing costs for a range of investment vehicles, all of which can be accused as doing nothing for the economy. You asked how rising house prices in particular benefit the economy? So I asked how rising "other" asset prices helped? A clever mind would quickly realise that the whole argument is moot.

    So the statement that you made up is utter BS then? That could well true as it would be well aligned then with much of what is written here by irrational property bears..... ;)

    PS: As a matter of fact, rising house prices can and do help the economy, through two factors:

    1) The well documented "wealth effect" which results in increased domestic demand/consumption as people feel "wealthier" due to the value of their number one asset.

    2) Rising prices produces more improvement, renovation and new building/property development which creates jobs in the building and materials industries - a significant chunk of Australia's GDP comes from this.

    I also acknowledge though that there are negative effects as well, both economic and social, so the real question is what is the NET effect?

    Cheers,

    Beej
     
  7. Moderator

    Moderator Moderator

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    The Moderator requests that the posters on this thread remains civil towards each other, despite the fact that the same arguements have been repeated for hundreds of pages now.

    Thanks

    Your friendly Moderator
     
  8. nunthewiser

    nunthewiser

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    uh oh.
     
  9. MrBurns

    MrBurns

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    Yes I lost it for a minute there, feeling better now:D
     
  10. Taltan

    Taltan

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    Beej

    Housing is a human need shares aren't. So if the share market's "inflated" thats good for the economy because it means businesses are profitable. Property can be inflated not only because its making money but also because supply of a needed good is scarce.

    The Govts of the last 10 years have been negligent in providing this need. As Mr Burns said this debate has nothing to do with the pros and cons of negative gearing on shares
     
  11. nunthewiser

    nunthewiser

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    Wrong.

    Shareprices OFTEN have absolutely ZILCH to do with a business being profitable ...
     
  12. Mofra

    Mofra

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    But to draw a long bow, higher shareprices mean cap raisings are easier ;)

    It's all about the credit baby, in any form you can get it.
     
  13. nunthewiser

    nunthewiser

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    Gday :D

    Yep definately a long bow there mate ;)

    This last round of cap raisings by most of the majors were done around there lows just after/during the correction :D.

    High shareprices had nothing to do with them ones .

    But yeah re credit , makes the world go round.
     
  14. MrBurns

    MrBurns

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    Not always but most of the time and at least someones putting in but higher house prices benefit no one but the parasite residential investor.
    I say parasite because unlike the commercial property investor or share investor their greed effects couples wanting a roof over their head to raise a family.
     
  15. trainspotter

    trainspotter

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  16. gav

    gav

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  17. Bill M

    Bill M Self Funded Retiree

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    You agree in doing it across the board so you are not biased either way which is good.

    Some 24 years ago one of our previous governments did abolish negative gearing on housing and it stuffed up the whole rental market from memory. Rentals went up, property went up and it did not help low income earners or tenants. It was so bad they they had to reverse that decision 1987, it just didn't work.
     
  18. trainspotter

    trainspotter

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    Weird HUH gav? Must be future newspaper or something? :confused: But at the top of the webpage the correct date is 5th November??
     
  19. Vizion

    Vizion

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    Beej

    I agree to a point that private individuals as landlords helps the rental market. However why is government backed development of housing always touted as a bad thing? 9.95 billion of negative gearing tax lost to our nations coffers plus 6.2 billion in reduced CGT would build allot of housing & infrastructure. They don't have to build crappy boxes either.

    If the federal government treated the building of housing as a business, but one with modest profit margins and not a free for the masses band-aid, or one that gouged as much as possible as allot of business tries too. I think it would go along way to putting the breaks on spiralling prices.
    Not only that they would actually be creating jobs and not just moving them about as they normally do. Our current system of federal / state / local is at least one tier to many and an enormous black hole we pour money into. Its the major cause of the bottle necks we have in planning, State blaming Federal, local blaming State etc etc. My own companies corporate dept is a 5 million a yr black hole. Any business and government is a business, just a poorly run one. Should be trying to minimise those costs and making them more efficient.

    There are other many ways to enable a larger part of the population to make money than through housing as an investment model. They would all have positive flow on effects to the nation as a whole. An increased ability to spend on retail etc, as well as other less tangible but equally important benefits that removing a little of the social inequalities and the ridiculous cost increases of housing, brought upon by our current housing policies, would enable in our nation. Is anybody seriously saying that before the property boom, people where not making money (large amounts of it at that) any other way?

    As has been stated here more than once, there is a load of business that would not exist if not for housing. I'm not one who believes
    this does not actually help to grow our economy. If your struggling to pay off the roof over your head though, your not spending in other sectors of our economy are you. Your not really spending at all unless your going heavily into "bad" debt, look where that got the rest of the western world.

    Just my :2twocents
     
  20. awg

    awg

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    Agree thats a problem,

    As most new property investors are heavily geared

    No new investment in rental, the consequences got so dire, Keating reversed.

    Public housing is problematic and innefficient for Govts, they keep winding it back.

    IMO even the change in bracket thresholds has reduced investor interest in rental property.:2twocents

    maybe it would settle out in the wash, but I wouldnt want it happening on my Govt watch, as it would take several years and be a bit nasty
     
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