Australia housing bubble

[GASWAGON]

Negative gearing has ruined it for everyone.

And the Chinese are taking buying up big in countries all over the world.

[zipping]

Negative gearing is where a loan is used to buy an asset and there is a loss because the income generated is lower than the interest repayments. It's often used to explain a property purchase but it can equally apply to a share purchase or other investment.

It's been with us for a long time. In 2010 there were 1.2 million Aussies with a negatively geared property which is 14.3% of individuals that lodged a tax return owned investment properties while a greater 19.2% of individuals that reported a taxable income owned investment properties.

http://blog.corelogic.com.au/2013/05...inancial-year/

Whilst some pressure comes from negative gearing when people speculate on prices going up is it really the driver behind the sharp rises we are seeing?

Some more recent info here

https://www.businessinsider.com.au/s...the-rba-2016-2

Good article

http://theconversation.com/policyche...g-reform-58404

It does provide an incentive for people to invest in property just on balance it seems to me unlikely to be the driver behind the last 4 years price expansion.

[asagaai]

As CoolBFWagon said, the Chinese are a huge country, becoming very wealthy, and they like investing their hard earned in a stable country in bricks and mortar that is safe. Property is very expensive there in their big cities, and Australia is good buying for them.

So Sydney, Melbourne are seeing big inputs of Chinese purchasers.

Also, SMSF re now being used to purchase properties which further increases prices.

So the older more well heeled are further using negative gearing/SMSF to buy property and cash in on capitals returns, and in effect will have the young slave away to pay for their capital gains, all while getting the young to pay their rents as the young cannot get into property.

[vztrt]

Originally Posted by CoolBFWagon

Negative gearing has ruined it for everyone.

And the Chinese are taking buying up big in countries all over the world.

Negative gearing has been around since the 80s yet house prices didnt start to deviate from its normal tangent line (median house price vs average wage) till the government halfed the cgt. Making housing more desireable wasnt a good move.

This needs to be scaled back as the market needs a correction. The house prices in my area are rediculous.

[zipping]

Originally Posted by vztrt

Negative gearing has been around since the 80s yet house prices didnt start to deviate from its normal tangent line (median house price vs average wage) till the government halfed the cgt. Making housing more desireable wasnt a good move.

Yes but increasing CGT would impact the stock market greatly I would assume?

[FairmontGS]

Originally Posted by zipping

Yes but increasing CGT would impact the stock market greatly I would assume?

There would be a rush away from housing to equities. That's not necessarily a bad thing but then the price of stocks will rise - not because they are better stocks but because they will be bid up. Dangerous territory.

[vztrt]

Originally Posted by zipping

Yes but increasing CGT would impact the stock market greatly I would assume?

It would impact the politions pockets.

There should also be a limit on the amount of houses that are negatively geared and only Australians citizens should be able to buy propertly below 5 million.