12 Dining Rooms Where You'd Never Miss a Family Dinner - Design Milk

12 Dining Rooms Where You'd Never Miss a Family Dinner - Design Milk

Savvy investors buying up as Queensland property values jumps by $50 billion | News.com.au

Savvy investors buying up as Queensland property values jumps by $50 billion | News.com.au

Article regarding Property Taxes for your perusal and information only.

By Leith van Onselen It has been interesting watching the transformation of Shane Oliver, chief economist of AMP, over the past six years. In 2008, Oliver released a well-argued research paper arguing that Australian housing was a “bubble”, and that the combination of excessive housing debt and inflated housing values were Australia’s “Achilles heel” (see below chart). Since that time, however, Oliver has taken an opposing view, going to great pains to argue why Australian housing is not a bubble, despite valuations and debt levels being much the same today. Today, Oliver is cited in The AFR arguing against changes to housing taxes, claiming that they would be viewed as “unAustralian” and, in the case of negative gearing, might even be undesirable: AMP chief economist Shane Oliver says changes to negative gearing or the CGT exemption on the family home would be seen as “unAustralian”. “If you have spent your life paying the family home off and then might be forced to sell it to get enough income, that would be very unpopular politically,” he says. “There may be some economic logic in getting rid of the CGT exemption since the family home is an asset like any other, so why should it be the only asset that’s tax free when a capital gain is made? But I think [the] odds of that [the government scrapping it] occurring is next [to] zero.” It is unlikely the government would move on negative gearing, Mr Oliver says, and he was not convinced it would be a good idea given the backlash Paul Keating suffered when he tried to do it in the 1980s. “Last time it happened, investor interest dissipated overnight and rental rates started to shoot up [in some capital cities],” he says. While I don’t buy the “unAustralian” argument, I believe that removing the CGT exemption on the family home would be a retrograde step, since it would create similar inefficiencies as stamp duties. Namely, it would discourage housing turnover and encourage an inefficient use of the housing stock, in addition to reducing labour mobility. A far better policy option would be to instead impose a broad-based land tax (preferably in exchange for also eliminating stamp duties), which would create minimal distortions, is more equitable, and would encourage greater housing efficiency. That said, Oliver’s arguments around negative gearing are complete bunkum. As has been shown many times before, the overwhelming majority of investors purchase existing housing (see below charts). And since investors primarily purchase existing dwellings, negative gearing in its current form simply substitutes homes for sale into homes for let. Accordingly, the policy has done little to boost the overall supply of housing or improve rental supply or rental affordability. Oliver’s claim that the quarantining of negative gearing in the late-1980s caused rents to spike is false. The below chart plots the Australian Bureau of Statistics (ABS) rental series from 1972, with the period where negative gearing losses were last quarantined (i.e between June 1985 and September 1987) shown in red. As you can see, there was nothing spectacular about this period, with much higher rental growth recorded in earlier periods when negative gearing was in place: Similarly, if we deflate the above series by CPI, in order to remove the effects of inflation, we again see that rental growth over the period when negative gearing was last quarantined was nothing special, with periods of higher rental growth recorded both prior to and subsequently: In the event that negative gearing was wound-back and a proportion of investment properties were sold, these properties would be purchased by renters (or other investors that would rent them out). In turn, those renters would be turned into owner-occupiers, reducing the demand for rental properties and leaving the rental supply-demand balance unchanged. With Australia’s Budget coming under increasing pressure as the population ages and the once-in-a-century mining boom unwinds, there is absolutely no policy rationale in favour of keeping negative gearing in its current form, whose foregone funds could instead be used for any number of other worthwhile endeavours. That Oliver can ignore these basic facts is disappointing. RTtwitter@ljgrealestate