{"id":4513,"date":"2017-05-12T00:00:22","date_gmt":"2017-05-12T00:00:22","guid":{"rendered":"https:\/\/amazingproperty.com.ng\/blog\/why-negative-gearing-is-bad\/"},"modified":"2017-05-12T00:00:22","modified_gmt":"2017-05-12T00:00:22","slug":"why-negative-gearing-is-bad","status":"publish","type":"post","link":"https:\/\/amazingproperty.com.ng\/blog\/why-negative-gearing-is-bad\/","title":{"rendered":"Why negative gearing is bad"},"content":{"rendered":"

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Negative gearing has received its fair share of heat as Australians look for a way out of the current housing<\/a> affordability crisis.<\/strong><\/p>\n

But is negative gearing one of the major causes of the current supercharged housing market? Or should we be looking elsewhere?<\/p>\n

We asked some financial and property experts to bust a few of the myths.<\/p>\n

Negative gearing = unaffordable housing<\/h2>\n
\"auction\"<\/p>\n

Competition at auctions isn\u2019t driven solely by investors looking to negatively gear. Picture: Getty<\/p>\n<\/div>\n

Financial advisor Bruce Brammall says it would be folly to pin the blame for a lack of housing affordability solely on negative gearing, given the concept has been used for decades \u2013 both in peak times and low periods.<\/p>\n

\u201cIt\u2019s not something that\u2019s only happened in the last five years or so and now it\u2019s why we have this current \u2018affordability crisis\u2019,\u201d Brammall says.<\/p>\n

\u201cIt\u2019s been around forever, it\u2019s not some new phenomenon that\u2019s been added into the mix and therefore is causing this.\u201d<\/p>\n

Negative gearing is an investment strategy<\/h2>\n

While negative gearing does cut down the overall cost of owning an investment property, the property is still a loss-making asset in the short to medium term.<\/p>\n

Brammall says no one dives into a property investment with the sole intention of having it negatively geared.<\/p>\n

\u201cNegative gearing is a tax benefit, it\u2019s not an investment strategy<\/a>. Negative gearing means that you\u2019re losing money on a cash basis on a property. Nobody\u2019s aiming to do that.<\/p>\n

\u201cIt\u2019s something that helps investors in the first five to 10 years of owning your property, and after that they\u2019ll hopefully be earning a positive income, and then they\u2019ll be paying tax on that income,\u201d he says.<\/span><\/p>\n

Abolishing negative gearing is the answer<\/h2>\n

AllianceCorp Property Experts managing director Jason Paetow says that ending negative gearing would likely see house prices cool off in some areas, particularly the inner-city, but it could also have other potential effects that would impact housing affordability.<\/p>\n

Paetow says landlords would look to cover the shortfall from losing their tax breaks by bumping up rents, which would then impact renters\u2019 ability to save for a house deposit.<\/p>\n

\u201cEstablished properties would become less attractive to investors as the holding costs on these properties could increase by several hundred dollars each week, which most investors won\u2019t stomach.<\/p>\n

\u201cWe must remember that housing affordability is not just about the ability to purchase a home\u2013<\/span>\u00a0we can\u2019t forget the tenancy market. There was a period during the 1980s where negative gearing benefits were abolished and during that time we saw rent rates increase and the waitlist for public housing skyrocketed. It could be a case of robbing Peter to pay Paul,\u201d <\/span>Paetow says.<\/span><\/p>\n

Most buyers have got no chance<\/h2>\n
\"Young<\/p>\n

Struggling first-home buyers aren\u2019t doomed, says Brammall. Picture: Kate Griffin<\/p>\n<\/div>\n

While many Australians wonder if they\u2019ll ever see the back of the current housing boom and will ever be able\u00a0to buy their own home, Brammall insists it\u2019s only a matter of time before the market turns.<\/p>\n

\u201cEvery time this happens\u00a0\u2013\u00a0<\/span>every three, four, five years or so\u00a0\u2013\u00a0<\/span>we have a run-up in prices and all of a sudden they\u2019ll start calling it an unaffordability crisis and the like. But the fact is that property is cyclical and we\u2019ve gone for a bit of a run recently,\u201d he says.<\/p>\n

\u201cIt happened in 2002-2003, then it fell for a couple of years, then it started happening again in 2007 and then it fell for a little bit, and then it started rising and it probably happened again in 2011.\u201d<\/p>\n

\u201cWe just get to a point in every property cycle where the concern becomes fever pitch, and it\u2019s usually at about that time that the market hits a peak and starts coming off again. To blame it on negative gearing, I don\u2019t think, makes a lot of sense,\u201d he says.<\/span><\/p>\n

Negative gearing helps major investors dominate the market<\/h2>\n

Fears that the use of negative gearing is dominated by investors who own numerous properties are unfounded, Brammall adds.<\/p>\n

In fact, only a small proportion of investors own more than one investment property, with most owning a single investment.<\/p>\n

\u00a0<\/p>\n

\n <\/p><\/div>\n

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Realestate.com.au <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

[ad_1] Negative gearing has received its fair share of heat as Australians look for a way … Why negative gearing is bad<\/span>Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":4514,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"jetpack_seo_schema_type":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[4],"tags":[981,1403,15239,1330,12908,543,617,344,41,1152,818,3052],"class_list":["post-4513","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opportunities-in-new-markets","tag-a-house","tag-buy","tag-chase","tag-financial","tag-home","tag-home-buying-guide","tag-house","tag-housing","tag-property","tag-property-investment","tag-real","tag-tenancy"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/amazingproperty.com.ng\/blog\/wp-content\/uploads\/2017\/05\/auction_crowd_getty_article-1024x768.jpg?fit=1024%2C768&ssl=1","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":4959,"url":"https:\/\/amazingproperty.com.ng\/blog\/what-would-happen-if-negative-gearing-was-abolished\/","url_meta":{"origin":4513,"position":0},"title":"What would happen if negative gearing was abolished?","author":"Amazing Property","date":"June 15, 2017","format":false,"excerpt":"[ad_1] The debate surrounding negative gearing continues to rage in Australia, with Labor maintaining its calls for the rules governing the tax advantage to be changed. 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