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 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 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 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 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 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 [ad_2]Negative gearing = unaffordable housing<\/h2>\n
![\"auction\"](\"https:\/\/i0.wp.com\/www.realestate.com.au\/blog\/wp-content\/uploads\/2016\/10\/21164115\/auction_crowd_getty_article-1024x768.jpg?resize=1024%2C768&ssl=1\")
<\/p>\nNegative gearing is an investment strategy<\/h2>\n
Abolishing negative gearing is the answer<\/h2>\n
Most buyers have got no chance<\/h2>\n
![\"Young](\"https:\/\/i0.wp.com\/www.realestate.com.au\/blog\/wp-content\/uploads\/2017\/04\/27110448\/young_couple_REA_article-1024x768.jpg?resize=1024%2C768&ssl=1\")
<\/p>\nNegative gearing helps major investors dominate the market<\/h2>\n
\n
Realestate.com.au <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"