Chortlepuss Posted May 20, 2015 Share Posted May 20, 2015 I live in West of Brisbane, 10K out of CBD (Sherwood). It's a lovely place and house prices are high - everything sub $600K gets snapped up immediately for investment market or so it seems. If you go on realestate there are very few properties to buy and heaps of properties to rent - There are also huge blocks of units being built (3 in the near vicinity). Everything seems to point to an oversupply - but is it that negative gearing means that people don't need to find tenants? I'd love to buy a small investment property, but it seems pretty risky at the moment..... Quote Link to comment Share on other sites More sharing options...
flag of convenience Posted May 20, 2015 Share Posted May 20, 2015 But why would you want to buy a product that is over priced, hard to lease (hence return) and unlikely to appreciate to any extent in at least the medium term? Surely you would want to make capital on capital and not on loses? Quote Link to comment Share on other sites More sharing options...
Guest Posted May 20, 2015 Share Posted May 20, 2015 Wait for the crash and snap up a bargain Lots of people trying to avoid paying tax going to have egg on their faces. Quote Link to comment Share on other sites More sharing options...
n1ck Posted May 20, 2015 Share Posted May 20, 2015 How likely is a crash though ? In Sydney at least there is no sign of one in the near or distant future... Quote Link to comment Share on other sites More sharing options...
FTA Posted May 21, 2015 Share Posted May 21, 2015 How likely is a crash though ? In Sydney at least there is no sign of one in the near or distant future... Good news: Some of the gains in Sydney would normally filter on to Brisbane. Bad news There is an oversupply of units, being driven by foreign investment. I think between the two, the market will be flat, but you'll be ok for rent as long as you don't buy a unit. Quote Link to comment Share on other sites More sharing options...
Paul1Perth Posted May 21, 2015 Share Posted May 21, 2015 Wait for the crash and snap up a bargain Lots of people trying to avoid paying tax going to have egg on their faces. That's the critical thing though, when do you know when it's a bargain? You may get one that you think is a bargain and prices could continue falling and you're stuck, losing money. I wouldn't be going near property unless you can afford to lose a lot. If I had any spare cash I would be having an offset account on my own mortgage and keeping it in there. If I'd paid my mortgage off and had a lot of cash laid around I could afford to lose then maybe. Quote Link to comment Share on other sites More sharing options...
Bungo Posted May 21, 2015 Share Posted May 21, 2015 (edited) But why would you want to buy a product that is over priced, hard to lease (hence return) and unlikely to appreciate to any extent in at least the medium term? Surely you would want to make capital on capital and not on loses? I agree, the mentality of negative hearing is lost on me. Willingly and deliberately making losses so that a proportion of the loss can offset tax is financially illiterate. It is like requesting a pay cut in order to decrease a tax bill. It is better to set out to make money and pay tax on a proportion of the gain. Yes more tax paid, but overall financially better off. And capital gains / losses the same either way. Edited May 21, 2015 by Bungo Quote Link to comment Share on other sites More sharing options...
AJ Posted May 21, 2015 Share Posted May 21, 2015 I agree, the mentality of negative hearing is lost on me. Willingly and deliberately making losses so that a proportion of the loss can offset tax is financially illiterate. It is like requesting a pay cut in order to decrease a tax bill. Because people seem to think they are getting one over on the Tax Man! Quote Link to comment Share on other sites More sharing options...
starlight7 Posted May 21, 2015 Share Posted May 21, 2015 It really is time they stopped negative gearing. That would put a lot more property on the market available for those looking for a home. An obvious way for the government to get more money but they won't do it because of all the middle class 'investors'. Quote Link to comment Share on other sites More sharing options...
Gbye grey sky Posted May 21, 2015 Share Posted May 21, 2015 This is one arena where the UK has an altogether more sensible tax policy IMO. In the UK there is no deduction for so-called 'depreciation' and losses made on a property can either be offset against profits on another rental property or carried forward in perpetuity to offset against any future rental profits. Quote Link to comment Share on other sites More sharing options...
flag of convenience Posted May 21, 2015 Share Posted May 21, 2015 Because people seem to think they are getting one over on the Tax Man! I know very well how it works. Rather dumb thinking though making money from a loss. Unless to cut tax from a high grossing job of course, which doesn't seem apparent in Op's case. Quote Link to comment Share on other sites More sharing options...
flag of convenience Posted May 21, 2015 Share Posted May 21, 2015 It really is time they stopped negative gearing. That would put a lot more property on the market available for those looking for a home. An obvious way for the government to get more money but they won't do it because of all the middle class 'investors'. It has become an 'entitlement ' and anyway we suffer such poor governance little can be expected to change until the lot blows up. The average Australian will need to sacrifice their life on the thread mill of mortgage payments. Not forgetting even when houses decline in price they'll be after the original mortgage and how. No handing in the keys here like in UK when it all belly flops. Quote Link to comment Share on other sites More sharing options...
flag of convenience Posted May 21, 2015 Share Posted May 21, 2015 I agree, the mentality of negative hearing is lost on me. Willingly and deliberately making losses so that a proportion of the loss can offset tax is financially illiterate. It is like requesting a pay cut in order to decrease a tax bill. It is better to set out to make money and pay tax on a proportion of the gain. Yes more tax paid, but overall financially better off. And capital gains / losses the same either way. Plus you have control of investment to chop and change and seek higher returns at will. Just the payment alone to the government on the purchase of a property is often overlooked as well. I believe it the herd instinct regardless of it being the least best option. Quote Link to comment Share on other sites More sharing options...
Bungo Posted May 21, 2015 Share Posted May 21, 2015 I know very well how it works. Rather dumb thinking though making money from a loss. Unless to cut tax from a high grossing job of course, which doesn't seem apparent in Op's case. Even then though, whether job is high paying or not it is still losing money overall. You would have to lose $1000 in the rental business to make $450 in tax credit. Better not to make the loss in first place me thinks and with the low interest rate environment it should not be too hard to turn a profit. It is a very odd mentality as you say, said so often by Australians that they must actually believe negative gearing is good for them. UK tax model definitely better in this respect. Quote Link to comment Share on other sites More sharing options...
Gbye grey sky Posted May 21, 2015 Share Posted May 21, 2015 Plus you have control of investment to chop and change and seek higher returns at will. Just the payment alone to the government on the purchase of a property is often overlooked as well. I believe it the herd instinct regardless of it being the least best option. The thing I attribute it to is the desire to invest in something that you can see and touch. Other investments tend to need greater application of thought and research to get a fuller understanding. I started investing in shares really late in life (about 5 years ago) and though they have done well I have to admit that it still makes me nervous and always have this feeling that it could disappear in a puff of smoke lol. Quote Link to comment Share on other sites More sharing options...
Gbye grey sky Posted May 21, 2015 Share Posted May 21, 2015 Because people seem to think they are getting one over on the Tax Man! Quite likely true but I suppose many believe that negative gearing gives them a limited safety net minimising potential losses. I see people on PIO (not all) referring to Aussie tax returns and paying an advisor to fill it in because you can claim the cost against tax (as if that makes it free). I would only want to pay an advisor if their fee (after tax) prevented me from making costly mistakes I might otherwise make - which in my case will be quite likely I suspect. Quote Link to comment Share on other sites More sharing options...
NicF Posted May 21, 2015 Share Posted May 21, 2015 I agree, the mentality of negative hearing is lost on me. Willingly and deliberately making losses so that a proportion of the loss can offset tax is financially illiterate. It is like requesting a pay cut in order to decrease a tax bill. It is better to set out to make money and pay tax on a proportion of the gain. Yes more tax paid, but overall financially better off. And capital gains / losses the same either way. The trick with negative gearing is to only make a loss on paper and not an actual cash loss. This is done through things like depreciation, although I still think you are far better to make a profit even with all your costs taken in to account. Quote Link to comment Share on other sites More sharing options...
flag of convenience Posted May 22, 2015 Share Posted May 22, 2015 The thing I attribute it to is the desire to invest in something that you can see and touch. Other investments tend to need greater application of thought and research to get a fuller understanding. I started investing in shares really late in life (about 5 years ago) and though they have done well I have to admit that it still makes me nervous and always have this feeling that it could disappear in a puff of smoke lol. Yes that and the constant media/circus around property investment. The seminars they hold here in OZ pointing the way to wealth through property management even on low incomes. Some of the seminars sound more like religious revivalist gatherings even to the point of coming close to speaking in tongues. A financial health warning should be issued prior to attendance and written in law. You are right with shares it can indeed disappear. Housing too though can and does see losses. Speculation equates gambling in the sense that prices will raise. Far from being the case. Better to be a conservative investor after a certain age and be thankful of a smaller but still a return. Quote Link to comment Share on other sites More sharing options...
flag of convenience Posted May 22, 2015 Share Posted May 22, 2015 The trick with negative gearing is to only make a loss on paper and not an actual cash loss. This is done through things like depreciation, although I still think you are far better to make a profit even with all your costs taken in to account. Far better off. Quote Link to comment Share on other sites More sharing options...
ramot Posted May 22, 2015 Share Posted May 22, 2015 (edited) A financial health warning should be issued prior to attendance and written in law. You are right with shares it can indeed disappear. Housing too though can and does see losses. Speculation equates gambling in the sense that prices will raise. Far from being the case. Better to be a conservative investor after a certain age and be thankful of a smaller but still a return. I'm sure you are right about the seminars Flag and things are probably different now, and I am talking about the UK not Oz, but we did invest in rental properties, in our 50's and it was the best thing we could have done. We took a chance quite some years ago, and the extra money in retirement is very welcome, but the timing was right when we bought. I'm not advising this route for any one else, we took a chance and it paid off. Edited May 22, 2015 by ramot Quote Link to comment Share on other sites More sharing options...
flag of convenience Posted May 22, 2015 Share Posted May 22, 2015 I'm sure you are right about the seminars Flag and things are probably different now, and I am talking about the UK not Oz, but we did invest in rental properties, in our 50's and it was the best thing we could have done. We took a chance quite some years ago, and the extra money in retirement is very welcome, but the timing was right when we bought. I'm not advising this route for any one else, we took a chance and it paid off. Glad it worked out for you. We have bought in Europe and besides having a base, one place in particularly has been beset by problems. Another had its share but is quiet for the moment. Prices have hardly risen apart from early days but that is how things turn out. Here is a very different market. Advance with extreme caution. The time for fast money doing nothing are past. I have been and heard the sales patter and really one can view the vulnerability of people and how the practice of manipulation truly operates. Only reason I attended a few though no longer get invites, was the fact it was a comfortable stroll from my house. Quote Link to comment Share on other sites More sharing options...
movingback Posted May 22, 2015 Share Posted May 22, 2015 I can't for life of me make sense of the Sydney market. I work with a girl - 25 - on maximum $40,000/yr ( I actually think her base is minimum wage). She told me the other day her partner is on $55,000. They bought a house in Penrith for 480,000 6 months ago. 5% down payment that took them 5 yrs of saving to achieve. Dump of a place. Needs lots of work. She wants kids in the next few years. She told me how excited she was the other day that they're probably already 'made' $50,000 on it. The numbers just don't add up!! I was in California 10 yrs ago just before the bust and heard the exact same stories from low paid workers there. Quote Link to comment Share on other sites More sharing options...
movingback Posted May 22, 2015 Share Posted May 22, 2015 I think its all a pyramid scheme personally. Quote Link to comment Share on other sites More sharing options...
Gbye grey sky Posted May 22, 2015 Share Posted May 22, 2015 Better to be a conservative investor after a certain age and be thankful of a smaller but still a return. Up to a point I agree but there is a big difference between those in a position to reinvest earnings and enjoy compound and those who need to generate an income on which to live from their savings in their retirement. With savers struggling to achieve rates of 2% gross pa in recent years you probably could not live off £1,000,000 without burning significant amounts of capital (and few of us have a £million). The best answer is diversification, not all eggs in one basket. Quote Link to comment Share on other sites More sharing options...
Chortlepuss Posted May 23, 2015 Author Share Posted May 23, 2015 I know very well how it works. Rather dumb thinking though making money from a loss. Unless to cut tax from a high grossing job of course, which doesn't seem apparent in Op's case. My situation is that I would like to buy an investment property in Oz for my daughter to live in (She doesn't want to buy just yet) and where we could come back to from time to time (I can get short term contracts with my company). But I am not up for making a loss - particularly if I have little to offset it against if based in UK for most of the year. I don't want anything grand (a small townhouse would do) but most of the smaller property seems to be built for the investment market and not for people to live in.... Small rooms, shoddy finishing. crowded in, potential rental returns on particulars. It's partly my fault for wanting to stay in such a desirable area but I do love it here. I do wish that negative gearing would be abolished and people could start building homes. I did talk to a real estate agent today and she said there was already an oversupply of units to rent in Sherwood - so prices for rents are being negotiated down - Three huge blocks of units are currently being constructed near to me - Who's going to rent them? a real feeling that the boom has passed - unless renters can be spirited out of the ether..... Quote Link to comment Share on other sites More sharing options...
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