The politics of housing

[pietillidie]

^If this data is any guide, earlier in the 00s the data was very comparable, with the ownership rate falling more here since then thanks to a succession of horrid Tory governments:

[stui magpie]

Cheers for that. I've been reading the autobiographies of Brian johnson from AD DC and Ozzy Osbourne, both who grew up in post WWII England and had the council flat thing stuck in my head. I also worked with a Pom in the mid 90's who described how his family still lived in a semi detached council flat. I must have missed the memo on Thatchers Right to Buy policy, one of a number of things she clearly did right.

In Melbourne, the sprawl continues. You can buy a Mcmansion for less than $500k if you're prepared to live 40km from the CBD , which people clearly are, but the price makes them attractive to investors to buy and rent out.

Where I live in Watsonia, duel occupancy and bulldoze and build 3 townhouses seems to have been replaced by buy, bulldoze and build a Mcmansion. 2 story monstrosities that take up a whole 1/4 acre block with just enough back yard for a BBQ area.

[David]

Would anyone be up for living here?

https://www.abc.net.au/news/2024-02-19/struggling-to-pay-rent-alys-bought-dilapidated-outback-home/103480108

Looks pretty good to me!

[stui magpie]

^

I read that article yesterday, you can have it.

But on the topic of housing, interesting article on negative gearing.

https://www.theage.com.au/money/tax/who-in-their-right-mind-would-want-to-stop-negative-gearing-20240220-p5f6bm.html

[David]

I think his logic is pretty questionable – he seems to be leaning heavily on "who knows what will happen in the future to super / the pension", which is a bit circular because any government policy changing negative gearing provisions might well also change those allowances.

[Culprit]

Whilst we have Politicians (every party/independent) who own multiple investment properties sitting in power and dictating housing policies nothing will change. Why would anyone introduce policies that will impact their investments?

The people voted against changes to negative gearing and franking credits etc. Not once but twice and unless a Government wants to be thrown out it's here to stay.

I have 4 houses close to me owned by overseas investors that are empty and have been for over 5 years. Freeing up these properties should be a starting point and I am all for compulsory acquisition.

[David]

Another response to Whittaker from The Age letters to the editor:

https://amp.theage.com.au/national/victoria/stamp-duty-isn-t-perfect-but-it-helps-us-stay-in-the-family-home-20240220-p5f6cv.html

[stui magpie]

^

Not sure if he's correct about that. The family home doesn't count in the assets test but their super balance would once they reach pensionable age. Depending on other assets and if they spend off some of the super on holidays or home renovations etc they could still qualify for at least a part pension, which would increase as their super balance goes down.

With an investment property AND super, no pension.

[Pies4shaw]

I understand that no-one wants to talk about what people earn - but let's be clear: people earning $100K a year are not "high income-earners". They may not be in the same shit as some other people (although I expect they are) but let's not pretend people on trivial sums like that are well off. The discussion about taxation should focus on what we do about the super rich.

Negative gearing is a sideshow and has virtually nothing to do with strategies to establish better access to owner-occiupied housing.

(And, just a reminder, in case people think I may be speaking out of slef-interest - I do not negative-gear - and have never negative-geared - any real estate.)

[eddiesmith]

The salary is relative to a persons circumstances.

A single person with no mortgage, 100k is a lot of money.

To a parent with kids and a mortgage, it's not even enough to live on.

[Pies4shaw]

I have probably raised the issue earlier (perhaps even somewhere in this thread) - I think there are a number of genuine taxation questions in the housing space. One that is always at the forefront of my thinking is whether the government could be trusted to impose an apprropriate (and appropriately-indexed) cap on the value of some assets at which various favourable tax treatment would commence scaling back.

Eg, many suburbs are full of extraordinarily valuable owner-occupied housing - and the desire of people to continue to purchase and service loans for such valuable property is largely-driven by the complete absence of captial gains tax on any "family home". More than a decade ago, now, one of my mates had his "faimly home" in Hawthorn on the market for $13 mllion (maybe a bit more, I can't exactly recall). How much of that was "really" the family home - was it fiscally appropriate for him to be able to take the value of the tennis courts and the heated external swimming pavillion (and the land on which they were located) as part of that CGT exemption? I'm not sure he, his wife and two kids needed a "better" house or to be given a leg up with the cost of purchasing the new one. Moreover, now the same house would likely be worth around $30 million - do we really think it's a good use of scarce resources to fund a full CGT exemption for the new owner (ie, no tax on a clear profit of $15 million, in nominal terms), if they sell now?

Similarly, one could see the merit of a cap on the value of negatively-geared property for which the full tax concession is available. Eg, if I own a valuable house near Melbourne and think I'd like to holiday in, say, North Bondi from time to time, I may know I won't get there often but I could purchase a magnificent apartment in the main drag, overlooking the beach for $5 million or $6 million and mostly rent it out as short-stay/holiday accommodation. Is that a choice we'd want to subsidise?

Those are both quite different questions from whether we think "CGT exemption for the family home should go" or "negative-gearing of any housing should go". Ultimately, I think even those sorts of "cap" strategies are problematic because, from experience, the likelihood is that the government would set a number and never index it. Eg, the general population might agree that it's ok to assist people who live in modest weatherboard houses in, say, Footscray with a value of $1.5 million (please don't get hung up on the figure, it's just an example) by letting them sell CGT-free and move to a slightly upmarket next family home and that the subsidy should phase out gradually and stop at, say, $5 million. That might look fine, niow - and it would probably have the immediate benefit that wealthy people might well reduce the extent of their over-consumption of owner-occupied housing that is presently only indulged in because of the tax benefit - but when the figures aren't properly-indexed to keep up with the real value of assets of the same sort of standard and class, so that the CGT exemption eventually only applies if you own-occupy a tin shack in Nelson, it would seem that everyone had been sold a pup.

There are, thus, many useful and progressive strategies that might be reasonably considered but I'm not sure that any government can be trusted to set a "fair" level and transition process and maintain them over time.

[think positive]

If they cut out negative gearing, where are all the families who can't or won't save a deposit going to live? public housing?

We no longer have any domestic rentals and never will again, not worth the hassle, the ridiculous new 'let em do what they want with someone else's property" rules, the mandatory yearly or every 2 years testing on electrical, gas etc. Our timing was great, we were very lucky, aside from shit arse low grade tenants on occasion, but for us its worth it now.

Quite frankly I reckon negative gearing with maybe better rules is a legit way for lower income families that have some saving sense to get ahead. Good luck to them.

A lot of the current housing problems is caused by "I want it now" attitudes, over borrowing when interests rates were low, and over extending. The amount of houses on the market right now is scary.

P4S your interstate apartment idea, close friends did just that but on a smaller scale, and it was rented out fully for the first 12 years or so, now that its paid off its their holiday home, about 200 metres from the beach, and tripled in value. Smart planning is not just for millionaires! meanwhile, the gentleman that rented it most of that time loved it, was well looked after, and does not begrudge them at all! And not all states have the same taxes and rules, the vic stamp duty rort for a start!

not everyone wants to own, their choice, but they need places to live, and not for 3K a week, hence the need for mum and dad blue collar investors!

[stui magpie]

^

Agree with both P4S and TP.

The general exemption and tax bands for PAYG should be indexed too, which would be sensible but fails in a marketing sense because people wouldn't notice it.

What they do notice is when a government, after a decade or so of reaping cash through bracket creep, magnanimously decides to give people a "tax Cut". In a practical sense all they are doing is adjusting the brackets to take into account the increase in wages over said past decade and setting them back to somewhere close to but less than where they would be had they been indexed, but they get to be the good guys in a marketing sense.

A good example is that the tax free threshold was tripled to $18200 in 2012-13.

At that time the average annual full time adult salary was just under $78,000 so around the first 25% of their salary was tax free.

Now, a decade later, it's just over $98,000. So someone who's stayed in the same job and just had basic increases now pays tax on more of their salary than they used to.

So the couple earning $100k each in the example above are pretty much Mr and Mr's average, not high earners and certainly not wealthy by any stretch.

I'd have no issues with P4S's suggestions to put a cap on the CGT on the family home and to limit legative gearing to one property per investor and put a cap on that too, as long as the caps were sensible and indexed annually.

Just for the record, I don't negative gear. I bought my property in Toc with a bank loan, got no first home buyers grant because I wasn't living there, never rented it out so no negative gearing so zero government assistance at all and, because I don't live there, if/when I eventually sell it I'll have to pay CGT.

[Skids]

Next door to me just sold for $865k. The seller bought the place 5 years ago for $500k and spent just over $100k on renos over the 5 years.

They probably would have got more on market, but didn't want the hassle. Was sold on a Facebook private buyers site within hours of posting at $800k- $850k.

[stui magpie]

^

Yeah, the joint across the road from me sold just before Xmas for $1.2M. The sellers bought it 15 years ago for $470K and didn't really do that much to it, just tarted it up for sale.

The joint a few doors down goes up for auction on Saturday. I had a look through on the weekend. Pretty much original floor plan 1960's weatherboard with tiny bedrooms. It's been tarted up nicely, even with the fake display beds which are 2/3 size of real beds to make the rooms look bigger. It's got a price guide of $880k to $980K. Be interesting to see what happens.