Blog
Negative Gearing, Your Pick
As the federal election gathers momentum, there is a fierce debate about the future of negative gearing. What the Labor movement is proposing is a disaster.
What the Labor movement is proposing is a disaster. My greatest fear is that if Labor wins and assumes that it has an unconditional mandate for change, what impact will this have on negative gearing in property.
Can you imagine an investment landscape where there is no choice ? What advice would you give a young family wanting to get ahead when they ask you, which property should we invest in when all they can see is a field full of sun flowers ?
Like our environment, our economic landscape is sensitive, and needs to be nurtured, not destroyed.
My initial reaction is that if negative gearing is limited to only new housing, then returns on investment will be compromised because capital growth in new housing on the outskirts and / or apartments do not compare with existing housing. One solution would be to purchase new housing in proven growth corridors, or consider commercial property investments but that won’t suit everybody, let alone their budget limitations. The other reason is most buyers want to like what they purchase even though it is primarily an investment, and I can tell, for many buyers, investing in a stand alone house in the new frontiers won’t cut the mustard.
Infrastructure and Scarcity are key growth levers. Let me make it quite clear, there is no scarcity in most new developments, because of duplication, that is why existing properties are keenly sought after for investment.
If Labor wins, sweeping changes may occur to negative gearing . My understanding is that there will be a small window of opportunity for buyers to get their negative gearing strategies in order, before it is too late, and the whole investment landscape is turned upside down. Make no mistake, there will be a stampede.
Rather than throw the baby out with the bath water, a more conservative approach is required which is supported by Deloitte’s Budget Expert, Chris Richardson who believes negative gearing should be left unchanged but maybe, the capital gains tax discount could be reduced. Let’s not forget that history is littered with great ideas that have resulted in disastrous outcomes ? A measured approach is the way forward.
So what does this all mean ? Growth is the key driver of wealth. How often do you hear about buyers who have purchased properties off the plan or buy properties that look no different to a paddock full of sun flowers. They get caught up in the hard sell of negative gearing but fail miserably when it comes to growth. Sad but true.
Buying the right investment property just doesn’t happen, it can take months of research and discovery to get it right. On the other hand, if it comes to choosing which sunflower you purchase, don’t call me because from my perspective, they all look the same.