Negative gearing is only part of the problem...INTEREST ONLY LOW DOCS are the sub
prime generator of selling homes to people who cannot afford to buy.
Steve Keen stated property was 40% overvalued when the GFC hit and it was for those who had low doc loans approved and had to sell..
APRA’s guide was banks only had to insure 40% of their loan portfolios.
It’s just going to mean more recycling of properties which is exactly how a PONZI
works!
7.30 Report does the investor bubble
at 12:27 pm on April 6, 2017 | 52 comments
By Leith van Onselen
https://www.macrobusiness.com.au/2017/04/7-30-report-investor-bubble/
ABC’s 7.30 Report last night ran a segment on how first home buyers (FHBs) are becoming casualties of Australia’s specufestor bubble.
The segment features a property developer, Pat Singh, basically telling FHBs to do whatever they can to enter the market:
HOW INSANE IS THAT?????
https://www.youtube.com/watch?v=Ygw3CTij56k
PAT MCGRATH [Reporter]: Who’s buying all this land? Is it investors or…
PAT SINGH: Mainly investors…
PAT MCGRATH [Reporter]: Do you feel like it’s fair for people to describe this market as dominated by people who are there to make money, rather than to have a place to live?
PAT SINGH: That sort of, ah – is always going to happen. People will always find somebody to tell them that somebody else is dominating it because they couldn’t do it. So what they need to do is basically, of course, go out and make it happen for themselves. That’s basically what it is.
PAT MCGRATH [Reporter]: Find a way to buy a house?
PAT SINGH: That’s exactly what it is. I mean, whether – I mean, if they don’t have the deposit, get it from their friends, family members: put something together and just buy something. Get into the market. Don’t wait.
It also features Stephen Walters, chief economist at the Australian Institute of Company Directors, urging the government to unwind negative gearing and the capital gains tax (CGT) discount:
STEPHEN WALTERS, CHIEF ECONOMIST, AUSTRALIAN INSTITUTE OF COMPANY DIRECTORS: I think we need to step back a bit from the politics, examine the core problems.
There’s a perfect storm of factors out there that’s causing the housing affordability problems and one contributor to the problem is the negative gearing nexus with the capital gains tax discount…
I would love to see the Government announce a review of the negative gearing arrangements, but I doubt that’s going to happen. I think we are only four weeks out from the budget and the noises out of the Government are not particularly constructive there…
However, the segment still pins the blame for Australia’s woeful housing affordability on a lack of supply – conveniently ignoring the mass immigration program that has caused the supply-demand imbalance in the first place: THATS JUST PURE ROT!!!
STEPHEN WALTERS: I don’t think you’d see much impact at all [from tax reform]. I think the core problem is: we still don’t have enough homes.
So I think certainly some parts of the inner city apartment markets would be exposed, but I think the broader market would still probably rise in price, because we simply have an excess of demand over supply of housing.
PAT MCGRATH: The Reserve Bank Governor also believes investors alone aren’t to blame. A lack of AFFORDABLE HOUSING is the bigger problem.
PHILIP LOWE, GOVERNOR, RESERVE BANK OF AUSTRALIA: I find it hard to escape the conclusion that we need to address the supply side if we are to avoid ever-rising housing costs relative to our incomes and to avoid the intended incentive to borrow that is created by rising asset prices.
The segment also features Prosper’s Catherine Cashmore, who notes that a significant amount of investor-owned homes are lying vacant:
PAT MCGRATH: Yet there’s evidence that, in parts of Australia, even in the centre of our big cities, homes owned by investors are sitting empty.
(To Catherine Cashmore) You have looked at the water usage of areas like this.
CATHERINE CASHMORE, PROSPER AUSTRALIA: Yes.
PAT MCGRATH: So what has that shown about the occupancy in these types of areas of Melbourne?
CATHERINE CASHMORE: Yeah, so there’s a lot of accommodation that’s vacant in the high-rise apartment blocks in Melbourne. That’s a lot of people who aren’t using much water per day and that’s how we work out how many properties are vacant.
PAT MCGRATH: So, what, people are just buying them and letting them sit empty?
CATHERINE CASHMORE: Well, the yields are so low in Melbourne. I mean, yields in Melbourne are at record lows: around 2.8 to three per cent.
PAT MCGRATH: That’s how much money you can make by renting them?
CATHERINE CASHMORE: That’s exactly right: that’s your earnings from the property. And so the only reason that people really buy property in Australia is to speculate on the capital growth. There’s no reason to buy property to actually get a rental yield out of it.
PAT MCGRATH: Prosper Australia, an economic research group that’s pushing for land tax reform, has found that up to 80,000 properties in Melbourne alone have nobody living in them.
(To Catherine Cashmore) So potentially 80,000 properties around Melbourne sitting empty, but the Government and the Reserve Bank Governor last night all say it’s a matter of supply and demand. What do you think about that?
CATHERINE CASHMORE: It’s poor research. And they should look far closer at the figures. They should be looking at our reports and they should be looking at some of the other studies that other people have done, which back up the data that we have shown.
PAT MCGRATH: So the Reserve Bank Governor is wrong?
CATHERINE CASHMORE: The Reserve Bank Governor is wrong.