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I know how hated negative gearing is in Australia but I believe removing this is solving the wrong problem and may exacerbate the top end owning a greater propo

I know how hated negative gearing is in Australia but I believe removing this is solving the wrong problem and may exacerbate the top end owning a greater proportion of real estate over the longer term. It;'s a different view but hear me out. Once negative gearing is removed, the wealthy can simply debt shift against asset classes that still allow negative gearing. e.g shares. The very wealthy have this asset base to increase debt ratios against share type assets, then buying property for that cash borrowed, effectively leaving them with the same negative geared net benefit just more higher leveraged against shares (and likely debt covenants against the property for collateral). Meanwhile the middle class can never do that so you just knocked them out of the property investment game reducing competition for the wealthy. Secondly, removing negative gearing doesn't stop property hoarding of all those people that own a bunch of houses debt free. Ultimately I believe the goal should be to allow people to own a home if they wish, and this group should always have a financial advantage to doing so over someone simply investing/spectating as residential property should not be a speculative asset class. The best way to solve investment hoarding of residential property is to remove/reduce land tax on owner occupied houses, and place a premium % land tax on investment properties. This will influence people buying both with and without debt. Further it will be easier for government to increase/decrease the % land tax differential to get the ratio right between investment opportunity and not overheating the market. Whilst Removing negative gearing is a one time move. I'd also look to do the same deal for farmland or we're likely to find rural Australia largely owned by corporate interests over the next couple of generations.

spronkey 11y ago
If you remove negative gearing for property investment in isolation, sure, agreed. But I think there are ways via taxation and other policy to effectively nullify any advantages to shifting to assets such as shares. I mean, the general problem you describe is that money creates means, to create more money. How do you solve this problem now that existing policies have resulted in a skewed distribution of existing money? Absolutely agree though that owner occupied houses should be massively incentivised compared to investment properties. IMO it's advantageous for society to have most people owning property. I think a good goal would be to have most people both owning property, and not being cash-poor at the same time.
- Gustomaximus 11y ago
  > But I think there are ways via taxation and other policy to effectively nullify any advantages to shifting to assets such as shares. Sure. But then you making increasing complicated rules when the land tax premium is simple. And generally the more complicated/specific the rule the more new loop holes are made. > I mean, the general problem you describe is that money creates means, to create more money. Not at all. The government should encourage people to save, invest and build wealth. I guess what my general problem is allowing unfettered business activity into essential areas of life, above the needs of the masses and especially where demand is inelastic. So I'd be inclined to keep strong regulation or government involvement in areas of; housing, health, education, agriculture (ie food), and telco if it became a problem to ensure this is available to the population at fair market rates not distorted by monopoly (or similar) or speculation.

spronkey 11y ago

If you remove negative gearing for property investment in isolation, sure, agreed. But I think there are ways via taxation and other policy to effectively nullify any advantages to shifting to assets such as shares. I mean, the general problem you describe is that money creates means, to create more money. How do you solve this problem now that existing policies have resulted in a skewed distribution of existing money? Absolutely agree though that owner occupied houses should be massively incentivised compared to investment properties. IMO it's advantageous for society to have most people owning property. I think a good goal would be to have most people both owning property, and not being cash-poor at the same time.

Gustomaximus 11y ago
> But I think there are ways via taxation and other policy to effectively nullify any advantages to shifting to assets such as shares. Sure. But then you making increasing complicated rules when the land tax premium is simple. And generally the more complicated/specific the rule the more new loop holes are made. > I mean, the general problem you describe is that money creates means, to create more money. Not at all. The government should encourage people to save, invest and build wealth. I guess what my general problem is allowing unfettered business activity into essential areas of life, above the needs of the masses and especially where demand is inelastic. So I'd be inclined to keep strong regulation or government involvement in areas of; housing, health, education, agriculture (ie food), and telco if it became a problem to ensure this is available to the population at fair market rates not distorted by monopoly (or similar) or speculation.