Andrew from Vista Financial

Investing in Property

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    At last a clear statement about negative gearing. We own a house outright that we rent out. I can never convince people that we are actually better off paying the tax rather than interest on a loan. I did the sums and as we bought and built the capital gain has been good too.

     

    Although I cannot say how much I could have made (or lost) by investing that money in other ways and that is always the final argument for the negative gearing camps!

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    I received this article as part of a financial newsletter, migrants get a mention.....

     

     

    Investors get in early

    Low interest rates, affordability and underlying demand created by migration draw both investors and owner occupiers into the market at the start of a new property cycle.

    The difference this time is that investors have returned early.

     

    Usually, when government incentives are on offer, first home buyers start things off. They buy from owner occupiers, who upgrade to better homes. Investors enter later.

     

    This cycle was preceded by a downswing in property prices and a long period of little construction in most cities.

     

    Migration rates stayed strong and rents rose but interest rates were high, constraining affordability.

    When rates were cut and affordability improved, rents were still rising and yields were good, so investors came back into the market at the same time as owner occupiers.

     

    Initially, the small gap between mortgage repayments and rents meant investors could positively gear into some properties. Rapid price growth stopped that.

     

    Rental growth is now slowing as tenants are buying and construction is increasing.

     

    Around the country, investors are still most active in Sydney, despite price rises.

     

    Brisbane will get more attention this year. Low interest rates and falling prices have made South East Queensland more affordable. An oversupply of homes that built up when prices were rising is being cleared. City fringe properties that will attract interstate migrants will be in demand.

     

    Investors are also returning to Melbourne, despite a glut of new properties. Overseas investors have been active. Foreign migrants are also absorbing the supply.

     

    Perth investor activity and price growth has slowed, partly due to questions over the mining industry outlook.

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    At last a clear statement about negative gearing. We own a house outright that we rent out. I can never convince people that we are actually better off paying the tax rather than interest on a loan. I did the sums and as we bought and built the capital gain has been good too.

     

    Although I cannot say how much I could have made (or lost) by investing that money in other ways and that is always the final argument for the negative gearing camps!

     

     

    Yes I have had the conversation more times than I can remember trying to explain that it is better to have an investment that you pay tax on that not!!

     

    The other one that crops up is if something is tax deductible, it is very common for people to believe that this means they will get it all back at tax time and not just the tax amount payable on it.

     

     

    Andy

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