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New Zealand is in the process of having negative gearing removed over 4 years… currently only 50% of losses are deductible. Interesting outcome 2 years in is that first home buyers are the highest percentage of people taking out mortgages, whereas historically it was investors who dominated. As a property investor I should be lamenting the removal of interest deductibility, and plenty of investors are. My take is that NZ will be a better place to live when more people own than rent - a more decent society of people with a stake in the place, rather than renting shitty damp houses. Too many investors here are undercapitalised and deliver sub optimal housing to the market. They are being taken out of the game via removing negative gearing as a means of building wealth via property. I think it’s a good thing - and this is from someone who owns quite a few houses :-)
If they are removing negative gearing, it should be for all income producing leveraged asset that's owned under an individual. This includes, shares, air bnb, people who rent out spare bedroom in their PPoR etc. Otherwise, it will be seen as an attack against people who invest in Real Estate. Now this won't happen because 144 MPs own more than one property. In fact, more MPs own three or more properties (84) than those who own one property or fewer (83)
Love the insights. They wont let negative gearing go away, they need people to invest in rental properties or else it just exacerbates the rental situation.
@@SpecialTBK renters don’t want to live in city outskirts, that’s first home owner territory for the lower-middle class Renters want to live near job and lifestyle locations
Very thoughtful analysis PK. Thank you. I find myself wondering what will happen (as an investor). If a property is slightly neg geared and rents rise dramatically, then that makes it positively geared, and the investor wins. Maybe The "Blue Chip" extreme neg geared properties don't improve as much, but for the majority of investors, it may not be so bad if this happens in the future...
Pollies never learn, they tried scrapping the Neg Gearing back in 1987/88 and were forced to bring it back in because investors left the market in droves and there were no properties available to rent, so in this particular rental climate, it'd be more a housing crisis than there is now. They would be really stupid to try it again.
@@AusPropertyMasteryWithPK I still dont understand why the rental market is worsen if the investor left the market. Let say the total houses is 100 and total 100 people to live in the houses. If investor left but more people own the houses and live in it. Then less renters and more owners. Total 100 people live in the houses is unchanged. Is that any trick here
@@erihsehc2 Not everyone can buy a house, what about foreign students, or those who've come from overseas to fill a certain position on a temp basis, those who don't have the money or resources to buy such as those on welfare, they all need to live somewhere. The Government needs to make it easier to buy an investment house not harder. I always tell people, if you can't afford to buy where you live, look for somewhere that one day you'd like to retire, it's easier to get an investment loan than it is a housing loan and someone will pay it off for you and one day, you might just get to live in it as after 25 years, you should be close to owning it outright but at the same token, you've given someone a place to live. Negative gearing is a tool available to anyone who'd like to invest in real estate, hopefully one day it'll be positive geared but it's a way of owning a property and a good way to get some of your tax back. You don't have to buy close to where you live now. Check out a topic called rent vesting.
@@AusPropertyMasteryWithPK Just a simple maths calculation here. If there were 120 families and 100 houses available, no matter the split between investors and owners (more investors or more owners), there were 20 families without a place to live. I still dont agree that more or less investors will impact the rental market, only more supply will do (build more houses or aptm)
Great video, Can you update this with data from NZ, where this is being implemented, especially your closing statements around 'new builds'. Cheers Mate
I am not in favor of removing completely, Negative gearing should rather be limited by number of title or capped value of combined title, specially those hard working parents who never taken any handouts and kept working hard not only for the family but also for kids' future. Too much handout for those who hardly put effort to improve productivity, will discourage the other group of hard working parents, who are not necessarily 'rich' as many may use the term wrongly
@@jamesm6341 my assumption in the video was instant removal, and it has negligee impact, phasing will be even more negligible. NZ market is completely different
@@AusPropertyMasteryWithPKpretty good results so far. Record hosuing builds. In Auckland, combinen with médium density relaxation rent has not moved much for 5 yrs plus (maybe not in the last 12 months for obvious reasons)
While negative gearing is NOT a reason to invest it does help some investors better manage their tax liabilities. Making losses while investing is not often the best strategy but it does suit a small number of investors. Having incentives for investors to invest in residential property is warranted. Negative gearing provides housing in more affluent locations which is also adding to the diversity in the communities. It is also necessary as government policy for public housing has been very short of the public needs. Losses are deductible in any business, however property investment is not considered a business as such.
It's ridiculous that the top % is getting such a huge tax break costing the govt top $ in taxes when they don't need the tax break. Australia needs to have regulated NG, stop letting developers land Bank, bring in STRICT regulations on the quality of the new building being built because they are cardboard boxes (hello Opal tower) and have rental protection like they have in countries like Switzerland where you can rent and not constantly worry of rent increases that are way over CPI.
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As a background to the baby boomer mentality as I’m around that generation there was only a buy and hold mentality in major capital cities and negative gear where possible. We did not have data or the internet with knowledge of positive gearing back then. It was just to take advice from 2 or 3 property “experts” like Koshie on Channel 7. There were only 2 other TV channels as well. So that’s the only advice we had.
Fascinated as to how you make many hundreds of thousands each year of net profit from only 12 properties. How does that work? Were these bought in 1970?
Obviously its time to focus negative gearing on builds and only for the first 5 years as a rental. There should be varied rates for regional and city builds. There should be a grandfathering strategy for recent builds under the existing rules. Governments allow tax deductibles to promote results they desire to create. Our current treasurer wants to do something like this at the next election. The libs are based on real estate developers and investors will not be honest about the countries best interests.
In my opinion , they won't do anything for the next 24 months with the current rental crisis ..once they get re-elected in 2025 , they will make changes to the policy they took to the 2019 elections and lost .It will be restricted to 1 property if it's established or 2 if its newly built( as it keeps the building industry going ). Cgt is a bit tricky as it will massively affect the share market as well , so not sure if there will be changes to that .
I ran across your channel and so far i like your videos. On this subject when you started comparing with the stock market i wanted to tell you to stop. People need water, air, work and place to live. The 4th piint makes a difference netween slavery and free society. People are selfish, even more in rich countries like ours. On an upturn they want to leverage and trade properties like shares. On a downturn they are the first to screech for commi like government subsidies. They have money, and they lobby. It is upside and still banks now are insured, government subsidies developers more than ukraine and insentives are everywhere. There is no free market. Never been.
As the data shows, the vast majority of property investors don’t even use negative gearing. Even the ones that do, after 5 years it become positive and they start paying tax.
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Great video as always. In my opinion, rental freeze proposed by Greens is more worrying than abolishing negative gearing.
Yes that’s not great policy - I did a video on it last Oct
Agree! Most serious property investors are looking for cashflow, thus positive gearing!🙄 Great statistics from PK as per usual!🙏🏼🙏🏼🙏🏼
New Zealand is in the process of having negative gearing removed over 4 years… currently only 50% of losses are deductible. Interesting outcome 2 years in is that first home buyers are the highest percentage of people taking out mortgages, whereas historically it was investors who dominated. As a property investor I should be lamenting the removal of interest deductibility, and plenty of investors are. My take is that NZ will be a better place to live when more people own than rent - a more decent society of people with a stake in the place, rather than renting shitty damp houses. Too many investors here are undercapitalised and deliver sub optimal housing to the market. They are being taken out of the game via removing negative gearing as a means of building wealth via property. I think it’s a good thing - and this is from someone who owns quite a few houses :-)
If they are removing negative gearing, it should be for all income producing leveraged asset that's owned under an individual. This includes, shares, air bnb, people who rent out spare bedroom in their PPoR etc. Otherwise, it will be seen as an attack against people who invest in Real Estate. Now this won't happen because 144 MPs own more than one property. In fact, more MPs own three or more properties (84) than those who own one property or fewer (83)
Nice share
STR should have to pay non occupancy tax, for sure!
Absolutely. Investment income should be siloed for deductions
Love the insights. They wont let negative gearing go away, they need people to invest in rental properties or else it just exacerbates the rental situation.
They need to have a lot of courage if they are going to do it
They need investors to build new homes for rental. Which is not what is spruiked here.
@@SpecialTBK renters don’t want to live in city outskirts, that’s first home owner territory for the lower-middle class
Renters want to live near job and lifestyle locations
Very thoughtful analysis PK. Thank you. I find myself wondering what will happen (as an investor). If a property is slightly neg geared and rents rise dramatically, then that makes it positively geared, and the investor wins. Maybe The "Blue Chip" extreme neg geared properties don't improve as much, but for the majority of investors, it may not be so bad if this happens in the future...
Thanks.. yes this is quite true.. the blue chip folks will suffer while getting no better cap growth
Pollies never learn, they tried scrapping the Neg Gearing back in 1987/88 and were forced to bring it back in because investors left the market in droves and there were no properties available to rent, so in this particular rental climate, it'd be more a housing crisis than there is now. They would be really stupid to try it again.
Agree, I’m all for affordability, but this would mean rents Jack up even more this time
@@AusPropertyMasteryWithPK I still dont understand why the rental market is worsen if the investor left the market. Let say the total houses is 100 and total 100 people to live in the houses. If investor left but more people own the houses and live in it. Then less renters and more owners. Total 100 people live in the houses is unchanged. Is that any trick here
@@erihsehc2 hey it will increase home ownership.. but the issue is more rental demand is constantly increasing.. it’s not static
@@erihsehc2 Not everyone can buy a house, what about foreign students, or those who've come from overseas to fill a certain position on a temp basis, those who don't have the money or resources to buy such as those on welfare, they all need to live somewhere. The Government needs to make it easier to buy an investment house not harder. I always tell people, if you can't afford to buy where you live, look for somewhere that one day you'd like to retire, it's easier to get an investment loan than it is a housing loan and someone will pay it off for you and one day, you might just get to live in it as after 25 years, you should be close to owning it outright but at the same token, you've given someone a place to live. Negative gearing is a tool available to anyone who'd like to invest in real estate, hopefully one day it'll be positive geared but it's a way of owning a property and a good way to get some of your tax back. You don't have to buy close to where you live now. Check out a topic called rent vesting.
@@AusPropertyMasteryWithPK Just a simple maths calculation here. If there were 120 families and 100 houses available, no matter the split between investors and owners (more investors or more owners), there were 20 families without a place to live. I still dont agree that more or less investors will impact the rental market, only more supply will do (build more houses or aptm)
Great video, Can you update this with data from NZ, where this is being implemented, especially your closing statements around 'new builds'.
Cheers Mate
I am not in favor of removing completely, Negative gearing should rather be limited by number of title or capped value of combined title, specially those hard working parents who never taken any handouts and kept working hard not only for the family but also for kids' future. Too much handout for those who hardly put effort to improve productivity, will discourage the other group of hard working parents, who are not necessarily 'rich' as many may use the term wrongly
Thanks for sharing
Great video PK. Thank you for the effort you put it to continue to educate thousands of people.
Thank you. Messages like this keep me going
Hey Pk, have you considered what happened in NZ? Negative gearing was axed and phased out in 5 years.
What are your thoughts?
@@AusPropertyMasteryWithPK the property prices dropped after this combined with high interest rate in NZ. My friends NZ all selling their IPS.
@@jamesm6341 my assumption in the video was instant removal, and it has negligee impact, phasing will be even more negligible.
NZ market is completely different
NZ economy has been destroyed so let us not follow...also no capital gains tax on property in nz so situation different.
@@AusPropertyMasteryWithPKpretty good results so far. Record hosuing builds. In Auckland, combinen with médium density relaxation rent has not moved much for 5 yrs plus (maybe not in the last 12 months for obvious reasons)
While negative gearing is NOT a reason to invest it does help some investors better manage their tax liabilities. Making losses while investing is not often the best strategy but it does suit a small number of investors. Having incentives for investors to invest in residential property is warranted. Negative gearing provides housing in more affluent locations which is also adding to the diversity in the communities. It is also necessary as government policy for public housing has been very short of the public needs. Losses are deductible in any business, however property investment is not considered a business as such.
I don't think I would trust RBA, RBA also said they won't raise interest rates
Good point! I was hoping they were better back then
It's ridiculous that the top % is getting such a huge tax break costing the govt top $ in taxes when they don't need the tax break.
Australia needs to have regulated NG, stop letting developers land Bank, bring in STRICT regulations on the quality of the new building being built because they are cardboard boxes (hello Opal tower) and have rental protection like they have in countries like Switzerland where you can rent and not constantly worry of rent increases that are way over CPI.
❤ JOIN THE COMMUNITY & GET FREE SUBURB TIPS + STRATEGIES
💡 Private Facebook Group With Over 30,000 Clients & Investors 👉 facebook.com/groups/passiveincomethroughproperty
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As a background to the baby boomer mentality as I’m around that generation there was only a buy and hold mentality in major capital cities and negative gear where possible. We did not have data or the internet with knowledge of positive gearing back then. It was just to take advice from 2 or 3 property “experts” like Koshie on Channel 7. There were only 2 other TV channels as well. So that’s the only advice we had.
Thanks for sharing, very understandable
negative gearing is losing...
Fascinated as to how you make many hundreds of thousands each year of net profit from only 12 properties. How does that work? Were these bought in 1970?
Search my name in google and put net worth and my whole portfolio is there, then you can do the math
@@AusPropertyMasteryWithPK ah, you have no debt on those. That makes sense. Well done to you
Obviously its time to focus negative gearing on builds and only for the first 5 years as a rental. There should be varied rates for regional and city builds. There should be a grandfathering strategy for recent builds under the existing rules. Governments allow tax deductibles to promote results they desire to create. Our current treasurer wants to do something like this at the next election. The libs are based on real estate developers and investors will not be honest about the countries best interests.
Pk I think they will reduce the 50% CGT discount to 25% to start with.
Could do - better do it for stocks too then
In my opinion , they won't do anything for the next 24 months with the current rental crisis ..once they get re-elected in 2025 , they will make changes to the policy they took to the 2019 elections and lost .It will be restricted to 1 property if it's established or 2 if its newly built( as it keeps the building industry going ). Cgt is a bit tricky as it will massively affect the share market as well , so not sure if there will be changes to that .
Could be! I don’t see the rental crises getting any better though..
more than 5% bank interest ......surely go negative gearing 😂😢
Not yet, we are at average rates long term just about
Well said PK
I ran across your channel and so far i like your videos. On this subject when you started comparing with the stock market i wanted to tell you to stop. People need water, air, work and place to live. The 4th piint makes a difference netween slavery and free society. People are selfish, even more in rich countries like ours. On an upturn they want to leverage and trade properties like shares. On a downturn they are the first to screech for commi like government subsidies. They have money, and they lobby. It is upside and still banks now are insured, government subsidies developers more than ukraine and insentives are everywhere. There is no free market. Never been.
if they remove it the incentives to own a rental is gone. cannot see how it is viable to house someone else anymore. good luck with that
As the data shows, the vast majority of property investors don’t even use negative gearing. Even the ones that do, after 5 years it become positive and they start paying tax.
@@AusPropertyMasteryWithPK im leverage to my eyeballs 😵