The Australian tax code also taxes businesses on profits, not income. If negative gearing was removed, investors would just restructure their portfolio using a company as a front, and pay tax on net earnings.
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Mortgage rates are generally under 4%, while the price for an average house in Melbourne or Sydney is getting up to a million bucks.
It’s fucking nuts. So many suckers are going to be burned when interest rates rise… Just because the bank will give you a loan doesn’t mean you should get one.
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If you buy a house in Australia – where housing prices are out of control, even by global standards – you can wait a couple months for the house’s book value to go up, and then borrow against that “unrealised capital gain” to buy another house…and then you can do it again.
I am not a banker, but that sounds like a really bad scheme to loan out a lot of money and expect it back.
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the reason it worked for banks in the us was that they immediately packaged the loans and sold them on wall st as securities.
the rating agencies basically lied on the returns, and everybody gobbled them up.
if australia is currently like the us was, when the crash comes it may not even be obvious who owns the loans.
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Yeah, I thought the tax was a good idea at the time, and I still do, but it’s not having the effect I had thought it would. Housing prices are still increasing. A lot. Rental prices are also increasing.
Part of the problem is that the housing market in Vancouver, Australia, and other places (like NYC and London) is now global. Local conditions are not determining prices, but rather global investors are driving up prices in all of these places in tandem without regard for the people who actually live there.
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It’s not…banks are fairly regulated in Australia.
As someone who can’t buy a house here, I’d love for there to be a massive crash, except it would probably also impact employment, inflation, all the rest of the fun stuff.
It’s a very layered problem, including things like middle-class welfare, overseas investment, the vast majority of jobs being located in inner cities while most new housing is built in the outer areas without accompanying infrastructure and a general “fuck you, I’ve got mine” that the current government has for the younger segment of the population who won’t vote for them anyway.
All in all, a clusterfuck of short term thinking that our political class specialises in, and a lack of political will to try and resolve anything.
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Mine is. I’ve been dropping quarters in between the floorboards for years.
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I don’t think it’s so much that the banks are ‘more cautious’ than that ‘the government won’t let the banks be as stupid’.
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I’ve heard that Vancouver is like the LA of Canada. Best weather by a fair margin. The large city with the best weather ends up being inhabited by the rich from all over. So that’s part of the crazy of Canada. San Francisco has that as well.
I’ve only been to Vancouver though, heh, so I don’t know about the weather in the rest of Canada.
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Meh, stories like this have been running in Aus for at least the last 30 years. The journo’s just dust the same article off every six months and update the figures.
It is either the mother of all bubbles, or they are wrong, as they have been wrong the last sixty times. I’m sure they will be right eventually, but I’m not convinced it will be this time.
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On top of that, a lot of the real estate spending by those “global investors” is actually money laundering.
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in Vancouver there is a LOT of CHINESE investors partly because there Chinese government is making investment in property HARDER in CHINA to AVOID a BUBBLE bursting
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IIRC it is also a way for rich Chinese to invest in non-Chinese stuff and diversify and get money they can spend out of the country.
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IIRC, the level of personal debt in Oz is unprecedented anywhere. Our economy is held together with crossed fingers.
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That’s pretty much the case; mild winters (maybe a couple of weeks with any snow in Vancouver proper) and usually mild summers. We get the warm weather because the Japanese Current is forced around the South end of Vancouver Island and hits the Lower Mainland head on. Drive 50 miles East in January and you’re frequently up to your ass in snow. Go into the Rockies and you’re into the same stuff as the US Midwest - summer prairie storms, winter blizzards etc.
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Lol now we know which civil servants added the “tax saving” catalyst, we should maybe check out their property ownership records!
Srsly, this day and age, sophisticated economy like Oz, don’t blame the regulator. If you can open the tap at home and money comes out, worry.
Ah, tulips.
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I feel I should call out this particular line from TFA:
they have invested into nothing more than a $1.7 trillion ‘piss in a fancy bottle scam’,” the report says.
You’re not going to read a line like that in a financial report anywhere else are you 
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Fascinating stuff. Thanks for sharing. I like the irony of the ship intended to function as a floating hotel actually precipitating the collapse of the property bubble.
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Is that a good thing? It doesn’t sound like a good thing to me, but then I’m not a landlord.
