The whole negative gearing debate has taken a comical turn, with Domainfax’s spruiker-in-chief, “Doc” Andrew Wilson, today warning that Australians will rush to invest in property in a bid to get in before negative gearing is restricted, thereby fueling another surge in prices and pricing-out first home buyers:
A plan to limit negative gearing tax benefits to investors who buy new homes and not existing ones threatens to send investors buying up existing real estate before the cut-off date, Domain Group chief economist Andrew Wilson said.
“The end of negative gearing is unprecedented motivation for investors to surge into the market,” Dr Wilson said.
The effect was likely to be felt at the lower end of the established housing market “further pricing first home owners out”…
I know that Aussie property investors are not always rational – hence the recent surge in investment as rental yields plumb all-time lows – but come on!
Why would an investor leverage-up big to buy a loss-making property in the full knowledge that as soon as the negative gearing curbs come into effect, prices will very likely fall and dwelling construction will rise, thus leaving them with a loss-making investment with fewer prospects for either capital or rental growth?
As H&H says, Doc Andy would sell you property as concrete was poured over the market’s and his own dead face.
