31-03-2014, 10:14 PM
(31-03-2014, 09:56 PM)Boon Wrote:(31-03-2014, 09:23 AM)greengiraffe Wrote: There is always 2 sides to a coin - these types of reports are very common and so far have failed to deter the strong appetite by local well off Australians, hardworking class Australians (taking advantage of negative gearing - a phenomenon only pertaining to Australia) and more recently hot $ inflow from overseas that have stoked the uptrend in Aussie property prices that has become more evident last year.
Last but not least with interest rates at the lowest levels since 1960s, there is really a lack of understandable investments for common Australians and hence the result of "fear" reports in "hope" that prices may correct to reasonable entry levels.
That's my 1 cent worth
(31-03-2014, 09:13 AM)Boon Wrote: Housing bubble fears: property prices could fall 10 to 20 per cent
March 31, 2014 - 9:02AM
Christopher Joye
Read more: http://www.smh.com.au/business/the-econo...z2xUxZflvk
According to the report, home value fell 6.1% in 2008 (following peaking of valuation benchmark in 2006) and 6.6% in 2011-2012 (following peaking of valuation benchmark in 2010), as per RP Data
In Sydney, prices had gone up around 20% over the TWO year period of 2012 and 2013, and it looks like prices are still trending up this year.
How long would prices continue to increase is anybody’s guess – but ultimately it is governs by the dynamics of Supply and Demand.
High dwelling price to disposable income and “normalized” interest rate would definitely dampen demand from the local Australians - but would these be enough to tilt the imbalances of “under-supply” and “overseas demand" to the extent that prices will fall 10 to 20% ? Only time will tell.
"there is really a lack of understandable investments for common Australians" - I bet the Aussies would disagree on this
In Negative Gearing one can get a tax deduction only if one has a loss on his/her investment - but remember, a loss is still a loss - If one does not make enough Capital Gain down the road to offset accumulated losses - it would be a loss making investment.
Negative Gearing in simple terms - suffer losses on investment properties to reduce taxable income. Losses are not accumulated.
For example someone made A$100,000 in income before losses on investment properties. Investment properties made a losses of A$30000 (rental income insufficient to cover outgoings - interest expenses and management fees plus non cash depreciation). So as long as you have earned income, losses on investment properties will reduced taxable income. For high tax paying countries like Australia, it is the most popular tool for legal tax reduction. In addition, the ownership of properties at a right gearing will have capital appreciation potential.
Over the last 25 years, Australians have enjoyed steady capital appreciation from properties and for the daring, it has became a sure rich model for many. While it may be a stack of cards to many conservative people, there are many that aspire to be landlords at some point in the future in hope of securing a retirement. I personally never believe in gearing but really a sizable correction of any sorts is not within my ability to predict.
If you refer back to a chart on the housing affordability rates on 19 Mar 14 in this same thread, you would have a better idea not to bet against the facts since 1980s.
Not vested interests
GG