The new <a href="https://www.apartments.com.au/new-apartments/yarraville-green-42-stephen-street-yarraville-vic-3013">Yarraville Green</a> development in Melbourne's inner west is showing that landscaping can be just as influential as architecture, with buyers responding strongly to the garden-first approach adopted from the outset by developer Excelon Projects and the project's design team.

Excelon appointed Six Degrees Architects and landscape architects SBLA to work collaboratively on the development, with a brief to create "a sustainable, design-led building with a focus on community."

That approach has resonated with buyers. According to Next Chapter Director Tom Hirini, who is leading the sales campaign, the landscaped communal garden has become one of the project's defining features, alongside its boutique scale and European-inspired cluster housing concept.

Local downsizers, right-sizers and established families already living in Yarraville and surrounding suburbs have accounted for the majority of purchasers.

[smartcode_project:default project_id=144913 project_image_fid=297740]

Yarraville Green will comprise 53 homes, including apartments and townhomes, arranged around the shared central garden to maximise connections to the landscaped open space. Parking has been moved underground, allowing the ground plane to be dedicated to greenery, pedestrian movement and communal spaces.

The landscape extends well beyond passive planting. Productive garden beds, a pergola, communal gathering spaces, garden sheds and a pet wash have all been integrated into the masterplan, creating spaces designed to encourage everyday interaction between residents.

[smartcode_project:default project_id=144913 project_image_fid=297741]

The interiors continue Excelon's focus on craftsmanship, incorporating bespoke elements by Melbourne artisans including leadlight detailing by Adadaz, hand-turned timber hardware by Auburn Woodturning and blown-glass lighting by Ruth Allen.

Sustainability has also been embedded throughout the project, with Yarraville Green targeting an average 7-star NatHERS energy rating through passive design principles, rooftop solar servicing common areas and rainwater harvesting for landscape irrigation.

[smartcode_project:default project_id=144913 project_image_fid=297735]

Construction continues to progress at Yarraville Green, with structural works well underway and framing works approaching completion under builder Balmain &amp; Co. The project remains on track for completion in mid-2027.

Apartments at Yarraville Green are currently priced from $625,000, while townhomes start from $1.4 million.

[smartcode_project_cta:default project_id=144913]

Joel Robinson

Garden-led design drives buyer demand at Yarraville Green

National diversified developer Fortis has officially launched Crest &amp; Walker, its latest Brisbane apartment development, with construction now underway on the 20-storey Newstead project.

Award-winning builder BINAH has commenced construction on the Bureau^Proberts-designed building, which will deliver a limited collection of 65 two and three-bedroom apartments on Kyabra Street.

[smartcode_project:default project_id=145922 project_image_fid=373556]

The project marks Fortis' fourth active residential development in Brisbane, following River House, which is nearing completion, alongside projects in New Farm and Hamilton as the national developer continues to expand its South East Queensland pipeline.

Fortis General Manager – Development Queensland Dan Boman said Crest &amp; Walker reflects the developer's long-term commitment to delivering design-led residential projects in Brisbane's established inner-city suburbs.

"We're proud to be strengthening our presence in Brisbane with Crest &amp; Walker, particularly in such a sought-after lifestyle destination as Newstead," Boman said.

"Every Fortis project is shaped by its context, and we approach each one with the respect and care it deserves.

"Our focus is always on creating places that feel connected to their neighbourhood and elevate the everyday experience for residents. Newstead continues to evolve as one of Brisbane's most sought-after urban communities, and Crest &amp; Walker reflects our ambition to contribute meaningfully to that story."

[smartcode_project:default project_id=145922 project_image_fid=373559]

Positioned between Gasworks Plaza and James Street, <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> has been designed as a boutique residential address offering privacy and generous living spaces within one of Brisbane's most established lifestyle precincts.

The building features a contemporary brick podium softened by integrated landscaping, while the upper levels are characterised by restrained architecture and enduring materiality. Interiors have been designed to maximise natural light, acoustic performance and long-term liveability.

[smartcode_project:default project_id=145922 project_image_fid=373583]

Residences comprise spacious two and three-bedroom floorplans, with two-bedroom apartments priced from $1.55 million and three-bedroom, half-floor residences from $3.95 million.

Residents will have access to a wellness-focused rooftop featuring a swimming pool, sauna, steam room, landscaped dining spaces and outdoor lounge areas overlooking Newstead and the Brisbane CBD.

[smartcode_project:default project_id=145922 project_image_fid=373571]

Sales are being managed by Slaite Projects, with Fortis expecting strong demand from owner-occupiers seeking a high-quality, design-focused apartment in one of Brisbane's most tightly held inner-city suburbs.

Completion of Crest &amp; Walker is slated for late 2028.

[smartcode_project_cta:default project_id=145922]

Fortis expands Brisbane pipeline with launch of Crest & Walker in Newstead

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 41-storey tower is now complete, with residents collecting their keys and moving into what has become one of the Gold Coast's most recognisable new landmarks.

Rising 127 metres above Chevron Island, Chevron One stands almost twice as high as any other building on the island. Its scale places it alongside the trio of towers at Jewel, arguably the last truly significant addition to the central Gold Coast skyline when they were completed around six years ago.

While there are several developments underway around a similar height to Chevron One, they are more concentrated within clusters of the highest towers in the city. The fact Chevron One sits within a developing precinct, looking back at the other high-rise developments in Surfers Paradise and Broadbeach, makes it a different proposition altogether. It will certainly become a reference point on the Gold Coast skyline.

[smartcode_project:default project_id=6515 project_image_fid=68833]

Developer Bensons Property Group is behind the 41-storey tower, which has 229 apartments, along with an exhaustive list of resident amenity spread across what is the largest development site ever assembled on Chevron Island.

The tower has been the talk of the town for years, says Ray White Projects Gold Coast agent Caitlin Rosenboom, who is selling the remaining apartments.

"People have been watching Chevron One go up for years," Rosenboom says, adding that many prospective buyers have been surprised by the scale of the views once they step inside.

"It's only when they walk through a completed apartment that they truly understand the position of the building," Rosenboom says.

"The views are jaw-dropping. Whether you're looking east over the ocean, across Surfers Paradise, along the river systems or out to the hinterland, every level offers something different but equally impressive."

[smartcode_project:default project_id=6515 project_image_fid=360215]

One of Chevron One's defining advantages is its location on the eastern side of Chevron Island on Stanhill Drive, a position which protects the views forever.

"There's only one row of houses between Chevron One and the water, and the height restrictions along the river means views from Chevron One can never be built out,"&nbsp;Rosenboom says.

While new apartment developments continue to emerge across the Gold Coast, Rosenboom says opportunities to secure a completed apartment with this level of outlook are becoming increasingly rare.

"The size of the site is something that would be incredibly difficult to replicate today," she says.

"That's allowed Chevron One to deliver the sort of amenity, open space and resident facilities that very few projects can offer. There are not many completed apartment buildings on the Gold Coast right now that can compete with the combination of scale, quality and amenity."

[smartcode_project:default project_id=6515 project_image_fid=68839]

There's around 2,000 sqm of amenity solely for the use of residents of Chevron One. Club One features a uniquely shaped swimming pool that mirrors the footprint of the building itself, set within a extensively landscaped gardens. There's also an indoor pool and spa, a fully equipped gym with a Pilates room, a yoga garden, a bookable private dining area and lounge that can host up to 30 people, and a 24-hour concierge service.

As for the buyers, Rosenboom is fielding enquiry from everywhere: Sydneysiders and Melburnians looking at the new and off-the-plan market following the changes in the Federal Budget, as well as those looking to relocate, through to South East Queenslanders seeking either a permanent home or a weekender bolthole.

"The Gold Coast lifestyle continues to resonate with people relocating from the southern states, and when they see the views and the quality of what's been delivered at Chevron One, it becomes very easy for them to understand the appeal," Rosenboom says.

A diverse mix of one, two and three-bedroom apartments remain available, with each offering "something a little different", be it the orientation and views, configuration, or level, to suit a wide variety of buyers.

The remaining apartments are ready to inspect in person, by appointment.

[smartcode_project_cta:default project_id=6515]

A decade in the making: Residents to move into Chevron One as construction wraps up

A general rule of thumb in new apartment developments is that the penthouses get the rooftop.

It's a formula that's become commonplace across Australia's apartment market. Residents might have access to a pool, gym or barbecue facilities on a dedicated lower level, but the most desirable outdoor spaces are typically reserved for the highest-priced homes at the top of the building.

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> has taken the opposite approach.

Rather than dedicating the rooftop to a handful of buyers, the Gold Coast developer has made it the centrepiece of its Flourish collection, creating expansive shared spaces from the best vantage point in the building.

The philosophy has reached its most ambitious expression at <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> in Palm Beach, where two rooftop precincts connected by a skybridge will deliver one of the most extensive lifestyle offerings seen in a residential apartment project on the Gold Coast.

[smartcode_project:default project_id=150017 project_image_fid=374053]

"We're seeing a clear move toward developments that offer more than just an apartment," Sherpa Group founder Christie Leet said.

"People want spaces that support how they actually live, whether that's working from home, staying active, or spending time with family and friends.

"That's where amenity becomes critical. It's not just about what's included, but how those spaces are designed to be used every day."

[smartcode_project:default project_id=150017 project_image_fid=374052]

The breadth of amenity has already attracted buyers across multiple demographics. Younger first home buyers have been drawn to Soleira's one-bedroom apartments, a product rarely delivered in Palm Beach, while families have responded to practical inclusions such as the shallow children's pool adjoining the main lap pool and the extensive communal recreation areas.

Instead of a single rooftop, Soleira delivers two distinct lifestyle zones.

[smartcode_project:default project_id=150017 project_image_fid=372547]

The southern rooftop has been dedicated to wellness, featuring a gym, yoga and Pilates studio, work-from-home facilities, a wellness centre, spa, and hot and cold plunge pools.

The northern rooftop focuses on recreation and entertaining, incorporating a heated resort-style pool, private dining rooms, pizza ovens, barbecues, a golf simulator, children's recreation areas, and what is expected to be the Gold Coast's first rooftop basketball court, which will also double as a squash court.

[smartcode_project:default project_id=150017 project_image_fid=374054]

Beyond the rooftops, Soleira will introduce 1,500 sqm of curated retail beneath the towers, creating one of Palm Beach's first genuinely mixed-use lifestyle precincts where cafés, restaurants and convenience retail become part of residents' everyday lives.

Sherpa has also retained management rights across the development, allowing it to oversee the long-term operation of the building through a 24-hour concierge model. The developer is also exploring additional revenue streams within the precinct aimed at helping offset ongoing body corporate costs for residents.

[smartcode_project:default project_id=150017 project_image_fid=370962]

While Soleira is the largest project Sherpa has delivered, the rooftop-first philosophy has been evolving for several years.

It began with <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>, the first project released under the Flourish brand. Rather than competing at the ultra-luxury end of the market with oversized half-floor and full-floor residences, Sherpa focused on creating lifestyle-driven apartments supported by resort-style shared spaces.

Amargo introduced more than 800 sqm of rooftop amenity, combining wellness facilities, heated pools, entertaining areas, cabanas, pizza ovens and private dining spaces into what was designed as an extension of residents' homes rather than a facility used only occasionally.

[smartcode_project:default project_id=146527 project_image_fid=366550]

That approach continued with Flourish Oasis, where the same amenity-led philosophy was refined into a more boutique development. Strong demand from Sherpa's growing VIP database saw much of the project sold before it reached the broader market, reinforcing buyer appetite for apartment communities centred around shared lifestyle experiences.

Flourish Amargo is slated for completion mid-way-through next year, with Oasis to be delivered by late 2027. Flourish Soleira is expected to complete in 2030.

[smartcode_project_cta:default project_id=150017]

Sherpa takes amenity to the sky as Flourish Soleira captures booming Palm Beach demand

As apartment living continues to evolve across Sydney's growth corridors, the quality and distribution of shared spaces is increasingly shaping how residents experience home. Rather than functioning as add-ons, amenities are being embedded into the daily rhythm of a building, supporting everything from quiet retreat to social interaction, often within a single vertical community.

At <a href="https://www.apartments.com.au/new-apartments/aeris-melrose-park-nursery-street-melrose-park-nsw-2114">Aeris</a> in Melrose Park, this approach is resolved through a layered amenity offering that unfolds from ground level through to its upper podium. Developed by <a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> in partnership with Hankyu Hanshin Properties, the project introduces 468 apartments across two towers and a mid-rise building, positioned at the highest point of the broader masterplan.

[smartcode_project:default project_id=426 project_image_fid=359199]

The amenity experience begins at street level, where two courtyards sit within a landscaped setting that connects residents to the wider network of parks and green spaces. These green spaces are not isolated pockets but part of a wider pedestrian network that links Aeris to the surrounding <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a> precinct, including Central Park, future schools, and the Town Centre opening in July 2026. The result is a transition that moves from public to private without abrupt boundaries, allowing residents to pass through shaded, tree-lined environments before reaching the building itself.

Moving upward, the focus shifts to the level five podium, where the primary communal facilities are concentrated. This space brings together a 16-metre swimming pool, outdoor seating areas, and a communal BBQ zone arranged to take advantage of elevated outlooks. Seating is positioned beneath pergolas, creating pockets of shade that extend the usability of the space throughout the day. The pool edge aligns with views toward the wider district, reinforcing the sense of elevation that defines the project’s positioning.

In the adjacent building, this is complemented by quieter, more contemplative spaces, including an outdoor cinema set within the same level. Positioned to operate primarily in the evening, it introduces a different tempo to the shared environment, shifting from daytime activity to after-hours use without requiring separate zones.

[smartcode_project:default project_id=426 project_image_fid=360299]

The podium also accommodates an intimate private resident gym. Located on the lower levels, it gives residents convenient access to fitness facilities without leaving the building.

Above, the elevated podium sky deck extends the amenity offering, providing additional open-air spaces with elevated outlooks across the surrounding landscape. While more restrained in program, this upper level reinforces the project’s vertical progression, from ground-level greenery to elevated outlook, allowing residents to move between distinct spatial conditions within a single address.

This distribution of amenities reflects a deliberate response to how residents use space across the day. Sekisui House Australia Sales and Marketing Director Peter Kalaf points to the role these shared areas play in shaping buyer demand. Aeris has been conceived as more than a collection of apartments, with the podium pool, gym and outdoor cinema forming part of a broader lifestyle offering that extends the home beyond each individual residence.

[smartcode_project:default project_id=426 project_image_fid=360300]

What distinguishes Aeris is not the inclusion of these elements individually, but how they are arranged in relation to one another. Active, social, and passive spaces are layered vertically rather than separated, allowing residents to choose between them without leaving the building or moving far from their apartment. This proximity supports both routine use, such as a morning swim or evening workout, and more occasional gatherings, whether around the BBQ area or within the cinema setting.

The amenity design also sits within a broader framework of connectivity across Melrose Park. The Melrose Park Town Centre, anchored by Coles and Dan Murphys, features a mix of retail, dining, health and lifestyle offerings, bringing everyday convenience closer to residents. By the end of the year, more than five hectares of parks and open space, equivalent to around seven football fields of green space on residents' doorstep, will further enhance the precinct, allowing the internal facilities at Aeris to operate as an extension of the wider neighbourhood rather than a substitute for it.

Construction at Aeris continues to gather momentum, with ground floor slabs expected to be completed in late 2026 before the first sections of the buildings begin to rise above ground.

[smartcode_project_cta:default project_id=426]

Elevated amenity anchors daily life at Aeris, Melrose Park

Negative gearing

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With elections looming and negative gearing a big issue, predictions abound of a dip in home sales. So, what could we expect in the short term?
According to CoreLogic RP Data research analyst Cameron Kusher, market activity had slowed in 2016 relative to 2015.
"With housing looming as a large election issue given the proposed negative gearing changes from Labor I would expect things to be a little quieter in the lead-up to the election than they otherwise would have been," says Kusher.
"Interestingly, if Labor are elected you may find a surge in activity (whether that be buying or selling) post-election as owners look to beat out the negative gearing changes coming into effect in mid-2017. Of course any further changes to interest rates over the year could also have an impact."
On whether the proposed changes to negative gearing may make it difficult to sell investment properties and have other possible flow-on effects, Kusher had this suggestion for investors.
"Firstly they should make note of the election result. If the changes were to occur we would expect to see some jostling by investors to sell true investment-grade stock prior to the changes. As you note, the proposed changes are likely to be damaging to the resale value of true investment-grade housing stock."
He also dismissed suggestions that the changes to negative gearing could cause a recession.
"I don’t think a recession is likely from changes to negative gearing."
"The truth is no one really knows the impact until if or when the changes are made. Remember that at the end of 2013-14 only 9.7% of taxpayers were negatively geared so it is unlikely that impacting on such a small proportion of the population could cause a recession.
Kusher said the true impact was difficult to gauge till changes actually occur, but some "educated guesses" might be made:
<ul>
<li>Before the changes a proportion of people will look to sell true investment grade stock prior to changes, conversely, some may also look to buy this stock if they have a plan to hold for the long-term</li>
<li>Post changes, investment grade stock will be less appealing to investors because NG is not available so it will impact on this product’s resale value</li>
<li>While the proposed changes look to funnel demand to new investment, remember new housing is often more expensive than existing so there is no guarantee that it would be a successful policy</li>
<li>Over time, we may see rental shortages appear due to less investment or in certain geographic areas where little new development takes place.</li>
</ul>
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jonathanchancellor-7SQnKwU6yx

Negative gearing changes won't cause recession: CoreLogic RP Data's Cameron Kusher

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<div>It's quite commonly argued that if dwelling prices aren't rising then investors will rush to the exits in order to sell their properties, particularly those recording net rental losses. </div>
<div> </div>
<div>It was a popular but flawed argument in 2011 too, come to think of it.</div>
<div> </div>
<div>However, while a significant number of new negatively geared investors in Sydney and Melbourne are making painful losses right now - some of them by design, even! - most investors are not, particularly in the prevailing low interest rate environment. </div>
<div> </div>
<div>This is partly because cash flows on investment property generally improve over time, with only a small share of the total number of investment property owners having bought their asset in the past year. It is also partly because the losses reported by the Australian Taxation Office (ATO) include non-cash costs, which aren't incurred annually by the owner. Reported losses
</div>
<div> </div>
<div>Superficially it would appear that a high proportion of investors are losing a good deal of cash, with more than 1.25 million taxpayers claiming net rental losses in FY2014, the most recent tax year for which detailed figures are available to date. </div>
<div> </div>
<div><a href="/images/2016/05/25/NG4.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div class="separator"><img src="/images/2016/05/25/NG4.jpg" alt=""></div>
<div> </div>
<div>However, all is not quite as it first appears.</div>
<div> </div>
<div>One of the reasons for this is that non-cash costs (specifically capital works and depreciation allowances) account for a goodly chunk of the reported losses. </div>
<div> </div>
<div>Indeed through increased awareness capital works claimed have increased substantially by 42 per cent since FY2011 to $2.7 billion.</div>
<a href="/images/2016/05/25/NG2.jpg" target="_blank"> Click to enlarge</a>
<div class="separator"><img src="/images/2016/05/25/NG2.jpg" alt=""></div>
<div class="separator"> </div>
<div>This has been one of the contributing factors in reducing the average net rental loss by 64 percent since 2008, although of course the predominant influence has been falling interest rates. </div>
<a href="/images/2016/05/25/NG3.jpg" target="_blank">Click to enlarge</a>
<div class="separator"><img src="/images/2016/05/25/NG3.jpg" alt=""></div>
<div>
 Example As an example of why most informed investors for whom cash flow is a key consideration need not consider selling even if house prices are stagnant for a period of time - or even falling - refer to the below hypothetical example of a two year old house bought recently by an investor in Brisbane.</div>
<div> </div>
<div>After the mortgage interest repayments and other cash holding costs the investor is making a small loss of a couple of hundred bucks in the first year. </div>
<div> </div>
<div>Yet because the house is relatively new the depreciation and capital allowances deductions are generous, allowing him or her to record a significant loss on their lodged tax return, thereby saving significant tax at their marginal rate. Note that since tax is saved at the marginal rate, this strategy is particularly beneficial to higher rate taxpayers. </div>
<a href="/images/2016/05/25/NG1.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/25/NG1.jpg" alt=""> The depreciation and capital allowances are clearly beneficial to the investor in this example.
<div>Although the land component does not qualify for a capital works or a decline in value deduction, the total capital works and plant and equipment deduction claimable over 40 years might be around half of the total purchase price of the property (in this case, ~$360,000). 
</div>
<div> </div>
<div>The ATO provides a detailed list of depreciable items in its Rental Properties Guide document.</div>
<div>
Observations This is rarely well understood in market analysis, in all likelihood because much of the commentary railing against negative gearing is naturally enough undertaken by folk that have never owned a rental.</div>
<div> </div>
<div>The above example highlights a few things to me. </div>
<div> </div>
<div>Firstly, for investors wanting a strong cash flow or to reduce their tax liability, nearly new or newly renovated properties can be attractive for their depreciation benefits, particularly houses. </div>
<div> </div>
<div>Secondly, even if house prices are flat or fall for a period of time the investor in the example above is unlikely to be motivated to sell, particularly having already paid a lump sum of stamp duty and when considering the other entry and exit transaction costs. </div>
<div> </div>
<div>And thirdly, it seems obvious to me that (although I'm not campaigning for them myself) if it were deemed necessary there are a raft of potential avenues to tweak tax legislation to make property investment less attractive without taking a sledgehammer to the market. </div>
<div> </div>
<div>
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>. 
His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.
</div>
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pwargent-M4siyDbqQY

Property investor average net loss reduced by 64 percent since 2008: Pete Wargent

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The risk of a recession - or even depression - has been raised as a potential outcome by opponents of Labor's negative gearing property policy.
It is a pity the policy is just 94 words. It is a pity the worthy debate sits within the election campaign.
But these forecasts have come from property veterans who've seen the residential markets through its many cycles over decades. They know all too well the herd mentality into and out of property.
It was industry leader, Mark Steinert, the Stockland boss, who first expressed his fear of recession earlier this month. 
Mark Steinert, chief executive of Australia's largest residential property developer, Stockland, believes Labor's housing policy has the potential to destabilise the entire economy – to the extent of risking a recession.
He suggested governments cannot deal with the affordability issue by de-stabilising the largest asset in the country.
These fears were echoed by veteran mortgage broker, Aussie John Symond who has long been concerned about any tinkering with the preferred investment vehicle of mum and dad investors.
Symond has warned of a potential recession if Labor's plan to limit negative gearing to newly constructed dwellings goes ahead after July 2017 should Labor win government at the July 2 election.
The founder of Aussie Home Loans predicted a slide in the value of all home prices under Labor.
"It is frightening and it will frighten others . . . and it creates this stampede."
His concern is that there could be a glut of properties come on the market, force the prices down, and then "all of a sudden it could be Armageddon with the housing industry that's propped up the Australian economy the last four years."
Mark Steinert actually went further than suggesting a recession. "It will be a depression," noting that property is such a major force driving Australian growth, that even a small change in sentiment flows through the entire economy. 
"It becomes the new dinner party conversation.... people feel poorer. 
"They buy less in the shops and people employ less ....that is how markets work."
Australia has avoided for recession for so long now many press commentators have no context for considering what happens to property markets in a recession.
Glenn Stevens, the outgoing RBA governor, recently noted shocks are inevitable.
"One way or another the human condition is characterised by things happening that were not well predicted and for which we are sometimes less prepared than we might, in hindsight, have wished to be."
I am old enough to remember the last few recessions, with property crash, but recent generations of buyers aren't. 
While it was not a recession there are still plenty of buyers who got caught out in the last big 2003/2004 apartment property boom bust - and some of these buyers are still underwater.
Since then there have been a rollercoaster series of dips, the biggest after the global financial crisis which triggered extraordinary government incentives to boost the property and related industries.
More recently we have had the backdrop where Chinese buying of apartments has enabled Australia avoid going into recession following the dramatic decline in Australia's mining investment industry.
Though some buyers have in recent times been struggling to get their money back after paying crazy prices, but any recession will see much wider suffering for even the more considered acquisitions.
Thankfully first home buyers haven't been big participants in the recent market, rather mature SMSF property investors and family home upgraders with record low mortgage funding.
Hopefully their circumstance might be better able to weather any downturn.
This article was first published in the Saturday Daily Telegraph.
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jchancellor-FAypfDUnLy

Risk of recession raised as potential Labor policy outcome

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The value of every Australian home is at risk if Labor wins the Federal Election, given their negative gearing policy, according to John McGrath.
He warned it would affect every single person who owned or rented a home, not just investors.
Property values would drop and rents would go up, he said.
Mr McGrath, on the Gold Coast for his 19th Australasian Real Estate Conference, warned of the “clear danger of curbing negative gearing and the capital gains tax buffer”.
“It will affect every single Australian who owns a home, their biggest asset is at risk.
"People are saying numbers like 20-30 percent falls in value.
"I don’t know what number is right but there will be a material drop in value to the downside by 5-10-15-20 percent, of that I am sure,” Mr McGrath told News Corp papers.
“This is a not a political statement.
"But Australia will go to bed one night and wake up on July 3, and someone’s property will have gone from being worth $600,000 to $540,000 in value and that’s a horrible thing.
“The other 30 percent of people (who are not owners or paying off a home) are tenants will be in trouble too.
"If they think the current supply is short it is going to get worse and landlords are going to be focused on getting better returns as the CGT will be of less benefit so negative gearing will no longer be a deduction so rents will rise.
“Property prices will drop materially and rents will skyrocket materially, and whether or not that’s 10 to 30 percent, only time will tell.”
Under Labor, negative gearing will be restricted to “newly constructed homes”, and capital gains tax discount reduced from 50 percent to 25 percent.
Both measures would come into force from July 2017.
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Labor election win puts Aussie home values at risk: John McGrath

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Like millions of Australians, I am an owner-occupier with a mortgage debt several multiples of our family’s annual household income.
Having bought in the last five years, I am on several Estate Agent’s email lists. This week past, I was accordingly surprised to receive an email from one of these Agents. The email concerned negative gearing, in 2016 a live election issue. It advocated against changing the existing policy, accordingly a vote for the incumbent government.
Australia is a democracy, and it is a privilege individuals and groups enjoy to be able to advocate for what policies they please. We are also a market economy, in which private interests are encouraged to pursue their private good within the limits of the Law.
Nevertheless, such direct advocacy by an Industry to its clients and everyone who will listen of one of the two major Parties' platforms is still novel or unusual. A precedent was set by the Mining Industry’s $22 million opposition to the Superprofit’s Tax.
Wise policy-making in a democracy or “common-wealth” should consider all the different interest groups affected, and different voices in the mix. It should orient itself towards a balanced, inclusive assessment of the general, as well as particular—and the medium and long-term, as well as short-term—good.
So let me put some considerations the email did not raise.
<h2>Some things the email did and did not raise</h2>
This email’s positive argument was familiar to anyone who follows the news cycle in Australia.  Negative Gearing is the ability of investors to claim any moneys lost on an investment property as reduced taxable income.
This effective subsidization of property investment may or may not have artificially inflated property prices by artificially boosting demand. This wasn’t mentioned.
Negative gearing may or may not place first home buyers aiming to own and occupy their little piece of Australia, against investors or consortiums buying 2nd, 3rd, or 4th properties, with much greater acquired wealth, economic capacity and even—with Negative Gearing—an artificial incentive to take on greater mortgages, but no intention to live on the property. This also was passed over.
But negative gearing stimulates property investment. And more investment properties means more rental properties. This keeps rental prices down. The beneficiaries of negative gearing are thus not only wealthy investors or developers, despite first appearances. The policy also benefits the (growing) 30 percent or so of Australians who presently rent: mostly the younger and least wealthy. It is an exercise in “equity”, as well as wealth creation.
Higher property prices also bring higher commission yields to Real Estate Agents. This was also not mentioned in my email.
<h2>The house prices (and unprecedented household debt) in the room</h2>
Also unmentioned were several relevant, larger pieces of economic information which affect how we should assess the wisdom of negative gearing, reintroduced by the ALP under Hawke-Keating in 1987.
By any accepted measure, the period of negative gearing in Australia has coincided with extraordinary rises in property prices. They have risen at disproportionate rates relative to the consumer price index. They have risen disproportionately relative to the median income.
In the year 1975 in which I, a Gen-Xer, was born, the average house price in Sydney was $28000.  To put things in perspective, the average Australian earned something just shy of $8000 in that turbulent year.
By early 2015, the median Australian income had become $72000, something like a tenfold increase, reasonably closely tracking the increase in the prices of most consumer goods.
House prices have however multiplied by something around thirty times in Sydney, Melbourne, Adelaide and Perth, and over twenty times in the other capitals.
In February of 2015, the average house price in Sydney came in at around $850000, well over ten times median annual income; Melbourne’s median house price (where we earn a bit less, to be fair) was about $615000.
As of August last year, Australian homes rated the third-least affordable of OECD countries. Only New Zealand, our neighbours across the ditch, and Canada, our commonwealth cousins North of our closest allies, have a higher house-price-to-income ratio.
The US itself suffered a grave financial crisis in 2007-2008 initially triggered by large numbers of defaults on household mortgages.
As of the turn of this year, some authorities suggest we have the second least affordable homes anywhere, following only Hong Kong.
So Australia is not alone in enjoying a property boom of historic proportions. Other countries have experienced broadly comparable rises in the price of property as against income and other consumer items.
Nevertheless, the rise of capital city house prices in the last four decades, as of last year,<a href="https://www.theguardian.com/business/2016/jan/15/how-australian-households-became-the-most-indebted-in-the-world"> </a>pushed Australia past Denmark as the most privately indebted nation, with a ratio of 123.08% debt to GDP. The International Monetary Fund (IMF), hardly crusted-on Labor voters anywhere, sent an economic team to Australia to examine “the risks posed by property speculation and record-high household debt as part of a broad health check-up of the sagging domestic economy.”
We Australians love a winner, and it is an Olympic year. But we should take no pride in the fact that, reaching the podium for a bronze in income-house-price ratios, we presently take the gold in private household debt.
<h2>X’s, Y’s, booms and boomers</h2>
Public debate around elections turns largely around budgets—what the government does with the money we provide the state in taxation, and who, how and what the government taxes or subsidizes. Less debate has turned over several recent elections on how Australia is now, after two decades of celebrated economic growth—and after a decade of being the economic envy of many another country globally—the most “negatively geared” population in the world.
But perhaps, since the ALP, Mr Turnbull and the Real Estate industry have made negative gearing an issue of public debate, now is the time we should be talking more—if not for our own sakes, then for those of the next generations. For the distribution of the household debt burden between different age and income groups is also not cause for celebration, alongside extant intergenerational data concerning who owns what in the lucky country.
Let me explain what I mean.
Since owning property requires greater wealth, everywhere the young and the less wealthy own less and, if this is possible (it hasn’t always been), lend more. The young have not had the time to accumulate wealth; the poor have had the time, but not the ability, opportunity or fortune.
There is nevertheless something historically exceptional about the present Australian situation. Anyone my age or younger, particularly those of us who teach and talk with Yers and “Nexters”, will know the frank resignation many young Australians feel about ever being able to own their own cut of the pie, except through aid from their parents.
As a Gen-Xer, I belong to the most indebted generation (35 to 44 year olds), when it comes to mortgages ($140000 average, as of 2011-12, including the growing proportions of us who do not own a house to be paying back). But my generation is followed by the Gen-Yers, 25 to 34 years (c$110000 average, for the same period). The Nexters must wait their turn.
In 1981<a href="https://grattan.edu.au/wp-content/uploads/2014/03/800_Renovating_Housing.pdf">,</a> more than 60 per cent of 25 to 34 year olds owned their own home in this country. By contrast, by 2011, only 48 per cent did so. The decline over the same period was 10 percentage points for those aged 35 to 44, from 75 percent to around 65 percent.
Home ownership rates stayed relatively stable only for Australians over 55 (born before 1960) in the decade of 2003-2013. In contrast to their children and grandchildren, the baby boomers remain the principal beneficiaries of the property boom.
<h2>We’re all in this together</h2>
Negative gearing is not solely responsible for this growing gap between income and house prices, Australia’s global leadership in household debt, and as such, the growing intergenerational wealth gap. The increased availability of credit, continually low interest rates, continuing population growth, and other factors have also contributed.
Illustrating all the old gags, economists disagree as to the effects of ending the regime of negative gearing in Australia. There will foreseeably be some decline in property investment, relative to other possible markets for capital. This may, in the shorter term, affect the availability of said properties to renters. Thus rental price increases are likely, at least in the short term.
But how steep the investment decline and how high the rental rise is debatable, should negative gearing be rolled back. Also debatable is how long these effects would last before the interconnected rental and ownership markets rebalance themselves.
Any such negative effects, that is, should be balanced against the effects removing negative gearing would have in moderating the rise and rise of Australian house prices relative to income. These are effects which will be relevant not only to Mr Turnbull’s “largest asset class”<a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2016-05-13/real-estate-industry-attacks-labor's-negative-gearing-policy/7412458">,</a> in whose name he has called down havoc on Mr Shorten’s “reckless and dangerous experiment”. They will also have impacts for the next generations, increasingly a class or classes with a longer future and fewer assets.
Most Australian parents I wager would prefer that the around $100-200,000 their child will spend in renting in a capital city throughout their twenties would go to paying down a mortgage of their own in the suburbs, rather than paying down the mortgage on someone else’s investment—particularly an investment whose losses (above what their child’s rental outlays pay down) are deducted from the investor’s taxable income.
They would also rather that when their child and her/his partner wishes to bid at auction for their own small place in the housing market, they were not competing with investors who already have theirs; who have no intention of living in this new property; and who, to boot, intend to claim any costs unmet by rental income as the means to minimize their tax share.
So boomers too, who are also parents and grandparents, have compelling reasons to listen to more voices on this issue than the Real Estate lobby.
<h2>Future proofing</h2>
One of the stronger criticisms of electoral democracy is that, by focusing politicians on winning the next three-four year term, it blinds deliberation to longer term trends and problems. In complex economies like Australia’s, increasingly intertwined with global economic forces, many trends that shape the way we live, the prices of our goods and availability of our services develop over decades.
The property boom, relative to income, and accompanied by unprecedented private Australian debt, is not the product of Mr Turnbull’s term in government, nor of Mr Abbott’s, nor Rudd-Gillard-Rudd’s, or even Mr Howard’s economic miracles.
It takes courage to challenge such a three-decade policy with so many beneficiaries. “Whatsoever is new is unlooked for; and ever it mends some, and [im]pairs others”, someone said. For “what is settled by custom, though it be not good, yet at least it is fit.” But just as the institution of negative gearing has aided some, it has impaired the young, and solely-wage-earning Australians who typically earn less than others, but must be taxed on it all.
Just so, by scrapping negative gearing, we shall be impairing investors and Real Estate agents, but aiding the next generations of Australians. At worse, if rental prices do rise, this will provide an incentive for the young to enter the property market earlier, bucking existing inequitable trends.
Scrapping negative gearing may help avoid a more damaging “correction” in property prices that more bearish commentators have long been prophesying, and the IMF felt concerned enough about to come visiting down under.
For by scrapping negative gearing, make no mistake about it, any new government shall be making a small step towards reducing Australian house prices. This, and its effects on their commissions, is the red raw motive behind the Real Estate lobby’s wounded advocacy.
But looking forwards, at some point Australia is going to have to confront the growing wealth disparity between the generations, and the gap between what people earn and what they owe. While it is just that older people be rewarded for their labours, this consideration needs to be balanced against the right of younger generations to feel like they can and do own a stake in the commonwealth, rather than facing longer and longer periods of paying down others’ mortgages or world-leading mortgages of their own.
So a vote against negative gearing, no matter which Party proposes it, is a vote to minimize the increasingly huge debt burden the younger generations need to take on to own, if not their quarter-acre block, then a quarter of the land most middle-class Australians could comfortably afford two generations ago.
Just as the email said, this is urgently important.
Matthew Sharpe is associate professor in Philosophy, Deakin University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/matthew-sharpe-125260" target="_blank">here</a>.
 
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Negative gearing not solely responsible for growing gap between income and house prices

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If you thought the election debate on negative gearing was interesting watch the new property debates get a whole lot hotter with the Australian Taxation Office’s (ATO’s) latest bombshell announcement which guaranteed will send shockwaves through property markets. 
No doubt this is just the next step following the ATO being handed total ownership of the Australian property transaction register in mid – 2015, a role they had been champing at the bit to control for quite some time.
From Friday July 1 2016 (the day before the federal election) all sellers of residential and commercial property worth in excess of $2 million will be deemed as an overseas investor unless they can attain a special tax clearance. Failure to attain the special tax clearance certificate means the seller must deduct ten (10) percent from the purchase price which is immediately paid to the ATO.
No doubt lawyers, accountants and conveyancers would be rejoicing at these newly discovered revenue streams although what has not been announced is when a seller receives their compliant special tax clearance are the associated costs in receiving the compliance tax deductible?
This is all aimed at closing loopholes solely aimed at the leakage of tax revenues. Australian residents will get their tax clearance so long as they are up to date with tax returns, proving that they acquired the property within their declared earnings – which I see as a very good move.
When the ATO took over the property reins they quickly started extrapolating all property transactions back to 1985, so it will take a while to complete the register. This new legislation is simply closing the door on those who acquired property illegally either from proceeds of crime or as non – residents.
For the last five years foreign investors have been running amok buying Australian real estate. The federal governments have laid out the welcome mat when they raised off – the – plan purchase restrictions in 2008 from 50 percent to 100 percent.
This week Fitch Ratings warned that Australia clearly has a significant ‘hidden’ offshore property buyers risk. Andrea Jaehne, a director at Fitch Ratings, stated that she was shocked by the increase of foreign buyers since 2010, where the Foreign Investment Review Board experienced an eightfold increase in approvals up to 2015. She said that it was difficult to know the true number of properties being sold offshore because foreign investment rules did not require an approval for foreigners buying apartments off the plan.
The question that needs to now be asked is (with the recent property frenzy which conveniently replaced the mining boom) with all these new measures what will happen to property prices? Well foreign buyers will almost certainly now hold back and watch what happens to the Australian markets particularly Melbourne and Sydney – we can expect some big corrections in these investment markets.
With a further 250,000 apartments to hit the domestic markets within the next two years it is very difficult to see a happy outcome for these markets – more particularly as we have more evidence that these markets are significantly slowing. Then throw in the latest Australian Bureau of Statistics data which shows that Australian wages are growing at the slowest rate for at least 18 years.
Furthermore, we are now hearing that market analysts are now coming to the conclusion that low interest rates actually cause more damage to the economy. As one commentator said this week “very low interest rates around the world are inhibiting economic recovery rather than encouraging it.”
Australia is now just 44 days away from getting a clearer indication of what will happen to the markets more particularly with negative gearing. Now is not the time to start tinkering with investors clearly preferring existing properties. Agents will tell you that when an existing apartment comes onto the market the ratio of home buyers to investors inspecting is generally 50/50. Take away half the market and of course prices will come down – which in turn will drive rents up.
Of course the opposition treasurer could produce his modelling to show otherwise, however this has not been forthcoming so one can then conclude that no modelling is in existence.
With all that’s happening on the Australian property landscape the timing is a potential disaster. In the meantime, watch how many vendors try and offload their properties before the new ATO legislation comes into effect. No doubt the ATO will be watching too.
 
MOSMAN – 2088
Number of houses on the market this time last year – 65
Number of houses on the market last week – 55 
Number of houses on the market this week – 55 
Number of apartments on the market this time last year – 47
Number of apartments on the market last week – 50
Number of apartments on the market this week – 50
 
CREMORNE – 2090
Number of houses on the market this time last year – 5
Number of houses on the market last week – 7 
Number of houses on the market this week – 11 
Number of apartments on the market this time last year – 10
Number of apartments on the market last week – 23 
Number of apartments on the market this week – 22
 
NEUTRAL BAY – 2089 
Number of houses on the market this time last year – 6
Number of houses on the market last week – 8
Number of houses on the market this week – 8 
Number of apartments on the market this time last year – 29 
Number of apartments on the market last week – 21
Number of apartments on the market this week – 22
 
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000.
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robertsimeon-hRNTwJyXkQ

ATO quickly wields its big new property tax

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Labor will limit negative gearing to new housing from 1 July 2017. 
All investments made before this date will not be affected by this change and will be fully grandfathered.
This will mean that taxpayers will continue to be able to deduct net rental losses against their wage income, providing the losses come from newly constructed housing.
From 1 July 2017 losses from new investments in shares and existing properties can still be used to offset investment income tax liabilities. These losses can also continue to be carried forward to offset the final capital gain on the investment.
For more information, <a href="https://www.alp.org.au/negativegearing" target="_blank">click here</a>.
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Property 101: Labor's negative gearing policy

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Aussie John Symond has warned of a potential recession if Labor's plan to limit negative gearing to freshly constructed dwellings goes ahead, calling it "frightening" in an appearance on Seven's Sunrise program on Sunday. 
"Who knows? I don't know whether prices will drop 10 percent, 20 percent or more," he said.
The property tycoon and founder of Aussie Home Loans predicted a slide in home prices under Labor.
"It is frightening and it will frighten others . . . and it creates this stampede. And that's my concern that there could be a glut of properties come on the market, force the prices down, and then all of a sudden it could be Armageddon with the housing industry that's propped up the Australian economy the last four years."
Symond joins another industry leader, Stockland boss who expressed a similiar recession fear last week. 
Mark Steinert, chief executive of Australia's largest residential property developer, Stockland, believes Labor's housing policy has "the potential to destabilise the entire economy" – to the extent of "risking a recession".
"At the end of the day, house prices are unlikely to adjust so much that it would really change that affordability equation anyway," Steinert told the Australian Financial Review.
"And if they do, believe me it won't be a recession. It will be a depression."
Steinert told columnist Jennifer Hewitt property is such a major force driving Australian growth and activity, that even a small change in the market and in sentiment flows through the entire economy. 
"Housing represents $6.5 trillion of the Australian people's wealth," he told The Australian Financial Review. 
"It is so big and so many people are involved that even when that order of magnitude of change is obviously small compared to the stock market…its affects people.
"It becomes the new dinner party conversation.
"People feel poorer. 
"They buy less in the shops and people employ less and people are less willing to borrow money to start a business and suddenly that goes on.
"That is how markets work.
"The only way you deal with affordability in my view is first and foremost about supply…in a structural way.
"You cannot deal with affordability in a manageable way by de-stabilising the largest asset in the country."
Symond's fears were dismissed by Labor's shadow parliamentary treasury secretary and western Sydney MP, Ed Husic, who called them "outrageous", according to a report in the Sydney Morning Herald.
"It's a shame that Malcolm Turnbull and John Symond have teamed up to look after their interests, having done very well for themselves, when there are so many people in my part of Sydney for example, who are trying to buy a first home but cannot," he said.
Turnbull called Symond an authority on the property market at a recent forum in Sydney, the report in the Sydney Morning Herald said.
"As you've heard today from the Real Estate Institute, from John Symond - from Aussie John - that is going to have the impact of putting up rents and reducing the amount of rental property," he said.
A campaign against Labor's change by many of the country's most prominent real estate firms and Coalition supporters uses a website to warn of "disastrous consequences" if negative gearing is crimped.
"Our industry participants pride themselves on being apolitical, but this time, the issue is far too important not to speak out," it states.
Labor has announced it will limit negative gearing to new housing from 1 July 2017 as part of it tax overhaul.
Labor says negative gearing and the capital gains discount have not achieved their aim to boost housing supply and instead will cost the budget over $10 billion this year, more than what the government spends on higher education or child care. It also claims it mostly benefits the top income earners.
 
{mijopolls 142} 
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John Symond says Labor's negative gearing 'frightening', fears recession

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
A memo on the subject of housing taxation from the Reserve Bank of Australia (RBA) is stirring up debate on proposed changes to negative gearing and capital gains tax in the election campaign.
The memo, dated December 9 2014, does counter the government’s claim that changes to negative gearing will have an adverse effect on housing prices, although this was never its intended purpose.
The memo was in response to the report from the Financial System Inquiry two weeks earlier. The inquiry noted that reducing capital gains tax concessions would “lead to a more efficient allocation of funding in the economy,” that “the tax treatment of investor housing…tends to encourage leveraged and speculative investment,” and that “housing is a potential source of systemic risk for the financial system and the economy”.
The RBA is usually reluctant to comment on areas of government policy outside its remit and hasn’t expressed any views on whether changes are needed to the long-standing tax treatment of housing investment. However, in response to a Productivity Commission inquiry 12 years ago, the RBA pointed out that:
“…taxation arrangements in Australia are more favourable to investors in residential property than are the arrangements in other countries.”
It also went on to note that a higher share of Australian taxpayers are attracted to property investment to lighten their tax burden and reducing investor demand would allow for more demand from first home buyers, without adding to the overall pressure on demand and prices. The RBA submission suggested this could also lead to a more stable housing market.
At that time, housing investors accounted for just over 45 percent of all lending by Australian financial institutions. In 1999 this was less than 32 percent, when the Howard government amended the tax treatment of capital gains in a way that made it more generous to investors (in property and other assets).
After falling back to around 36 percent in the aftermath of the global financial crisis, the share of property loans taken out by investors rebounded to more than 50% in the first half of 2015. The Australian Prudential Regulatory Authority (APRA) has since required banks to tighten their lending standards for property investment loans, now the share of new housing loans going to investors has fallen back to about 45 percent.
The key point to note here is that the changes enforced by APRA to banks’ lending criteria have also had the effect of dampening investor demand, as Labor’s current policy also intends, without any obvious adverse effects on property prices.
The government’s strict enforcement of foreign investment regulations, designed to prevent foreigners from purchasing established properties (other than in limited circumstances), and the cutting of grants to first-time buyers of established properties while boosting grants to first-time buyers of new dwellings at a state level, have both failed to dampen investor demand for property.
In other words, governments are trying with these policies to reduce demand for the purchase of established dwellings (90% of borrowing by Australian property investors is for the purchase of established dwellings) while encouraging the demand, and therefore building of, new properties. This is exactly what the Opposition’s proposed changes to negative gearing and the capital gains tax discount seek to do.
Labor is trying to make it less attractive for investors to buy an established property after 1 July 2017. As a result, the prices of established dwellings should go up at a slower rate than it would otherwise – and from the standpoint of would-be home-buyers, this is a good thing.
However, the Opposition proposes to “grandfather” existing negatively-geared investors from these changes. This means anyone who has a negatively geared property investment as of 30 June 2017 will still be able to offset the excess of their interest costs over their net rental income against their other taxable income. So there is no reason to expect that investors will seek to sell their investments en masse and that prices of existing properties will fall any more than they have done as a result of the other government measures.
And this is precisely what the memo from the RBA notes:
“only if changes were not grandfathered” would there be a risk of “large scale sale of negatively geared properties.”
The RBA note also raises the possibility that changes to negative gearing could prompt a “potential increase in rents” – a point which the Coalition has been as quick to seize upon. Presumably this concern reflects an assumption that if changes were to be made to existing negative gearing arrangements, those changes would apply to new properties as well as established ones (since the Financial System Inquiry whose recommendations prompted this staff memo didn’t make any distinction between the two).
The Opposition’s policy is to keep existing negative gearing arrangements for investors in new dwellings. There is a risk that it could end up inflating builders’ profit margins, rather than boosting the supply of new housing.
However, to the extent that it does the latter, there is less reason to expect rents to rise. This is because under the Opposition’s policy more would-be home-buyers could fulfil their aspirations. It would reduce the competition they face from investors who negatively gear and this would decrease the demand for rental housing.
The Reserve Bank hasn’t explicitly supported Labor’s negative gearing policy. But it does appear to have rebutted one of the government’s principal arguments against it.
Saul Eslake is vice-chancellor’s Fellow, University of Tasmania and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/saul-eslake-665" target="_blank">here</a>.
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What the RBA memo really says about negative gearing: Saul Eslake

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<img src="https://counter.theconversation.edu.au/content/57114/count.gif" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Despite being widely described as a “tax rort for rich investors”, negative gearing is not a tax concession (a tax deduction as opposed to an exemption or rebate). It does, however, encourage over-investment and over-leveraging in Australia’s housing market, as the Financial System Inquiry Murray Report concluded.
Consequently, while not the only reason for increasing house prices and affordability issues in some locations, negative gearing has become a focal point in an election year for tax reform debate and a review of housing policy.
From Waleed Aly to the prime minister on his own blog, negative gearing is generating much talk without context.
<h2>Where does the idea come from?</h2>
Gearing describes the use of borrowing to finance an investment. When the interest costs of servicing that borrowing exceed the net income of the investment, it is said to be negatively geared.
The idea underlying negative gearing is relatively straightforward: when an individual (or business) incurs costs associated with generating income, those costs are tax-deductible from income.
As it is applied to investment properties in Australia, when interest costs of the mortgage exceed the net rental income of the property (that is, it is negatively geared) then the net loss on the investment property may be used by an individual to offset their ordinary wage income.
This is because, under the current rules in Australia, investment property losses are not “quarantined”. That is, the losses on an investment property are not only tax-deductible against the income from the investment property. As a result, the higher your total income, the greater the tax-minimisation benefit of negative gearing.
Quarantining losses is a major point of difference in the application of negative gearing in Australia to the rest of the world, and a key area that previous reforms in Australia have targeted.
<h2>International examples</h2>
Compared to the rest of the world, Australia’s negative gearing policy is one of the most generous to property investors.
Of OECD countries, New Zealand and Japan have the most similar treatment of negative gains to Australia. In these countries, negative gearing is allowed with relatively few restrictions.
On the other hand, the United Kingdom applies strict quarantining rules to loss-making properties. Investment property losses may be applied to the pool of income from investment properties and carried forward, but the losses may not be deducted against wages (i.e. non-passive income).
However, this summary should be treated with extreme caution. An international comparison of negative gearing treatment is incomplete without also examining the rules for capital gains and other housing market distinctions such as owner-occupier versus investment properties and new versus existing developments.
In the United States, while not a system to aspire to, even interest on owner-occupied housing is fully tax-deductible against ordinary income. By contrast, in Sweden, tax deductions from negative gearing of rental properties are permitted (although quarantined with income from other capital assets), but imputed rents from owner-occupied housing are taxed.
The net welfare gains are cumbersome to measure and entwined with government policy.
<h2>Previous attempts at reform</h2>
In 1984-85, major reform to negative gearing policy in Australia took place.
Prior to the Hawke government’s tax reforms, negative gearing rules quarantined investment property losses and allowed investors to carry these losses forward to offset future income when, or if, the property became positively geared.
In the space of six months, investment property losses quarantines were lifted (in order to boost the stock and affordability of rental housing) and then removed.
From property investors’ perspective, this final reform was severe: losses were quarantined on an asset-by-asset basis and could not be carried forward to offset future income.
Though this reform was not retrospective (that is, it would apply only to properties purchased after July 1985), it was largely criticised at the time and arguments that it caused rents to increase dramatically prevailed. While these analyses have been questioned in more recent debates, in September 1987 the reform was repealed and the system largely as it exists today was set.
The one major subsequent attempt at reform to negative gearing came in the 2010 Henry Tax Review. The primary recommendations for a “fairer” and more efficient housing market were for the removal, or reining in, of negative gearing. Specifically, negative gearing losses should be capped at 40 percent.
At the time of the report’s release, then-prime minster Julia Gillard chose to maintain the status quo with respect to negative gearing. Her response on ABC’s Q&amp;A shows that negative gearing is a bilaterally difficult topic.
<h2>Where are we now?</h2>
With calls for negative gearing reform from a range of voters, economists and advocacy groups such as ACOSS, why has no major political party achieved significant reforms to negative gearing?
There is the elephant in the room: the majority of Australian voters have a direct interest in the stability of the housing market.
Beyond that, the added confusion is the conflict between what negative gearing policy aims to achieve and the reality.
It is true that negative gearing distorts the housing market. It encourages over-investment and over-leveraging in Australia’s residential real estate sector. And this is exactly what it was intended to do.
But when combined with the existing progressive income tax structure, the relative benefit to low-income versus high-income earners is easily muddied.
For over 30 years, negative gearing has been untouched under the primary political motivation – that it increases the housing supply and, importantly, the stock of rental housing. It has taken this long to conclude that the stated aim does not appear to have been achieved. Finding a better alternative is not going to happen overnight, no matter how persuasively Waleed Aly puts the case against it.
<h2>So what are the reform options?</h2>
The Turnbull government has ruled out changes to negative gearing in the pre-election budget. The government has walked away from earlier suggestions of capping the losses that may be claimed from negative gearing, or restricting the number of negatively geared properties in an individual’s portfolio.
By contrast, Labor’s policy has been placed on a pedestal by proponents of reform. Labor proposes to restrict the tax benefits of negative gearing to new properties only. In theory this would redirect housing investment (which currently is concentrated in existing properties) to housing construction and help to boost supply.
Labor’s proposal would be a further distortion. Taken to its limit, offering incentives for investment in new properties also encourages speculative developments. The policy risks unoccupied housing investments and the resulting “ghost towns”, without improving housing affordability.
Complicating this analysis, however, is the complexity of the tax system and housing market policy. Negative gearing should not be analysed in isolation from capital gains (on which the Grattan Institute has published a comprehensive report) and other special treatments of housing such as stamp duty, land taxes and first-home-buyer exemptions. Rather than take a sledgehammer to the current policy, a good reform should encapsulate this spectrum of housing market distortions.
Danika Wright is lecturer in Finance, University of Sydney and author for The Conversation. She can be contacted <a href="https://theconversation.com/profiles/danika-wright-121868" target="_blank">here</a>.
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