Hondo wrote:Yeah but eliminating negative gearing won't stop property speculation by investors. Some don't need to negative gear to invest in property.
You would reduce the number of first timers in the property investment market but it won't deter everyone.
That's true.
In the late 1980s I got out of property investments, like a lot of others, because I was paying interest rates at around 14% and rents were not covering that, even though they were going up.
Negative gearing was they only thing that kept me in it as long as I stayed - once that went it was time to get out.
(And I was doing well paying 14% on rolled over quarterly Bank Bills when normal housing loans were nearer 17%.)
Then interest on cash deposits was doing better than rents, and property did not look like offering capital gains in the foreseeable future.
Eliminating negative gearing was the last straw triggering a bail out and the rental property shortage.
These days I have enough capital to invest on lower borrowing ratios, and rents are paying better than bank deposits.
So, I can afford to stay in property now without relying on negative gearing like I needed to 25+ years ago.
But a lot of those early in their investing careers would have to bail like I did then, if negative gearing were banned again.
(It would work OK for me as I could stay in the property market and reap the higher rental rates as the rental housing shortage began to build, and have enough equity to ride out a price slump.)