You are spot on about NG it is a joke when prices fall or stay flat for some time. Please dont try to explain this to Averagebloke, he will never to except the truth. He clings to the dream that in the longterm NG will work but this only hold true if the market is on a bull run over say 10 years. This will not happen again until the price of a house vs incomes reverts to the norm and the only way that can happen is a crash or a long flat stage over the next 5 to 10 years. So as far as NG dont go there untill the crash has happend unless you want to get smashed big time!

I see where you are coming from. It is true that unexperienced short-term investors will get bled first, but even long-term investors will suffer in a flat market, since, mathematically, it costs them money every month to support their investment. This cash outlay, unless 100% offset at the end of the financial year by a tax refund, will mean their cost of holding property will be larger than the revenues received from this property, so they are hemmoraging cash. Some people can keep it up for a while in hopes of the market turning upwards, but the end result is the same, compliments of mathematics – net loss. That is the issue with Negative Gearing – financing the investment in hopes of recouping the losses through capital gains.

In the declining market, where property values are dropping, I would imagine the long-term investors will be even more vulnerable, because of my thoughts on property owners vs. renters make-up, but that is a different topic of discussion.

I appreciate your input.

I often have to distinguish between Long Term Investors and the Unexperienced Short Term Investors that have jumped in during the last few years.

The Short Termers will get burned but the Long Term Investors will not. The whole point of Long Term Property Investing is to hold multiple properties for as long as possible, NG assists in this process.

If you trust the numbers coming out of Chinese (ahem… communist) government, it is in overdrive.

I didn’t mean to poke fun at you, it is just that you made your argument about negative gearing being the ultimate floor under the housing prices numerous times here and elsewhere (I assume you post on other forums/blogs under the same name). However, you never give (or I missed it?) your reasoning for this belief. I am honestly interested why you think negative gearing provides the ultimate floor. To me this point is flawed, because without constant price increases negative gearing, even is a flat market, is a kiss of death to any investor, faced with financing a loss in his investment every time a mortgage payment is made. Even a tax offset resulting from negatively geared investment properties diminishes the pain, bu does not remove it – tax refund is a proportion of money spent on financing the negatively geared property. So I am at a loss why you think negative gearing plays such an important role. It certainly prolongs the pain, but does not remove it. Or am I missing something?