The negative gearing debate is back in the media.
On Monday, the ABC’s Michael Janda warned everyone will lose in the long run when our investor lead property bubble bursts. (‘Few positives to be found in negative gearing‘)
Today, The Business Spectator’s Callam Pickering is singing the same tunes (‘Why negative gearing is Australia’s biggest policy failure‘) saying “Unfortunately the government, through inaction, is supporting speculation and rising indebtedness, and in the process has left households increasingly vulnerable to economic shocks.
A recent International Monetary Fund (IMF) report shows the three countries with such favourable negative gearing schemes, Australia, Canada and New Zealand were ranked in the four top most overvalued property markets it surveyed, leaving these countries extremely vulnerable to significant financial crises when their property bubbles burst. So concerned of a bigger property lead crash than the GFC, the IMF has set up a website to monitor housing bubble activity – Global Housing Watch.
Losing money hand over fist with negative gearing in the pursuit of speculative capital gains is regularly spruiked to naive property investors through free property seminars. According to the ABC, the consumer affairs departments of the Western Australia, New South Wales and Victoria state governments have launched a crackdown property spruikers writing to them and “warning them they must abide by Australian Consumer Law or could be hit with penalties of up to $1.1 million.” The fear is vulnerable investors, many of whom lost a small fortune in the GFC are being lured into the “risk free” but unprecedented property bubble.
» Property spruikers put on notice by states The ABC, – 8th July 2014.
» Few positives to be found in negative gearing – The Drum, ABC, 7th July 2014.
» Why negative gearing is Australia’s biggest policy failure – The Business Spectator, 9th July 2014.