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  • » Bullion Baron: Who's to Blame for Australia's Expensive Property?

#1 2015-07-26 07:51:44

Bullion Baron
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Bullion Baron: Who's to Blame for Australia's Expensive Property?

61_bullion_baron_header_ss.gif

Picture a science lab with a square metal table in the centre. On top of the table lies an intricate wooden maze. The maze itself is completely enclosed. In the middle of the maze, at the end of the one way walled passage, is a block of cheese. In a small cage not far from the maze is a rat, who hasn't been fed for a day and whose nose is going haywire smelling the nearby cheese. The three researchers (who were responsible for building the maze) are standing nearby, one of them removes the rodent from the cage and places it into the maze, soon after which the rat finds it's way to the cheese and consumes it.

I would liken this scenario to the Australian property market, where the researchers represent the three levels of government (federal, state and local), the maze walls are policies they've introduced, cheese symbolises investment properties and for the purpose of this exercise the rat is us, investors (though it could also represent other home buyers who are also herded by government policy)... Read More

CONTINUED: Who's to Blame for Australia's Expensive Property?

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#2 2015-07-26 07:57:17

mmm....shiney!
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

So you are opposed to any government policy that helps reduce the taxation burden and improve the long term financial position of those using property as an investment vehicle?


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#3 2015-07-26 08:00:57

SpacePete
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

Sorry BB, but you're conclusion is wrong:

If you want someone to blame for Australia's expensive property, turn your eye away from the property investor / speculator, they are just another rat in the same maze as the rest of us. It's government policy at fault and that is what needs to change. With change of policy will come a change in investor behaviour.

It's not just  government policy. Government policy does not manifest in a vacuum. It is endemic self-interest throughout Australian society, politicians and voting citizens alike, that blinds people to the longer-term harm of their actions.


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#4 2015-07-26 08:12:40

SpacePete
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

mmm....shiney! wrote:

So you are opposed to any government policy that helps reduce the taxation burden and improve the long term financial position of those using property as an investment vehicle?

Why should property get favourable taxation and policy treatment? What if the government decided to artificially limit food supply (as they do land) to ensure food investors, both local and foreign, had a favourable investment vehicle?


Catus amat piscem, sed non vult tingere plantas

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#5 2015-07-26 08:16:23

SilverDJ
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

mmm....shiney! wrote:

So you are opposed to any government policy that helps reduce the taxation burden and improve the long term financial position of those using property as an investment vehicle?

People don't need shares, people don't need gold and silver, people don't need bonds, people do however need a roof over their head and a place to raise their family. And in a long standard cultural tradition in this country, aspiring to owning that roof over their head.
This is what makes housing a little bit different to other investments, so I for one would have no problem with the government putting in place policy that increases the "taxation burden" and hinders the "long term financial position" of property investors if the situation is getting out of hand and seriously impacts the general population. Property investors are not owed special treatment because it's an investment, especially at the expense of the general population. There are plenty of other avenues available for investors aside from property that government could better incentivise.

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#6 2015-07-26 08:25:46

Bullion Baron
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

mmm....shiney! wrote:

So you are opposed to any government policy that helps reduce the taxation burden and improve the long term financial position of those using property as an investment vehicle?

If done in tandem with protecting the institutions (from failure) who pump the credit & restricting supply to market, then yes I am opposed to government policy which reduces the taxation burden on this particular asset.

As SilverDJ says, property is not just an investment asset like any other.

Ultimately I would prefer less government involvement in the market, less central planning, but if that's not realistic then they need to be centrally managing with some level of responsibility for the outcomes of their policy.

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#7 2015-07-26 08:36:39

Bullion Baron
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

SilverPete wrote:

Sorry BB, but you're conclusion is wrong:

If you want someone to blame for Australia's expensive property, turn your eye away from the property investor / speculator, they are just another rat in the same maze as the rest of us. It's government policy at fault and that is what needs to change. With change of policy will come a change in investor behaviour.

It's not just  government policy. Government policy does not manifest in a vacuum. It is endemic self-interest throughout Australian society, politicians and voting citizens alike, that blinds people to the longer-term harm of their actions.

Bit of a chicken egg argument to be had here, look at this article as my (small) way of trying to sway societal opinion to push for government change wink

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#8 2015-07-26 08:39:21

mmm....shiney!
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

SilverPete wrote:

Sorry BB, but you're conclusion is wrong:

If you want someone to blame for Australia's expensive property, turn your eye away from the property investor / speculator, they are just another rat in the same maze as the rest of us. It's government policy at fault and that is what needs to change. With change of policy will come a change in investor behaviour.

It's not just  government policy. Government policy does not manifest in a vacuum. It is endemic self-interest throughout Australian society, politicians and voting citizens alike, that blinds people to the longer-term harm of their actions.

Be fair, I don't think BB's intended goal in publishing this opinion piece is to purposely ignore any discussion of the lemming-like behaviour of market participants, nor does he address the morally justifiable strategy of making financial decisions that enhance the self-interest of those individuals who engage in a market. His are just reflections on the government's impact in attempting to manage the residential real estate market.

BB views both the positive outcomes of government policy eg tax policy - in particular the CGT discount and negative gearing (both of which help protect the wealth which individuals accumulate as a result of risk, hard work and luck), in the same vein as the negative outcomes of government policy eg interfering with the supply and demand of available land, sales taxes and fees, charges and banking guarantees etc.

Unfortunately the position he arrives at fails to acknowledge that some of the policies that the government pursues enhances the ability of individuals to protect their wealth. He lumps the good with the bad, claiming all outcomes of government policy in relation to the housing market are bad.

Yet even worse, on a logical platform, even though he cites examples which provide evidence that governments are incapable of intervening in the market, he argues that governments have both the moral authority and economic capacity to do so.


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#9 2015-07-26 08:49:01

trew
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

Nobody is to blame - it's just part of the market cycle.

Was property expensive in the 1990s when negative gearing was available ?


Property booms and busts have been happening for hundreds of years.

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#10 2015-07-26 08:51:39

SpacePete
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

EveryoneMost people always look for someone else to blame. Things always have to be "someone's fault" rather than the outcome of interactions of large groups of people.

Last edited by SpacePete (2015-07-26 08:52:37)


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#11 2015-07-26 08:57:47

mmm....shiney!
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

SilverPete wrote:
mmm....shiney! wrote:

So you are opposed to any government policy that helps reduce the taxation burden and improve the long term financial position of those using property as an investment vehicle?

Why should property get favourable taxation and policy treatment?What if the government decided to artificially limit food supply (as they do land) to ensure food investors, both local and foreign, had a favourable investment vehicle?

I'm not talking about favourable treatment, I'm talking about protecting wealth. If you view CGT discounts or the ability to negatively gear as "favourable treatment", then you are operating from a position where the collective is entitled to profit firstly, and whatever is remaining after the collective have taken "their" share is then passed to the individual who has initially engaged in the market activity.


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#12 2015-07-26 08:58:45

The Black Ram
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

Like all tax breaks it's only a rort if your not in on it. So to me it's a rort.

This situation will go on for a lot longer than people think. It will take an extrodinary event for politicians (Libs/labour) to change policy. My finger is pointed first at the banks for letting debt flow like cheap goon at an under 18 backyard birthday. Look at what Aussies have gotten themselves into:

http://www.smh.com.au/money/borrowing/o … 724-giijtn

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#13 2015-07-26 08:58:55

Bullion Baron
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

mmm....shiney! wrote:

Unfortunately the position he arrives at fails to acknowledge that some of the policies that the government pursues enhances the ability of individuals to protect their wealth.

I don't really consider the use of high levels of leverage, to the point where borrowing to buy an income producing asset results in a loss, which is then deducted against unrelated income to be a 'wealth protection strategy'.

Nor is a 50% capital gains discount a fair way to capture an amount of tax from windfall gains (to account for inflation), when the price growth is exceeding inflation so substantially. It's especially unbalanced when compared with tax on regular income or interest on savings.

I am all for lower taxes across the board, smaller government in general, but that doesn't mean I have to agree with every policy that technically achieves that.

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#14 2015-07-26 08:59:15

mmm....shiney!
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

Bullion Baron wrote:

Ultimately I would prefer less government involvement in the market, less central planning, but if that's not realistic then they need to be centrally managing with some level of responsibility for the outcomes of their policy.

That's illogical.


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#15 2015-07-26 09:06:17

trew
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

mmm....shiney! wrote:

I'm not talking about favourable treatment, I'm talking about protecting wealth. If you view CGT discounts or the ability to negatively gear as "favourable treatment", then you are operating from a position where the collective is entitled to profit firstly, and whatever is remaining after the collective have taken "their" share is then passed to the individual who has initially engaged in the market activity.

Got no problem with all of that as long as all these 'investors', and the banks financing their 'wealth generation' are happy to take their lumps along with their rewards.

When the property market eventually turns down (and it will - nothing goes up forever) will the banks take their losses or go running to the government for bailouts ?

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#16 2015-07-26 09:06:34

Bullion Baron
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

mmm....shiney! wrote:
Bullion Baron wrote:

Ultimately I would prefer less government involvement in the market, less central planning, but if that's not realistic then they need to be centrally managing with some level of responsibility for the outcomes of their policy.

That's illogical.

It's the same logic as this: I would prefer you posted less in this thread, but if you're going to post so incessantly then I wish you would put a little more care into making your posts intelligible.

If you don't think it's logical then explain why. Or don't. smile

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#17 2015-07-26 09:23:34

mmm....shiney!
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

Bullion Baron wrote:
mmm....shiney! wrote:

Unfortunately the position he arrives at fails to acknowledge that some of the policies that the government pursues enhances the ability of individuals to protect their wealth.

I don't really consider the use of high levels of leverage, to the point where borrowing to buy an income producing asset results in a loss, which is then deducted against unrelated income to be a 'wealth protection strategy'.

"Unrelated income" is a total nonsense argument. Individuals engage in economic activity to meet their needs, every activity is related.

Bullion Baron wrote:

Nor is a 50% capital gains discount a fair way to capture an amount of tax from windfall gains (to account for inflation),

I must have missed the bit where you justified capturing tax in the first place. lol

How did we arrive at the point when a government is entitled to a cut of the profit in the sale of an asset, simply because it has appreciated over time (not the government)? In other words, a body is entitled to a share in the profit of an asset in which they had no financial stake in the first place?

Last edited by mmm....shiney! (2015-07-26 10:23:09)


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#18 2015-07-26 09:27:12

hiho
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

I liken the property investor to the extremists out there, if they are dual nationality out with them!

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#19 2015-07-26 09:44:28

mmm....shiney!
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

Bullion Baron wrote:
mmm....shiney! wrote:
Bullion Baron wrote:

Ultimately I would prefer less government involvement in the market, less central planning, but if that's not realistic then they need to be centrally managing with some level of responsibility for the outcomes of their policy.

That's illogical.


If you don't think it's logical then explain why. Or don't. smile

Your line of thought:

I want less central planning because it hasn't worked.
But if that can't be achieved I want central planning that can work.
Hmmmm, but didn't I say in the first place it hasn't worked?

BB then throws himself under a fast moving logical express bound for "Circular Reasoningsville"wink

Last edited by mmm....shiney! (2015-07-26 09:47:57)


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#20 2015-07-26 09:45:08

mmm....shiney!
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

hiho wrote:

I liken the property investor to the extremists out there, if they are dual nationality out with them!

That is weird, but it's nice to have you back. big_smile


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#21 2015-07-26 09:47:35

mmm....shiney!
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

trew wrote:
mmm....shiney! wrote:

I'm not talking about favourable treatment, I'm talking about protecting wealth. If you view CGT discounts or the ability to negatively gear as "favourable treatment", then you are operating from a position where the collective is entitled to profit firstly, and whatever is remaining after the collective have taken "their" share is then passed to the individual who has initially engaged in the market activity.

Got no problem with all of that as long as all these 'investors', and the banks financing their 'wealth generation' are happy to take their lumps along with their rewards.

When the property market eventually turns down (and it will - nothing goes up forever) will the banks take their losses or go running to the government for bailouts ?

I'm happy with that position as well. And with the prospective "favourable tax treatments" that may arise from any loss.  cool


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#22 2015-07-26 09:49:39

mmm....shiney!
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

The Black Ram wrote:

Like all tax breaks it's only a rort if your not in on it. So to me it's a rort.

-1

Rorts are rorts regardless of whether you are in on it or not.

Last edited by mmm....shiney! (2015-07-26 09:51:04)


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#23 2015-07-26 09:59:38

SilverDJ
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

Bullion Baron wrote:

It's especially unbalanced when compared with tax on regular income or interest on savings.

When you can pay less tax on a massively leveraged capital gain on your 20th investment property then you pay on cash savings in your bank account, something is horribly wrong.

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#24 2015-07-26 10:16:54

mmm....shiney!
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

SilverDJ wrote:
Bullion Baron wrote:

It's especially unbalanced when compared with tax on regular income or interest on savings.

When you can pay less tax on a massively leveraged capital gain on your 20th investment property then you pay on cash savings in your bank account, something is horribly wrong.

And can you explain what exactly is horribly wrong?

Apart from the fact that tax on savings is an abomination.

Last edited by mmm....shiney! (2015-07-26 10:17:46)


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#25 2015-07-26 10:22:36

SilverDJ
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Re: Bullion Baron: Who's to Blame for Australia's Expensive Property?

mmm....shiney! wrote:

Apart from the fact that tax on savings is an abomination.

Bingo.

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