Agree except for point 4. Low interest rates are still good for...

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25/06/20

11:43

Post #: 45443112
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Originally posted by pandabear20: ↑

Housing market is artificially kept at this level by:

1. foreign investors - many empty units in Mel and Syd, kept purely for the steady price growth, we can expect selling once the growth stops

2. immigration - steady flow of 200k/year + temporary and student visas, government can't justify it with projected unemployment figures over next 2 years

3. low interest rates and easy lending - interest rates are going even lower, but lending conditions will tighten, banks not keen to take risk

4. rental properties as investment with negative gearing - with less demand, rents will go down, and with low interest rates, negative gearing doesn't pay off

Maybe more first home buyers will be able to afford a roof after all, many have given up already.

Or it will continue? 60k / year for 20 years + 3% interest for a modest house in Syd suburb? For a couple on 90k salary. No surprise people start drinking

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Agree except for point 4. Low interest rates are still good for negative gearing since they reduce the 'negative' side (albeit this is currently being cancelled out by reduced rent). Only an idiot wants their investment to be more negatively geared. Positively geared is always better than negative geared (assuming equal properties & leverage etc.).

The only thing that will kill the negatively geared investments is lack of capital growth.
The only reason negative gearing can be worthwhile is to minimize holding costs for an asset which is increasing in value faster than you are losing money. If the asset is not increasing in value then you are intentionally losing money for the opportunity to lose more money when you sell.
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