Eagle, I agree the market will stabilize and adjust, I just don't think the option to "neg gear" on new houses only has been thought through property in view of raising tax, the likely scenario is that new house construction will slow as they won't be an attractive investment re capital gains.
Incidentally the 25% discount on capital gains came about as the situation that existed beforehand was to apply CPI to the cost base of the investment to arrive at a current cost value, remember this was in a time of 3-5% inflation, this proved very cumbersome and expensive and almost impossible on properties that had been held for many years, so a simplified method was adopted 50% then a further 25% if property held over 12 months. it was a different time to now.
My issue with this proposal is that the ALP are "banking" the tax they expect to collect , that IMO and many others, won't be there.
If we really want to sort out the property market , sound lending ratios will be a big part, once you had to have 25% deposit. also the freehold land situation will continually cause ups and downs in the market as people are flush with either money or borrowing capacity they will spend up to get the site they want.
In reality building costs for the average house don't vary too much , its the location location location (land value) that changes.
Council infrastructure costs don't help either.
