What is Keeping Property Prices High?
In an article for the website Property Update, Michael Yardney talks about 7 things that have kept property prices high in Australia.
Here are the 7 points:
- Yardney feels that negative gearing, enjoyed by 1.3 million people, has overheated the market.
- The family home is exempted from capital gains tax and this accounts for no less than $14 billion annually.
- Tax structure favours the rich investors.
- Record-low interest rates.
- Decent purchasing power- triggered by a faster rate of growth in wages compared to growth in price of goods and services.
- Rush for inner city living
- Demand outstripping supply
You can read the original article here.
There is no denying that these are some of the major causes for the rise in property prices (and why the prices are not coming down). However, I feel we have been too harsh on gearing. I remember one of my friends calling it an “occupational hazard of the property market” and an unavoidable by-product of the wave that wanted to invigorate new housing construction.
To me, negative gearing will always remain a cushion for the investor ilk; after all, neither capital growth nor a high rental yield is guaranteed. To some extent, the tax benefits give investors much needed peace of mind.
Demand has been outstripping supply for a long time now. This might change though now that the construction industry is back on its legs and skilled overseas migration may give a shot in the arm to the labour industry, too.