As a property investor I’m starting to get a little annoyed about being blamed for Australia’s apparent crisis of housing “affordability”. I’m also getting a bit perturbed when the media attempts to target us for allegedly pushing First Home Buyers out of the market.
Now, there’s some talk around, again, about how we should all be targeted for claiming Negative Gearing Tax Benefits. It’s making me feel like a criminal for my own hard work, diligence and risk-taking that have led me to being a landlord. (Which the last time I looked, was not actually a criminal offense!)
It’s time I think to put some facts and perspective back into the argument.
A property investor is basically someone who takes responsibility for their own future. More responsibility I might add than the average home-owner.
By investing in property I am doing several things. I am taking responsibility for my own future and my family’s. I am also taking responsibility for the tenants who rent my properties, by giving them a place to live.
What is often lost in the argument over Negative Gearing is that it is a taxation benefit, which the government provides. So why do they do that? They do so because they know they couldn’t afford to pay for all the housing stock that we provide, if they had to pay for it themselves.
All they are doing is giving people like us an incentive to take the risk ourselves and provide the funds to build the houses that our rapidly growing population so desperately needs.
You see, the Government has a delicate balancing act to play. They need to ensure that there is adequate housing for the Australian public. They have a social responsibility to provide housing to those who can’t help themselves but they also need to make sure that there is enough housing available overall.
The trouble is, not everyone wants to buy a home. This is the fatal flaw in the argument against property investors benefitting from Negative Gearing. There are people out there that don’t want to buy a home and are very happy renting. There are people out there who simply can’t afford to buy a home because they don’t or won’t save the money required. There are people out there who won’t buy a home because they don’t want the responsibility.
So who provides the housing for all these people? We do! The Government looks after those that can’t look after themselves. We look after those that have choices and decide what to do with their lives. People from all walks of life make decisions about how to live their lives. This call for the Government to take over rental housing by so called experts is nonsense.
Well I have something to say to those “experts”. I’m not sure about you, but even if those experts took away Negative Gearing I’d still buy property as an investment. I don’t buy it because of Negative Gearing, I buy property because it’s a good investment! Buying a property for tax reasons alone is not the right decision. I’m buying an asset. I’m buying something that helps out other Australians who can’t buy at the moment or who choose not to buy or who don’t care about owning a home. That’s their choice. I made mine when I invested in property.
Now the one key point that often gets overlooked in this discussion is that Negative Gearing on a single property doesn’t last forever anyway. It finishes when the property starts making money! As soon as the rent on any property starts exceeding the expenses it’s not losing money anymore so the investor can no longer claim Negative Gearing on it.
Besides, the rental income will increase over time, just like the property price does. I want the property to make money. I want the properties I own to pay themselves off. Over time they will.
Negative Gearing only helps investors to get to the point where the property starts paying for itself. That is generally years down the track. Guess what? When I get to that point and I have a property paying for itself I will buy another one and repeat the process all over again. By increasing my wealth through property I am doing my part to become financially independent.
I’m betting on property values to increase in the long term and I am taking that risk personally as an investor. When I buy property I have a growing asset, with help to repay it from my own income and a happy tenant. Negative Gearing is a thank you from a grateful Government for me helping out my fellow Australians and making sure I am not a drain on the government purse in my retirement.
So the Government, and therefore the nation, benefits in two ways from Negative Gearing. First their tax incentive is only a small fraction of what they would have to pay if they had to build all the properties we investors pay for. And secondly, every self-sufficient property investor puts far less drain on the public purse in their retirement.
By the way, these days it seems many First Home Buyers are actually buying their first homes as investments. They rent where they want to live and they invest in property to build equity so they can get into the market later. This is sound thinking and something that should definitely be encouraged. Perhaps with tax breaks to help get those young people into the property market….. hang on…. don’t we have that already?
Yes we do, it’s called Negative Gearing!!!!