HIA: Negative Gearing barely costs economy

An interview on Lateline Business with Harley Dale (HIA) and Saul Eslake makes for interesting viewing on whether Negative Gearing will be grandfathered and quarantined to new housing only in the upcoming May budget.

At about the 10 minute mark Harley Dale makes an extraordinary statement that if this was to occur, there would be only a ‘little bit less than a $100m economic dividend’. Encouraging urban sprawl forever is deemed to be worthy of $1.5bn and stamp duty reform worth ‘multi-billions’.

With 92% of Negative Gearing invested in existing homes (adding little to supply) and costing about $4bn in tax subsidies pa, one wonders where the HIA pull these figures from?

Even commentators like Kochi are talking in positive terms (and the Herald Sun is publishing it) that this reform is ‘probably right’.

Keep in mind the excellent post by Dr Gavin Putland on why genuine property developers should leave the HIA. Putland dismantles recent HIA misinformation regarding first home owners.

The importance of rewarding productive over speculative activity is reinforced by the article today on Harry Triguboff potentially selling his business to Chinese interests. What caught our eye was the relatively low return on risk for $1.1bn in apartment sales to earn $300m. Comparatively, the return Mr Triguboff is expecting to make on his land bank is much higher according to risk and productive effort.

“the company’s land bank for future developments has “easily” gone up $200 million in value in the past 12 months.”

In the past Triguboff has made some eye-raising statements about this process. Readers of this site will understand that whilst building apartments requires great skill, sitting on a land bank requires absolutely none. Would Mr Dale like to explain how the tax impost plays out in this capacity?

5 Comments

  1. Michael Fracis18-04-2014

    If 1.2 million voters are advantaged by NG then how many are disadvantaged.

    Those disadvantaged are FHB’s and what are their numbers.

    Assuming the average age entry point into the ‘property ladder’ is 25 years of age and there are 250,000 turning 25 each year then it would take 5 years for those disadvantaged by NG to outnumber those advantaged.
    Assuming those 25 year olds have been locked out for the last 4 years since the end of the FHBG I think the Government better do its number crunching again when it comes to NG for the next election.

  2. THEO19-04-2014

    HIA has lost all relevance except to itself. Nothing else matters more except to make itself(a minority)super rich at the expense of everyone else.(majority). Fortunately massive and out of control deficits will force many desperately needed reforms by a government that once supported this corrupt and many other groups that fed like leeches off all of us.

  3. May Hem19-04-2014

    I expect that this government will introduce the “Second Home-buyer’s Bonus”. Wouldn’t surprise me at all.

  4. Karl Fitzgerald
    Karl Fitzgerald21-04-2014

    thxs Michael, you have hit the nail on the head! If we expanded that to 10 years of locked out the numbers would be even more favourable. Lets make this meme grow!

  5. Karl Fitzgerald
    Karl Fitzgerald21-04-2014

    Yes this is one of the reasons i fear any chance of a major correction has now passed. The LP will do all it can to keep the bubble billowing.

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https://prosper.org.au/2014/04/17/hia-negative-gearing-barely-costs-economy/