The compulsory retirement of home ownership in Australia
… A Turnbull victory will entrench the bidding advantage of investors over owner-occupants, even for established homes. The age of home ownership as we know it is coming to an end. The age of investor hegemony is here. From now on, for a typical first home buyer, the only way to beat the investors will be to join them: make your first home an investment home, and forget about living in it, at least until the interest and other expenses are less than the rent.
That raises two problems. First, the home that you can afford now might be too small or too poorly located by the time you’re ready to move into it. If, by then, your income has risen enough to let you trade up, you will incur capital-gains tax on the sale and stamp duty on the next purchase. Second, if you subsequently downsize for your retirement, you’ll incur another round of stamp duty.
Both problems have the same obvious solution: Buy the home you want to retire in! In the mean time, let your retirement home to tenants, and rent the home you live in. If all goes to plan, you’ll pay conveyancing stamp duty only once in your life, service the mortgage with the help of negative gearing, and never realize a taxable capital gain. That is the rational response to the present tax regime.
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