pomtastic

You are kidding? Explain how listings in Perth have risen 50% since January and how comes rents are unchanged from 18 months ago? Have a look on REIWA and see the amount of properties that are not shifting, just piling up all unsold. How comes retail in Perth is suffering along with the other mining state, Queeensland? Only 1.5% of people work in mining.

Perth is overpriced now, not the draw card for migrants anymore, it's had it's boom migration period.

EDIT: Watch the Perth September quarter price statistics when they are realeased in a week or so, falls all round on top of the 2.5% drop in the June quarter. My guesstimate is that Perth prices will be off 5% over the last 6 months and no sign of getting better.

MartinLuther

But rent is generally paid out of post tax salary (assuming most people don't get salary sacrifice). So how can you compare a before tax item with an after tax item? You were calculating his lost opportunity in pre tax dollars for something that would normally be paid for in post tax dollars.

Steve2009

I clearly said "before tax", I did not claim they were directly comparable. It's a poor example anyway because we have no idea what his property would rent for on the open market so we have nothing to compare to.

If anyone here is trying to prove that property investment or home ownership in the current market in Australia is a winner on a cash basis they will fail comprehensively. I'm not sure how well informed or studied the property bulls here are but I might save some people some time by pointing that out. I would welcome anyway to challenge that hypothesis but in the main it's true unless you get into some sort of exotic deals or relying on guarantees from dodgy people/entities. If property were a winner on a cash basis then people would not be relying on negative gearing. The statistics from the ATO illustrate this clearly. 70% of landlords report a loss on their tax returns currently. You may point to the other 30%, but there could be many reasons for their break-even / profit.

MartinLuther

I heard you say before tax the first time. Does that mean I can't ask about it?

Steve2009

I can't help it if you can't pick up on the response. They are not comparable. I did not say they are comparable. Is that clear enough?

Steve2009

Actually, the figure would be between $143 and $81.4 after tax.

MartinLuther

You said it was equivalent* to $400pw. Which it is clearly not. Is that clear?

(Love the patronising. Keep up the good work )

MartinLuther

If someone was on FTB taper out then they would pay 30c tax and lose 20c of FTB on each extra $ plus 1.5% medicare which would put their marginal tax rate at 51.5%

Steve2009

I believe (and intended to) I said ~$400 in every instance. If I omitted the ~ then I must apologise.

MartinLuther

Okay. I guess we have different tolerance for ~

Steve2009

Yes.

Thank you for your figure for maximum marginal rate. This makes the minimum yield on demand deposit 2.92% versus an average yield for rental properties of 3.5%. This is ignoring the bonus interest of 0.5% which would bring the minimum yield to 3.2%.

EDIT: FYI, according to ATO statistics, 80% of negatively geared properties are owned by landlords who have an income of $80,000 or less. Only 3% of negatively geared properties are owned by landlords who earn over $200,000. That may have implications for the discussion around opportunity costs.

pomtastic

So the 'poor' are holding all the crap and are taking a flyer at making themselves rich through real estate.

The wealthy aren't touching real estate with a barge pole.

Interesting.

(Not really surprising, the 'wealthy' are probably educated and can actually use a calculator to work out how crap real estate investing is today)

Steve2009

I'm not as au fait with Australian demographics as I would be in my native country but I think the average wage in Australia is about $75,000 for a male? You would expect at least half of the working population to earn under that figure. The figures would suggest that bad property investments are more popular among low earners but the figures not as heavily skewed as you would initially think.

wilf70

See the website the unconventional economist for a very detailed an incisive view of this problem/bubble.

Rod-Helen-Poppy

or possibly a decent accountant that can be creative with figures perhaps?

i know of people who earn a decent wage here and they can get their tax liability down to practically nothing by using a decent accountant....