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Australian Housing bubbles. Any thoughts? Lived through the US Housing crisis and it was really bad

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keepitfun
1 hour ago, dm92 said:

 


I don’t see how the person that owns the house would make any money


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The wonders of negative gearing.  Owner gets a tax benefit against their loss if they borrow to own the apartment and while the capital gain on the building goes nuts as it has for the last 20 odd years...everyone is happy.

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wayne5
18 hours ago, dm92 said:

 


I don’t see how the person that owns the house would make any money


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I Purchased a property in australia  for $320 000. I rented it for $350 per week. The rent was enough to cover the interest only repayments on the loan plus most of the other expense. So i wasn't making money there. The  advantage to me was the amount i could claim on my tax. Instead of paying about $5000 extra each year i got back about $4500. The other advantage was when i sold it after 4 years i got $525 000 for it. Of course the government wanted some of that so i had to pay about $15 000 tax because i made a profit.

So the advantage is in the tax deductions and the amount the property increase in value. 

I also sold it about 2 months before the market started to drop in sydney. So i was lucky there.

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biggles

In many other countries isnt the interest you pay on your home loan tax deductable from your income. 

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OutbackJack
On 21/05/2019 at 12:16, wayne5 said:

I Purchased a property in australia  for $320 000. I rented it for $350 per week. The rent was enough to cover the interest only repayments on the loan plus most of the other expense. So i wasn't making money there. The  advantage to me was the amount i could claim on my tax. Instead of paying about $5000 extra each year i got back about $4500. The other advantage was when i sold it after 4 years i got $525 000 for it. Of course the government wanted some of that so i had to pay about $15 000 tax because i made a profit.

So the advantage is in the tax deductions and the amount the property increase in value. 

I also sold it about 2 months before the market started to drop in sydney. So i was lucky there.

I've got 2 homes, in a remote tourist location with high traffic. I'm looking at moving to Melbourne and buying another property in the next few years but having trouble deciding whether to just sell these off or renting them out to cover the mortgages. Trying to set myself up for the future really. Would you say the tax breaks on rentals are better than just selling them off for the one property? Not sure what's better to be honest. I could likely get a decent amount per week above mortgage repayments for each place.

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OutbackJack
On 22/05/2019 at 00:05, biggles said:

In many other countries isnt the interest you pay on your home loan tax deductable from your income. 

I think that's only in relation to investment properties. If you live in the home, you don't get anything tax wise. Asked my tax agent last year.

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taylor1975
1 hour ago, OutbackJack said:

I think that's only in relation to investment properties. If you live in the home, you don't get anything tax wise. Asked my tax agent last year.

In the UK, any capital gain is tax free and main residence can offset inheritance tax. Rent a room facility provides tax free income too. None apply to investment properties.

You don't have these in your country?

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likeaking
On 21/05/2019 at 07:35, biggles said:

In many other countries isnt the interest you pay on your home loan tax deductable from your income. 

 

4 hours ago, OutbackJack said:

I think that's only in relation to investment properties. If you live in the home, you don't get anything tax wise. Asked my tax agent last year.

Biggles is correct. In the U.S., interest paid on your residence is deductable from taxable income. Many folks count on this deduction when computing if they can affort to buy a home.

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olic
6 hours ago, OutbackJack said:

I've got 2 homes, in a remote tourist location with high traffic. I'm looking at moving to Melbourne and buying another property in the next few years but having trouble deciding whether to just sell these off or renting them out to cover the mortgages. Trying to set myself up for the future really. Would you say the tax breaks on rentals are better than just selling them off for the one property? Not sure what's better to be honest. I could likely get a decent amount per week above mortgage repayments for each place.

You've stated that you want to set yourself up for the future so It would really depend on expected capital growth. Most people made money on property prices increasing even if it was their own home. So I'd put the money where you expect the biggest capital growth. Sorry I don't have the answer for that!

Whilst you can't rely on previous performance Melbourne has had great capital growth over the last few decades. The beauty of living in your own house is you won't pay tax on it. So when you sell it, you can downgrade and use any extra profits towards super or other investments.

 

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Whalley
On May 20, 2019 at 01:43, dm92 said:

 


I don’t see how the person that owns the house would make any money


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First, our bubble is bigger than your bubble!

I own a few houses I bought cheap in the 80's and 90's here in Vancouver and there is money to make even if the rental income  is an extremely small percentage of the house value.

 

Blue line is house price:

 

.

image.png

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wayne5
17 hours ago, OutbackJack said:

I've got 2 homes, in a remote tourist location with high traffic. I'm looking at moving to Melbourne and buying another property in the next few years but having trouble deciding whether to just sell these off or renting them out to cover the mortgages. Trying to set myself up for the future really. Would you say the tax breaks on rentals are better than just selling them off for the one property? Not sure what's better to be honest. I could likely get a decent amount per week above mortgage repayments for each place.

It depends if the properties are going to increases in value. A property in the big cities tend to go up in value more.  Also if you are selling them to buy another investment property the negative gear rules changed last year so there is somethings you can't claim anymore if you buy after the changes.

It is a good time buy at the moment with prices having dropped. But it is very hard to get the banks to lend as they are all scared after the banking royal commission. I have heard some rumors that they will loosen up a bit in the near future hopefully.

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OutbackJack
6 hours ago, wayne5 said:

It depends if the properties are going to increases in value. A property in the big cities tend to go up in value more.  Also if you are selling them to buy another investment property the negative gear rules changed last year so there is somethings you can't claim anymore if you buy after the changes.

It is a good time buy at the moment with prices having dropped. But it is very hard to get the banks to lend as they are all scared after the banking royal commission. I have heard some rumors that they will loosen up a bit in the near future hopefully.

That's the tricky part with these particular properties - they have the potential to increase a fair bit if the mines pick up in the future, which is somewhat unpredictable, however the prices have risen almost 100k in general over the past 15 years and seem to have stabilised a bit on the past 2. I bought one 2 years ago and the other 4 years ago, so it's only marginally better now.

I was thinking of switching to city based properties at some point as they are less reliant on population trends and more reliable as a rental source of income, though I'm seeing alot of blocks getting purchased and replaced with 4 new homes instead of 1 and traffic congestion getting silly in those areas. It'll be interesting to see what those homes end up getting valued at in the near future, and if that style of investment is worth it or not.

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