The recent decision by the Government to leave negative gearing alone in the new budget has been a topic of great interest among the mortgage brokers in the Kwinana, Rockingham and Baldivis areas.
A lot of property investors are happy about the decision to keep negative gearing in effect. But just because you can still use negative gearing, does it mean you should? Let’s take a look at three myths about negative gearing.
Myth #1: Negative Gearing is a Boon for the Average Joe
While a lot of middle earners with one or two investment properties benefit from negative gearing, those on the upper end are much more likely to do so. For example, of nurses with investment properties, 12% are negatively geared. 9% of teachers’ investment properties are negatively geared.
Meanwhile, 29% of anaesthetists, 27% of doctors and 23% of finance managers who invest are using negative gearing. Since those in higher income brackets enjoy better tax breaks from negative gearing, the average teacher only reduces their tax bill by one tenth the amount of the average anaesthetist.
Negative gearing helps the upper end a lot more than the “Average Joe.”
Myth #2: Negative Gearing Promotes the Building of More Homes
More than 93% of home loans in Rockingham and across Australia are written for existing homes. Negative gearing has no effect on the new housing supply. Government policies such as the First Home Owner Grant are more likely to increase the supply of new homes.
Myth #3: Negative Gearing Decreases Rents
This myth is a farce. No matter what anyone tells you, supply and demand are the two factors that determine rent prices. Negative gearing doesn’t affect supply or demand enough to have any effect on rent prices.
Contact Our Mortgage Brokers for a Pre-Approved Home Loan
If you are looking for an investment property, the first thing you need to do is find out how much money you can obtain to purchase one. At Smartline Rockingham, we have access to 28 different lenders. We know their preferences and are great at fitting them to your individual financial status.
To learn more, call us today: (08) 9527 1800.