The Reserve Bank of Australia has made things slightly easier for homeowners and investors, lowering the cash rate by another 0.25 per cent this week. Good to see as well that ANZ and Greater Building Society dropped their rates by more than the RBA’s .25%. The cash rate is now at its lowest level ever.. down to 2.75 per cent.
Now you might be thinking that it’s surely a good time to lock in, with rates so low… but Westpac chief economist Bill Evans says a further rate move could still be possible. In fact, Mr Evans says there’s scope for another rate cut next month… and then rates could eventually bottom out at two per cent by the first quarter of 2014.
This would obviously be a huge help for property investors and also the property market. But on the flip slide, negative gearing is back in the spotlight. There are some whispers that negative gearing should be scrapped, to help the Federal Government’s deficit and upcoming budget. But the Real Estate Institute of Australia president, Peter Bushby, says the talk is extremely concerning. He believes that if negative gearing was scrapped, rents would dramatically increase and make it even harder for those renting to save for a home deposit. He says abolishing negative gearing would also destroy confidence in the market.
It’s also important to note that about 80 per cent of taxpayers who negative gear earn less than $80,000 per annum.. so these are mum and dad investors, not wealthy landlords. In actual fact, tax collected through the housing sector goes a long way to help governments Nearly half of all tax revenue collected by state and local governments in the last financial year came from the housing sector. RP Data says property taxes accounted for 46 per cent of all income in the 2011 to 2012 financial year.
The largest sources came from council rates and stamp duty. It’s interesting to note that housing related taxes actually increased by nearly one per cent, even though sales across the country fell by more than six percent.
Originally posted on realestatetalk.com.au