I’m a MILLIONAIRE? Because I Own an Investment Property

According to Bill Shorten, the current opposition leader here in Australia, people like me are "millionaires" because we own an investment property. Happy days! If only it were true…

The soon to be Prime Minister, if the polls stay on track into next year's general election (and they probably will) made the "millionaire" statement in front of the country today as he rebutted comments made by reputable housing market expert John Symonds when he described Labor's policy of scrapping negative gearing as a nuclear bomb on the Australian economy if it comes into being as promised. 

John Symonds reckons that the Australian economy would suffer terribly if the already falling housing market was hit with this new policy + increased tax, and likely push Australia into recession. I personally agree with him, mostly, except to say Australia might still fall into recession in the next few years regardless of Labor's negative gearing changes (I'll write more about that soon in another article) needless to say bringing in these negative gearing changes will only make it worse.    

Those of us with an ear to the ground out here in the real world know that the economy isn't near as rosy as the politicians and statisticians tell us. It's not rosy at all it's SCARY and we just don't know what straw it will be that breaks the middle-class battlers back.    

Most investment homeowners are ordinary middle-class Australians (not millionaires) many already struggling under the financial burden of high living costs such as record fuel and electricity prices. Couple that with the disgraceful greed of the four main banks as they keep home loan interest rates artificially and unjustifiably higher than the Reserve set rate and you have a tinderbox ready to go off like a mailbox full of Penny Bangers (if you don't know what a Penny Banner is/was you probably never grew up in the era of firecracker day as a kid – if so, I feel sorry for you).             

Anyway, my first investment property was an old shitty chamfer on brick in Toowoomba when I was just a 23 y/o soldier in the Army. I scrimped, saved and busted my arse chewing sand serving in the Sahara Desert for 11 months to afford the deposit for this small home so I could accumulate some type of asset whilst touring around the country and world during what was a very nomadic career. 

Under Labor's new policy, I wouldn't have been able to negative gear that property instead I would have had to consider a new dwelling, which probably would have been beyond my financial reach at the time. As it was, we were able to sell it 20 years down the track for a modest profit to help us buy our family acreage. 

Back in 2003, Nina and I purchased a second investment property and it was a new build because that's just how it worked out. There was a new development north of Brisbane (out of the city) and again it was an affordable investment with good rental prospects so we decided to buy. Unfortunately, this property will devalue next year when/if Labor takes government because the pool of people willing to buy the property when we go to sell it will diminish significantly. Why? Simple… Any subsequent buyer won't be able to take advantage of negative gearing as it won't be classed as "new" dwelling so we'll be pitching our property mainly to a much smaller owner-occupier market.

On top of that, the capital gains tax on our investment property when we do sell it will increase because Labor is reducing the capital gains tax discount by HALF from 50% down to 25%. The beauty of buying outside of the city is it's much cheaper (as we all know) the downside is the profit margins are nearly always considerably less because outer city property appreciates slower than the inner city. 

Therefore, those who don't have as much spending power will be disproportionately worse off because not only will they make less profit but what profit they do make will be taxed heavily. Do you think many investors will consider buying property in the outer suburbs once these negative gearing changes come in? I doubt it! 

This will mean fewer homes for poorer people and economics 101 will tell you that fewer homes + more people mean higher rents. Then add on the probability of even higher rents that will be demanded by investors who don't qualify for negative gearing and the looming crisis is clear.          

Just to be clear, I wouldn't describe myself as a "battler" (although I have been one) but I'm certainly not RICH either so whilst we're doing alright as a family I know we're an exception at the moment. In our community, people are doing it tougher than I have ever seen – I know people who can no longer afford the ball fees to play tennis at our local centre so they stopped playing their favourite recreational activity over saving a few bucks – it's getting bad out here away from the Canberra echo chamber and inner city organic turmeric tea sippers.      

Therefore, when I heard Bill Shorten call me and others who own an investment property millionaires I felt compelled to write this quick post in defiance to be on the record at least so when the walls of the housing market come tumbling down I can say, see I told you…  

Now, if the Government wants to tinker with the current negative gearing policy and make minor changes in the name of "fairness" then I can understand that. For example, if the Government decided to cap the number of properties an individual could own and gear then there's argument for such amendments because it has always seemed greedy and exploitive to me how someone could be negatively gearing five or ten properties – it's a bit excessive and not really why the policy was introduced in the first place. So yeah, tinker but don't trash!     

BTW, I hope you guys are readily working on your backyard vegetable gardens (or balcony garden if you live in an apartment) because the better prepared and self-sufficient you are the less hurt you'll feel as the economy squeezes under increasing cost of living pressures in the coming years ahead. No one's going to save us (I sound like a doomsday prepper now) but seriously no one in the government (Coalition or Labor) has a clue so start growing because even a small food garden will help when times are tough.      


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