Are prices going to crash by as much as 50 per cent, as some experts predicted in the news this week?
Will the government have the ticker to change the negative gearing rules?
Well, to answer these questions, and offer some views on livestock, this week I caught up with none other than the newly crowned Deputy Prime Minister of Australia, Barnaby Joyce.
And in doing so, I worked out we actually have quite a lot in common: we’re both country blokes. We both have a love of numbers. And we both have a habit of saying whatever’s on our minds at the time.
Barefoot: “Thank-you for your time Deputy Prime Minister. I currently own two Alpacas on my farm, and I just don’t care for them at all. They’re more stubborn than Greens Senator Sarah Hanson Young. Have you ever been spat on by an alpaca…or a Greens supporter?”
Barnaby: “No, although I’ve actually had alpacas run alongside me as I go for a jog down the side of my road. They just look like too much…hard work”.
Barefoot: “First home buyers have the footprints of property investors squarely on their backs. Negative gearing has created an uneven playing field because they can write off their losses against their tax. Explain to me how this is fair or productive?”
Barnaby: “Well….there are affordable houses, there just mightn’t be affordable houses in the places you’re looking. When people say there’s no affordable houses, well that’s not correct, there are, and in regional areas they’re vastly more affordable than in the cities”.
“Look I bought a house in St. George in South-West Queensland. I lived out at Charleville, now I’m living south-of Tamworth, but here’s the thing: I’m still out of town where it’s cheaper. What I’m saying is you’ve got to look across the nation. If you look around and say the houses around me are unaffordable you’ve got to ask yourself… is there somewhere else you can go where they are affordable?”.
Barefoot: “So what you’re basically saying is the Government doesn’t have the ticker to touch negative gearing, right?”
Barnaby: “The problem you’re going to have is that if you start messing around in any place without a proper plan, the problems you can create can be vastly greater than the problems you had. If you go into any market and take a substantial group of people out of that market, you can have an incredibly detrimental effect on all the people who have currently bought a house. There’s two sides to every equation”.
Barefoot: “Yes, but there is a substantial group of people who right now are priced out of the housing market. They’re called first home buyers”.
Barnaby: “There are two groups of people who you always have to consider: the people who want to get in and the people who are already there. So it’s never a simple equation, if you’re going to say I’m going to make all houses cheaper, you’ve just made all the people who own houses or owe money to a bank on a house, poorer”.
So here’s my take out from my discussion with the Deputy Prime Minister.
There is absolutely zero chance the government will do anything more than fiddle around the edges of negative gearing policy.
As Barnaby says there are two sides to every equation — and make no mistake, in politics the side that wins is usually the one with the most voters — and roughly two-thirds of Australian voters are homeowners.
It makes perfect political sense: who the hell wants to be remembered as the government that pricked the biggest housing bubble in history?
Well, I’ll tell you who: Bill Shorten.
He’s got nothing to lose, so he’s prepared to roll the dice, and end negative gearing for existing homes.
It’s bold, and it’s brassy.
But there’s just one little problem with it: getting Aussies off negative gearing, is alike a junkie getting off the gear. Long-term it’s totally the right thing to do. Just not today…maybe tomorrow (but probably not). The scary part is that everyone knows there will be a withdrawal period, and it will be nasty, and no one can accurately predict what will happen. But let’s have a go…
Bill Shorten has said that if he’s elected, negative gearing on existing properties will be axed on the 30th June 2017. However, he’s also assured landlords (and his party) that anyone who buys before that, gets grandfathered tax deductions for life.
So, what do you reckon the property market will do in the run up to the cut off date?
What will happen the day after?
Will we be shivering in in a corner, with our heads in a bucket?
Either way we should encourage our politicians to make hard, courageous decisions, that benefit the country in the long-term. However the trouble is for a politician, long-term isn’t even a three year electoral cycle these days — just ask Kevin, (and Julia and Tony).
So where does that leave first home buyers, with the likelihood that the Barnaby and his boys will be returned to power?
Well, last year the former Treasurer, Smoke’n Joe Hockey’s advice to young people who were struggling to crack into the Sydney property market was to ‘get a good job that pays good money’ (teachers, nurses, police-women, scientists… no house for you. Lawyers, bankers, politicians, you win!).
When I asked Barnaby the same question, here’s what he said:
“The great thing about Australia is if you’ve still got the drive, if you’ve still got the mongrel about you that wants to get up and go, you’ll get there. But if you think you’re going to – by some stroke of luck – walk into a multi-million dollar place for a couple hundred thousand bucks, well that just ain’t going to happen. Like everything in life you’ve got to start from the bottom, work hard and you’ll get there”.
Tread Your Own Path!