Making lemonade out of negative gearing cuts
If the tax incentive is the only thing keeping you in the market, it might be time to reassess your property investment strategy.
Blogger: Josh Masters, director, Buyside Buyer's Agency
As I walked out of a meeting in Potts Point last week, basking in the sunshine, I spotted a 20 cent piece on the pavement.
Bending down to pick it up, I quickly realised it was glued to the concrete. I’d been had!
I looked around for cameras or some cheeky kids and when I realised I was in the clear, quietly had a chuckle to myself.
I was now one of “those guys” who grabbed money on the street, no matter its value.
Years ago, I would have viewed this as very uncool. I wouldn’t have broken my stride to stop for 20 cents, let alone bend over to pick it up. The near-worthless coin wouldn’t have been worth my time.
But now things are different. I am older, wiser, and these days I carry years of experience with me as a property investor and business owner, and I can tell you my attitude has changed.
I naively used to believe that people who picked up coins needed every cent they could get. Now I stop for 20 cents and I don’t care if it’s glued to the pavement. Now I know that it’s not about the coin, it’s about the attitude.
These days I take every opportunity that comes my way. Nothing is too small because I know it’s actually the small things that come together to make big things happen. More importantly though, I’m always on the lookout for a way to make things work. I’m ready to make the best of any situation.
So when the news reports came out last week that negative gearing might be abolished, I wasn’t too worried. No doubt even the Liberals will take the chance to claw back a little revenue from a restructuring of the system.
Whether you believe the removal of this tax is right or wrong is beside the point. There will be some people who look at the proposed changes and will make the decision not to pursue property as an investment.
If the tax incentive was the only thing keeping them in the market then maybe it wasn’t the place for them anyway. If the allowance was the critical saving that made property investment affordable, then the cost of investing may have been too high for them to start with.
Either way, those whom it doesn’t suit will look elsewhere. For all the others, property investment will still remain a relatively low-risk asset that can generate returns far greater than I can get working my ass off in any job.
If you’re still in doubt about the future of property, it’s worth remembering that there are plenty of countries that have only partial gearing breaks and others, like the UK, that have no allowances whatsoever. Their markets are just as robust when it comes to building wealth.
If the next election does bring a change of heart around negative gearing, there may indeed be a short-term backlash in the markets, but so what? Property is a long-term game and if anything it may provide for a good buying opportunity that you can hold for the next decade of growth to come.
The day I bent down to grab that coin was a proud moment for me. I knew I had built it into my psyche to look for the advantage in every situation.
The removal of negative gearing will be no different. If the tax laws change, if there’s a recession, if China collapses – I’m going to make the new world work for me and the people around me.
How will you handle your new world?
