How do we think interest rates will affect investors who use low interest and rising property prices to skim the equity of the property and claim the interest as a tax deduction. This model would not work great with rising rates and even flat prices. I have seen this model spruked by numerous property investment types.
OF course it works. Most of those investors already hold properties that have been sky rocketing. So even as they flatten out, or even drop they already have the crazy equity earned.
So they could take that current equity and use it to invest elsewhere. Or even take a gamble on inner metro apartments in anticipation of student and foriegners flooding back.
Where it won't work is if you were buying now at the top end of the market and even then probably only in the short term.
Claiming interest on investments is no different to claiming expenses on stock for your business you use to make a living. You still have to pay tax on any positive income you mKe either from positively geared property or capital gains when you sell.
After the recent senate inquiry couldn't even work out how many Australian properties were owned by overseas investors I have no idea if we have the granularity of the market to know how many investors who have little to nothing invested in the properties might walk away. This is how much of the US crash started (at a local level where we lived) with investors just walking away.
Not saying this is what could/would happen here but would be good to know the make up of the entire market.
This one is interesting. Because much of the foreign investment in Australian property is bought via Australian citizens acting as proxies for those foreigners.
I used to work for a business that actively ignored this. You're a part time barista with 19 properties, and you want to buy another? No worries!
Strange how all these mega wealthy baristas and dishwashers are all of one particular demographic. Nothing sus.
There's actually several outfits that make income payments to these proxies' bank accounts for months to seed some of the information that needs to be verified. But after you see 500 customers who all get paid by the same group, you start poking around a bit. On3 such group was a property investment group out of China litterally not hiding it. The bank statements didn't even have outgoing expenses, just a regular income and growing balance. Think anyone asked about why that might be? Nope. Give them house number 20. Fucking rediculous