I suspect the parent was replying to the second part of your question: What specific regulation do you propose that would prevent housing investments?.
The parent's response is (presumably): "remove negative gearing".
The original parent said "housing has become an investment commodity" and that it very true here in Oz.
Thanks to a climate of very low interest rates and "negative gearing" it means only those with high taxable income and a high tax burden can afford to invest in housing and in the process pushing housing prices ever higher.
But this is a bubble and it is unsustainable. If the world economy ever gets over the problems of the 2007 GFC and we finally see any form of real growth, interest rates will have to increase from their near zero position.
When that happens it will cause yet another crisis when that housing bubble is pricked.
By removing that unhealthy gearing tax, the Oz government could at least take some of the heat out of what is an already overheated property market.
Edit: Before someone points out Oz interest rates are actually not zero but rather high, unlike the majority of the developing world. Last Tuesday the overnight cash rate came down to it's lowest level since the 1950's.
And since the Oz economy is not running as well as it should, all predictions are we'll be seeing several more rate cuts in the future.
And with the current tax settings, that means we're in for a booming of house prices. We only have to go back to 2007 to see how over inflated house prices can destroy a world economy.
So many people say this, presumably because "it must be true".
I just don't see why that is necessarily so - at least in the medium (20-30 years) term. Australian demand is propped up by Chinese flight-to-safety money, and housing demand (especially in Sydney and Melbourne) remains very high.
In the short term, yeah, it would be good to see lower growth in housing prices, or even a drop. I'm quite sympathetic to the idea of negative gearing reform.
A 5% drop in real terms is possible, or even likely at some point, and markets like Perth and Darwin will always be more volatile.
But that's very different to the 30-50% drops that "bubble bursting" implies.
* Across Australian state and territory capitals, the median asking price for detached homes jumped $6,400 over the week to $755,100, the figures show.*
At a rate of 6% the interested alone on that loan is $45,000.00 a year. Move that rate to 7% and that jumps to close to $53,000.00 a year.
How can any family earning average or better than average wages every have enough income to cover those interest re-payments?
> Australian demand is propped up by Chinese flight-to-safety money, and housing demand (especially in Sydney and Melbourne) remains very high.
I don't disagree with this and I have no doubt the prices are being over inflated by a large numbers of oversees investors.
Hover, part of that problem is the Australian government is not enforcing it's own rules regarding home ownership. If a foreign money buys a home in Australia the owner needs to be a student or a permanent resident.
Currently there is massive level of overseas investment in Australian driving up the prices in the housing sector but most of that investment is actually illegal:
Australia also suffers from demography issues in that there are so few cities where you can live.
Unlike the US where there are numerous big cities options, in Australia there are less than a dozen such big city locations to choose from.
That factor alone is also putting upward pressure on housing in those areas.
The question is will interest rate every go up. That is not certain since the world is still suffering with the issues of the last GFC.
But in Australia if those interest rates do ever start to move upward, which would be an indication the country is finally showing something in the form of economic growth, those rising interest rates are going to cause problems with those massive $1 Million+ home owner debts.
The parent's response is (presumably): "remove negative gearing".
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