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Mal Maiden: Time nearly up for negative gearing

With the Federal Reserve hinting at a looming rate rise, and the government white paper on tax overdue, Mal Maiden examines the market future.




Australia's federal politicians have been outed as the country's most eager property investors, casting doubt on their willingness to rein in negative gearing.

The controversial practice allows taxpayers to use tax losses from rental properties to cut their taxable income. Critics argue it contributes to Australia's house affordability crisis.

If someone has more than one mortgage of course they're negatively gearing. You'd be an idiot not to 

Around one in seven Australian taxpayers own rental properties, but among federal politicians it is at least one in three.

Figures compiled by property authors Lindsay David, Paul Egan and Philip Soos show federal politicians own an average 2.4 properties each, including their family homes.

Collectively they own a portfolio of 541 properties, conservatively estimated to be worth $350 million.

Barry O'Sullivan is Capital Hill's biggest property tycoon, with the Queensland Nationals senator owning 41 properties.

Other big real estate investors include the Nationals' David Gillespie (18 properties), the Palmer United Party's Clive Palmer (12 properties), and the Country Liberal Party's Natasha Griggs (12 properties).

High-profile Communications Minister Malcolm Turnbull owns an impressive portfolio of seven properties, while Labor MP Alannah MacTiernan has five.

But of the 226 members of Parliament, 84 of them hold at least one investment property and at least one mortgage or investment loan, meaning they are possibly negative gearing.

Parliament's register of members' interest does not disclose if its members who hold a loan against their investment properties are negatively geared.

But as one federal politician told Fairfax Media, after admitting he negatively geared a second property: "If someone has more than one mortgage of course they're negatively gearing. You'd be an idiot not to."

Alannah MacTiernan said that her sole investment property (in which she has a 33 per cent interest) is not negatively geared. 

Economists like Saul Eslake from Bank of America Merrill Lynch, and John Daley from the Grattan Institute - who recently took on Treasurer Joe Hockey on Q&A - say negative gearing and the capital gains tax discount should be wound back because they are inflating house prices and accelerating falling rates of home ownership among the young.

Mr Daley said if the government was unwilling to remove the capital gains tax discount it should get rid of negative gearing altogether.

"The most important argument against negative gearing is that it drives up house prices because it increases the after-tax returns to housing investors, and so prices are higher than they would be otherwise," Mr Daley argued last week.

Mr David, Mr Egan and Mr Soos last year warned that, with such high rates of property ownership among Australia's senators and ministers, it was "difficult to believe that politicians will address the real causes of housing unaffordability, despite the recommendations from government reports".

When it comes to Canberra's entire property portfolio, members of the Coalition own 331 properties, or 61 per cent, at an average of 2.7 properties each.

Labor politicians own 162 properties, at an average of two properties each. Greens politicians own 16 properties, while the Palmer United Party owns 14 (Clive Palmer owns 12 of those).

Australia's MPs currently used more properties for investment or commercial purposes (291 properties) than for residential or recreational purposes (250 properties).

Property ownership among politicians is slightly down since the last time Mr David, Mr Egan and Mr Soos conducted similar research.

In 2013, the authors found MPs owned roughly 563 properties, including 312 for investment or commercial purposes.

In 2011/12, more than 1.2 million taxpayers owned a negatively geared property, and the number of people who use the tax strategy has more than doubled since capital the gains tax discount was introduced in 1999.

This article originally contained errors relating to Alannah MacTiernan's property ownership. They have been corrected.

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Property prices in Dubai Marina have dropped by as much as 18 per cent over the past three months, according to the classifieds website Dubizzle.

The company's second-quarter report shows that sale prices for a studio apartment fell by 18 per cent in the Marina to Dh900,000, while three-bed properties dropped in price by 14 per cent to Dh3.6 million.

Rents in the area, which remains the most searched for community in Dubai, have fallen by 7 per cent for three-bedroom properties to Dh213,000 per year.

Meanwhile, prices in some of Dubai's older communities such as Deira have increased as renters have sought cheaper options in the city and no new stock has been built in these areas.

o Where Dubai rents have risen and fallen, second quarter of this year

The rent for a studio apartment in Deira has increased by 18 per cent to Dh65,000 (the same as in Bur Dubai) and three-bedroom apartments have risen by 5 per cent to Dh158,000.

In Abu Dhabi, rents and prices have increased across the board apart from Al Reem Island, where there was a decline in sales prices for two and three-bedroom apartments. Two-bedroom apartments dropped in price by 2 per cent to Dh1.96 million, and three-bed units fell by 5 per cent to Dh2.8m.

o Dubai and Abu Dhabi tenants locked in limbo as landlords seek rent advantage

Rents at Saadiyat Island increased by more than 10 per cent, with a three-bedroom property costing an average Dh210,000 to Dh240,000.

Musaffah East, encompassing Mohammed bin Zayed City and Khalifa City, remains the most affordable area in Abu Dhabi to rent.

However, even here prices increased by up to 13 per cent. A one-bedroom apartment in Khalifa City A costs 11 per cent more at Dh55,500.

"The Dubai property market is softening, while older areas in Dubai showed price increases in reflection to a maintained level of demand," said Ann Boothello, product marketing manager for dubizzle. "An example of this is that now a studio in Bur Dubai is rented out for Dh65,000 annually and in Dubai Marina at Dh70,000."

o Where Abu Dhabi rents have risen and fallen, Q2 2015

"Prices of properties for sale decreased across Dubai, with the exception of studios and two-bedroom apartments on the Palm Jumeirah increasing up to 6 per cent," she added.

"Abu Dhabi, on the other hand, experienced price increases in for sale and rent properties."

The top five areas where people were looking for property to buy in Dubai during the first six months of the year were Dubai Marina (which attracted 20 million searches), followed by International City (16 million), JLT (13 million), Downtown Dubai (7 million) and Arabian Ranches (4 million).

In Abu Dhabi, the most popular areas for buyers were Al Reem Island (2 million searches), Gate District (2 million), Tamouh's Marina Square (900,000), Al Ghadeer Village (900,000) and Shams Abu Dhabi (500,000).

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