It literally never occured to me that people would get loans to bet on the stock market.
It literally never occured to me that people would get loans to bet on the stock market.
umm, no one is lending me $2M.
Iām going to summarise you, for you, in a remarkably crude way.
āFuck you, I got mineā.
Those that have not will will take from those that have an abundance.
We live in a society. āFuck you, I got mineā will be stopped violently by those excluded by the structure of that society if itās not solved politically before it blows up.
Security and opportunity. How do we give it to all members of society?
Thereās heaps of Nigerians looking for help getting money out of their country and are willing to reward you handsomely for helping them.
Would you like me to forward you the e-mails?
fo sho!
You are being sarcastic, right?
People get loans to bet on everything
There is conflation of two issues in this discussion I think.
Firstly that housing is a fundamental necessity for every single person that exists. Using that need as a primary driver for economy activity or for wealth creation is a disgraceful path for any country.
Secondly is why people who use wealth to generate income are taxed differently. Income is income. Because one person gets their income from using money shouldnāt mean that income should be taxed less than a person who gets their income from labour. If anything it should be taxed at a higher rate - especially with property.
āFuck you I got mineā. That is the problem.
So that sort of gets to the heart the issue.
Investors can use borrowed funds for any sort of investment (āgearingā just means investing using borrowed money, and it can be negative or positive).
So then why is negative gearing so popular with property but not other classes?
Partly itās the perception that bricks & mortar is safer.
Partly itās because the current market value of property isnāt continuously updated and presented back to us in a ticker, Bloomberg terminal or in the finance section of the news. (Iām not sure most people would have a stomach for property investment if they could see the price fluctuating daily like stocks do).
Partly itās because historically property prices have gone and continue to go in one direction: up. So do stocks (generally, over a long enough period), but theyāre more volatile because theyāre more liquid and are continually revalued by the market.
All of which is to say, if we want investors to go elsewhere, we have to either make property less attractive, or other forms of investment more attractive, or both.
Edit: I have a vested interest in property, not as an investor (I only own one property and I live in it), but because I spent an absolutely eye watering amount on mine, so itās a very large part of my overall net worth.
I have the dubious claim of holding the record purchase price for a non-waterfront home in my suburb - but Iām ok with that. I went in with my eyes open, and have zero regrets.
But I equally worry for my children who have zero prospect of ever owning their own homes in the current system (until I cark it, but I donāt want that to be their only hope).
So I do want to see change. I want a more equitable system where more people can realistically see a path towards home ownership. And if that means the value of my home doesnāt go up, Iām perfectly fine with that.
What youāre not addressing is the inherent utility value of property, and the opportunity cost of renting.
if you do not have a mortgage, you have to pay rent in most cases, thereās no equivalent cost in not buying shares.
No, not at all. When I think about people who invest to get a return to supplement earned income as opposed to the professional investors, I canāt grasp someone taking out a personal loan for $500k at 7/8/9% to push into a stock market with a proven average long-term return of 5%.
Maybe Iām missing something, but I donāt buy the conflation of mortgages with long-term loans to purchase stock in a company.
Short-term loans, sure, to cover a liquidity issue, but long-term it makes no sense, unlike a house, which even if it does not rise in value, your mortgage payments allow you to avoid rent and have somewhere to live, and as a generalisation, if you donāt overleverage, offer a buffer against rising rental costs driven by inflation, e.g. your proportion of pay spent on somewhere to live reduces over time and eventually ends, offering significant value outside of the cumulative capital gains.
Itās not just stock speculation, either.
There are all sorts of private companies out there.
Iām well aware of that, but the comparison given was investing in BHP shares.
Investing in starting or developing a business isnāt remotely like buying shares on the stock market.
Iād say itās remotely like it.
Youāre ultimately buying an ownership stake, in exchange for investment of your money.
Moral of the story is:
Increase property tax, tax the shit out of unoccupied homes, invest in more affordable housing.
When you buy retail shares on the market you are speculating and have zero impact on the business itself, when you invest directly you are facilitating business investment and growth directly.
I think these are just matters of scale.
You can buy a share in a private business and get no right to make any decisions.
You can buy all of a publicly traded company and do whatever you want (kinda).
Come on, weāre talking about retail investors not warren fucking buffet, itās not the same thing for normal people not even close.
Return capital gains back to at least itās former level (perhaps calculated over the period of ownership rather than based on a single year income).
Scrap negative gearing or at least put heavy restrictions on it (new builds for a fixed period, hard cap on the number of properties that it can be applied for a person/family).
Proper government investment in public housing that actually meets the projected need within the next decade.
Hard cap on short term rentals in any given locality
Heavy tax on unoccupied homes
I havenāt seen it discussed but Iād like to see progressive land/property tax discussed to help put a soft cap on the number of properties individuals can own.