We would greatly appreciate a comment on the messages coming from Treasury, APRA and the RBA. It seems to attack sensible asset accumulation & an independent retirement free of the pension.
- They see “a potential risk” from increased property purchases
- They have taken action to”curtail their speculation”
- They have taken action to curb Interest Only loans
They admit to tighter credit restrictions and higher interest rates on Interest Only loans to achieve this “curving and curtailing”.
1. Can the Treasurer please explain what the potential risks are from an employed person buying property, with an Interest Only loan to house tenants? With low-Interest Only loans and a tenant, the loan is completely self-sufficient. Being an Interest Only loan this loan is 100% tax deductible making the out of pocket expenses extremely safe and a safe asset loan for the bank. There is over $7.4 trillion in residential real estate in Australia with just $1.7 trillion debt. A safe lend for the banks.
2. What effect does “curtailing speculation” and “curbing Interest Only loans” and “tighter credit” and “high-interest rates on Interest Only loans” having on the voters progress to have financial independence free of the pension?
3. Can Treasury confirm with these above restrictions the average person now is deemed to have insufficient serviceability if they have any more than 3 investment properties?
4. Can the Treasurer confirm that this person needs at least 8 properties to live successfully in retirement on the equivalent of the average wage free of the pension?
5. Is the Treasury aware that the forced Principal repayment is a whopping extra 45% out of the consumer’s pockets that must affect retail spending?
6. Can Treasury confirm that the extra payment from consumers pocket has no taxation benefit? The Treasurer introduced a new bank tax and promised that banks would not get this money from consumers. Isn’t the dramatic increase in interest rates this year following the budget, the banks are defying the Treasurer! The matter should be referred to ACCC as the Treasurer promised post budget.
A Better Alternative Please?
7. Can Treasury confirm that the Intergenerational Report for 2050 shows super runs out after 5 years? Treasury’s alternative suggestion (2013 via Treasurer Swan) of an endowment policy/annuity not super, this suggestion was also a disaster running out after the person retired. Both super and annuity see investors broke after 5 years and relying on the pension!
8. Can Treasury suggest a better alternative than property as a pension avoiding strategy?
A successful Strategy.
9. Can Treasury comment on my suggested alternative to the above? Accumulate new properties in growing cities. Accumulate 8 properties steadily over a decade using tax saved and rent to substantially pay ongoing costs. In retirement, the rent from 4 properties pays all the outgoings for the total 8 properties. This leaves rents from the remaining 4 properties to live on in retirement free of the pension. Bonus income is gained by asset borrowing on the rising capital growth. Asset lending is where the maximum lend is up to 60%. This makes it a very safe asset lend to the bank.
The final exit strategy is that these valuable assets with low debt are passed on in the wills to the younger generation. The younger generation has jobs and can provide serviceability. They can choose to sell the assets and pay the capital gains tax or continue to own assets that would keep them independent of being reliant on future taxpayers.
10. Underlying this can Treasury comment on the economic value to the community of jobs created to build these new properties – to be built, maintained and lived in?
11. When the Property Club was started 25 years ago there were 600,000 pure investors. As a result, tenants were paying a lot higher to get a roof over their head. 7% rent return was the norm. Now with the extra investors in the market, this has dropped below 5%.
It is time to wind back bureaucratic bungling in property.