Taxation Imbalance

I've always thought that our modern economy has gamed property into an growth strategy, and largely ignores the utility in its use. That is, the asset's capital cannot be returned through rent alone. The investment focus is on long term asset appreciation and capital gain. Think how the taxation system must subsidise property investors so they can offset operational expenses against other taxable income, just to help make being a landlord more attractive. At least in the present property market here in Australia, being a landlord does not make economic sense, unless you are a top tier income earner AND you can flip that house for profit, to the greater fool.

Much inflation in property has been because the tax system has allowed property investors to offset top tier income as a tax free sink into the costs of being a landlord. I've been involved in an auction or two in my life, against a property investor with deeper pockets and more to gain from the old homes we like to live in.

Take how the taxation system is focused being a drag on enterprising activity. Consumption tax, payroll tax, income tax. What are the taxation expenses on empty plots of land, or homes? Just a fraction of a percent a year for council rates. Nothing to stop an investor sitting on ill-used property for a year or three, in the hope, they can make better capital gain on its eventual sale.

Little hiccups in property values can shudder a market significantly. If there is anything that shakes this unquestioned axiom of capital gain. Money will seek enterprises that use land to better effect.

I maintain that if current sources of taxation start to dwindle. Like say slowing retail activity, growing unemployment. Government will need to shift to sourcing its income more directly from land owners.

The following video puts my above notes into sharp focus.


Real Estate 4 Ransom from Real Estate 4 Ransom on Vimeo.
http://player.vimeo.com/video/38500767?title=0&byline=0&portrait=0