BEHIND negative gearing is the idea that an investor is prepared to bear immediate income losses in the hope that, over time, the value of an asset will increase, offsetting those losses and resulting in a profit from capital gains.
The problem with this strategy is that negative gearing locks an investor into certain near term losses, in the hope of a positive but uncertain outcome. Over the years we have analysed many people’s investment properties and achieving the capital gain required to make a profit is by no means certain.
People like the tax deductions that can be claimed against the up-front losses, but you can’t get away from the fact that negative gearing is a risky strategy.
While my professional view is one thing, it obviously doesn’t explain the ridiculous prominence given to negative gearing in the current election campaign. Let’s look at a few facts:
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