Safe As Australian Houses? Financial Returns, Volatility and Taxation Policy 1999-2015

31 Pages Posted: 20 Aug 2016

See all articles by Greg Costello

Greg Costello

Curtin University - Centre for Research in Applied Economics

Date Written: August 19, 2016

Abstract

This paper estimates ex-post returns to Australian housing in Australian capital cities 1999 2015 considering the cycle of asset ownership; acquisition, annual operations, taxation and disposition. Modelling accommodates financial leverage and varying taxation regimes. Results confirm home ownership as a significant source of wealth creation. Financial leverage is beneficial for owners and investors, also increasing volatility. In general, owner-occupier returns exceed investors due to capital gains tax exemption. When returns are lower investors can be ‘immunised’ against greater losses due to ‘negative gearing’ tax shelter benefits. Significant regional variations exist both in the scale of returns and in temporal cycles.

Keywords: Australian housing, housing returns, user-cost of housing, negative gearing, price-to-rent-ratio, housing taxation policy

JEL Classification: R31, B41, C54, D14, D31, H24, R14

Suggested Citation

Costello, Greg, Safe As Australian Houses? Financial Returns, Volatility and Taxation Policy 1999-2015 (August 19, 2016). 29th Australasian Finance and Banking Conference 2016. Available at SSRN: https://ssrn.com/abstract=2825072 or http://dx.doi.org/10.2139/ssrn.2825072

Greg Costello (Contact Author)

Curtin University - Centre for Research in Applied Economics ( email )

GPO Box U1987
Perth, Western Australia 6845
Australia

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