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The Other Side of Housing Affordability: The User Cost of Housing in Australia *
Author(s) -
BROWN RAYNA,
BROWN ROB,
O’CONNOR IAN,
SCHWANN GREGORY,
SCOTT CALLUM
Publication year - 2011
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.2011.00730.x
Subject(s) - debt , capital (architecture) , order (exchange) , tax policy , economics , monetary economics , capital gains tax , business , cost of capital , finance , ad valorem tax , public economics , tax reform , market economy , double taxation , geography , incentive , archaeology
We calculate the ex post user cost of housing (UCH) in Brisbane, Melbourne and Sydney over the period 1988–2010. We find that the UCH varied considerably over time and, to a lesser extent, between categories of property owners. The UCH for an owner‐occupier without debt is nearly always lower than for the corresponding property investor; for an owner‐occupier with debt the corresponding investor tends to have a lower UCH. The 1999 capital gains tax (CGT) changes reduced the UCH for investors. Also beneficial to investors are the tax treatment of negative gearing and the CGT ‘discount’ of 50 per cent. These two benefits are of a similar order of magnitude. The main policy implication of our results is that in practice tax policy has far less effect on the UCH than interest rate policy.