The other side of housing affordability: The user cost of housing in australia

Abstract

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 r..