When my partner and I were trying to buy our first home in Sydney in 2014, we were the under-bidders at half a dozen auctions.
Every single time, we lost to an investor.
You could spot them a mile off – middle-aged, mostly white, no small children in tow, well dressed, nice car.
Even if they hadn't so neatly fit the stereotype, the estate agents confirmed it for us. "They're not even planning to live in it," they'd say, with an air of disbelief.
We finally succeeded by gritting our teeth and finding a way to borrow more. Some investors who beat us to earlier properties actually paid less than we eventually did – though we have no regrets now.
It is a sign of the times that it took two of us on above-average incomes – with decent savings and support from family – to buy an average home. We know we're lucky but it isn't right that so many others are locked out. Home ownership is not only about household wealth, it's also about creating a home and joining a community. It's hard for renters to do that when they're forced to move every year or two.
Our prime minister says housing affordability is about supply. He's right, but it's also about demand.
Our experience on the auction trail is not unusual. It's not just that nearly one in three buyers are investors, it's also that they're disproportionately competing with first home buyers.
As the graph shows, investors bought 30 per cent of the properties under $500,000 in the past 12 months but only 21 per cent of the properties above $1.2 million, according to national figures from CoreLogic RP Data. Across the entire market the average is 27.5 per cent investors.
More than nine out of 10 investors bought a property worth under $1 million, compared with about eight out of 10 owner-occupiers. These figures are national and the contrast would be greater in Sydney and Melbourne.
To fit the bill for negative gearing, it first must be the type of dwelling that will attract tenants – go too upmarket and you'll be trying to rent to people who can afford to buy.
Second, you have to be able to afford the losses. A 10 per cent loss on a $2 million home will hit harder than a 10 per cent loss on an $800,000 home, even if it's tax deductible.
Finally, you need to believe the property will increase in value. Negative gearing usually means you deliberately make losses for years in the hope of a big profit at the end to make up for it.
That brings us to capital gains tax. Negative gearing has been around a while, but it really took off as a tax strategy after 1999 when the Howard government heavily discounted capital gains tax for investors.
Negative gearing gets all the attention, but you could probably leave it untouched and reinstate full CGT and get the same outcome.
The current system fuels property speculation. If you don't think the market will rise, then the way to make money is to ensure the rent exceeds your costs – also known as positive gearing. Or you could settle for neutral gearing – aiming for break-even.
When Malcolm Turnbull and Scott Morrison held their press conference with the Mignacca family in Penshurst last week, they were trying to paint negative gearing as something that ordinary people do to get ahead.
It stuck in the craws of many Australians that taxpayers are subsidising an investment property for the Mignacca baby when many other families are struggling to break out of renting. The Mignaccas aren't to blame but that doesn't mean the underlying tax policy is fair.
Turnbull argues that negative gearing is a bog-standard tax deduction; it's "income tax 101". Yet it's either not allowed, or heavily restricted, in most OECD countries.
It's true that it's supposedly a principle of the tax system that you can deduct expenses incurred in the course of earning income from your taxable income. (I say "supposedly" because if that were really true we'd be able to deduct the cost of childcare and business clothing).
If you're a doctor with an investment property, it's reasonable to deduct interest and maintenance expenses from your rental income. But if your costs exceed that, should you be allowed to deduct the deficit from your doctor's salary? It is less clear cut because the activities of being a doctor and being a landlord are not related.
Plus your loss is deliberate, something the Tax Office takes a dim view of elsewhere. Take the so-called Collins St cockies or Pitt St farmers - city professionals with a farm as a weekender who claim a loss as a primary producer to offset against their salary. The Tax Office states the farming activity must be done to make a profit, otherwise it's a hobby.
Turnbull says curbing negative gearing would hurt property prices and discourage investment. He's probably right.
After all, that's the point. You can't improve housing affordability without prices either coming down or at least staying steady.
The question is by how much. Wiping 30-40 per cent off home values might sound appealing to frustrated first time buyers, but only if they haven't thought it through. The property market is too big to fail and buying a home would be just as unaffordable at half the price if you no longer had a job.
It's important to avoid a hard fall. That's why Labor plans to end it for new purchases, while letting existing investors keep the perk.
Turnbull is stretching the truth when he says this would remove one in three buyers from the market. Many investors earn rental income and pay tax. And those who want to keep negative gearing would hang on to their existing properties, so supply would also soften – and security for renters would increase.
My reservation is Labor's plan entrenches the advantage of older generations. Yes, young people would be better able to afford their first home, but they'd never be able to enjoy the same tax breaks on investment.
I'd prefer to see modelling to keep negative gearing open to anyone but with a limit of five years. Investors could claim a loss to get started, but they'd need a clear strategy to eventually break even. Just as incentives for start-up businesses don't last forever.
Turnbull also claims negative gearing would push up rents. The Grattan Institute disputes this because many current renters are would-be buyers. There are already signs more people are buying their first homes, as the property market slows.
Credit reporting agency Veda says the proportion of mortgage applications by the youngest group, 18-24 year-olds, had steadily decreased from late 2012 to late 2015 but enjoyed a healthy uptick in the first quarter of 2016. The proportion of mortgage applications by people in the 25-34 age category also increased.
Long may that continue.
