WHAT A rollercoaster the past year has been for property!
We saw a lacklustre start to 2019 largely due to apprehension around last year’s Federal Election and particularly proposed housing-related tax policies from the ALP.
Activity was also subdued due to the fallout from the Banking Royal Commission and tightened lending restrictions imposed by the Australian Prudential Regulation Authority.
However following the Federal Election in May and confirmation the status quo would continue the market slowly started improving as confidence returned, and now it’s firmly in recovery mode.
The difference between the start of 2020 and the same time one year ago is like “chalk and cheese”, says Hotspotting.com.au founder Terry Ryder.
“One year ago everything was super negative but now things are much more positive,” he states.
But just how positive is the market? Will the price growth that started in 2019 continue this year, and if so, will it be at a strong pace?
Let’s first look at why prices have started to rise again…
In the wake of the uncertainty in the property market over 2019 many sellers decided to hang onto their homes, fearing they wouldn’t get the desired price, and construction also eased.
This led to a lack of available stock for buyers to choose from, which Ryder says was one of the several factors contributing to the price growth that started towards the end of the year and has continued into this year.
“One of the factors in the escalation of prices, particularly in bigger cities, was that at a time when demand recovered quite strongly, there was very little supply and vacancies were generally low in most locations around Australia,” he says.
“There was a lot of competition for good properties available, which was a big factor in price growth last year.”
Now, in 2020, there are signs supply is starting to rise, with sellers more confident in testing the market, and more construction in the pipeline, so price inflation that occurred due to a lack of stock will likely be tempered moving forward.
National residential property listings increased in January by 2.2%, according to the latest data from SQM Research. All capital cities saw a rise in listings, but the largest rise was in Sydney of 5.1%, followed by Hobart at 4.9%.
Sydney’s listings are still 24.8% lower than 12 months ago, while nationally listings are 10% lower than a year ago. But there are likely to be further increases in the coming months.
Dwelling approvals are also improving, with annual growth lifting to 2.7%, the first positive since June 2018.
“Markets are rising and people can get pretty good prices for their properties if they’re willing to list them,” says Ryder.
“Consumers were a bit battered and bruised after a period of negativity, including fears of the Federal Election, but since the middle of May last year there have been a series of fortunate events.”
These events include an easing of lending restrictions, tax cuts, three interest rate reductions and more positive media coverage on the market.
“There are always multiple factors in why the market rises and these factors are all part of the equation,” says Ryder.
“But with more supply coming to the market this year, it will take some pressure off prices, particularly in Sydney and Melbourne.
“The market will settle down a bit and be what you might call a ‘normal’ market.”
Indeed, the latest CoreLogic Home Value Index found that while property prices rose across every capital city in January, the rate of growth had slowed in recent months.
Over the past year prices have grown by 4.1%, which is the fastest pace of growth for a 12-month period since December 2017, but in January the index was up by a total of 0.9%, down from its recent monthly peak of 1.7% in November.
Growth markets are aplenty this year
With Sydney and Melbourne likely to take a backseat this year, smaller capital cities are set to come to the fore, including Brisbane, Perth, Canberra and Adelaide.
“Sydney and Melbourne have had substantial and lengthy booms, and the increase in supply and the affordability factor will tend to suppress the level of growth in those cities,” says Ryder.
“Cities that haven’t had a big run but have the right dynamics in play will have a strong year.”
Brisbane is overdue for growth, and all the ducks are starting to fall into line for the city to do much better this year, explains Ryder.
“All indicators are that Perth has finally moved into a recovery after five years of gradual decline and Canberra looks solid, underpinned by one of the steadiest economies in the country.
“Adelaide is always underrated; it’s got a lot more going for it than people realise and it will have a good year as well.”
Hobart has had a good run and is likely past its peak, and Darwin is still struggling, adds Ryder.
He points out that regional areas also have the potential for growth this year, with the strongest market being regional Victoria, with parts of regional New South Wales also looking promising, including Orange, Wagga Wagga, Goulburn and Dalby.
In regional Queensland the Sunshine Coast offers some of the best growth potential, with a strong economy, while some parts of Central Queensland are also recovering, including Mackay.
I wanted to spread some Christmas Cheer and mention the 5 little-known things you CAN claim on if you’ve purchased a property built after 1987. This season is about giving and I hope the below gives you some further insight on how to maximise your Tax Depreciation deductions.
1. A Capital Idea
Many investors do not realise that even if the property is not brand new, they can still claim on the Capital Works/Improvements or Structural aspects of the property. If the property was built prior to 1987, you cannot claim on the original structure but you can claim on the structural portion of any renovations/improvements that have been done by previous owners. Kitchen, bathrooms and Outdoor improvements typically have a higher structural component.
2. Fees Incurred
For any significant renovation or improvement, its is likely that council fees were incurred along with Architect and maybe even Engineer’s costs. Whether incurred by yourself or a previous owner, these expenses should be factored into your depreciation report.
3. Many Parts to the Whole
So you’ve purchased a second-hand property and you can see that previous owners have installed a ducted Air-conditioning system. Air Conditioners are categorised as plant & equipment by the ATO so you cannot claim anything, right? Well, while you cannot claim on the mechanical components, the ducting is considered structural, or capital, in nature and you are able to claim deductions on this.
4. Just Cosmetic?
Painting (both internal and external) is considered to be a capital improvement and can therefore be claimed by subsequent owners. The same is true for Floor Sanding or Polishing. Whilst these are typically not HUGE amounts, they are claimable and help to reduce the investor’s taxable income – “every little bit helps”
5. The Common Good.
Did you know that when buying into most Strata Titled complexes, you are actually taking ownership of a portion of the common areas and facilities? If you have purchased a second-hand property in a Strata Titled building or community, you are eligible to claim your portion of deductions on the capital works items/assets. This often includes things like swimming pools, lobby upgrades and basements etc.
As accredited Quantity Surveyors with over 40 years’ experience, Washington Brown are recognised by the ATO as having the necessary skills and experience to estimate the cost and dates related to previous renovations or improvements.
If you’ve purchased an “older” investment property and have not had a depreciation schedule prepared, get in touch via the link below. We’ll happily provide you with a free estimate of the likely deductions available.
Let me introduce you to our new product, the CGT Saver™ Report – A report specifically created to prevent our clients from paying too much in Capital Gains Tax.
Although you can no longer claim depreciation on second-hand Plant & Equipment Items (ovens, dishwashers, etc.), with Washington Brown’s CGT Saver™, you can claim the applicable and documented value as a capital loss if you remove or replace any of these in the future.
This report lists and values all those included items that you have purchased at settlement. It then allows you to claim a capital loss straight away if any of these items are removed.
The best bit.. This loss can offset other share &/or property gains that you might make.
This report is exclusive to Washington Brown, so ask for it by name and contact us to find out more.
If you have purchased an investment property after May 9, 2017 – request a free quote here and one of our tax depreciation specialists will review your property and let you know if a depreciation schedule is worthwhile for you.
Six Things To Know Before Buying an Investment Property:
You may be thinking about buying an investment property. Australia has a strong property market, which attracts a lot of buyers. However, there are some property investment basics to keep in mind.
The attractive Australian house market has many people investing in property. For beginners, this means learning the property investment basics that will lead them to success. After all, property isn’t a sure thing. It may offer more security than investing in stocks, but you have to put the work in to generate an income.
So what do you need to learn before you invest in a property? Here are some things you must know about property investment for beginners.
Issues #1 –How Much You Can Borrow
You need to know how much you have to spend before looking for an investment property. If you don’t, you run the risk of finding the perfect property, only to discover that you can’t afford it.
You can get a general idea for how much money you need when buying an investment property. Calculator websites allow you to enter some figures to produce a rough estimate. They’ll ask about your income, in addition to any expenses you currently incur. These include everything from your debts, through to the dog food you buy each week.
However, you won’t know for certain until you speak to a lender. Most importantly, you must find out how much of the property value you can borrow. This will tell you how much money you must raise for your deposit.
Issue #2 – Your Investment Plan
Most people approach property investment with a simple end goal. They want to make enough money from their property to quit their jobs. However, many don’t really understand what this means. Enough money for one person may not be enough for another.
So, you need to have a plan in place before you start investing. Work out how much income you need your investments to generate before you can live off the proceeds.
This is your real goal. A vague notion of early retirement won’t keep you focused. You need to know exactly what you’re shooting toward before you invest your money.
Issue #3 – The Different Types of Gearing
You may have heard of gearing, without really understanding the concept. You need to learn what gearing is to create a strong investment plan.
There are three types of gearing: positive, negative, and neutral. Positive gearing means that your property generates enough income to cover its expenses, with money left over. You have to pay tax on your income when you have a positively geared property.
Negative gearing means your property doesn’t generate enough money to cover its costs. This may sound like a bad thing. However, you can use negative gearing to your advantage. Many investors offset the losses their properties make against other income sources, such as their salaries.
As the name suggests, neutral gearing means the income covers the costs. You don’t make any profit, but you don’t lose money either.
Issue #4 – The Choice Between City and Rural
There’s a huge difference between city and rural properties. City properties give you access to more people, which makes it easier to fill vacancies. However, rural properties allow you to charge higher rents. You can also buy rural properties for less money.
So, which do you choose? It all comes down to what you want to achieve. City properties tend to enjoy higher capital growth than rural properties. However, it’s easier to positively gear a rural property.
You need to do your research before creating any property investment strategies. Australia offers all sorts of opportunities. Consider area population, local economies, as well as demand when choosing where to buy your property.
Issue #5 – Who Provides Legal Advice?
You’ll have a choice between conveyancers and solicitors when looking for legal advice. Both work in law, but they’re slightly different.
Conveyancers focus solely on property law. They’re highly specialised, but won’t be able to help you with any issues that aren’t directly related to the property. Solicitors offer well-rounded knowledge on a range of issues. However, they also cost more money.
Your choice depends on the property. If you anticipate a lot of legal issues, hire a solicitor. This usually costs between $2,000 and $3,000.
A conveyancer costs approximately $1,000. Use these professionals if you anticipate a simple transaction.
Issue #6 – Your Exit Strategy
You should achieve success with proper planning. However, that doesn’t mean that you don’t need an exit strategy.
Your exit strategy determines how you’ll generate a profit from your investment. For example, you could decide to sell after a set amount of years to take advantage of capital gains. Alternatively, your exit plan may involve benefitting from the rental yield until you retire. Upon retirement, you could move into the property, rather than sell it.
The main point is that you need to know how you’ll exit the investment. If you don’t, you can’t take full advantage of the property during your ownership period.
The Final Word
Investing in property could help you to enjoy a greater level of financial comfort. However, poor preparation will lead to mistakes and potential losses. You need to know how to maximise your investment before you commit your money to a property.
Washington Brown can help you with that. Our Quantity Surveyors can help you to calculate how much you can claim in depreciation. Get in touch today to find out more.
Many see granny flats as an easy property investment. For beginners, they offer the opportunity to start investing, without spending too much money. As with any investment property, you must remember to claim for the depreciation of your assets.
Tons of people like the idea of buying an investment property. Australia offers plenty of opportunities, but many struggle to get over the initial financial barrier.
You may find yourself asking how to invest in property with little money. A granny flat may be the answer. They cost less than most other types of investment property. Plus, you still get to claim for the depreciation of the property’s assets.
So, what are granny flats, and how can you claim for their depreciation? This article will help you to answer those questions.
What is a Granny Flat?
You can think of a granny flat as a secondary home on your property. They’re usually self-contained extensions that come with a lot of the features you would expect in an apartment. The difference is that the granny flat is on your land. As a result, you have far more control over it.
Most people build their granny flats behind their properties. After all, the back yard is a perfect space to extend into. The flat itself will usually contain the following:
A general living space
This makes them ideal for all sorts of tenants. The name “granny flat” should tell you that they’re perfect for elderly tenants. However, that’s not the only use for this type of investment property.
Australia is full of young people who view granny flats as an affordable way of achieving their independence. Your own children may find the idea of moving into a granny flat more appealing than staying at home.
They’re also a cheap way to enter the investment sector. On average, a granny flat costs about $120,000 to build. In return, you could enjoy a yield of up to 15% on the property.
You do, and they depend on the state you build the granny flat in. Each has its own rules with regard to size. For example, a granny flat cannot exceed 60 metres squared in New South Wales. However, you can build up to 90 metres squared in the Australian Capital Territory.
Exceeding these limitations changes the status of the granny flat. This could have an effect on how you claim tax deductions. Australia has several states, so you need to get informed before you start building.
Claiming Depreciation on Granny Flats
There’s one key question you must ask when buying an investment property: what can I claim? Granny flats are no different. Just because you’ve built the property on your land, doesn’t mean that you can’t claim depreciation.
As a secondary dwelling, a granny flat must produce an income before you can claim depreciation. Assuming that’s the case, you can claim depreciation for capital works. These include the wear and tear the structure undergoes during its lifetime.
You can also claim for plant & equipment depreciation. In a typical granny flat, this means you can claim depreciation for the following assets:
The hot water system
Air conditioning units
Curtains and blinds for the windows
A range of kitchen appliances and assets
The bathroom’s freestanding assets
You can also claim depreciation on the areas the granny flat shares with your home. For example, you could claim for a pool or a patio, assuming the tenant uses these assets.
As you can see, that covers a lot of ground. In fact, research suggests that you could claim over $5,000 in depreciation on a granny flat for the first year of ownership. This figure increases to almost $24,000 over the first five years. That’s about one-fifth of the value of the average granny flat, in just five years.
The Final Word
As you can see, granny flats offer high yields and plenty of opportunities to claim for depreciation. That’s why they’re considered one of the best options when it comes to property investment for beginners. Manage the flat correctly, and it could generate thousands of dollars in income in a short time.
However, you need help to create a full depreciation schedule. Without the help of a Quantity Surveyor, you may end up failing to claim for the full depreciation of your assets. Contact Washington Brown today to get a quote for a granny flat depreciation schedule.
Find out What Capital Works Are and How You Can Claim Them
Not all people buy an investment property in Australia and leave it just the way it is. Many invest in improvements, so they can charge more rent to tenants. Buying a property and making improvements to it is one of the best investment property tips for beginners in its own right. But did you know there are plenty of tax deductions in Australia that you can claim for the extra features you build?
It all comes down to capital works. Also known as Division 43 of the Income Tax Assessment Act (ITAA), capital works relates to the work and materials you spent money on to build the house.
Such costs include the following:
The materials you use in construction, such as timber and tiles
New extensions, such as a garage
The construction of internal walls
Excavation of new foundations for your construction work
Improvements to the property’s structure, such as a new carport or fencing for the garden
Renovations to the bathroom and kitchen
Beyond these practical costs, you can also claim tax deductions in Australia for some of the fees associated with construction. For example, you can claim for the fees you pay to surveyors, architects, and engineers. Additionally, you could also claim for the money you spent on acquiring building permits for the work.
Can I Claim Capital Works?
It depends on your situation. Your building needs to generate income, which means it must be an investment property in Australia. If the building has produced income within one financial year of your claim, you can claim tax deductions as part of Division 43 of the ITAA.
As for your own status, it can vary. You could be an individual investor or member of a trust. Companies can also claim for capital works, as can the managers of superannuation funds.
How Do I Calculate My Capital Works Deductions?
The first thing to remember is that any valuations you have for the work are not relevant. Your capital works tax deductions in Australia must relate to the actual construction costs.
There are two rates may apply to your capital works – 2.5% and 4%. Which of these is relevant to your work depends on several factors. These include when you started construction, how you use the capital work, and the type of work undertaken. Furthermore, you have to take the amount of time the capital work generated an income for during the last financial year into account.
It’s best to speak to a professional to find out which rates apply to your capital work. Making claims you’re not entitled to could land you in trouble.
How Do I Make a Claim?
You can make claims for tax deductions in Australia on any capital works for a maximum of 40 years after the construction completion date. However, you’ll also have to provide several details in your claim, which include the following:
Information about the type of capital work undertaken
The start and end dates for construction
Information about who did the work
The actual cost of construction, which is not the same as any valuations or purchase prices you have
Information about how the capital work generated an income for you during the last financial year
Sometimes, it’s difficult to determine the actual construction costs. You may have lost some receipts along the way, which means you need an estimate. This must come from a quantity surveyor, or an independent third-party who holds similar qualifications to a quantity surveyor.
The estimate your quantity surveyor produces will consist of a schedule for all the capital works undertaken. It also creates a forecast for the tax deductions in Australia that you can claim on the work. Take this schedule and use it to complete your tax returns. Also, bear in mind that the estimate cannot come from a real estate agent or accountant. The Australian Taxation Office (ATO) will refuse your claims if your estimate comes from the wrong source.
How Does Capital Gains Tax Relate to Capital Works?
Any capital works that you claim must be taken into account if you decide to sell the property. You will use them to figure out your capital gains or losses.
You must deduct your capital works claims from the base cost of the home. The amount of these deductions will affect the amount of Capital Gains Tax (CGT) you pay. If the deductions result in you making a loss on the property, you may not have to pay any CGT.
Our Location-Based Property Investment Strategies in Australia
You need to consider much more than the state of the property when buying an investment property in Australia. The location plays just as big of a role in your decision. After all, a property in the wrong location won’t attract any demand. With no demand, you can’t find tenants. This leads to an investment property in Australia failing to generate the income you expected.
So how do you choose the right location? There are several location-based property investment strategies in Australia that you need to keep in mind.
Mapping the Suburb
You should already have a general idea of how much you’re willing to spend on your new property. If you don’t, then organising your budget should be your first step.
However, let’s assume you already know. Now’s the time to start looking at different suburbs. What you’ll find is that the majority of suburbs have what some professionals refer to as “preferred pockets”. These are areas where the demand for properties is at its peak.
If you buy an investment property in Australia in one of these pockets, you should enjoy capital growth almost immediately. However, you can also use preferred pockets as part of a long-term strategy. As preferred pockets become more popular, so do the pockets around them. You could buy in a preferred pocket, while also investing in some of the less popular pockets around it.
As your preferred pocket grows, you’ll reap immediate rewards. However, you’ll also enjoy long-term rewards as the surrounding pockets become preferred pockets in their own right.
Read the Data
It’s not difficult to find organisations that can provide you with the sales data for the area you’re considering. You can use this information to track how much prices have grown or fallen in a location. Many reports even allow you to break this down by month or year, often up to a 10-year limit.
So how can this help you? Firstly, it helps you to identify if the location is in an upswing or downswing. Ideally, you should avoid properties in areas that are about to swing downwards.
However, you could also take advantage of a downswing. If it looks like a location has bottomed out, you could buy a property in preparation for a rebound. The data will show you how likely this rebound is.
Check Infrastructure Trends
One of the best property investment tips for beginners is to track infrastructure trends across several locations. As a general rule, more infrastructure leads to higher house prices. After all, most people want to live in areas that offer easy access to amenities or the city.
The trick here is to look at what’s planned, rather than what’s already in place. Speak to local councils to find out what work may be planned in an area.
You’re looking for the “hot spots”. These are areas for which there are plans for infrastructural improvements that either haven’t started yet or are just beginning. Upon completion of those improvements, you should find that the demand for properties in those areas skyrockets. If you got in early, you can reap the rewards.
Avoid High Population Areas
This is one of the simplest property investment tips for beginners. The more houses there are in a location, the less demand you will experience.
It comes down to the basic concept of supply and demand. Property prices and rents fall whenever housing is in high supply. That’s because buyers and tenants have more room to negotiate because there are always going to be more options.
As a result, you should avoid areas with high populations. These tend to have a lot of supply, which means the demand is already met. Instead, look towards developing areas in desirable locations.
Check the Attractions
People buy or rent properties because of what the location offers as well as the property itself. This is where local attractions could shape your decision. A property that has a lot of nearby attractions will generally experience more demand than one that doesn’t.
So what is an attraction? On the basic level, you have things like creeks, beaches, and hiking trails. A lot of people like to have those things on their doorsteps, especially if they have families that they need to entertain.
However, you also need to consider the proximity of these attractions to the property. For example, let’s assume you’re buying a house near a beach. However, a freeway separates one set of properties from another. Those on the beachside of the freeway will command higher prices, often tens of thousands of dollars more than those for properties on the other side. In this example, it’s often best to invest in one of the lower-priced properties. They offer the same attractions, which means they’ll still be in demand. However, you pay less money to benefit from that demand.
You have to consider the location whenever you buy an investment property in Australia. After all, the location plays a huge role when it comes to the income you generate from the property.
Speak to professionals and find out as much information as you can. This will ensure you don’t end up buying in an undesirable location.
Make Sure You Claim All Depreciation on Your Commercial Real Estate
If you’re thinking about buying commercial real estate in Melbourne, you need to prepare yourself. Many people fail to claim the commercial tax deductions in Australia that are due to them. This results in thousands of lost dollars.
You can claim for all sorts of things on your commercial real estate property. For example, you can claim deductions for the wear and tear of your fittings, furniture, and the structure itself. In fact, making the right deductions at the right time can affect cash flow. You can change a negatively geared property into one that enjoys a good cash flow.
So now you’re probably wondering how to maximise depreciation on your commercial investment property in Australia. Our guide will show you how.
Get the Ownership Structure Right
How you buy your commercial property is just as important as the type of property you buy. You need to have the right structure in place if you’re going to claim the maximum depreciation.
For example, you can increase your deductions if you buy the property using a trust. The same is true if you buy with your self-managed superannuation fund (SMSF). In both cases, you can split your deductions. You can make claims on the building as a standalone entity. Furthermore, you can also claim on any tenancy assets. However, you must operate a business in the property to do this.
Furthermore, you can claim for any capital works you undertake during your ownership. These can include extensions and many other general improvements. Finally, if you occupy the building as a business owner, you can also claim depreciation for any fixtures or fittings. Again, you must use these as part of your business operations.
Maintain Your Records
It should go without saying that it’s vital that you maintain accurate records if you want to claim commercial tax deductions in Australia. However, a remarkable number of people don’t do this.
Document every expenditure that relates to the building. These include both the immediate and ongoing costs. Furthermore, you should add day-to-day expenditure to the list. Keep anything that relates to a financial transaction involving your building. These records can help you to claim more.
Use a Quantity Surveyor
Every commercial property investor should employ the services of a quantity surveyor. These professionals can help you to create depreciation schedules. A good schedule ensures you can claim as much as possible on your property.
A quantity surveyor will carry out regular inspections of your property. These help to determine what deductions you can make each year. They’re ideal for long-term planning as well. A good depreciation schedule will lay out how to claim deductions for the next 40 years.
Furthermore, quantity surveyors understand how to maximise your depreciation based on your timeline. You may only intend to invest in the property for a short period of time. That’s okay. A good surveyor will take this into account, just like they would for a long-term investment.
It’s likely your surveyor will recommend the diminishing value method if you’re a short-term investor. This assumes the value of your assets depreciates most during their early years. As a result, you can claim for more depreciation in the short-term.
Long-term investors may prefer the prime cost method. This assumes uniform depreciation over the lifetime of your assets. As a result, you claim the same amount each year, rather than the bulk in the early years.
Which method works best for you will depend on the time commitment you make to your commercial real estate investment. A good quantity surveyor can talk you through the different timelines.
Take Advantage of the First Year
Your first year of ownership is vital. It’s when you will set up the structure through which you will manage your commercial property for the years that follow. Getting things wrong during the first year makes things more difficult than they need to be later on.
However, you also need to take depreciation into account from the moment you invest in the property. This is where your quantity surveyor can help again. You may be able to depreciate some of your assets faster with a commercial property than you would a residential one. Your surveyor will point this out to you. As a result, you can make more upfront savings using depreciation, which means you have more cash to use during that difficult first year.
The Final Word
Maximising your depreciation from a commercial property isn’t easy, but you can do it. Use the services of a reputable quantity surveyor and don’t put anything off.
Remember that you can make claims for depreciation from the moment you invest in the property. Don’t lose money because you were slow on the uptake.
You Could Bag a Great Investment Property in Australia at Auction
Trying to buy an investment property in Australia at an auction is something of a mixed bag. On one hand, you have the chance to snap up a bargain. A lot of sellers use auctions as their last resort. As a result, they may ask for less than the value of their property. As long as you don’t get caught up in the heat of the moment, you may get a great investment property in Australia at auction.
However, you also have to consider the other possibility. Auctions are emotional places. If you get caught up in a bidding war, you could end up spending more than you intended. That makes it much more difficult to generate a good return on your investment property in Australia.
So how do you get the most out of your visit to a property auction? We have a few tips that should help you.
Tip #1 – Prepare Your Finances
Did you know that you have to pay the deposit for any properties you win on the same day as the auction? There’s no cooling down period, which means you need to be prepared financially.
This means you need to prepare yourself financially for the auction. Firstly, make sure you have a budget, and enough cash available to pay the deposit relevant to that budget.
You also need to consider how you’ll buy the investment property in Australia. If you’re buying using a trust or self-managed superannuation fund (SMSF), you need to make sure it’s organised for the purchase.
Finally, lodge a home loan application and get it through to the pre-approval stage. This means the lender is confident that they’ll approve your loan, barring a couple of extra checks. Having pre-approval means you can feel more confident in your bidding. It also places you in a good position to negotiate if the property doesn’t meet its reserve price, and you’re the highest bidder. The seller will see that you’re serious about buying if you have pre-approval, which may help you pull the price down.
Tip #2 – Look the Part
Impressions play a bigger role than you might realise at an auction. There are going to be all sorts of people there, so you need to play to the crowd a little bit.
Make sure you look the part. Ideally, you should arrive in business wear, so you look like the investment professional that you are. Bring a small notebook to jot things down. You may not need to write anything important, but it’s a little thing that could make inexperienced bidders wary of you.
The key is that you need to look confident, so people think you’re an experienced auction-goer. If you look like you have money to burn, a lot of people will refuse to bid against you. This gives you a distinct advantage, so you may secure an investment property in Australia for less than it’s worth.
Tip #3 – Bid Early
Many people try to lodge late bids when buying an investment property in Australia at auction. This tactic seems to make sense. You wait until the last second before making your bid. You rattle the other bidder, which lends you an advantage.
That tactic can work, but it has some risks attached. If you leave it too late, you may miss your bid. The auctioneer will bang the gavel, and you’ve lost out on a great property.
It’s much safer to bid early. This puts you in the running straight away, plus the auctioneer will start paying attention to you. As a result, you may get a touch more time to make that last bid count. Furthermore, jumping straight in with a strong bid can unnerve your opposition. This can reduce the bidding pool, so you face less competition.
Tip #4 – Don’t be Afraid to Walk Away
Walking away from a property you want is one of the hardest things you may have to do. However, it’s sometimes necessary.
Remember that you have a budget, and that every property you buy has to offer a good return on your investment. The bidding may get heated, and there may be people who can top every bid you make. It happens. You just have to make sure to react in the right way.
Stay calm and walk away if it looks like you’re going to spend more than you’re comfortable with. This protects you financially and ensures you have more money left over for any other properties you may be interested in.
You can make a lot of great purchases at property auctions. However, you need to avoid getting caught up in the emotion of the event.
If you follow these tips, you’re sure to bag some bargains eventually.
HOUSING affordability has been an issue for, well, what seems like forever, with Sydney a particular focus as prices have been skyrocketing.
So what’s being done about it? Well, it was addressed in the Federal Budget, the Victorian State Government announced stamp duty concessions, and now it’s New South Wales’ turn, with the State Government announcing a new housing affordability package at the beginning of this month.
It includes measures to help first homebuyers into the market, dampen competition and increase supply to put downward pressure on prices.
Before the new measures will take effect in just a few weeks, on July 1, let’s take a look at what they are and what impact they’ll have on the market.
The benefits to first home buyers
The major measure to come out of the package for first home buyers is concessions to stamp duty.
The tax has been abolished for home purchases up to $650,000 and concessional rates will apply for homes costing between $650,000 and $800,000.
It will apply for both new and existing homes, while concessions used to be only available for new homes.
Insurance duty on lenders mortgage insurance will also be abolished for all buyers, and this, combined with the stamp duty concession, is expected to save first homebuyers up to $26,857 for a $650,000 home.
The $10,000 first home owner grant will also be capped at $600,000 for new homes, but for those constructing a new home it will remain at $750,000.
What else is in the package?
The stamp duty surcharge for foreign investors will double from 4% to 8%, and the surcharge on land tax will rise from 0.75% to 2%.
For investors, the 12-month stamp duty deferral will be no longer, and stamp duty concessions for off-the-plan properties are also gone.
The NSW Government has also undertaken measures to increase supply by speeding up development approvals and council rezonings. It also aims to accelerate the provision of infrastructure to support the construction of new homes.
What impact will the affordability package have?
The affordability package has had mixed reviews since its announcement. While it has been welcomed by the industry overall, there are some criticisms.
The biggest issue is the threshold for stamp duty concessions; the argument is that it needs to be much higher to actually have an impact in Sydney. Since prices are so high, it’s not easy to buy a property under $650,000.
It’s a different story in regional areas of course, and perhaps this is the intention – to encourage people to move out of greater Sydney and to elsewhere in NSW.
Another issue is that stamp duty is still very high for upgraders and potential downsizers – ie. empty nesters – which prevents them from selling and moving on, which in turn reduces the supply available for first homebuyers or families to get into the market.
So even though there are incentives for first homebuyers, one has to wonder whether the supply will be there, even with the measures being undertaken by the NSW Government. Although of course the Federal Budget did provide an incentive to Australians over 65 to downsize, giving them the opportunity to make non-concessional contributions of up to $300,000 into their superannuation from the sale of their home, and this may help.
Another criticism of the NSW affordability package is that grants or concessions can simply create a surge in demand and the extra funds available to first homebuyers are simply added to the purchase price, so it just ends up in sellers’ pockets.
With the Sydney market already moderating, however, and supply likely to be increased, prices may not be pushed up.
Sydney price growth has already started dropping off due largely to affordability constraints and lending restrictions on investors.
According to CoreLogic, the city’s median dwelling price fell by 1.3% over May and has had zero growth over the past quarter, with growth now sitting at 11.1% for the past year, less than that for Melbourne. Sydney’s median dwelling price is now $872,300.
The other issue people will be keeping an eye on is the impact of dampening foreign buyer demand from the measures in the NSW affordability package.
Since these buyers are usually the ones developers get pre sales from, it could result in less development, restricting supply and pushing prices up.
On the other hand, foreign investors may not be put off and could still compete with other buyers, which will do nothing for affordability. Or if they completely disappear there is a risk that prices could significantly fall, as they did in Vancouver, especially since the market has already started moderating.
It’s all going to be a wait and see exercise it seems.
The affordability package is expected to be just part of the solution to the so-called housing affordability crisis in NSW, so stay tuned for the next announcement!
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