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New research shows that most first home buyers are clueless when it comes to knowing the ins and outs of property buying.
A concerning 61 per cent of first home buyers failed a basic property buying literacy quiz, compared with only 27 per cent of owner occupiers, and a quarter of investors.
Home loan lender ME Bank tested the knowledge of 1,000 Australians who are looking to buy their first home or have already purchased an owner occupied or investment property.
But it turns out that those buying their first home were not as clued up as they would like to think, despite nearly 70 per cent of respondents saying they feel confident about making financial decisions, and around half saying they understand the property buying process and related costs.
ME Head of Home Loans, Patrick Nolan said overconfidence and low financial literacy is a risky combination that could be costing first time buyers.
“It is difficult enough for those trying to get their foot in the door to save up a deposit and decide where to buy. A lack of necessary property buying knowledge is sure to increase the risk of young Aussies being caught out with unexpected costs, adding to the existing stress,” said Nolan.
According to the research, these are the biggest gaps in first home buyer knowledge:
88 per cent of first home buyers don’t understand that lenders’ mortgage insurance covers lenders, not borrowers.85 per cent of first home buyers don’t know there’s no cooling off period when buying at auction, compared to 66 per cent of investors.78 per cent of first home buyers don’t know that you need to pay the deposit on auction day.66 per cent of first home buyers don’t know what conveyancing is) with 38 per cent incorrectly thinking that the term refers to checking boundaries or physical issues with your property before you buy.63 per cent of first home buyers don’t know what an offset account is.
“Financial literacy is a valuable asset and one of the biggest money savers over time, especially when it comes to buying what is likely to be the biggest investment of your life,” Nolan told WILLIAMS MEDIA.
But it isn't just first home buyers
Owner occupiers and investors are predictably more informed than their first home buyer counterparts, but ME’s research still identified some areas for improvement.
Among the most worrying findings, 66 per cent of owner occupiers and 65 per cent of investors are unsure of the key things that contribute to the amount of interest you pay on a loan, meaning they could be saving more on interest.
Meanwhile, 53 per cent of owner occupiers and 54 per cent of investors don’t know that you need to pay the deposit on auction day, meaning they could be seriously caught out if they win a bid and don’t have the money ready.
Thankfully, there were some aspects of property buying that respondents excelled at. Nearly all of those planning to buy or have already purchased a property understand the buyer pays stamp duty, not the vendor (90 per cent got this correct). Similarly, 71 per cent understand what ‘equity in your home’ means i.e. the difference between the market value of your property and the amount you still owe on your home loan.
Furthermore, 69 per cent understand you pay less interest on a 10-year home loan versus a 30-year loan, and 62 per cent understand that banks look at multiple factors before determining how much they can lend borrowers.
How first home buyers can be more informed
Do your online research. There are plenty of educational options like the Government’s MoneySmart website and ME’s engaging online school of money, Ed, that can outline the basics and explain all the home buying terminology. Crunch the numbers. Many lenders have online calculators to help you understand things like borrowing power and what your repayments could look like.Independent advice. Speak to independent experts like an accountant who can answer all your unanswered questions.
“Some Aussies fail to educate themselves because they find finances dull and complex and think they know best, while others find working with numbers difficult and put their head in the sand.
“But like it or not, financial decisions including buying a property is best made on facts – a hunch or a guess could lose you thousands," Nolan said.
Source: The Real Estate Conversation 26th June 2018 https://www.therealestateconversation.com.au/news/2018/06/26/advice-first-home-buyers-after-new-research-shows-most-are-clueless-about-buying
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Median home price in the country slid by 7.2% in the year to April, with capital cities recording a larger decline of 8.4% in average weighted terms. Data from CoreLogic, though, showed that for some specific markets, the declines have been massive, while in others prices have not decreased at all.
The largest value drops among capitals have occurred in Sydney and Melbourne—which logged over 10% falls—and in Perth and Darwin, which have been demonstrating weakness.
On the other hand, Hobart, together with some suburbs in Canberra, topped the list of capitals with largest price growth in the year. The five best-performing regions in both cities recorded increases of 7.9% from 12 months earlier.
House prices in the Tasmanian capital defied the downward trend. Three of the city’s five worst-performing regions recorded price increase over the year.
“While prices in some pockets of the smaller southern capitals boomed, three of the five top performing regions in Sydney and Melbourne, and four of five in Perth and Darwin, actually recorded price declines from a year earlier,” said Business Insider Australia.
Source: CoreLogic
Source: Your Property Investment 13th May 2019 https://www.yourinvestmentpropertymag.com.au/news/varied-market-house-price-trends-262773.aspx?utm_source=GA&utm_medium=20190512&utm_campaign=YIP-Newsletter-Opener&utm_content=&tu=
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It’s a dilemma every landlord has to face at some point: when, and by how much, should you increase your rent?
You might fear raising the rent too much and driving your great tenants away, while at the same time you know you’ll never achieve property mogul status if you continue leasing your property for rock-bottom rent.
Here are seven strategies proven to boost your rental return, which you can implement across your property portfolio. Of course, this advice is general and does not take the place of speaking directly to your property manager or investment advisor, who should be able to guide you on specifics such as the market rent for the area and what local tenants are looking for.
1. Little and often By far the most successful way to hang on to good tenants and keep your rental returns increasing is to raise the rent by a small amount every six or 12 months, depending on the legislation in your state.
If you don’t increase the rent for several years, then hit your tenants with a $50 per week rise out of the blue, they’ll be understandably annoyed and you may find your next communication with them is when you receive their ‘Notice to Vacate’!
Instead, try tacking $5 or $10 per week onto the rental amount at a time. Each of these small, incremental increases will be affordable for your tenants, meaning they’ll be less likely to jump ship and leave you with a vacant property that’ll cost you money to maintain while you find new tenants.
2. Know what tenants want As a landlord, it’s easy to get caught up and throw good money after bad when it comes to making improvements to your property. Unless you know what tenants are looking for, you can’t possibly cater for it.
You could spend thousands repainting or installing a dishwasher, when an air conditioner may have made the property much more appealing to potential tenants, at half the price.
Seek feedback from your property manager about the must-have items on tenants’ checklists. And if you’re unable to offer some of them, such as off-street parking (which you can’t manufacture out of thin air), perhaps you can make up for this with another coveted feature, like solar panels to reduce their energy costs.
3. Consider allowing pampered pooches While laws in some states now make it illegal to discriminate against tenants who own a pet, many landlords still prefer their investment properties to be occupied strictly by humans only.
If you’re willing to allow pets at your property, your goodwill could see you rake in extra rent from a grateful animal owner. Most tenants with pets will apply armed with references from previous landlords, so you’ll know they are responsible when it comes to limiting the damage their pets cause to the property. You may even be able to insert a clause into the lease covering damage done by pets, or to ask for a slightly larger bond amount just in case.
4. Give the property a makeover It doesn’t have to be a super-expensive renovation with all the bells and whistles – improvements as small as a fresh coat of paint or new door handles on the kitchen cabinets could be enough to attract more tenants and bump up your asking rent.
Do your sums to make sure the investment will pay off, and consider speaking to your accountant to ensure you understand exactly what is tax deductible, as this may inform your reno choices.
There are myriad minor changes you can make that will give the property a new lease of life: think sparkling new taps, adding a second air-con unit in the master bedroom, or ripping up the tatty old carpet and polishing the boards underneath. Many small jobs can even be done yourself, saving you the extra expense of calling in a tradie. The rooms that tenants tend to pay the most attention to are the bathroom and kitchen, so your time and money are often best spent in these areas.
5. Add a unique selling point Have a look at the rental listings in the area. How many have alfresco entertainment spaces, ducted air conditioning or solar panels? It’s well worth considering adding something to the property that will make it stand out from the rest, allowing you to justify why it is a little more expensive to rent than similar nearby properties.
What you choose to add will depend on the location and your target tenant of course, but remember that by improving what you’ve got to offer you could actually begin to attract a whole new demographic – one that has more spare cash to splash out on rent. For example, professional couples likely crave an outdoor dining space, families will be impressed by a secure yard with safe, flat surfaces for the kids to play in, and eco-lovers will be drawn in by sustainable-power options.
6. Keep on top of changes in the area Has a new shopping centre, freeway or swimming pool recently been built near the property? What about the awesome local schools, childcare centres and parks?
Don’t forget to emphasise these when you next advertise your vacant property, so you catch the eyes of higher-paying tenants. Improvements to services and infrastructure may also boost median figures in the suburb, which you can then use as a reason to increase your own rent. And the best bit is, unlike renovating, it won’t cost you a cent!
If you find your tenants fleeing when their lease is up, it could be bad customer service, not the rent, that’s sending them packing
7. Audit your property manager Property managers play a huge role in the success of your rental portfolio, from how they handle repair requests from tenants to giving good advice on when to increase the rent.
If you find your tenants fleeing when their lease is up, it could be the bad customer service they’re receiving, not the rent, that’s sending them packing. Many tenants are willing to pay a few dollars a week more for a property manager who attends to issues promptly and communicates effectively with them, so it may be time to assess whether the one you’ve employed is giving you the best chance possible of charging premium rent.
Source: Your Property Investment 7th May 2019 https://www.yourinvestmentpropertymag.com.au/property-management/seven-proven-strategies-for-boosting-your-propertys-rent-262537.aspx?utm_source=GA&utm_medium=20190512&utm_campaign=YIP-Newsletter-Opener&utm_content=&tu=
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With tax time fast approaching, claiming depreciation is the key to increasing cash flow from an investment property.
MT Tax Depreciation has some tips for investment property owners when it comes to claiming depreciation at tax time. Below are five ways to make sure you get what is yours.
1. Don’t miss out on depreciation deductions
Property investors are entitled to a range of tax deductions which help to lower taxable income and make owning an investment property more viable.
Some of the tax deductions available include council rates, the interest from a mortgage, property management fees, land taxes, strata fees, maintenance costs, insurance, accounting fees and depreciation.
Of these deductions, depreciation is the most commonly missed.
This is because it’s a non-cash deduction.
That is, investors do not need to spend any money to be eligible to claim it.
Research has shown 80 per cent of property investors are missing out on the depreciation deductions they’re entitled to.
To ensure that depreciation is being claimed correctly and maximised, investors should contact a specialist Quantity Surveyor, such as BMT Tax Depreciation, to organise a comprehensive depreciation schedule.
A BMT Tax Depreciation Schedule outlines all the deductions an investor can claim for their investment property. It lasts for forty years and the fee for preparing it is 100 per cent tax deductible.
During the 2017-2018 financial year, BMT Tax Depreciation found their clients an average of $8,212 in tax deductions in the first year claim alone for residential properties.
Visit BMT’s tax depreciation calculator for an estimate of the deductions you may be entitled to. 2. If you recently purchased an investment property, you can still make a claim this tax time
The Australian Taxation Office (ATO) allows investors to claim depreciation based on the number of days a property was available for lease.
A BMT Tax Depreciation Schedule makes partial year claims like this easy for the property investor and their accountant and can pro-rata deductions based on the percentage of time the property was available for rent. 3. Have you made improvements? Don’t forget to update your tax depreciation schedule
If improvements have been made to the property in the past financial year, like a renovation, it’s a good idea to get in touch with a Quantity Surveyor to see if you will require an updated depreciation schedule.
It’s important to be aware there is a difference between a repair and a capital works improvement, as this will affect the claim. The cost of any repairs can be claimed in full in the same financial year they are completed.
An improvement, on the other hand, is when you improve the condition of an item or property beyond that of when it was purchased. Such improvements are capital in nature and must be depreciated over time.
For this reason, if any renovations or improvements have been made to the property in the last financial year, the property investor should seek the advice of an experienced Quantity Surveyor to ensure their deductions are claimed correctly.
Find out more about BMT Tax Depreciation by visiting their website.
An updated tax depreciation schedule may be required after a renovation to capture all newly installed plant and equipment assets or capital works expenditure. 4. Discuss tax depreciation deductions with your accountant
An accountant will often refer property investors to a Quantity Surveyor or contact them on your behalf to arrange a schedule.
While they can process the deductions, they can’t estimate construction costs to provide you with the tax depreciation schedule.
Only a qualified Quantity Surveyor can do that.
Quantity Surveyors are one of the few professionals recognised under Tax Ruling 97/25 to have the appropriate construction costing skills to estimate building costs for depreciation.
However, not all Quantity Surveyors specialise in tax depreciation.
Only a tax depreciation specialist like BMT can be relied on to maintain detailed knowledge of all current ATO Tax Rulings relating to depreciation.
Once a tax depreciation schedule has been completed, an Accountant will input these deductions into the property investor’s annual income tax return. 5. Amend previous tax returns and don’t miss out on claiming past years’ deductions
Investment property owners often enquire about a property they have owned and rented for a number of years and they haven’t claimed depreciation deductions before.
The ATO allows tax returns to be easily adjusted for two years after the initial submission. This enables property owners to recoup some of the deductions that may have been missed.
It’s important to note a separate application will need to be submitted for each financial year requiring an amendment.
Income, depreciation and other claims made will impact the outcome of each tax return.
If you have missed or not maximised your claim in previous years, the depreciation schedule can be tailored within the eligible years.
BMT offers a guarantee to all clients that if we can’t find double our fee in deductions in the first full financial year, we won’t charge for our service.
Source: The Real Estate Conversation 7th May 2019 https://www.therealestateconversation.com.au/news/2019/05/07/five-things-know-about-depreciation-this-tax-time/1557189981
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Australians spend an average of 2.5 hours a week focused on property, more than twice the time they spend at the gym (1.08 hours) or speaking to their parents (0.88 hours), according to new research from HSBC.
The bank said that the result is an indication that the cooling housing market is doing little to dent some Aussies’ property fixation.
Softening property prices and low interest rates were encouraging factors for many Australians looking to enter the property market, said Alice Del Vecchio, head of mortgages for HSBC Australia, said.
“Buying a property is often the most significant purchase Aussies make,” she said.
Globally, people spend an average of 3.5 hours every week window shopping for homes, reading property magazines and scanning online listings – even when they are not in the market for a new house. Over 6% of them could be defined as an “extreme house hunter.” This means that they spend more than seven hours a week reading about or researching property.
Nearly half (49%) of these extreme house hunters check the value of their own home monthly. Nearly one-quarter of Australians (23%), meanwhile, check the value of their property every three months.
Notably, extreme house hunters feel the time they allotted to researching properties pays off, with three quarters (74%) globally saying they feel ‘relaxed’ about buying a property and almost four in five (79%) feeling ‘in control.’
The research revealed that extreme house hunters are more likely to delay important life stages as they save for the perfect home. Across the world, 19% of extreme house hunters have put off having a child to get on the property ladder. They are also twice as likely to put marriage on hold to save up for their next property purchase.
There are also some aspects that discourage buyers from snapping up a property. Locally, some Australians (21%) say that rumours of a house being haunted would stop them from buying. The study showed that having difficult neighbours is the biggest deal-breaker in the quest to find an ideal home (46%).
The UAE and USA are the most property-obsessed countries in the world, spending an average of 6.6 and 4.95 hours, respectively, on property each week.
Source: Your Property Investment 3rd May 2019 https://www.yourinvestmentpropertymag.com.au/news/aussies-obsessed-with-property--study-262540.aspx?utm_source=GA&utm_medium=20190502&utm_campaign=YIP-Newsletter-Opener&utm_content=FB30EBA4-A343-4537-A961-B966FABA4B8F&tu=FB30EBA4-A343-4537-A961-B966FABA4B8F
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With tax time fast approaching, here are five tax time tips to ensure you maximise the deductions for your investment property.
1. Understand what deductions you’re entitled to
As a property investor, you’re entitled to a range of tax deductions. These will help lower your taxable income and make owning an investment property more viable.
For example, some of the tax deductions available to investors include deductions on council rates, the interest from a mortgage, property management fees, land taxes, strata fees, maintenance costs, insurance, accounting fees and depreciation.
Of these deductions, depreciation is the most commonly missed. This is because it’s a non-cash deduction and the owner doesn’t need to spend any money to be eligible to claim it. Research suggests 80 per cent of property investors are missing out on the depreciation deductions they’re entitled to.
During the 2017-2018 financial year BMT Tax Depreciation found their clients an average of $8,212 in depreciation deductions in the first year alone for residential properties. These deductions shouldn’t be overlooked and could inject healthy cash flow back into your investment.
A BMT Tax Depreciation Schedule outlines all the deductions you can claim for your property. The schedule lasts for forty years and the fee is 100 per cent tax deductible.
2. Don’t wait until the next financial year to make a claim
If your property has only been income producing for a short time, you will still be able to make a partial-year claim.
The Australian Taxation Office (ATO) allows investors to make a depreciation claim based on the amount of days a property was available for lease. This rule applies if you’ve only recently purchased an investment property, if the property was only listed as available for part of the year or if is a holiday home only rented for part of the year.
3. If you’ve made updates to your property, you may need to amend your tax depreciation schedule
If you’ve made any updates to your property in the past financial year, such as a renovation, it’s a good idea to get in touch with your Quantity Surveyor to see if you will require an updated depreciation schedule.
It’s important to be aware there is a difference between repair and maintenance and a capital works improvement, as this will affect your claim. The cost of any repairs or maintenance can be claimed in full in the same financial year work is completed. However, a capital improvement occurs when you improve the condition of a structural item or asset beyond its original state at the time of purchase. Such improvements are capital in nature and must be depreciated over time.
An updated tax depreciation schedule may be required after a renovation to capture all newly installed plant and equipment assets or capital works expenditure and in some circumstances, items removed during a renovation can be scrapped and any remaining deductions written off.
5. Discuss tax depreciation deductions with your Accountant
An Accountant should be recommending you claim depreciation for your investment property. They can organise a schedule on your behalf or refer you to a Quantity Surveyor, but they can’t estimate construction costs or provide you with a tax depreciation schedule. Only a qualified Quantity Surveyor can do that.
Quantity Surveyors are one of the few professionals recognised under Tax Ruling 97/25 as having the appropriate construction costing skills to estimate building costs for depreciation.
However, not all Quantity Surveyors specialise in tax depreciation. Only a tax depreciation specialist such as BMT can be relied on to maintain detailed knowledge of all current ATO Tax Rulings relating to depreciation.
Once you have a tax depreciation schedule completed, your Accountant can input these deductions into your annual income tax return.
6. It’s not too late to claim on past years’ deductions
Investment property owners often enquire about a property they haven’t claimed depreciation for they have owned and rented for a number of years.
The ATO allows tax returns to be easily adjusted for two years after the initial submission. This enables property owners to recoup some of the deductions that may have been missed.
To start claiming or maximising your depreciation deductions with BMT, Request a Quote now or call an speak to a depreciation expert on 1300 726 728.
Article provided by BMT Tax Depreciation. Bradley Beer (B. Con. Mgt, AAIQS, MRICS, AVAA) is the Chief Executive Officer of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia wide service.
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Home prices across Australia fell by half a percent in April —down by 7.2% over the past year and by 7.9% since peaking in September 2017. The rate of decline, though, has been easing since moving through a monthly low point in December, when national dwelling values dropped by 1.1%, according to recent CoreLogic data.
“The improvement in the rate of decline is attributable to an easing in the market downturn across Sydney and Melbourne where values were previously falling much faster. In December last year, Sydney dwelling values were down -1.8%, with the pace of month-on-month, falls progressively moderating back to -0.7% in April. Similarly, Melbourne values were down -1.5% in December, with the rate of decline improving to -0.6% in April,” said CoreLogic Head of Research Tim Lawless.
Data also showed a rise in mortgage-related valuations activity, an improvement in the Australian Bureau of Statistics (ABS) household finance data for February. In addition, auction clearance rates are holding around the mid-50% range across the major auction markets. These property market insights suggest a subtle improvement in housing market conditions.
“While none of these indicators could be described as strong, the current trend in the data implies that housing market conditions may have moved through the worst of the downturn,” Lawless said.
Dwelling values decreased across every capital city except for Canberra in April. Regional areas of Tasmania, Victoria and South Australia avoided a fall. “The broad-based nature of lower housing values highlights that while the rate of decline has eased, the geographic scope of lower dwelling values remains broad,” CoreLogic said.
Notably, Hobart values slid by 0.9% over the month, marking a weakening across what has been one of the strongest capital city markets for value gains. Canberra was the only capital city where dwelling values were up over the month.
Across the capital cities, Sydney (-10.9%) and Melbourne (-10.0%) both recorded double-digit annual declines, followed by Perth (-8.3%) and Darwin (-7.1%). Hobart (+3.8%) and Canberra (+2.5%) posted the largest gains, while Adelaide is the only other capital city to remain in the black over the past twelve months (+0.3%).
Source: 3rd May 2019 Your Property Investment https://www.yourinvestmentpropertymag.com.au/news/house-prices-continue-to-drop-262542.aspx?utm_source=GA&utm_medium=20190502&utm_campaign=YIP-Newsletter-Opener&utm_content=&tu=
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Investors will be piling into the Adelaide market – just as soon as they read somewhere that there’s a boom in the South Australia capital.
But not before. The only constant in the residential property market is that the herd mentality drives the actions of buyers and sellers.
Adelaide right now is a strong value-for-money proposition, with one of the steadiest and most consistent markets in capital city Australia, underpinned by an economy that the experts have recognised as one of the nation’s best.
But investors generally refuse to consider it. Adelaide flies under the radar screen, with many people clinging to the outdated notion that Adelaide and SA is a low-growth sort of place.
But the experts know better. Here’s a snapshot of what some have said recently:
“South Australia’s economy was the standout of all states and territories in the last three months of 2018, with strong house prices and positive employment momentum boding well for the future.” – ANZ Stateometer report
“Residential property capital values in South Australia had their fastest rise for six years in the last financial year.” – SA Property Landscape report from Land Services SA
“Business confidence in SA is now at levels not seen in more than 10 years.” – Business SA William
Buck Survey of Business Expectations
“South Australia remains home to the most confident property sector in the country, buoyed by tax cuts and positive economic announcements. It is the fourth consecutive quarter that confidence in the state’s property industry has topped the country.” – ANZ / Property Council Survey’s Statewide Index
“All the economic indicators are suggesting that Adelaide is going to experience a very buoyant 2019.” – Broadway Property director Ben Heritage
“Price Growth Reaches 6 Year High in Sleeper State” – Smart Property Investment magazine
“Adelaide Median House Value Soars To Record High, Defying Downturn In Other Capital Cities.” – The Advertiser
“Adelaide Housing Market Forecast To See Steady Growth.” – Moody Analytics
“The two key measures of the SA economy – how much production in the state and how much spending in the state – are both accelerating.” – Chris Richardson, Deloitte Access Economics
“Elon Musk’s Tesla is aiming to more than double its battery rollouts during 2019, saying its huge Hornsdale battery in SA has become an important calling card that’s attracting bigger projects.” – The Australian
“Technicolor’s Move To Adelaide Will Generate 400 Jobs and Boost CBD Living and Lifestyle.” – The Advertiser
Against that background of economic and property performance, Adelaide is one of Australia’s most consistent markets, a status it has maintained over the past 12 months. It remains the busiest market in capital city Australia and one that is forecast by several analysts to be a national leader on price growth in 2019 and beyond.
SA, dominated by Adelaide, has impressed with its steady performance in the past five years. Each of the past 20 quarters has recorded between 8,000 and 9,500 dwelling sales. Adelaide continues to record high numbers of suburbs with growing sales demand, well above the levels seen in most of the capital cities.
This has produced multiple years of steady price growth, without generating a price boom – yet.
While sources such as CoreLogic and SQM Research report annual growth of only a few percent in Adelaide house prices overall, these generalised figures disguise individual areas which have done better.
It’s noteworthy that many of the millionaire suburbs have recorded big growth in their median prices in past 12 months. Uplift in the premium market is often an early signal of a market upcycle.
The growth is not all confined to the top end: there are suburbs with growth above 10% spread across all price ranges. This reinforces the reality that out-performing areas can be found even when the overall market appears to be moderate.
Adelaide has a broad geographical spread of LGAs with good numbers of growth markets. There are seven municipalities which have five or more suburbs with rising sales trajectories leading to price growth. This means there is growth momentum across the metropolitan area.
The leading precinct, with 12 growth suburbs (which makes it a nation-leading market), is Port Adelaide Enfield – which is likely to attract growing interest as the massive project to build Navy vessels unfolds.
The Marion LGA, a middle-market area in the south-west of Adelaide, has been a market leader for the past 12-18 months and continues to be.
A new challenger in Adelaide is the West Torrens LGA, which is situated between the CBD and the beaches – and offers wonderful value for money, relative to its location. Most suburbs have median house prices in the $500000s.
Another contender is the Tea Tree Gully LGA, which offers a good location relative to major jobs nodes and the Adelaide CBD, good local infrastructure and a high level of housing affordability.
Source: Metricon 26th April 2019
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The ALP's proposed changes to taxation arrangements for investment properties will hit investor demand, not stimulate it, says the Property Council of Australia.
Investors are more likely to scrap plans to invest in new homes if the ALP introduces its crackdown on negative gearing and capital gains tax breaks, according to a new poll.
The poll of more than 1,000 people, commissioned by the Property Council of Australia, found that 33 per cent of potential investors surveyed said they would buy a newly built investment property under existing taxation arrangements.
But that number drops to 24 per cent if the ALP's proposed crackdown is implemented.
Property investors also said they would be less likely to buy a newly built property under Labor's proposed changes.
Property Council of Australia chief executive Ken Morrison said the findings "challenge the ALP's key assumption that its property tax package will stimulate new housing supply and construction".
“They show that investors will be less likely to invest in newly-constructed housing under the ALP’s tax changes, not more likely," Mr Morrison said.
“This is a critical new insight because if less new housing is being created for people to rent it can only mean higher rents in the medium term.
“Housing construction is already falling and is a major source of jobs for Australians. The last thing we want to do is make this worse."
Mr Morrison told WILLIAMS MEDIA the findings highlight the dangers of making big policy changes at this "uncertain" time in the property cycle.
“The ALP policy was first announced a few years ago when Australia’s residential property market was in a very different state.
“Since then, we’ve seen banks tighten up their lending, as well as changes to foreign investment rules, along with falls in residential property values in most markets,” Mr Morrison said.
“We are concerned that the proposed changes would drive away investors which will affect the supply of new and established property to the rental market which is essential for one-third of Australian households,” Mr Morrison continued.
Shadow treasurer Chris Bowen has come out in defence of the findings, saying there is clearly "still a large cohort that would continue to invest in new homes".
Source: 27th February 2019 The Real Estate Conversation https://www.therealestateconversation.com.au/news/2019/02/27/changes-negative-gearing-wont-stimulate-housing-demand/1551230775
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The change in median dwelling price across most capital cities was moderate year-over-year, according to realestate.com.au’s April Property Outlook report.
Sydney posted the sharpest annual drop at 8%, down to $830,000. Melbourne’s median price, meanwhile, declined 4.1% to $660,000.
Perth (-3.9%), Darwin (-3.4%) and Brisbane (-0.9%) also reported price drops for the 12-month period.
Hobart tracked the opposite direction, recording a steady increase of 5% growth to $425,000. Canberra and Adelaide prices also rose— up 0.9% and 0.8%, respectively.
The property downturn is nowhere near the worst the Australian market has experienced. However, housing conditions in Sydney, Perth, and Darwin are struggling, according to Nerida Conisbee, realestate.com.au’s chief economist.
“These cities are the most challenged in the country right now – Perth and Darwin are five years into a downturn, while in Sydney it has been shorter and faster, with prices down almost 10% in only 18 months. In other cities, the results are far more mixed. Melbourne frequently gets lumped in with Sydney when discussing the falling market, but the reality is Melbourne is holding up a lot better. Elsewhere, conditions are relatively flat,” Conisbee said.
The economist said that there is now a better picture of the market outlook given the findings from the banking royal commission, which, according to Conisbee, was the source of uncertainty early in the year.
“In the end, [the final report] said pretty much nothing about housing finance… The biggest impact of the Royal Commission was actually when it was announced, with banks immediately beginning to focus more on responsible lending,” Conisbee said. “Finance is set to continue to ease this year… This won’t bring back investors to the same point as during the boom, but it will make it easier for them. Ideally, it will put first home buyers and upgraders in a better position, particularly because, for this group, buying conditions are far better than two years ago.”
The upcoming federal election, though, will potentially have a substantial impact on the market.
“If it wasn’t looking like we’re in for a change of government, it is likely we would be seeing prices stabilising right now. Elections create paralysis in property markets – new listing volumes decline, and buyers sit on their hands.” Conisbee said.
Source: 19th April 2019 Your Property Investment https://www.yourinvestmentpropertymag.com.au/news/annual-change-in-capitals-median-prices-restrained-262247.aspx?utm_source=GA&utm_medium=20190418&utm_campaign=YIP-Newsletter-Opener&utm_content=FB30EBA4-A343-4537-A961-B966FABA4B8F&tu=FB30EBA4-A343-4537-A961-B966FABA4B8F
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