Tag Archives: tasmanian real estate blogs

Why should millennials jump into the investment property market?

Why should millennials jump into the investment property market?In today’s market, there are all sorts of people who seek to buy a home for investment purposes. According to Digital Finance Analytics’ 2015 Household Survey, just under one million households own investment property without building any kind of portfolio, while 178,000 households have a collection of investment properties.

These range from people in their 40s and 50s pondering their retirement strategy, to young professionals trying to get a foot in the market early.

With this in mind, some interesting research has recently turned up on the behaviour of the millennials, which may highlight the need for them to invest into real estate.

Millennial Falcon

People generally branded as millennials are those born sometime between 1980 and 2000, and seem to hold different values and objectives to the generations that came before.

Deloitte’s millennial Survey of 2016 revealed that this group of people tend to be far less attached to traditional career-based goals and more on personal development. Just under half of the millennials surveyed expect to change workplaces within two years. Simultaneously, roughly one in five actually intend to stay with their present employer for more than five years.

So, what does this all mean? As David Hill, chief operating officer from Deloitte Australia, suggested, millennials are more independent and more assertive of what they seek, wanting their work to have purpose beyond turning a profit. They are also unafraid to simply seek employment elsewhere until they find a fulfilling line of work.

Plan B

If you’re a millennial yourself and share this sense of free-spiritedness, you may just benefit from buying real estate for investment purposes. It’s likely that this sense of personal independence may not disappear as the decades roll by, and it’s important to have financial backing in the instance that you choose to drop jobs to pursue another passion.

Investment real estate is a practical solution, providing you with a secondary stream of income when your cash flow is erratic or you simply need extra cash to pay the bills.

Furthermore, having a valuable asset that only really goes up in value over time is a great parachute to pull in time of financial need. CoreLogic RP Data’s most recent Market and Housing Update shows that the median price of Australian property was $600,000 by January – a result of a market that, aside from a few slight dips, have only really trended upwards since 1998. This means that investing early could earn you that sweet pay out later down the line if you want to move in a completely different life direction.

Just get in touch with First National Burnie to see how we can turn those dreams into reality.

Why is investing in a holiday home a smart move?

Why is investing in a holiday home a smart move?As most real estate experts will tell you, building your property portfolio is a smart way to invest your money because land, like gold, retains its value. This means that you are safely investing your funds, as the likelihood of a return – or even profit – on your investment is high given that property and land are always in demand.

For those of you who are looking to expand your property portfolio further by buying real estate in Australia, it might be time to consider purchasing a holiday home. There are both financial and health benefits to be enjoyed by doing so.

Financial perks of a holiday home

In many ways, investing in a holiday home is the gift that keeps on giving because even when you are not using it, you can rent out the property to other holidaymaking families. This is where location, location, location comes in - consult with an agent to find a holiday home that is near the beach, parks, gardens or tourist attractions of a city to ensure you’re getting as much rent money as possible on a weekly basis. Sea views are a great calling card for renters.

Simply take your house off the rental market when you and your family want a vacation, so you can all enjoy the nearby amenities, too!

Health benefits of a holiday home

Interestingly, a study sponsored by Nuffield Health found that taking annual leave, or having regular holidays, can dramatically improve our overall health and wellbeing. In addition to being positive by releasing endorphins and dopamine, the chemicals that make us happy, going on holiday can reduce our blood pressure by 6 per cent on average, according to the study’s findings. What’s more, our sleep quality can also improve by up to 17 per cent.

Building more value, depreciation and new houses

Building more value, depreciation and new housesChoosing to build a brand new home rather than buy an existing property provides a number of benefits for potential investors.

Generally these types of properties will be built in a developing suburb close in proximity to schools, transport and local services. Surrounded by other new homes, a new house is likely to have street appeal that will attract potential tenants and as a result provide excellent weekly rental returns for the property owner.

One benefit that often goes unconsidered by potential investors when investing in property however is the depreciation benefits available.

According to the Chief Executive Officer of BMT Tax Depreciation, Bradley Beer, research suggests that 80% of investors don’t maximise the depreciation deductions available from their properties.

Considered a non-cash deduction, investors don’t need to spend any money to be able to claim depreciation from their property. It is a deduction available for any wear and tear which occurs to the building structure and the plant and equipment assets contained in the property over time.

Depreciation relating to the building structure is claimed as a capital works deduction. Examples of items which can be claimed as capital works deductions include the walls, windows, doors and the roof of the property. Capital works deductions can be claimed at a rate of 2.5 per cent per year over forty years for properties in which construction commenced after the 15th of September 1987.

Plant and equipment depreciation on the other hand relates to the assets which can be easily removed from the property such as carpets, blinds, ovens, dishwashers, garbage bins and even shower curtains. These items depreciate based on an individual effective life as provided in legislation from the Australian Taxation Office.

While the owner of any income producing property is eligible to claim depreciation, those considering building a brand new property for investment purposes will usually receive higher depreciation deductions. There are two main reasons for this:

  • The owner of a brand new property will be eligible to claim the full deduction for the entire cost of the building structure over forty years. Owners of properties which are not brand new can only claim the remaining years available.
  • New houses usually contain plant and equipment assets which are higher in value. This increases the depreciation deductions which will be available for the owner.

Let’s take a look at some of the depreciation deductions the owner of a freshly built brand new house can expect to claim over the first five years of ownership.

depreciation deductions the owner of a freshly built brand new house

As the table shows, the owner of a newly built house can claim between $8,300 and $10,700 in depreciation deductions in the first full financial year alone. Over five years, this cumulates to between $32,500 and $42,800 in deductions the owner can claim as a tax deduction.

Based on a tax rate of 37 per cent, investors will receive an average annual cash return of between $2,405 and $3,167 from a newly built house depending on its size and the assets contained.

Those considering building a brand new house for the purposes of an investment are recommended to seek advice from a specialist Quantity Surveyor prior to purchase.

A Quantity Surveyor, such as BMT Tax Depreciation, can provide a detailed depreciation estimate outlining the deductions that will be available once the property is property is constructed and available for rent. This estimate can help investors to crunch the numbers to get a more accurate picture of their after tax scenario to help them with their investment decision.

Once a property has been built, in order to claim depreciation a Quantity Surveyor should complete a tax depreciation schedule outlining all of the deductions available for the owner. This schedule can then be used by the property owner’s Accountant to process their claim when they complete their annual income tax assessment.

For a detailed estimate of the depreciation deductions available for any property, contact BMT Tax Depreciation on 1300 728 726 to speak with one of their expert staff or visit click here to request a quote.

Article provided by BMT Tax Depreciation.

Bradley Beer (B. Con. Mgt, AAIQS, MRICS) 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.

Long Term Real Estate Values Linked To Sustainable Energy Planning

Long Term Real Estate Values Linked To Sustainable Energy PlanningOver the past decade, momentum for sustainable energy has been swelling worldwide, with more and more cities embracing environmentally friendly initiatives.

As a result of collaboration between town planners, citizens, the corporate sector and law makers, many international cities have adopted clean energy projects and Australian cities are among world leaders, according to First National Real Estate chief executive, Ray Ellis.

‘Adelaide is planning to be the world’s first carbon neutral city. It has establishing a Green Industries SA renewable energy investment agency and is building solar PV plants. These steps are in line with the state’s target of 50 per cent renewable energy by 2025’ said Mr Ellis.

New research by the New Climate Economy (Global Commission on Economy and Climate) has found that if more cities take steps similar to Adelaide, the savings could amass a current value of US$17 trillion (AU$24 trillion) by 2050.

‘The sustainable energy initiatives that cities, towns and villages undertake reduce their energy costs, improve public health, and help them attract new residents and businesses,’ said Mr Ellis.

‘Green communities attract residents and this bodes well for real estate values. People want to live in homes capable of generating clean energy, whether that be through solar panels installed on the roof, or geothermal pumps dug beneath the house foundations. The level of interest in Tesla’s low cost Powerwall, soon to be made available in Australia, appears to underline the appetite for more sustainable home energy’.

As investment in renewable energy becomes commonplace and cheaper, and as more effective energy storage becomes commercialised, buying a property that is ‘green’ will eventually become more affordable for a wider range of people.

By streamlining the costs of producing green technologies, more houses will come already equipped with these features. In time, expectations will be such that energy efficient houses will be more highly sought after, thereby rising in value more quickly.

More space for home owner-occupiers in the market

More space for home owner-occupiers in the marketStruggling to buy a home in Australia? It can be frustrating, especially when you have to compete with investors snatching up houses for sale on every corner.

Housing values in the country have been on the up, driven mainly by prices of real estate in Sydney and Melbourne. This is partially thanks to the 2 per cent cash rate that has pushed interest rates on home loans to record lows.

To combat the risk of a market crash, the Australia Prudential Regulation Authority (APRA) has put countermeasures in place, including a ten per cent limit on investment credit yearly growth. While not technically enforced, this suggested target aims to restrict lending to investors to help cool rising prices.

So the big question is, is this solution working?

A look at the numbers will seem to suggest – yes.

Owner occupation on the rise

According to the Housing Industry Association (HIA), home loans for owner-occupier housing increased in August by 2.5 per cent. HIA Economist Diwa Hopkins also notes that “lending to investors seeking to construct housing fell away sharply during the month”. This means that more financing is being shifted away from investors and put toward owner-occupiers.

Furthermore the Australian Bureau of Statistics show that the dwelling commitment values for this type of property increased by 6.1 per cent (seasonally-adjusted estimate) from July to August. Meanwhile, it decreased by 0.4 per cent for investment housing.

As the APRA continues to crack down on banks exceeding the 10 per cent ‘speed limit’, you can expect to see the real estate market be less and less heated in the months to come. If you’re looking to buy a home you can settle in, it’s important to be ready to snatch up a property for sale that suits your needs.

What does new housing construction mean for you?

What does new housing construction mean for you?If you’re on the hunt to buy a house, you might notice there’s been a shortage of new property in certain capital cities.

While auction listings have been high as vendors race to put up their homes for sale, it doesn’t reflect the “10 years of underbuilding” noted by Nick Proud from the Property Council of Australia.

Supply has been tight in searing property markets like Sydney and Melbourne, which have been unable to keep up with climbing demand. As observed by CoreLogic RP Data’s monthly indices, this has lead to soaring dwelling values, with both of these cities respectively seeing a 16.16 and 13.94 per cent annual increase in the year to October.

However, this supply shortfall is soon to change
.
New builds on the way

Figures from the Australian Bureau of Statistics show that there was a record high of new housing constructions this year. In 2014 to 2015, 211,976 new homes had been commenced. This marks an increase of 16.9 per cent and “caps three consecutive years of growth for new home building”, mentions the Housing Industry Association (HIA) Chief Economist Dr Harley Dale.

This result has followed in step behind the HIA’s news in the previous quarter, which reported peak building approvals in the June quarter. The 56,351 buildings approved to be built would begin to trickle into the market as they move from planning to construction stages, as seen by the spike of new home commencements.

What does this mean for you?

This will do two things for house hunters across the country. Firstly, prices in the housing market will cool as supply arrives in force. As mentioned by the Property Council of Australia, national residential construction may “create enough housing to satisfy growing demand”.

Figures from CoreLogic RP Data reveal that this stuttering in price growth can already be seen now. Sydney and Melbourne both recorded a 1.5 and 3.1 per cent increase in dwelling values over the September quarter – a notably slow change when compared to previous quarters this year.

If you’re seeking to buy real estate in the near future, this could be good news  for you. The market could soon swing in your favour as prices ease in these markets.

Secondly, the influx of new builds will provide buyers a greater choice of real estate in Australia. More new houses for sale mean there’ll be a wider range of property types, house sizes and more, available for people to choose. This will give you greater opportunity to find housing that’s ideal for your needs and lifestyle.

Why should you should consider renting?

Why should you should consider renting?When it comes to living in Australian property, purchasing with home loans seems to be the default choice. For many, there’s a general impression that renting property is some kind of short-term bridge between leaving your family and buying your first home.

But if you’ve had your eye on real estate news for the last few years, you’ll notice that purchasing real estate in Australia is getting increasingly difficult, particularly in certain capital cities.

While there are many great perks and benefits from owning property, there are also key advantages to renting that make it an appealing option.

Affordability

Affordability is a big factor for anyone. In this field, the case for renting seems to have the upper hand.

The Housing Industry Association reported in June that the National Affordability Index dropped by 2.9 per cent. Sydney and Melbourne saw the greatest decreases, at 6.9 and 9.1 per cent respectively. This demonstrates that housing prices are rising faster than people’s earnings.

While people with low interest home loans can still find ways to adapt and purchase property, it outlines just how comparatively affordable renting could be.

The deal with yields

The best way to observe this comparison is not just to examine rental rates, but to take a look at yields. Sure, rates can give you a snapshot into how much it’ll cost you per week, but this alone will not give you a holistic view.

Yield figures on the other hand, will show you how renting stacks up to buying property in the current market, which is the real contest here. This can be defined as the percentage of rental income to the home’s purchase price.

For instance, CoreLogic RP Data research notes that the median rental price for a Sydney house was $610 in July. This figure might seem high and have you consider buying instead.

However, figures reveal that Sydney’s rental yield was down 0.2 per cent over the quarter, and decreased by 0.6 per cent over the year to July. This shows that rental income were in fact lower than they should have been when considering property prices.

This is true for many of the other capital cities as well, and is a sign that renting could the far more affordable option in relativity to housing prices.

Stable rates

Another good reason to look at houses for rent is the fact that rates have been mostly stagnating. Australia’s combined capital cities experienced a 0.7 per cent decline in rates over the September quarter, with every single one recording negative change.

Melbourne has lead the charge in rental growth over the year, showing a 2.1 per cent rate increase in the year to September but clearly, this figure is hardly something to worry over.

With stable rates that are lower than property prices would have them, anyone who may struggle with mortgage repayments should consider renting instead.

We already own two separate properties. Should we keep them, or sell and combine assets?

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Sometimes, couples enter a relationship each owning a property already. These properties might be rented investments or their principal place of residence.

Either way, when moving in together, there’s plenty to think about with your future real estate strategy. You have the option to…

  • Sell both properties, combine assets and buy something bigger or in a better location
  • Keep both properties, rent them out, and use the income to increase your borrowing capacity
  • Sell one property, keep the other, and use the equity from the one you sell to improve the one you keep
  • We suggest you get up-to-date appraisals on both properties and then consider which is best to keep, or whether both should be disposed of

Talk over your hopes, dreams and aspirations. Then, when you’re both on the same page, talk to real estate agents and your financial advisor to help plan a strategy.

How do millennials feel about climbing the property ladder?

How do millennials feel about climbing the property ladder? Generation Y, also known as millennials, are the group of people born between 1980 and the early 2000s. As is often the case with generational groups, millennials have their own set of values and ambitions that differentiate them from their predecessors.

These values frame their world view and influence a range of their financial decisions, running the gamut from travel to buying real estate, and especially their first home. So, how do millennials feel about investing in property and potentially beginning a portfolio by climbing the property ladder?

Enthusiastic

The Domain Consumer Insights Study found that, contrary to popular belief, the average age at which a millennial becomes an investment property owner is 25. This is in stark contrast to baby boomers, who purchased their first home nearly two decades after the age of 25.

“The idea of buying an investment property and renting at the same time is now much more commonly accepted, whereas probably 10, 20 years ago you bought your house to have your family in,” explained Jennifer Duke, editor of the Domain Review.

Moreover, the number of millennials who buy multiple properties is on par with older generations. According to the study, 17 per cent of millennials own two or more properties. All of this research implies that millennials are getting on the first rungs of the property ladder fairly early. However, it’s important to note that 26 per cent of millennials don’t fall under this category – they are still living in their parental home.

Apprehensive

While some millennials are embracing purchasing property, there are still a fair amount who have some anxiety regarding the subject. A report compiled by BDO and Co-Op surveyed 18-29 year olds and found that 87 per cent think their generation will never own a home outright.

Yet, 72 per cent of them feel that it’s important to buy a house as soon as they can. In light of this, a whopping 93 per cent of millennials have money saved, according to the report’s findings. This also shows that this group is savvy with savings, with over 65 per cent of them committed to long-term savings goals. This approach has resulted in an average savings per person of more than AU$8,000 or more.

These positive habits might be contributing to why so many of them are in fact ascending the property ladder at fairly young ages.

What are the latest green trends in housing?

What are the latest green trends in housing?As going green and adopting sustainable development methods are increasingly becoming popular in the real estate and housing construction sectors, several trends are emerging. Here we take a look at what these trends are, and what they mean for the real estate sector  across the country.

Australia and green building goals

In Australia, the Climate Change Authority has set an emissions reduction target of 15 per cent below the levels of the year 2000, to be achieved by 2020. Looking ahead to 2030, this target increases to between 40 and 60 per cent below 2000 levels.

Despite these goals, renewable energy sources aren’t being used as often as they should. Indeed, a recent Energy White Paper produced by the Department of Industry and Science found that only 6 per cent of the total energy consumption over 2012-2013 was generated from renewable sources.

While there is room for things to improve, the biggest positive is that Australians are wanting a greener future for their homes.

Trends in green housing

A whopping 87 per cent of people living in Australia would like solar panels installed on their homes, according to a report by independent market research company Ipsos.

In addition, geothermal energy is also a fairly popular choice, with 45 per cent of people interested in using the heat from below the Earth’s crust to supply warm water to their homes. Geo-exchange pumps are increasingly being used in housing construction, built under the house to transfer the natural heat from underground to the water inside the pipes before residents can shower or wash dishes.

“The results show Australians strongly support renewable energy and demonstrate the importance of involving and consulting locals,” stated Australian Renewable Energy Agency CEO Ivor Frischknecht.

Impact on buying real estate

It can prove to be fruitful to keep these trends in mind when planning to buy real estate. With more and more people attracted to green energy when buying real estate, both agents and buyers can keep note of the value of a home if it comes with environmentally friendly features.

For first home buyers, investing in a green home might at first glance feel like an extra expenditure or outside the budget, but it may in fact end up costing you less in the long term. For instance, a study published in the International Journal of Global Energy Issues found that solar water heating can pay for itself five times over, making it a sensible investment.

Why not invest in a home with solar friendly features already included and reap the benefits for years to come?