Tuesday, March 25 2014
There are a range of offers in the market at present like the one below offering significant price discounts plus a range of other concessions. If you haven't reviewd your lending in a while now might be a good time. Contact us to arrange a finance review
Tuesday, March 25 2014
by Emily Guterras CBA
While many first home buyers may be struggling to get their foot on the property ladder, Gen Ys have no grounds to blame parents or grandparents, according to new research, which found that housing affordability has barely changed in a decade.
The median price of homes across Australia in the December quarter was $450,000, according to the RP Data/Rismark Home Value index, while the Australian Bureau of Statistics (ABS) national accounts estimate disposable income per household of $111,919.
The figures suggest that the median home price was around 4 times disposable income in the December quarter, up from 3.9 times in the September quarter.
However, over the past decade, the average household income has risen 70.6%, while house prices have gone up 66.7%.
"Gen Y has no reason to blame parents or grandparents - home affordability hasn't really budged in the past decade," said CommSec economist Craig James, who authored the research.
“Simply, Australians have got richer over time. But broadly over the decade little has changed in terms of home affordability – it has gone sideways.”
While low interest rates have contributed to a steep rise in house prices last year and early in 2014, the Reserve Bank of Australia does not believe that the present conditions pose a near term risk.
“Certainly homes are less affordable than 20 years ago, but that is not because income growth has been sluggish, but because wealthier Australians, utilising lower interest rates, and benefitting from more affordable basic necessities like food, clothing and transport, have channelled extra dollars into the family home," said James.
"Homes are bigger and of higher quality than 20 years ago.”
Tuesday, March 25 2014
Redeveloping parklands in the Gold Coast's Southport will be one of the most significant and largest urban renewal projects ever taken in the area, as part of the 2018 Commonwealth Games.
Premier Campbell Newman confirmed that an agreement had been made with Grocon to be the preferred developer of the 29 hectare site.
"The Commonwealth Games Village will provide essential services and accommodation for 6,500 athletes and officials in Games-mode and will be one of the Games’ most significant legacy projects," said Newman.
"This project will inject an estimated $500 million into the local economy over the next five years and will generate more than 1,500 jobs during its construction phase."
Newman released the Commonwealth Games Village Masterplan yesterday and the design includes more than 1,200 dwellings, including 1,171 one- and two-bedroom apartments and 82 townhouses, across more than 30 new buildings. These buildings will range from single to eight levels in height.
This community is expected to be retained after the Commonwealth Games.
"The developer’s approach is to create a tailored institutional investment vehicle to hold and rent the village dwellings after GC2018, with a gradual sell down over time. Approximately 12 hectares of land will be held by the state for future health and knowledge use," the masterplan details.
Other features include seven hectares of total green and open space and gardens, including a community park, over 6,000 square metres retail precinct and 12 hectares for future health and knowledge development.
Minister for Tourism, Small Business, Events and the Commonwealth Games, Jann Stuckey, said that it will be iconic after the games themselves have passed.
"It will create a great civic space that will no doubt become a focal point as the Gold Coast is propelled onto the international stage," said Stuckey.
"After the Games, Parklands will provide significant infrastructure as it becomes home to people and new businesses as part of a modern, mixed-used community which will include residential and a new business hub for health and knowledge, commercial and retail development."
Meanwhile, Grocon CEO, Carolyn Viney, said that they are thrilled to be part of the redevelopment and delivering value for the Gold Coast.
"Grocon’s design captures the essence of the sub-tropical environment of Queensland’s south coast with special attention being paid to sunlight, shading, natural air flows and water," said Viney.
"The urban and landscape design approach adopts the history and unique characteristics of the Gold Coast and its hinterland, intertwined with the role that water has played, and will continue to play, in shaping the Parklands site."
The masterplan has been submitted for development approval, with construction suggested to begin by early-2015.
Tuesday, March 04 2014
It is interesting to note that several lenders in the last week have reduced their 3 year fixed rates St George down to 5.14% and NAB 5.07%. Both ahead of the RBA board meeting today.
Perhaps they knew something as the interesting comment in the statement is the RBA's view on inflation "Inflation is expected to be consistent with the 2–3 per cent target over the next two years".
The Governor's statement below.
Glenn Stevens' statement from the March Reserve Bank meeting:
"At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a pick-up this year. The United States economy, while affected by adverse weather, continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth, while China's growth remains in line with policymakers' objectives. Commodity prices have declined from their peaks but in historical terms remain high.
Financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets are well placed to provide adequate funding, though for some emerging market countries conditions are considerably more challenging than they were a year ago.
In Australia, recent information suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have shown improvement and exports are rising. At the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative. Public spending is scheduled to be subdued.
The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. Growth in wages has declined noticeably. If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate.
Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth remains low overall but is picking up gradually for households. Dwelling prices have increased significantly over the past year. The decline in the exchange rate seen to date will assist in achieving balanced growth in the economy, though the exchange rate remains high by historical standards.
Looking ahead, the Bank expects unemployment to rise further before it peaks. Over time, growth is expected to strengthen, helped by continued low interest rates and the lower exchange rate. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.
In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates."
Tuesday, February 25 2014
Despite many publicly aired fears to the contrary, it’s safe to say the Brisbane of 2034 will not look vastly different to the 2014 version. Beyond the boundaries of the inner city, where an estimated 50 extra skyscrapers are expected to rise in the next 20 years, the status quo is anticipated to remain among the vast majority of the river city’s suburban landscape.
Just seven per cent of the city’s land mass will be impacted by development in the next two decades and 40 per cent of the city will remain devoted to green space. More than 150 urban villages will rise but leafy backyards will remain. City Plan 2014, Brisbane Lord Mayor Graham Quirk said, will create a city Brisbane residents can continue to enjoy and be proud of.
Tuesday, February 25 2014
Australian house prices are set to keep growing by around 6% annually in the next 12 to 24 months. The latest NAB quarterly residential housing survey showed that housing market sentiment lifted again in the December Quarter, supported by faster house price growth in all states except South Australia and the Northern Territory. NAB's forecast expects average capital city house price gains of about 6% this year. Queensland is set to lead the country, with Brisbane prices to increase 6.4% this year and 6% in 2015. Perth house prices are expected to grow 6.3%.
Monday, February 24 2014
The Reserve Bank of Australia has noted while weak conditions in the labour market had weighed on consumption growth, the increase in housing and equity prices over the past year had raised the possibility that consumption growth could outpace that of income in the period ahead.
The board members noted in the February minutes that the effects of low interest rates were clearly evident in the housing market, where prices had increased further and turnover had picked up to be just below average.
"These conditions were expected to provide further support to new dwelling activity over the period ahead, and leading indicators of dwelling investment had increased," the minutes noted.
The members also observed that the softness in commercial construction meant that there was labour available to support the strong growth of higher-density dwelling construction.
Growth of housing credit was gradually picking up, particularly so for investors.
The members discussed the staff forecast for the domestic economy, which was a little stronger over the next year or so than at the time of the November Statement on Monetary Policy, in part due to the lower exchange rate.
GDP growth was expected to strengthen a little through 2014, though would be likely to be at a below-trend pace.
Growth was then expected to pick up to an above-trend pace by mid 2016.
But the outlook for the labour market was little changed, as the effect of the softer tone of the recent employment data had been largely offset by the slightly stronger growth outlook.
The inflation forecasts had been revised higher, reflecting a combination of the lower exchange rate and the higher-than-expected December quarter CPI outcome, slightly offset by a softer outlook for wages growth. Underlying inflation was expected to be around 3 per cent over the year to mid 2014 and was then expected to decline towards 2.5 per cent.
Members recognised that conditions in the labour market tended to lag economic growth, and that the labour market had remained weak following the period of below-trend growth in activity.
The minutes noted further signs that the expansionary setting of monetary policy was having the expected effects, with more timely indicators having been more positive for consumption, dwelling investment, business conditions and exports.
"Although inflation in the December quarter had been higher than expected, there were several possible explanations.
"The Board noted that it was likely the inflation reading contained some noise as well as some signal about inflationary pressures, but also presented something of a puzzle in interpreting the mix of activity and price data.
"Also, the further depreciation of the exchange rate since the December meeting was expected to add to inflation for a time, although the outlook for slightly slower wage growth was expected to help keep domestic cost pressures contained over the medium term.
"At recent meetings, the Board had judged that, given the substantial degree of monetary policy stimulus already in place, it was prudent to keep policy unchanged while assessing the continuing impact of that stimulus."
Paul Bloxham, chief economist at HSBC suggests the bottom line was today's minutes reinforced the RBA's shift to a more neutral policy bias and their greater comfort with the current level of the AUD.
"The outlook for the labour market and the degree of persistence of recent strength in inflation will be key factors determining the timing of future rate hikes.
"We see the RBA's easing phase as done and also see it as likely that the RBA may need to lift the cash rate before the end of the year," Paul Bloxham said.
Tuesday, February 18 2014
MacQuarie bank has predicted two further rate cuts this year. There view is not shared by all including the RBA which is expecting a pick up in GDP to 2.75%. ONly time will tell
Friday, February 14 2014
If you are considering upgrading your property you may be looking at your existing home and feeling it could make a good investment property. Whether it is the right move for you will depend on a number of factors.
Tax deductible debt
Interest which is directly linked to income producing investment assets is tax deductible.
Many people assume they can simply redraw or set up a new loan on their old home (which will become an investment property) and claim that debt as a tax deduction. This is not correct.
Example
When Bill purchased his original home he borrowed $350000. Over time Bill has paid the debt down to $100,000. Bill decides to upgrade to a $500000 property. The purchase costs are $25000. Using the equity in his existing home Bill redraws the original loan back to $350000 ($250000 increase) and then borrows the remaining $275000 against the new property.
Because Bill has a loan of $350000 against his investment property he assumes that all this loan is tax deductible. Bill is dead wrong.
Which property the loan is secured against is irrelevant – it is the purpose of the loan that the ATO will consider. In this case the purpose of the $250000 increase was to assist with the purchase of a new owner-occupied property therefore the purpose is not for investment purposes and therefore is not tax-deductible.
Only $100,000 of the loan is tax-deductible. The remaining $525000 offers no tax benefit whatsoever.
Age
If the property is older than 5 years it will offer little in the way of depreciation for plant and equipment which would offer significant tax write downs. It will also have lower capital depreciation deductions.
Tax Refund
The impact of both the lower interest and the age of the property could mean that Bill will miss out on a tax refund of around $7000 if he had instead sold his own home and borrowed for a new investment
Capital gains tax
As his existing home is his principle place of residence Bill can sell it today capital gains tax free. If he purchases a new principle place of residence his existing home will attract capital gains tax if it is sold at a gain. So for example Bill holds onto the old home for a further 10 years and it increases in value by $200000. Bill sells the property and is taxed on 50% of the gain - $100000 at the applicable marginal rate.
So he has not only missed out on a substantial tax refund for the last 10 years he now gets hit with a huge capital gains tax bill as well.
Repairs
If it is a significantly older property then it may also present significant maintenance and repair issues which will impact the overall cashflow of the property.
Performance
Just because you have an emotional attachment to the home doesn’t make it a great investment property. The rental yields and capital growth rates may be substantially less than what can be achieved elsewhere.
What opportunities are you missing?
Are there ways to improve your current cashflow that you are not currently doing? Are your finances correctly structured to build a property portfolio or are they holding you back? Do you have a plan of attack of how to build a portfolio? Are your finances set up to ensure you can acquire property without negatively impacting your lifestyle? Are there things you are missing that you should or could be doing that could have a significant impact on your wealth creation plans?
Contact us for an initial discussion.
What are the secrects you need to know before you start investing?
Sign up for FREE Online Investor Bootcamp to start receving information straight way
All the best
Greg Carroll
MTA
View my profile
Friday, February 14 2014
Not all properties are treated equally by lenders. There are some properties that lenders like, some which they will have restrictions around, and some which they just won't touch at all. What does this mean for you. It means you may not be able to fund a particluar property purchase of they you may have to tip in additional cash to get the deal across the line
Below are some the the property types where lenders may have restrictions or may not fund at all.
- Inner city units and developments particularly studio apartments
- Student accommodation
- Retirement villages
- Rural properties
- Remote regional properties with low population levels
- Unusual properties eg unusual building designs
- Multiple properties on one title
- Company title properties
- Properties under the NRAS scheme
Units less than 50m2
Lenders prefer units with a liveable floor space of 50m2 and above. Some may consider units down to 40m2.
Number of units in one complex
Most lenders will put a cap on the number of units a borrower can hold in one complex. The guidelines for this will vary on the size of the complex. Usually around 4 is the maximum but this may be reduced is it accounts for more than 25% of all units.
Lenders may also choose to restrict their exposure to certain apartment blocks. If they have already financed a number of purchases in a particular complex they may not support any further transactions.
Inner city units and hi-rises
Some lenders have an aversion to inner-city apartments and high rise developments. They may still lend against this type of property but at a reduced LVR.
Serviced apartments/Student accomodation
The majority of lenders are not very keen on serviced apartments. Generally it is not possible to obtain lending where mortgage insurance is required. Most lenders who will consider this type of property will restrict the lending to 60% to 70%, however some will go to 80%.
Lenders may need to see additional detail to determine the level of acceptable lending. In particular they will want to see the current letting agreement and if there are any restrictions associated with having the property released from the letting pool.
Commercial property
In terms of home lending generally commercial property can not be accepted on a stand alone basis. Some lenders may accept it as supporting security at a reduced LVR.
Company title
This will vary from lender to lender. Some are an absolute no while some will consider on a case by case. It is definitely worth making investigations before proceeding with this type of property.
Heritage listed
Generally considered on a case by case situation.
Warehouse conversions
Only considered by a handful of lenders. Again assessed on a case by case basis
Multiple units on one title
This situation may particularly apply where someone want to purchase a block of units that have not been strata-titled. Some lenders will consider up to 4. Above this would probably see the deal considered on a commercial basis.
Rural property
Will vary from lender to lender. Some will only consider a few acres. Other will look at up to 50 hectares. Property can not be income producing, hobby farms are acceptable.
Aged care security and retirement villages
No
Vacant land
Accepted by almost all lenders if the intention is to build on the block. Usually will be part of a construction loan. A number of lenders will not accept land only as security. Some will accept as supporting. Some will accept as a stand alone.
|
