To claim or not to claim

 

By Mark Hay – Mark Hay Realty Group Principal    https://www.markhay.com.au/

Knowing what you are able to claim from the Australian Taxation Office as a landlord can be difficult.

There are a growing number of investors who are unwittingly leaving themselves open to investigation by claiming renovations and refitting of rental properties as maintenance items.

In the wake of all the home renovation shows and wealth creators urging investors to add value to their investment properties, I am constantly seeing clients making claims that will be disallowed by the taxation office.

For instance, repairs must be related to fair wear and tear over a reasonable timeframe. If an investor repaints and extends an existing investment property within, say, six to twelve months of owning their investment property, they cannot claim repairs and maintenance on 100% of the cost in the year of expenditure, rather, the tax office would suggest these are depreciable at the relevant tax rates, which could be as low as 2.5% per annum.

Similarly, replacing and old and broken wardrobe with a built-in wardrobe would once again be deemed a structural or capital improvement and would only be depreciable at 2.5% and not 100%.

Whilst there are billions of dollars of unclaimed depreciation lying idle every year, the taxation office is now looking very closely at ensuring all these claims are legitimate.

To ensure you are claiming your correct entitled expenses, it may be wise to enlist the assistance of your accountant or a similarly qualified person.

 

Rental vacancy at five-year low

 

By REIWA President – Damian Collins    https://reiwa.com.au/

Perth’s rental vacancy rate is the lowest it has been in more than five years, according to REIWA.                                                                                                                                                       It dropped to 2.8% in the December quarter 2018 from 3.8% in the previous quarter. President Damian Collins said the last time the vacancy rate was that low was March 2013. “The rapid improvement we’ve observed in the last 18 months is impressive, especially considering the vacancy rate peaked at 7.3% in June 2017 – the highest it’s ever been,” he said.

“Now that the vacancy rate is below 3%, we can safely say the market is in a recovery phase, with landlords now the beneficiary of the current rental environment,” Mr Collins said. Perth’s overall median rent remained at $350 per week for the seventh consecutive quarter, the longest stretch of stable rents since reiwa.com started collecting rental data in 2001.    Despite the overall median remaining steady, 105 suburbs recorded an increase in price.

“When we drill down further and isolate houses and units, the results of the December quarter are very pleasing for landlords, with both houses and units experiencing increases in rents,” Mr Collins said. “The median house rent increased $10 per week to $360 while the median unit rent increased $5 per week to $325 – this improvement did not translate into an increase in the overall median, as there were more units leased during the quarter than houses, which has kept the overall median stable.”                                                                        Mr Collins said, “If the rental market continues on its current trajectory, we should see Perth’s overall median rent price increase in 2109.”

There were 12,917 properties leased in Perth during the December quarter, slightly below the September quarter figure of 13,234. Mr Collins said the decline was common over the festive season, with activity tending to decline in December before increasing again early in the new-year.

The five suburbs to experience the biggest increase in leasing activity (percentage wise) were Kallaroo, Daglish, Melville, Merriwa and Hilton, while the suburbs with the highest volume of leased properties were Perth, East Perth, Scarborough, Baldivis and Maylands. The average time to lease a property was 44 days, down from 48 days in the September quarter and 50 days in the December quarter 2017.                                                                      At the end of the quarter there were 6,865 properties for rent in Perth.

“Listings continue to reduce, with the December quarter figure down 10% on the September quarter and a substantial 27% on the same time last year. The sharp decline in listings is the driving force behind why Perth’s vacancy rate has improved,” Mr Collins said. “With population growth in WA on the incline and fewer new building projects commencing, listing stock is being absorbed more quickly.”

With the vacancy rate falling and REIWA members reporting a significant increase in the volume of enquiries for rentals in January, Mr Collins said the signs for 2019 were promising. “The rapidly improving rental landscape combined with Perth’s favourable buying environment should hopefully see more investors enticed back to the market,” he said.

Support needed for those entering the property market

by Nick Allingame UDIA WA President     www.udiawa.com.au

It’s no secret the property market in Western Australia has weathered challenging times over the last few years, with sales levels and average prices declining since the peak of the last boom in mid-2014.                                                                                                                                                                    There are positive signs for the market in 2019 and beyond, meaning for those in a secure financial position, now is an opportune time to get into the market before demand and prices start to pick up. For those on lower incomes, it can be tough, even with prices declining slightly, to get a foot in the homeownership door.                                                                                                                                      That is why programs such as the State Government’s Keystart low deposit home loans are an important pathway for many first and subsequent homebuyers in WA.

Keystart allows eligible applicants to access finance with as low as a 2% deposit, as compared to the average 20% required from other institutional lenders if you want to avoid mortgage insurance and other costs.                                                                                                                                                        Currently it takes approximately four or five years for a couple on an average income to save enough for a standard home deposit. This can seem like a huge length of time and, for many, it will take significantly longer.

Given these challenges, UDIA was extremely supportive of the State Government’s announcement late last year that it would extend the Keystart loan book by $420.9 million. This will allow more people to access the finance they need to secure their own home.                                                      UDIA has also been advocating for the further expansion of the eligibility criteria associated with accessing a Keystart loan so more people have the opportunity to access the service.                 Currently the income limit is $90,000 for singles living in Perth, $115,000 for couples and $135,000 for families.

Given the median house price in Perth is $510,000, we believe it would be prudent to increase those limits to allow more homebuyers on moderate incomes access to finance that is increasingly difficult to get through lending institutions.                                                                                                                    The First Home Owner Grant is also available to eligible applicants seeking further assistance to purchase a residential home.

This is where it is extremely beneficial to consider purchasing a new home, as the grant is only available to those buying or building new.

The new house and land market provides a range of housing choices for new homebuyers in inner, middle, outer and regional areas.

Developers are continuing to diversify the housing product available to buyers, from traditional larger homes through to townhouses, units and apartments that are close to public transport and other essential services and amenities.

UDIA provides plenty of information on its website to help potential buyers through the land and house purchasing process.

www.udiawa.com.au

Welcome to 2019: a year for optimism in the market

 

By Nick Allingame – UDIA WA President    www.udiawa.com.au/

The development industry in Western Australia is kicking off 2019 in an optimistic state of mind.

After a challenging few years, the positive signs in the broader economy keep coming and we are confident 2019 will be a year of recovery and moderate growth for the new land & housing market.

This positivity has been boosted by the forecast for an early return to surplus in the State Budget and the hope that more stable economic conditions will encourage the State Government to further invest in critical infrastructure for the future growth of Perth and the regions.

This type of investment is important for boosting the economy and ensuring strong employment across the state. Government policy at all levels will be critical in supporting the potential market recovery in 2019.

At a federal level, the outcome of the election in May is likely to lead to changes in government policy that will have an impact on the market here.

The Federal Labor Party has made significant promises in relation to housing affordability, including announcing a $6.6 billion ‘affordable rental plan’ that will see 250,000 new homes built across the country over the next decade.

According to Labor, the program will provide annual incentives of $8,500 per year for 15 years for newly constructed properties that are owned or managed by a registered community housing provider, and they will be mandated to provide 20% below market rent for eligible Australian tenants on low and middle incomes.

This policy is a step in the right direction for growing the stock of affordable homes available to those who need them, as well as providing a much needed boost to the construction industry.

However, UDIA is concerned Labor’s current position on negative gearing and capital gains tax will jeopardise the broader supply of affordable rental accommodation that is delivered to the market via private ‘mum and dad’ investors each year.

At a state level, we would like to see tangible progress on the implementation of recommendations from the planning reform agenda that was initiated in November 2017.

The recommendations were handed down in May 2018 and we are yet to see a formal government response.

We would particularly like to see the recommendations around local government planning community engagement and efficiency implemented so the industry can deliver projects to the community in a more timely and affordable way.

These issues are just the tip of the iceberg when it comes to the policy issues that UDIA will be navigating this year, with the aim to ensure governments at all levels support the market recovery that will benefit our state as a whole.

Innovative policies required to kick-start WA property market

 

by Damian Collins – REIWA President         https://reiwa.com.au/

The Western Australian Government released its 2018-19 mid-year budget in the lead up to Christmas, bringing with it some good cheer, as the mid-year review showed the state’s budget position had exceeded expectations.

State Treasurer Ben Wyatt announced WA’s economy was expected to grow by 3% in 2018-19, up from 1.9% in 2017-18.

This improvement is good news for the state and presents the McGowan Government with an opportunity to reinvigorate the real estate sector with some innovative policy initiatives.

While the worst of the market downturn appears to be over, our local market remains subdued. Revenue from transfer duty is at a record low – expected to be down almost $1 billion across the forward estimates – and incentives are clearly needed to give people the confidence to buy and sell property again.

Transfer duty (or stamp duty) remains the biggest hurdle to homeownership and a significant deterrent for those looking to trade up or downsize into something more suitable. With Western Australians holding onto their properties for longer and being less inclined to move, this has resulted in a stagnant property market.

In order to address this issue, the McGowan Government needs to seriously consider undertaking a state tax review. Tax reform is critical to the prosperity of our state, and REIWA would like to see the WA Government set aside funds for a thorough investigation into the economic impacts of phasing out transfer duty in favour of a broad-based land tax.

We would also like to see a transfer duty concession introduced for seniors over the age of 65 to enable them to right-size into more appropriate housing, freeing up more large family homes for Western Australians wanting to trade up.

Although WA retains the largest proportion of first homebuyers in its owner-occupier market out of any state or territory in the country, the volume of first homebuyers in WA has declined in recent years. To help address this issue, we would like to see the WA Government reintroduce the $3,000 First Home Owner Grant (FHOG) for eligible buyers of established properties.

As it currently stands, the FHOG unfairly penalises buyers wanting to enter the established market by only providing assistance to those who chose to build. A 43,000 FHOG for established properties will go a long way to evening the playing field and will result in more transfer revenue for the state.

As the WA economy begins its recovery, it is important the WA Government doesn’t sit on its hands and just wait for the market to turn.

Now is the time to take action and think of new ways to drive the state’s economy forward.

Signs point to a recovery

Extracted from ‘The West Real Estate’       (Saturday 12th January 2019)

To say 2018 was an interesting year for the local property market would be an understatement. With grass shoots appearing in the Western Australian property market this year, conditions are expected to remain stable into 2019.

REIWA President Damian Collins said the market had been fairly subdued overall and weekly sales in Perth had hovered at approximately 500 per week throughout the year. “While we expect sales activity in 2019 to largely reflect what we’ve seen in 2018, there is a possibility rising consumer confidence levels, coupled with improved housing affordability could translate into increased sales volumes,” he said.

“If weekly sales remain at current levels or better, Perth’s median house price could improve during the next 12 months,” he said. “However if lending standards tighten further, this could restrict the number of people who are able to purchase a property, which could negatively impact sales and prices – additionally, if banks chose to increase interest rates, this has the potential to adversely affect buying and lending conditions in WA.”

If recent REIWA data is anything to go by, the most significant improvements in Perth’s property market in 2018 occurred in the rental sector.

Slowing new dwelling commencements and stable population growth has driven its upwards trajectory, a trend REIWA predicted would continue throughout 2019.                                                                                                                                                 Mr Collins said the market had delivered stable median rents, healthy leasing activity levels, declining listings and a plummeting vacancy rate in 2018.

“Available rental stock should continue to decline,” he said. “This should see competition amongst tenants increase, putting further downward pressure on the vacancy rate which recently dropped below 4% for the first time in 4 years.

Perth’s overall median rent has held at $350 per week since April 2017 – the longest period of stable rents Perth has experienced since REIWA first started recording rental data in 2001.

“We’re at 19 months and counting of stable median rent prices in Perth,” Mr Collins said. “If listings continue to decline and leasing volumes remain healthy, we should see the overall median rent price increase in 2019 for the first time since September 2014.”

Casting a spotlight on regional Western Australia, Mr Collins said market conditions were poised to improve as a direct result of investment in the mining sector. “Port Hedland, Karratha and Kalgoorlie are areas to watch, with the new mining projects going a long way towards restoring confidence in these regions,” he said. “These projects are expected to create thousands of new local jobs, which should continue to support population growth, improve demand for housing and aid recovery.”

“After a prolonged period of turbulent conditions following the slowdown in the mining sector, the WA market appears to be stabilising, and while the worst appears over, REIWA cautions against expectations of a rapid recovery during the next 12 months,” Mr Collins said.