Topic overview from our recent Canberra Property Investor Evening

The lucky attendees of our Canberra Property Investment Evening on the 12th of May got the opportunity to hear directly from property investment experts - Performance Property Advisory. They revealed the most up-to-date predictive data on investing in the Canberra property market. In addition, we had Rob Garth, local Mortgage broker from Clarity Home Loans, talk about the lending market. And Bradley Beer, Chief Executive Officer from BMT Tax Depreciation Quantity Surveyors provide the latest information on depreciation and the tax benefits. Here's an overview of the info that was covered at the event.

DAVID MCMILLAN - Performance Property Advisory

CANBERRA AT A GLANCE  

Population:

Current: 431,380

Current Growth Rate: 1.2%

Average 10 Year Growth Rate: 1.8%

Unemployment rate:

3.4%

Current Median:

$750,000 House

$500,000 Unit

Yield:

House yield: 4.6%

Unit yield: 5.1%

In the current stage of the cycle:

The Canberra House market is in the: Buy momentum stage

It would be best suited to: Medium (4-7 years) to long (10+ years) term strategy

The Canberra House market is a: medium to high risk investment  

Long term compounded growth  

PA (1990) us 7.21% for houses and 5.31% for units


PPA VIEW OF THE CANBERRA HOUSE and UNIT MARKET

Hold

Hold and monitor property in this market. Potential for growth in the short term is predicted but limited. Investing at this stage in the cycle holds extreme risk, due to low yields and aggressive prices.

Buy momentum

On a macro level the market is at or close to halfway through this growth cycle and demand for quality property is strong and rising. Macro fundamentals are present to support growth in the short term.

Sell

The market has peaked and prices are likely to soften or stagnate in the short to medium term. Consider selling in this market after consultation with your financial planner or property investment adviser.

Downturn

The market is moving through a correction stage. We see minimal growth in the short to medium term

Buy value

This market offers good investment value with macro fundamentals present to support growth in the short to medium term. Buy at the true market bottom to take advantage of the full growth upswing, with cyclical risk at its lowest.

This information is general only and does not constitute professional advice. You should always seek professional advice concerning your particular circumstances before acting.

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ROB GARTH - Clarity Home Loans

INVESTOR LOANS

RBA cash Rate  

  • The cash Rate is all-time low and the RBA have said the cash rate is to stay at this level for 3 years.

What’s been driving fixed rates down?  

  • RBA selling bonds to banks at 0.10%, Banks lending at 1.99%. This is putting cheap money into the economy to assisting the rebound from COVID.

Regulators may move to slow the market

  • Reduce borrowing capacity before increasing rates
  • If rates move investor rates might be first to go
  • Not a huge impact in ACT as we have the highest average income in the country

Bank assessment times

  • Some lenders 3 days, ANZ up to 30 days

Lending Policy  

  • Banks are being more flexible
  • Good news for casual income earners, contractors, self-employed
  • Borrowing capacities still very strong

Living expenses still being scrutinised

  • More investors entering the market
  • 13% increase nationally from March to April, the fastest increase in 10 years
  • Clarity are seeing investors making up 20% of all loans, which has steadily increased since Christmas
  • We are seeing more investors buying land and building as they are being priced out of the established market
  • Low vacancy rates are applying upward pressure to rentals increasing returns which are driving investor activity  
  • Increases in house values are driving investors to use equity for investment.
  • Less ‘Rentvestors’ as people are trying to get out of the rental cycle

DEPOSIT REQUIREMENTS

  • Major lenders offering 90% LVR loans including LMI
  • Minimum 12% deposit plus costs required
  • Some smaller lenders maximum 80%
  • Equity release funding 100% plus costs – great to maximise tax benefits. No savings require use of equity in your existing home

This information is general only and does not constitute professional advice. You should always seek professional advice concerning your particular circumstances before acting.

BRADLEY BEER - BMT Tax Depreciation Quantity Surveyors

TAX DEPRECIATION FOR PROPERTY INVESTORS

What is tax depreciation?

  • Every income-producing property and its assets experiences wear and tear over time. This wear and tear can be claimed as a tax deduction.

Significant savings

  • It is generally the second biggest tax deduction for property investors, after loan interest.

Improves cash flow

  • A property investor may be eligible for thousands of dollars in depreciation deductions each year.  

Components of depreciation

Capital works deductions (Div 43)

  • Claimable for forty years
  • 2.5 per cent of capital works (depending on age and type)
  • Applicable to renovations
  • Driveways. Windows. Bricks

Plant and equipment (Div 40)

  • Different rates apply based on their effective life
  • Different rules apply depending on date of acquisition
  • Oven. Dishwasher. Air-conditioner

Frequently asked questions

  1. Q. Doesn’t my accountant look after that?
    A. We work alongside your accountant
  2. Q. Isn’t the property too old?
    A. No property is too old to start asking the question
  3. Q. What about renovations?  
    A. Scrapping – contact BMT before you start
  4. Q. Is it ever too late to claim depreciation?
    A. Claim back missed dollars by adjusting previous tax returns

This information is general only and does not constitute professional advice. You should always seek professional advice concerning your particular circumstances before acting.

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Should I buy or sell first?

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