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Recent information provided by the ANZ Bank on the housing outlook, and recent historical, paints a diverse but interesting picture for the Australian housing market.
In summary, whilst reports of a weakening housing sector seems to fill our news papers, the reality is a market that is holding its own.
The article states that “A combination of lower interest rates, falling house prices and rising household incomes has driven Australian house purchase affordability to better than long-run average levels.” And whilst housing has become somewhat more affordable rental income continues to be the big winner in this picture.
This sentiment is backed up by the article which says “Since 2006, net overseas migration has largely driven Australian population growth and supported strong underlying demand for housing… annualised net movements of 300,000 at May 2012 are expected to drive population growth and continue to support underlying demand for housing in the years ahead.”
It is our view, and that of the ANZ, that unless there is something that generates a sharp downturn escalating unemployment then improving housing affordability, solid household financial positions and strong housing market fundamentals should support modest house price growth into 2013.
While previous structural and policy drivers have now been capitalised into house price growth, ANZ expects prices to increase at 4-5% in annual terms by the end of 2014.
So what are some of the other facets driving this predicted increase?
* strong population growth in key areas including WA and regions such as the Hunter Valley in NSW
* Slower but significant population growth in other areas
* Lower new dwelling constructions
* Major housing shortages squeezing rental markets
The article suggests, “…the fundamentals of the Australian housing market remain generally solid. Skills shortages, particularly in the mining and related professional services sectors, have driven recent increases in net arrivals, indicating population growth is about to re-accelerate. Combined with a weak outlook for residential construction, we expect the underlying shortage of housing to increase in the years ahead, pushing rental vacancies lower, rents higher and eventually supporting house prices.”
Good news for Portfolios Property clients. The fundamentals for property growth are strong and the prospect of good rental yields are seemingly consistent.
Portfolios can discuss investment opportunities with you in more details. We would encourage you to fill out our Portfolio Review Form or contact us to see where you can get started.
Make it happen today!

Maybe the best investment is in property right now?

Recent information provided by the ANZ Bank on the housing outlook, and recent historical, paints a diverse but interesting picture for the Australian housing market.

At Portfolios we always start with knowing your property investment strategy – so you can know how to finance it and of course then you will know what you should buy.

The Reserve Bank of Australia today has ushered in another rate cut dropping the official rate by 25 points.

The rate now sits at 3.5% the lowest since 2009 – our challenge now is to the banks – what will you do?

BOQ has come out fighting – 20 point drop – ominous for the rest of them. From memory they were first to move last time.

Source: SMH Online

Could you benefit from higher cash flow now?
What could you do with extra cash each fortnight?
Save on interest costs by paying a current mortgage off faster? Save more quickly for the next investment property deposit? Go on a holiday? There are so many possibilities…
Why not consider a Pay As You Go (PAYG) variation?
Often overlooked by investors, the PAYG system is a great way to increase fortnightly cash flow throughout the year. The PAYG method of tax collection was introduced in July 2000 to replace previous versions of the same system, such as pay as you earn (PAYE). The system gives the option of claiming back tax regularly, rather than in one lump sum at the end of the financial year. A PAYG variation means that the property owner’s employer will reduce the amount of tax withheld to reflect set deductions like depreciation on a rental property. In essence it is a way of decreasing the amount of tax paid by the investor each pay period.
It is important to note that submitting the PAYG variation does not replace a normal tax return. A tax return still needs to be filed at the end of the year to calculate the actual amount of tax liability. Your PAYG instalments for the year are credited against your assessment.
A Quantity Surveyor can provide all current and future depreciation values for investment properties in a detailed tax depreciation report. Obtaining the report immediately after the purchase of a property will allow the maximum return from a PAYG variation, as the precise figures will make the instalments accurate.
The flexibility provided to the Investor through a PAYG variation, combined with depreciation deductions identified by a Quantity Surveyor, can be of great help in managing the fortnightly cash flow of an investment property.
Let’s consider a hypothetical situation:
A typical $400,000 investment property would show an average annual loss (or deduction) of $35,000 and an average income of $20,000 for the first 5 years. The deductions include costs such as interest on a $350,000 mortgage, management fees, maintenance and property depreciation. The total loss (income minus expenses) will result in a deduction for the owner of $15,000. In the 37% tax bracket the $15,000 deduction could generate a tax return (or credit) of $5,550. Under a PAYG variation, the investment property owner can adjust their fortnightly pay to anticipate this return, adding $213 to their pay packet each fortnight.
BMT Tax Depreciation are specialists at maximising tax deductions for investment properties. Talk to an accountant about a PAYG variation to increase fortnightly cash flow.
Article Provided by BMT Tax Depreciation.
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is a Director of BMT Tax Depreciation.  Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia wide service

What could you do with extra cash each fortnight?

Save on interest costs by paying a current mortgage off faster? Save more quickly for the next investment property deposit? Go on a holiday? There are so many possibilities…