Nov 10
0

Is it really time to be asking for a rental decrease?

By | best investment, Economy, Real Estate, rent | No Comments

Is it really time to be asking for a rental decrease?

This attached recent article from Jessica Irvine of sometime ABC fame, is suggesting renters should now be asking for rental decreases but is it really time to be asking for a rental decrease?

I believe that while there is some truth in the story, it is not the time for a huge number of renters to be asking for a decrease.

Read more here: http://www.smh.com.au/money/why-its-time-to-ask-for-a-rent-reduction-20161107-gsjq6i

The data she uses is all sourced from NSW, particularly the NSW Tenant’s Union and of course, this data seems to support the fall in rentals in Perth and the likely fall in rentals in inner Brisbane and Melbourne!

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

I’d suggest to any renter looking for a new property or a new lease that they use their own common sense when negotiating. In Sydney and Melbourne in particular, yields for landlords (yield being rent paid) are now at their lowest ever. Landlords are not inclined to lower their returns even more. Common sense, in this instance, just means having a look around your area and on real estate web sites for comparable property for rent. If you are looking at a unit, then perhaps in some areas you may find that there are many similar units available for rent. In the knowledge that you can easily find another place if necessary at maybe a lower rental, then you MUST try and negotiate a decrease on your current rent or try for a decrease in the advertised rent. If the landlords are desperate, they will negotiate.

If you are sitting in a nice little townhouse or villa, or even a house and land close to the city or even in the middle suburbs of your city, you may find that you are lucky to have the property you are currently renting. There are many areas with plenty of rental properties, but make sure you are comparing apples to apples. It can still be very difficult in many areas of all our east coast capital cities to find the type of home you wish to rent, particularly if it is not a unit, and if there is a scarcity, be prepared to pay for it. Your landlord will easily find someone else who is prepared to give them what they want if you won’t! Maybe it is not time to be asking for a rental decrease.

If you want to know more about rental yields in certain areas or discuss buying new property investment,   contact: info@limepropertysolutions.com.au.

Nov 07
0

Buying your first home is not easy, Bernard Salt

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Buying your first home is not easy, Bernard Salt

Buying your first home is not easy, Bernard Salt, some of our younger generations, Gen X and Gen Y, seem to miss the humour of one of our best known demographers, Bernard Salt, who has now written two articles over the last couple of weeks suggesting firstly, that they might like to stop buying expensive avocado lunches and save for a home or even give up their overseas holidays and save instead for a house deposit! Like me, Bernard is a “baby-boomer”, one of the lucky who just drifted through life buying cheap properties and having a ball!

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

While his recent articles should not be taken too seriously, or rather too literally, I do feel some annoyance at how hard the world is perceived to be to some of the younger generations trying to jump on the first step of the property ladder. It has never been an easy step to take, Buying your first home is not easy, and it can be annoying when we baby-boomers are reminded just how easy it was for us to get started.

Read more Bernard Salt article here: https://goo.gl/wGnqiK

My first home was bought in the UK. I was a 21 year-old teacher and the very small two-bedroom duplex I purchased was around eight times my annual income. I managed the deposit through working for the previous four years, sometimes up to 126 hours per week during all the long university breaks and saving by staying at home. On a couple of occasions, I did take lower paying jobs which offered me free accommodation and free meals in holiday destinations like France and the Channel Islands. While I didn’t save much on these jobs, I at least had the opportunity to explore and enjoy a different culture. Travel expenses were absolutely minimal as I hitch-hiked most of the time.

When I eventually moved in to my first home, I had most of the basics from presents from a large family. I had a bed, lounge suit and necessary kitchen-ware and linen. I made most of the ‘furniture’ from cheap melamine sheets and watched a black and white television gifted to me as most people were switching to colour. I did have an old car that was serviced by me with the help of a friend. I had to take on another evening part-time job to help make ends meet. The only time I could ever afford to eat-out was at family gatherings where usually, my parents were paying. Every couple of weeks, if the budget allowed, we may have had a bottle of wine. Eight years after buying the house, I had my first 10 day trip overseas.

This was a lifestyle very typical to all my friends, it did not seem ‘hard’ and it certainly was not unusual. The older generation thought, quite rightly, that we never had it so good.

In speaking to older Australians, including many European immigrants from the 50’s and 60’s, it seems their life was similar. Many tell stories of building their own first home with the help of friends and sleeping on mats on the floor until they could afford a proper bed.

I’m very glad the world has changed and our standard of living has improved immensely since the 1970’s but I do think Mr Salt, tongue in cheek or not, is putting out a very important message; it is not easy to get on to the property ladder buy it never has been! It does often take some sacrifice in current lifestyle and it does involve living on a tight budget …. and always has!

‘Affordability’ is always an issue after a period of cyclic growth. Buying your first home is not easy and never has been. The same stories emerge after every growth cycle. We had the same discussions in Sydney in 1989 and again in 2003 after the last two major growth cycles. After a few years, income increases, borrowing rates change and things become easier – affordability increases! If we make the necessary sacrifices and budget/lifestyle changes now, then there may be a good chance that advantage can be taken during the next phase of more-affordable housing. It will happen, it always does, just be ready for it and don’t expect to start off with everything that your older neighbours have; it’s taken them all their life to get to where they are!

If you want to know more about this or discuss buying new property investment, a great way to ‘save’ towards your own first home, contact: info@limepropertysolutions.com.au.

Nov 02
0

Banks are destroying your land titles

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Banks are destroying your land titles   

Last week we had a couple of days hold up with a refinance matter with one of our clients; the reason was that the banks are destroying your land titles and there may be some hicups in going digital!

It is reported today in the business section of the Sydney Morning Herald –

read more here https://goo.gl/FzUOk2

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

title-deeds

The old Title deeds will disappear as banks are destroying our land titles

All of the old paper certificates of title have been converted to electronic as part of a national push for conveyancing to go on a new PEXA system. It was not a big surprise to learn that PEXA is owned by state governments, the ANZ, CBA, NAB, Westpac, Macquarie Bank and private equity.

What was a surprise to me is the fact that all my title deeds, being held by a couple of the big banks have probably now been destroyed and no one bothered to inform me that this was being done to my title deeds. I can, we are assured, request a paper print out now from the electronic records.

What is not a surprise is that, moving forward, all future sales of properties whose titles are held by the bank will need to be transacted, at least in part, electronically and of course, the fees for the service will increase.

We have been dependant on the old Torrens title system since around the middle of the 19th century and some property lawyers are questioning this move by the big Banks as they fear it may compromise the security of the system.

While it is not yet fully implemented in NSW, it is now ‘working’ in Victoria where The Law Institute of Victoria has been an outspoken critic of the electronic system. They are arguing it is increasing costs for transactions and undermines those holding titles for security against other assets, as well as adding complexity and legal uncertainty to a what was once a simple, safe system.

One thing is for sure, you will be hearing a lot more about PEXA which is likely to become another new acronym with which we will all be familiar in the future.

The chief executive of PEXA said paper titles were cumbersome to use. “People keep losing them, including banks,” so maybe in the long term it will prove more efficient as well as more expensive!

If you want to know more about this or discuss buying new property investment contact: info@limepropertysolutions.com.au.

Nov 01
0

Why it is important to invest in property

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Why it is important to invest in property

A little understanding of how we are supported in our old age by our government should make it clear why it is important to invest in property.

Before Federation, most states had introduced a means tested state pension for older people who could no longer support themselves. By 1910 the new Commonwealth Government introduced the age pension for men over 65 years old and women over 60 years old who had lived in one of our states for more than 25 years. This was probably no big deal as only around 7% of the population lived to be over 65 years of age, and the likelihood is that the majority of these were from relatively well-nourished middle class families who could support themselves. It was not until the late 1930’s early 1940’s the number of over 65’s reached 10% of the population.

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

The reality is that all working Australians are making some tax contribution to support our older Australians throughout their working lives and have been doing this for over 100 years. The irony of the situation was that only 1 out of every 10 contributors, at most, lived long enough to benefit from the government scheme! Even back in the 1930’s and 40’s, seventy years of age was a very old person, so even those who made it to age 65 usually only had a very few years of state pension before dying.

It was Keating’s government back in 1993 who recognised that as most Australians, (not just 1 out of 10) were living to 65 and 10 or more years beyond, the age pension was no longer affordable to government. The ‘answer’ was compulsory superannuation and then, more recently, rising retirement age to 67 for both men and women. This still means that the average female in Australia today will have around 18 years to live, the average male around 14 years. Without allowing for inflation, at an average Australian income for these 18 years, the average couple now needs around $1.3 million to live an average life in retirement. For most, it is very unlikely that they will achieve this through superannuation alone, but just one $500,000 property investment could deliver another $500,000 for retirement in just around 10 years of ownership. This one property investment could well be the difference between a comfortable 20 years of retirement or 20 years of living below the poverty line in the later years of life. This is why it is important to invest in property. More and more we are becoming a ‘user-pays’ society, we can’t depend on government handouts in our old age.

If you want to know more about how you can prepare for retirement through property investment contact: info@limepropertysolutions.com.au.

Read more: http://www.smh.com.au/federal-politics/political-news/australian-life-expectancy-hits-alltime-high-20161027-gsccau

Oct 26
0

Affordable Housing fix is years away

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Affordable Housing fix is years away

Don’t you get fed up reading about the latest ideas on affordable housing? Now we read again something we all know, the affordable housing fix is years away!

The latest government inquiry, costing thousands of dollars again has been abandoned and placed in the ‘too hard’ basket yet again, good and not surprising news to the property investor but not so good news for the first home buyers in our major capital cities.

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

It’s reported today, “Treasurer Scott Morrison’s speech on housing affordability might look like an improvement on his predecessor’s “get a job, a job that pays well” advice. It’s not. In practical terms, it’s nothing at all.”

It’s reported as one of the government’s favourite sort of problem, “one they can flick responsibility for onto the states and spend some years “thinking” about it without actually doing anything constructive.”

So the problem is all about supply, or is it state land use regulations, or is it tax policy and something to do with the cost of supplying expensive social housing? Maybe it’s all about changing our capital gains tax rules or getting rid of negative gearing or just moderating the rules on new land releases? It might also help to charge developers more for appropriate infrastructure around new releases or developments, (struggling to understand this one?) or just a simple case of easing the huge amounts of stamp duty payable on the purchase of a property?

Of course, the answer may just be reviewing the first home owners grants, introduced in 2000 to assist with the additional costs in building caused by the introduction of the GST or maybe it’s just about lowering interest rates even further and keeping them low?

Now you know what some of the issues are you should have some idea of how easy this is to rectify! For a fuller explanation, you might like to try and understand this article: https://goo.gl/pE6vAR

I really think it is fair comment to assume that property investors have little to fear in the future about what government can or will do to make owning a property more affordable. The one thing that is very true and understandable about the issue is that affordable Housing fix is years away, if ever.

If you want to know more about how to make money out of the ever increasing price of property, contact us at info@limepropertysolutions.com.au.

Oct 24
0

Empty bedrooms? Put your money where your mouth is!

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Empty bedrooms? Put your money where your mouth is!

Apparently Sydney now has 20 years of future housing stock in empty bedrooms? Put your money where your mouth is NSW if you want to utilize more of this ‘space”.

Houses roofs

Downsizing is too costly for many older Australians

The first point of this new argument must be defining who has these ‘extra bedrooms”?   While some bedrooms in the homes of empty nesters may be empty some nights of the week, many do not have empty bedrooms gathering dust.  After years of being cramped with children, it’s a later life treat to own enough space for a study or an area to pursue a hobby. These rooms can also be used as exercise rooms to keep ageing bodies trim. Most are also grandparents who require bedrooms for visiting children and grandchildren; they are perhaps underused but certainly not empty.

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

 It’s also time to review the massive disincentives placed on older Australians to downsize. Many empty nesters will never consider downsizing because the appropriate type of housing is just not being built. Sure, we are constantly being warned about the forthcoming glut of apartments in most of our east-coast city markets, but many older Australians are not prepared to give up their gardens or a small private area where they can allow their ‘fur-children’ some space to run around outside the home. A smaller garden is often an attractive proposition but no garden at all is a deal-breaker. We need more villas and town homes in the established suburbs where the majority of these older Australians currently live.

 

The financial penalties for retirees downsizing can be enormous. Just imagine, an older retired couple in a slightly above average (larger) home worth $1.5 million. The home sale, including marketing and legal costs will cost them around $30,000. They buy a smaller town house at around $900,000 and they say goodbye to another $40,000 in stamp duty, another $2000 on legal fees and probably around $10,000 in removal expenses and buying some new furniture that ‘fits” their new surroundings. Basically, they would need to budget around $100,000 of their, (in most cases) diminishing wealth just to move.

 

Having made the move, they find that they have an additional $400,000 in the bank. This may be enough to stop many of their senior benefits, including pension payments. The argument, of course, is that they don’t need any government funding now but this misses the point that older Australians do love their children and grandchildren and they see it as an essential legacy to leave an inheritance to their family.

 

It will always be difficult to persuade older people to move out of their family home to free up empty bedrooms for the younger generations but as long as our governments insist on penalising such a move, the bedrooms will stay “empty”. Read more https://goo.gl/jBePqx

If you want to know more about appropriate house type investment contact us at info@limepropertysolutions.com.au.

Oct 18
0

Forecasts for Housing Price growth

By | best investment, Economy, Investment, News, property cycle, Research | No Comments

Forecasts for Housing Price growth
We seem to be by bombarded by various forecasts for Housing price growth, or maybe I should say, in some cases, housing crashes or bubbles bursting.
If you are feeling in a particularly negative mood, or perhaps you are a first home buyer waiting for the market to crash in order that you can buy, then its best to try and get a hold of the many international companies, looking at the Australian housing market from the outside, to find the doom and gloom price crash scenarios. Just last week, Deloitte Access, (not for the first time) tipped property to be the ‘worst investment’ over the next few years; I’m sure they’d love to get it right just once!
If you are interested in hearing a more positive forecast for real estate prices, you can usually depend on the Real Estate Industry itself, particularly some of the better known, (not necessarily more accurate!) organisations like Domain or Hotspotting “ guru” Terry Ryder, who infamously wrote that there was ‘no mining boom’ a few years ago and high prices, high rents and growth would continue in some of our mining boom towns!
(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)
Probably, by far, the most dependable forecasts we have are those done by BIS Shrapnel on behalf of QBE, the most recent being the Australian Housing Outlook Report 2016-2019. This report is published in October each year and the latest has just recently been released.
While the press report on this release loves the opportunity to use phrases and words like “The Boom is over” and “Prices Plummet”, the experienced property investor will find absolutely nothing out of the ordinary or unexpected in the report. In summary, Sydney has hit the top of its growth cycle and we may see a small correction in the price of units and an even smaller correction, if at all, in house prices; exactly what happened after the 1988 and the 1993 Sydney ‘booms’ but maybe not as much as the small corrections of the last two booms – just don’t expect any price growth over the next 3 years. The forecasts for Melbourne are very similar although we may see a slightly larger correction in unit prices and a small correction in house prices.
Brisbane is forecast to see a drop in unit prices due to the very high level of unit development in the CBD and fringe but house price growth will continue, making the Brisbane house market the strongest growth market in Australia over the next 3 years.
Take away the emotive language of this daily mail article and the truth behind it shouldn’t hurt any property investor in our east coast cities too much and, in fact, should see Brisbane house investors continue to smile! Read more https://goo.gl/a6XArr
If you want to know more about the QBE Forecasts for Housing Price growth or find out more about growth suburbs contact us at info@limepropertysolutions.com.au.

Oct 17
0

Brisbane suburbs where house prices have doubled

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Brisbane suburbs where house prices have doubled
It’s interesting to read about the number of Brisbane suburbs where house prices have doubled over the last 10 years.
(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)
The news always seems to be centred on the Sydney market with the occasional comment on what is happening in Melbourne. We read about property investors (and maybe a few home owners) almost buying out a brand new release in Macquarie Park in Sydney at the weekend but one story you will find very difficult to find is about Sydney suburbs that have doubled in value over the last 10 years – there are none. It’s a slightly different story in Melbourne where we do have a few suburbs that have doubled in value in the last ten years but we read and hear so little about Brisbane.

Well, according to Domain Group Data, here are the suburbs in Brisbane that have more or less doubled in value over the last 10 years:-

• South Brisbane*
• Newmarket*
• Wishart* (*have more than doubled in value, according to Domain Group data)\
• Macgregor
• Cannon Hill
• Northgate
• Sunnybank
Apparently the growth is not all about people paying more to get into a suburb. Simon Pressley said, “While someone in South Brisbane may have bought for $500,000 and now their home is worth $1 million, they might have spent $800,000 on the home.”
Sunnybank has attracted a very large number of residents from a Chinese background and like many of the well-populated Chinese Australian areas in Sydney, prices have just grown and grown.
Probably not surprisingly, seven of the top ten of the biggest growth suburbs are located within five-kilometres from the CBD.
According to Andrew Wilson from Domain, most of the growth had occurred in the past three years. Similar to the claims being made about the growth in Melbourne and Sydney, low interest rates over the past few years are being attributed to the cause of much of this growth.
It is interesting to note that BIS Shrapnel’s annual housing report released last week is still predicting house price growth to be stronger in Brisbane than in any other capital city over the next few years, so look out for more additions to the list of Brisbane suburbs where house prices have doubled over the last 10 years. Read more here: https://goo.gl/4ChtqG
If you want to know more growth suburbs in Brisbane and how they may affect your property investment choices contact us at info@limepropertysolutions.com.au.

Oct 13
0

Life changes for the property investor to understand

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Life changes for the property investor to understand

Today we are reading about how the housing boom is changing the way Australians live, quite important life changes for the property investor to understand for successful investment.

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

It hasn’t been a “long boom” as the writer describes it in the article link below but we certainly have seen significant price growth in our two largest cities, which not surprisingly, has some effect on the way we live and our behavioural changes.

Most of these changes would be very predictable we spent the time to think about them, but the primary question for the property investor should be how important it may be to understand the impact these demographic/life changes have on the demands of certain types of property?

  • The most obvious change is that we are finding that young adults to live in the family home for longer than in the past. We also have what has been described as the “boomerang generation” – the chicks leave the home only to return when they have to face the economic realities of not living with mum and dad. This trend is now showing up clearly in Australia’s demographic data.
  • Closely related with the above, is the fact that home ownership rates among those between 25 and 45 years has fallen markedly during the past two decades. If that decline is not reversed, the proportion of life-long renters in Australia will grow.
  • There has been a huge shift towards high- density living in our big cities. I’d comment that it is incorrect to assume that this is because of the price of well-located urban land increasing relative to incomes. I’d suggest it has a lot more to do with the choice the young in particular are making for the city and city-fringe lifestyle as well as the increasing number of older Australians who are downsizing into more manageable city units.  It is interesting to note that 51 per cent of all dwelling approvals in Australia were for multi-unit houses and 62% in Sydney!  Unsurprisingly, the number of small cottages with a yard is in decline.
  • House price movements have a “clear and consistent” influence on how much some people work. The economists recon there is a tendency for older females in particular to use any unexpected wealth gains from house prices to retire early.
  • High property values also affect the work choices made by younger women and men. Those between 20 and 40 years who own property cut back their hours of work, on average, following strong gains in housing wealth. At that formative stage of the family life-cycle many young couples use housing wealth gains to help manage the juggle between work and family.
  • There is another pretty predictable change – as prices rise, homeowners take on more debt.

You can read more about this here: http://www.smh.com.au/comment/how-the-housing-boom-has-changed-the-way-australians-live-20161011-grzoe1

If you want to know more about how these changes can affect your property investment choices contact us at info@limepropertysolutions.com.au

Or even better, why not give us a call at LIME and we’ll be happy to discuss with you.

Oct 10
0

Negative gearing does NOT mean you are making a loss!

By | best investment, finance, Financial, Investment, Negative Gearing, Properties, Property Research, Uncategorized | No Comments

Negative gearing does NOT mean you are making a loss!

George Cochrane in this week’s money section in the SMH tells us that negative gearing means we are making a loss – what rubbish! – Negative gearing does not mean you are making a loss! Obviously on paper, a tax loss must be showing before we can claim the ‘loss’ against our tax, but very often the astute property investor is making this ‘loss’ through permitted depreciation only, it is not an actual loss in cash but it ‘transfers’ to money in the pocket after tax. By most definitions, money in the pocket is PROFIT not loss!

mortgage rates

Negative gearing does not mean you are making a loss. Property can be positively geared after tax

Let’s look at a hypothetical apartment bought in one of Sydney’s fringe around 3 years ago. It doesn’t really matter how many bedrooms it has or in which suburb, but for the sake of the exercise, we’ll assume it was bought brand new!

It cost $600,000 and the investor borrowed another $20,000 on top of the purchase price to help pay the stamp duty and legal costs, so $620,000 is owed and borrowed at an interest rate of 4.3%.

$620,0X 4.3% =                                               $26,660.00 per annum interest

Annual rates =                                                 $2000.00

Annual Body Corp =                                        $4000.00

Annual Management fee Inc insurance =      $2000.00

Total costs out           =                                                  $34,660

Less rent @ $570 per week =                                    $29,640

TOTAL ACTUAL ANNUAL LOSS =                          $5020.00

As well as the cash loss of $5020, we then have to add the first year depreciation on a new apartment. A very conservative figure for this depreciation would be $16,000.

Now we add together the actual loss and the depreciation loss ($5020 + $16,000) giving a total tax loss of $21,020 in the first year. You multiply this figure by your actual tax rate to give a very good idea of what you will be reimbursed by the ATO so assuming you are paying tax at the following rates (excluding the additional Medicare levy which can also be claimed) then we have:-

30% tax bracket          –            rebate of 30% x 21,020 = $6306

37% tax bracket          –           rebate of 37% x 21020 = $7,777.40

45% tax bracket          –           rebate of 45% x 21020 = $9459

In EVERY case the tax rebate is greater than the actual cost of holding the property. In Every Case, the owner of the investment is in a stronger cash flow position because they bought the property. THEN we look at the close to 25% – 30% market growth in apartments in Sydney over the last 3 years giving capital growth profit on the $600,000 of (600,000 x 25%) = $150,000 profit before CGT!

In summary, over 3 years on a 37% tax bracket you would be around $23,000 better off in your daily cash and around $150,000 better off in asset!

So keep this in mind if you read the following article which explains that negative gearing means you are making a loss! Negative gearing does NOT mean you are making a loss! Read more here: https://goo.gl/iJX5Ow

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