» Buying Property

Understand how Investment property renovations increase tax deductions, rent and property value

BMT team — Mon, 17 Oct 2022 06:06:34 +0000

BMT Tax Depreciation are often asked what investors can do to increase tax deductions and boost cash flow. One way is to renovate! Investment property renovations increase tax deductions, help with increasing a property’s value and improve rental yield leading to greater returns. This article outlines the different types of investment property renovations, what to look out for and how to maximise tax deductions. Depreciation explained Greater returns Repairs, maintenance and capital improvements Previously used plant and equipment can’t be claimed Scrapping Renovations completed by a previous owner Cosmetic versus substantial renovations Maximise the tax benefits with depreciation Depreciation explained Depreciation is the natural wear and tear of a property and the assets within it over time. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim this as a tax deduction. There are two types of deductions available to claim. Capital works deductions (Division 43) is a claim available for the building’s structure and the assets that are permanently fixed to the property. And plant and equipment depreciation (Division 40) is a claim on the assets that are easily removable from the property or mechanical in nature. Capital works deductions are a fixed amount that can be claimed each year on all applicable building structures for up to forty years. Plant and equipment items have varying effective lives and therefore can be depreciated at an increased rate which varies depending on the asset and the method used to calculate the claim. Greater returns Renovating an investment property will not only heighten depreciation deductions but can also increase the capital growth and rental return. Even updating the flooring, adding a fresh coat of paint and updating areas like the kitchen or bathroom can attract better quality tenants and increase rental return. The case study below demonstrates a scenario where an investor completed a $65,000 renovation. Here is the investor’s scenario before and after completing the renovation • Original purchase price (before renovation) = $610,000 • Rental income per annum prior to renovation = $20,580 • Total renovation spend (completed in 2021) = $65,000 • Property value on completion = $785,000 • Rental income per annum after renovation = $27,040 Due to the renovations completed the property’s value increased by $175,000 and yielded an additional $6,460 per annum in rental income to. Repairs, maintenance and capital improvements Knowing the difference between repairs, maintenance and capital improvements is particularly important when renovating. According to the Australian Taxation Office (ATO), repairs are considered work completed to fix damage or deterioration of a property, such as replacing part of a damaged fence. This occurs when an asset is already damaged or deteriorated and therefore requires repairing. Maintenance, on the other hand, is work completed to prevent damage or deterioration of an asset. For example, oiling a deck is considered maintenance as it helps to preserve the quality of the property and prevent future corrosion. The total cost incurred to repair or maintain your investment property can be claimed as an immediate tax deduction in the year of the expense. However, the ATO specifies that initial repairs for damage that existed when the property was purchased does not always qualify for repairs and maintenance and therefore not always 100 per cent is claimable in the first year. Instead, these costs are treated as capital improvements and depreciated as capital works deductions or depreciation of plant and equipment. A capital improvement is considered any works that improve a property beyond its original state. According to TR 97/23, an ‘improvement’ provides a greater efficiency of function in the property – usually in some existing function. Some indicators that the work performed is an improvement include whether the work will: • extend the property’s income-producing ability • significantly enhance its saleability or market value, or • extend the property’s expected life For investors who already possess a BMT depreciation schedule and would like to update minor upgrades they can do this via email, the MyBMT portal or a phone call. Previously used plant and equipment can’t be claimed Residential property investors completing renovations should be aware of the 2017 legislation changes. The legislation stipulates that investors who purchased property after 7.30pm on 9 May 2017 are unable to claim deductions for the decline in value of previously used plant and equipment found in second-hand residential properties. But these investors can still claim depreciation on new plant and equipment assets added to a property and all structures new and old as capital works deductions. It’s common for investors to live in their property while renovating. While this may seem like a good idea, all plant and equipment assets like air-conditioning units, light fittings and hot water systems will be classified as previously used and no longer be eligible for depreciation deductions due to the legislation changes. Scrapping Assets may be removed while there is remaining depreciable value left over, claiming this un-deducted value is commonly referred to as ‘scrapping’. Scrapping value is essentially the un-claimed or un-deducted depreciable value of an asset at the time of removal. The scrapping value is calculated as follows: Scrapping value = original depreciable value – deducted value to date For example, if the original value of an asset or part of a building was $8,000, and $6,000 was claimed by the time of the asset’s disposal, the ‘scrapping value’ or part of a building would be $2,000 (assuming no amount is received on disposal). The owner could then claim the $2,000 as an instant tax deduction in the same financial year as removal. It’s important to talk to a quantity surveyor before removing any items so they can capture the assets available for capital works or plant and equipment depreciation deductions. Renovations completed by a previous owner Many older properties have had renovations completed by previous owners, these works are often qualifying and can be claimed by current owners. For instance, if a property was built in 1979 but renovations were completed in 1993 the capital works for the renovation […]

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PropCalc: the secret to avoiding mortgage stress

BMT team — Tue, 17 Mar 2020 22:58:47 +0000

Interest rates are dropping, so it would be fair to presume that mortgage stress rates are too, right? In reality, mortgage stress continues to rise among Australian homeowners. All homeowners, both owner-occupiers and investors, can reduce mortgage stress by understanding the full picture before making the purchase. In this article we will explore: What is mortgage stress? The scale of mortgage stress in Australia PropCalc: The secret to avoiding mortgage stress What is mortgage stress? Mortgage stress doesn’t have a concrete definition, but it’s commonly described as paying more than 30 per cent of a household’s income in mortgage-related costs. Unfortunately, it often causes a ripple effect to other areas of a homeowner’s life such as struggling to pay utilities on time, credit card repayments and other everyday essentials. A mortgage often lasts over 20 years. Interest rates and a homeowner’s personal circumstances will go through many changes over this length of time, which can contribute to increasing mortgage stress. The scale of mortgage stress in Australia A recent study from Digital Finance Analytics (DFA) reported that mortgage stress has pushed even higher in 2020. The results revealed that mortgage stress is a very real issue in Australia with one in three households, or 1.1 million, currently feeling the pressure. While personal circumstances can change suddenly, one of the key reasons for mortgage stress is present at the very beginning. Not having a full picture of the type of costs of owning the property is a common misstep that can creep up on homeowners. There are so many costs involved with buying a property and if they aren’t totally understood, the homeowner can find themselves in a stressful situation. PropCalc: The secret to avoiding mortgage stress Research is key to setting yourself up for a stress-free property purchase. Helping many householders reduce the risk of future mortgage stress, PropCalc shows the real costs of owning the property, before you even make an offer. Forgetting to factor in all the costs involved with owning a property can result in mortgage stress down the track. PropCalc helps you grasp a realistic breakdown of the costs of owning the property and how it will impact your cash flow. PropCalc accounts for a range of expenses beyond the initial purchase including interest, stamp duty, insurances, council rates and maintenance costs. If you’re a property investor, PropCalc can be your go-to tool to ensure you get the best property for your portfolio. The tool includes many features to help you understand what type of cashflow you can expect, from the rental income to any depreciation claims available. PropCalc is your essential property research tool that does so much more than a mortgage calculator. To help you find the perfect property for your budget, PropCalc generates property reports to allow you to save and compare multiple properties online and through the app. Start using PropCalc today PropCalc is a free tool that is available through the BMT website. The platform gives you access to depreciation information, insurance, market analysis and property tools at your fingertips. To join more than 120,000 people enjoying the benefits of PropCalc, visit bmtqs.com.au/propcalc today.

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Is it better to rent or buy property?

BMT team — Sun, 08 Mar 2020 23:17:04 +0000

Is it better to rent or buy property? It’s an age-old question that continues to spark debate. In previous years Australian property prices, particularly in Sydney and Melbourne, were among the most expensive in the world, forcing many buyers out of the market. However, a sluggish economy and subdued property market has once again opened doors for those looking to get on the property ladder. With the residential market recovering from recent lows and house values still well below peak, the question of whether to rent or buy is more relevant than ever. In this article we will look at: Renting advantages Renting disadvantages Buying advantages What is PropCalc? Renting advantages It’s more affordable One of the main benefits of renting property is the ability to live in an area that you may not be able to purchase in. A perfect example is Bondi where the average weekly rent for a unit is $675 but the average purchase price is $1,050,000, according to realestate.com.au. Renting offers affordable living without having to comprise on location or lifestyle. Less upfront costs Another key benefit is the fact that you don’t need a large deposit. In order to buy property, you typically need to have at least 10 per cent of the purchase price for a deposit. If you’re purchasing in Bondi, that’s $105,000. In most scenarios, if you want to avoid paying Lender’s Mortgage Insurance, you’ll need a 20 per cent deposit. Add in your conveyancing, pest and building inspection and solicitor fees and the numbers quickly add up. You also don’t need to stress about ongoing maintenance costs or problems as in many instances it’s the landlord’s responsibility. Renting disadvantages You’re paying someone’s mortgage Though there are drawbacks, with the most obvious being that you’re not paying off your own property. Unlike a mortgage, rental payments are never-ending and essentially go towards the landlord’s income. Lack of stability Along with this, the flexibility in renting can also be seen as a lack of stability. When your lease ends you have to either negotiate a renewal or move to a new property, both of which require time and effort. Rules and restrictions You also have to abide by the landlord’s rules, which means you may be restricted when it comes to making the space your own. Renovations and substantial redecorating are usually off the table and pets may be prohibited. Buying advantages Security and stability As previously mentioned, there is security in owning your own property. You won’t have to deal with finding a new property at the end of a lease and can work towards turning the house into a home. This stability is particularly appealing for those with young children. You’re in control You’ll have full control of the building, meaning you can design the space to cater for your needs without having to seek approval from a landlord. You can even turn the property into an investment down the track. Paying off your own mortgage Owning a property also means you won’t have to deal with annual rent increases. You can make repayments at a fixed rate which enables you to better plan your finances. It can also act as a form of enforced saving, encouraging you to spend less and pay off your loan sooner. It’s important to do your research before purchasing property, particularly when it comes to your holding costs. A simple way for buyers to do this is by using PropCalc. What is PropCalc? PropCalc is an essential cash flow calculator that could help thousands of Australians reduce their risk of mortgage stress. The tool is revolutionising property research by using key market analysis and customisable data to show exactly how a purchase will affect your finances. Can PropCalc help you decided whether to rent or buy property? Yes. PropClalc allows you to customise and personalise data to produce results tailored to your situation. More than just a mortgage calculator, PropCalc allows users to personalise data such as purchase costs, property income, annual expenses and cash flow. Available online or as an app, the free calculator also considers the stamp duty, variable deposits, interest rates and finance fees. To help first home buyers and those less familiar with the housing market, PropCalc prefills suburb price averages in line with the property you’re interested in. Keep this prefilled data or change it to suit your needs – it’s completely up to you. Once you’ve personalised the data, PropCalc will show you a full breakdown of the holding costs of any property you’re interested in. Compare the results to your current rental property to get a deeper understanding of what you can truly afford. Start using PropCalc today PropCalc is free of charge and available in MyBMT, a comprehensive portal designed to help investors access and manage their depreciation and property needs. The interactive platform gives you on-the-go access to depreciation information, insurance quotes, valuable market analysis and helpful property tools. To join more than 120,000 people enjoying the benefits of PropCalc, visit bmtqs.com.au/propcalc today.

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Property market update September 2019

BMT team — Wed, 11 Sep 2019 01:49:09 +0000

National dwelling values increased for the first time since October 2017, as the Australian property market continued its trajectory to recovery throughout August. With the spring season forecast to lift the market, experts are predicting a slow and steady recovery. Property values Housing values increased across five out of the eight capitals and national dwelling values rose by 0.8 per cent throughout August. The increase in dwelling values lifted the national annual rate of decline to -5.2 per cent, an improvement from May 2019 when values reached their sharpest annual decline of -7.3 per cent. August was also the third consecutive month of capital gain in Sydney, Melbourne and Hobart and the second consecutive month in Brisbane. The weakest market conditions remain in Perth and Darwin where values have been declining for several months. Darwin values are now 30.7 per cent below their 2014 peak, while Perth values are down by 20.6 per cent. Despite this, there are subtle signs of improvements in the rate of decline for both cities. Residential property listings An increase in buyers combined with a lack of stock has contributed to further market recovery in August, with listing numbers expected to increase throughout spring. The beginning of September has already signalled a resurgence in the property market, with the largest seasonal rise in new listings in five years. According to CoreLogic data, the first weekend of spring recorded a 21.7 per cent increase in the number of homes listed on the market in Sydney, Melbourne, Brisbane, Adelaide and Perth. Out of the eight capitals, Melbourne had the most substantial increase in listing numbers, up 36.2 per cent from its winter low. Vacancy and rental rates Dwelling values and listing numbers are improving but the same cannot be said for the national rental market. Rents fell 0.1 per cent over August, the third successive month of decline. Brisbane, Adelaide and Hobart rental markets were the only exceptions. Sydney and Melbourne are leading the softening of rental yields, however if the market recovery continues, we could see this stabilise in the coming months. Auction clearance rates Auction clearance rates across the country continued to climb in August and are now at their highest levels since early 2017. Sydney’s auction clearance rate was almost 50 per cent higher in the last week of August compared with the same time last year, as experts predict a bumper spring with the number of property listings already rising. During the same week, Melbourne auctions returned a preliminary clearance rate of 76.1 per cent. Across combined capital cities, 1,605 homes were taken to auction in the final week of August, returning an average preliminary clearance rate of 73.6 per cent. Finance and interest rates Lending to property investors tumbled in July, however, could be back on the agenda as we head into spring. As rates drop and property prices stabilise, the rental investment market is showing signs of improvement. CoreLogic data shows the national average rental yield on residential property is currently 4.1 per cent, a return which experts suggest can comfortably surpass term deposit rates. In construction news, reduced interest rate cuts and tighter credit conditions have contributed to a fall in building approvals. Overall, the number of building approvals fell 9.7 per cent in July. Houses declined by 3.3 per cent and other dwellings, which comprises apartments and townhouses fell by a startling 18.4 per cent. Commercial property The retail property market is continuing to transform as major stores like David Jones, Myer and Big W announced the decision to reduce their store footprint. The reduction in retail stores could see further opportunities for commercial property investors in the warehousing sector, as businesses start to increase their online services. In the agriculture sector, the demand for rural properties didn’t waver throughout August, despite ongoing drought conditions. Reasonable commodity prices, particularly in the sheep market, seemed to lift the rural property market sentiment. Some purchasers were still showing hesitation, with limited cash flow from their existing holdings and little to no stock feed for additional properties.

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Choosing a Conveyancer or Solicitor for your investment property

BMT team — Mon, 26 Nov 2018 04:25:19 +0000

Conveyancing is the legal term for transferring ownership of a property. Whether you’re buying or selling a property this is completed by either a Conveyancer or a Solicitor. These experts handle all the legal aspects of buying or selling a property for you. Good ones will keep you updated regularly and support you in what can sometimes be a stressful process. The first question you might be asked when you put in an offer on a property is the name and contact details of your preferred Solicitor or licensed Conveyancer. A typical conveyancing transaction generally consists of three stages: pre-contract pre-completion post-completion In this article we will answer: What do Solicitors and licensed Conveyancers do? Is this why there is a difference in their fees? When should I hire a Conveyancer or Solicitor? How do I make sure I choose someone suitable? Questions to help you choose a prospective Conveyancer or Solicitor What do Solicitors and licensed Conveyancers do? Conveyancers have detailed knowledge in one area of law; property law. Solicitors have detailed knowledge about property law, but they also have a broader knowledge of the law in general. This means that a Solicitor can advise their client not only on all aspects of a conveyance, but also on issues that might relate to the conveyance such as the tax implications of a property transaction, or how the sale of a house might impact their client’s divorce proceedings. This difference in knowledge and experience is what commonly creates a price difference between Conveyancers and Solicitors. Is this why there is a difference in their fees? The main reason people hire a Conveyancer over a Solicitor is because they are often the cheaper option. Conveyancers can usually be hired for around $500-$600 plus disbursements, whereas a Solicitor may charge $1,000-$1,100 plus disbursements. Disbursements are generally outgoings and incidentals to cover certain processes that the Conveyancer/Solicitor will have paid for on your behalf and may include various searches related to title, land tax, planning, council and water rates. Hiring a Conveyancer may be more suitable when the property value is low, the budget is tight or the transaction simple and straightforward. Don’t forget that Conveyancers often have to take on a lot of clients in order to offer a lower price and make a profit. So, you may not get the same level of service that you would from a Solicitor. When should I hire a Conveyancer or Solicitor? Whether you choose to hire a Conveyancer or a Solicitor, it’s important to hire them at the outset of your transaction. If you’re selling your property, you need to hire someone when you’ve decided to sell as it can take some time to draft the Contract of Sale and prepare the Vendor’s Statement. If you’re buying a property, hiring someone before you sign any paperwork is always preferable. Before bidding or making an offer to buy a house it’s advisable that your Conveyancer or Solicitor reviews the Contract of Sale so they can point out any intricacies about the property and negotiate on your behalf for contract terms that would be favourable to you. How do I make sure I choose someone suitable? Just as you would interview prospective Real Estate Agents, you should sit down and talk to multiple Conveyancers and Solicitors before selecting one to oversee your settlement process. A good place to start is by asking your friends and family if they can recommend a good Conveyancer or Solicitor. If nothing comes from this, do some online research and ask for recommendations from your Real Estate Agent, Accountant and Lawyer. Give them a call and ask a few questions to find one that meets your needs. Some Conveyancers and Solicitors specialise in different types of real estate, which should help narrow your search. Questions to help you choose a prospective Conveyancer or Solicitor: Are you a member of the Australian Institute of Conveyancers? What types of property do you specialise in? How much will their fees and charges cost? What will I have to pay at settlement? What government fees and charges will I need to pay? How will you communicate with me and how often? How long will everything take on settlement day? (This is important if you are arranging movers and other parties) Remember, your Conveyancer or Solicitor plays an important role in the purchase of your property, so be sure to choose someone you feel comfortable with and remember, cheapest isn’t necessarily best. Read more articles about choosing experts to help you on your property investment journey: 9 experts you should have on your investment team How do I choose a Real Estate Agent? Why choose a depreciation expert?

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What’s the best way to buy a house at auction?

BMT team — Wed, 14 Nov 2018 04:57:19 +0000

While auctions are somewhat unpredictable, it’s nevertheless important to be prepared to avoid overbidding in the heat of the moment. Auctions are typically high-pressure environments where clever auctioneers use techniques to encourage big spending. To help you land your desired property at a price you’re comfortable with, here is our advice on the best way to bid at auction. Do your research If you’ve never experienced an auction before, it’s a good idea to try to attend a few to get the feel for them before you plan to bid. There are certain protocols specific to auctions and you will feel much more comfortable if you already know what to expect. During the research stage, carefully review the contract and ensure your finance is in order so you can write a deposit cheque on the day. Ensure you have researched the price of similar properties in the area and set yourself a maximum price that you would be comfortable with paying, taking depreciation deductions into consideration. Depreciation makes owning an investment property much more affordable. Use the BMT Tax Depreciation Calculator to see the likely deductions claimable on the property before deciding on your walk-away price. It’s a good idea to take advantage of PropCalc, an innovative tool which calculates the real costs of owning an investment property based on its specifications. You can also find investor case studies on our website for various property types and price points to show you how depreciation improves investors’ cash flow in different scenarios. Slow the pace on auction day Auctioneers want their auctions to remain at a fast pace to increase the sense of urgency, putting pressure on bidders to place bids. In these situations, it can be easy to bid higher than you had planned to in order to avoid missing out on the property. Slowing the pace of the auction will disrupt the auction’s momentum and give you a fraction more time to consider your bids. A technique used the slow the pace of an auction is to bid in odd increments. Auctioneers try to increase bids in even increments as they are simple to calculate and allow auctioneers to retain the auction’s speed. Bidding in odd increments will cause the auctioneer to slow the pace and subsequently, take the pressure off bidders to place urgent bids. Keep watch As important as it is to show your competition you mean business by standing tall and confidently placing bids, it is equally important to watch your rival bidders’ body language. If rivals are chatting amongst themselves or hesitating, it’s a good sign your competition are reaching their upper limit. Try to counterbid quickly and confidently to show your competition that you are prepared to top whatever they throw at the auctioneer. Read some of our recent blog posts: Shining the investor spotlight on Flemington, VIC Property market update – October 2018 Depreciation incentives lure savvy property investors to The Block 2018 auctions Image Source: Collins Home Loans

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How to double the power of your deposit

Simon Pressley — Wed, 27 Jun 2018 04:31:43 +0000

In modern Australia, the housing affordability musings attract more newspaper column inches than a royal wedding. For most, the biggest challenge isn’t being able to afford the mortgage repayments – it’s putting together a deposit for the purchase. Let’s face it, if you’re trying to save a ten to twenty per cent deposit to buy a median-priced house ($1,033,892) or apartment ($878,325) in Sydney, you’ve got your work cut out for you. But for those who reside beyond the Harbour City or for those prepared to explore the increasingly popular rentvesting strategy, the opportunity to purchase a piece of Oz is there for those with an open mind. Property Investment Professionals of Australia (PIPA) recently pointed out that a detailed study of mortgages and incomes shows the average loan is more easily serviced now than it was thirty years ago. The problem isn’t affordability per se – Australia is littered with locations offering affordable housing – but rather accessibility, because the hurdle is putting together a deposit rather than paying back the lender. There’s a narrow, inaccurate and slightly offensive assumption by the broader media and political landscape that “the Australian property market” is a proxy term for Sydney real estate. Last time I checked, Sydney was a city, not a country! If you’re willing to break free of that misnomer, I can show you how to double the power of your deposit. Mindset The first important step in understanding the solution is to remember Australia consists of 10 million dwellings that are spread across 550 local councils, and the vast majority provide affordable real estate options to potential buyers. With our realistic view of Australia’s whole market now firmly front of mind, let’s run the figures and see how you can power up your savings and get into a property. According to the Australian Bureau of Statistics (ABS), Australia’s capital city average median dwelling price was $686,700 as at December 2017. A buyer would therefore need $68,700 for a 10 per cent deposit. Adopting the national median rent of $435 per week, the annual holding cost (after rent) on a typical property worth $686,700 with a 10 per cent deposit would be $13,100 per year – that’s before taxation or negative gearing benefits. This cash flow calculation assumes receipt of rental income for forty-eight weeks of the year, interest expenses calculated at 4.5 per cent, and other standard holding costs (property management fees, council rates, insurance, and $500 for general maintenance). The solution to double your deposit The simplest way to double your deposit is to buy a property that’s priced at half the capital city average dwelling price. That’s right – instead of laying down $70,000 as a deposit for a purchase of almost $700,000, try broadening your mind and seeking areas where a house price closer to $350,000 is the norm. Remember – the phrases ‘more expensive property’ and ‘capital city location’ don’t automatically translate into ‘better capital growth potential’. If you doubt this, ask yourself why property markets in Sydney and Melbourne both declining right now while Hobart is booming and parts of regional Australia are strengthening nicely. Buying an investment property worth $343,500 (half the capital city average house price) using your $68,700 deposit means you’ve fronted up 20 per cent straight away. The annual holding costs will now be significantly less at $850 per year, because you’re only borrowing 80 per cent from the lender. If saving up a deposit of $68,700 is too steep, how about halving your goal to $34,350 and using it as a 10 per cent deposit on a $343,500 purchase? The annual holding costs would be a very manageable $2,400. And, if you’ve purchased in a location with all the fundamentals in place for great long-term growth, the asset is working for you straight away. This means you’re in the market and enjoying the benefits sooner. The key takeaway from all this is that you shouldn’t stand back and struggle waiting to save up a deposit for an expensive property that will be more difficult to service and has no more, if not less, potential for capital gains than some non-Sydney investments. Instead, lower your buy in, look for smart locations and start reaping rewards sooner.

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Is Australia’s apartment love affair like The Bachelor?

Simon Pressley — Mon, 21 May 2018 06:05:25 +0000

There’s an interesting relationship unfolding between the supply and demand of property markets in Australia’s biggest cities. I use the term ‘relationship’ loosely because what I’m referring to is about as scientific as that (un) reality TV show, The Bachelor. As we’ve seen over and over (make that ‘my wife has seen’ – I don’t watch the show), simply placing an attractive man and an attractive woman in a romantic hideaway is absolutely no guarantee that they’ll be compatible. It’s not that dissimilar in Australian property markets at the moment. It seems that developers and city councils are concocting their own version of The Bachelor. The plot goes something like this ‘… our population is growing, they all need to live somewhere, we’ll whack up as many high rises as we can, they’ll buy whatever we build.” They’ll all live happily ever after. Apparently! In Propertyology’s opinion, the enormous increase in the ratio of apartments to total new dwellings built in Melbourne, Canberra, Brisbane, and Darwin raises a big question mark over how these values might perform over the next decade. It’s one thing to question whether the total volume of new dwelling supply is equal to, above or below what is required to accommodate the increased population in different locations. It’s a completely different thing to evaluate whether what has been built is what the public actually want. There will always be an emotional connection between human beings, the style of dwelling that each household desires, and which part of town they want to live in. Developers don’t determine that, buyers do! According to official data, roughly 50 per cent of capital city households are families with children and, if anything, the average number of people living within each household is increasing. But for some inexplicable reason, the proportion of apartments to detached dwellings is increasing from three out of ten to almost one for one; in some cases, even higher. There’s no question that demand for apartments in Australia’s biggest cities is increasing however, the rate of apartment construction is occurring far too fast to be tested by those who they are being built for – the Australian public. For generations subsequent to the arrival of the First Fleet at Botany Bay in 1788, detached houses were the only style of dwelling built. Fast forward to 2016 (the last Census) and 43 per cent of Greater-Sydney’s 1,855,734 total dwelling stock were apartments and townhouses. And since the 2000 Sydney Olympic Games, six and a half out of every ten new dwellings approved were apartments. Evolution! Five consecutive years of record volumes of new (overall) supply may very well result in Sydney dwelling prices declining over these next couple of years. However, at least public demand for apartment living has been well and truly tested. Melbourne is a completely different story. The 2016 Census confirmed that 32 per cent of Greater-Melbourne’s total dwelling stock of 1,832,043 were apartments and townhouses. That’s quickly changing with the volume of apartments constructed over the last five years being three times higher than the long-range average. We already know about Melbourne’s population growth being phenomenal. We also know that supply of new dwellings has been at record high volumes for several years. But it seems that Melbourne developers and city councils have just rushed in and decided that they’ll marry the two together by assuming everyone has the same personality. From the start of 1985 to the end of 2017, Victoria’s average quarterly dwelling completions consisted of 7,281 houses and 2,711 apartments (9,992 total dwellings per quarter). In other words, for every ten dwellings completed, only 2.7 were apartments. From June 2012 to December 2017 (the largest residential construction boom in Australian history), the total quarterly volume of dwellings completed in Victoria increased significantly to 14,203. Detached houses represented 7,880 (much the same as the 33-year average) while 6,323 were apartments. For every new house built in Melbourne there’s now just shy of one new apartment built as well. The courting period for Melbourne’s growing population and the style of digs that they prefer to live in has not been long enough. While it’s clear that the property sector has a love affair with building apartments, the odds of a perfect match with the public is as scientific as The Bachelor. In contrast, Sydney dwelling completions during the five year residential construction boom produced a ratio of apartments to houses of slightly more than one (51.7 per cent). But the important difference is that Sydney is an extremely mature apartment market. Its relationship has been tested whereas Melbourne’s hasn’t. Melbourne’s median dwelling values have been consistently declining since January 2018; the large volume of supply of total dwellings has certainly played a part in this. But it’s the sudden structural change in dwelling style that Propertyology questions. 68 per cent of new dwellings completed in Canberra over the last five years were apartments and townhouses. And there’s more in the pipeline with 78 per cent of dwelling approvals over the last three years being for attached dwellings. That’s quite a step up from the 48 per cent three decade average. The proportion of attached dwellings completed in Brisbane (from 31.9 per cent to 42 per cent) and Darwin (41.7 per cent to 51.7 per cent) has also increased significantly. At the other end of the spectrum, only 15 per cent of Hobart’s dwellings are apartments and townhouses. Sure, apartments provide an affordable option for living closer to town. But suggesting that everyone wants to live in an apartment close to town is akin to only inviting six-foot tall brunettes on The Bachelor. Buying a property is the largest financial decision that most people ever make. People want to live in what they want to live in. It’s foolish to expect that thousands of people will fork out $600,000 plus on one asset that they’re not happy with. Maybe they’ll continue to rent. Maybe they’ll completely relocate to a different city where they […]

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Your seasonal guide to buying and selling

BMT team — Fri, 13 Apr 2018 02:05:12 +0000

If you’re planning to buy or sell a property, you’re bound to get advice from friends, family or acquaintances on the best time of year to do so. “Don’t try and sell in winter, the market is too quiet then.” “You be best waiting until spring selling season to buy.” While such advice is well-meaning and not completely inaccurate, there are a myriad of factors that come into play for a successful home purchase or sale. It’s important to look at the bigger picture and consider trends in the market at certain times of year, and how this may aid or hinder you in your mission to buy or sell. As such, here is a seasonal guide to buying and selling to give you an overview of what generally happens in the real estate market year-round. Summer There are some major advantages to selling in summer: The extra lighting will usually improve the look and feel of a home Buyers may have more time for house hunting if they have some time off work over the summer The garden generally looks more inviting and well-kept at this time of year This is traditionally the time of year when people are relocating for new work opportunities, education or other life changes that typically happen around the new year, so you may have a larger pool of people looking to buy. On the other hand, there are a few downsides to a summer sale that you’ll need to consider: If it’s very hot, this can make inspections unpleasant, especially if your home traps a lot of heat or gets a lot of direct sunlight Prospective buyers may be away on summer holidays and you’ll have to allow for public holidays, including Christmas and New Year, which may slow proceedings down a bit If you’re buying you may also face this delay and Whether you’re buying or selling, you may find this a more stressful time if you’re looking for a home while preparing for Christmas and if you’re relying on selling your home before the new year. You’ll also face a move in the summer heat. Insider tip: If selling and holding an open house on a hot summer day, make your home pleasant and cool with air conditioning and consider having refreshments on hand for house hunters. Autumn Despite the common belief that spring is the best time to buy, research has found that autumn is actually the busiest time for the property market, based on the number of sales by month and season over the past thirty years. For both buyers and sellers, this may mean increased competition from other house hunters and sellers, but more options on the table for buyers. For sellers, this competition may mean a higher selling price. The weather at this time of year also makes for more pleasant house hunting and moving. Winter Typically the quietest time of year in the real estate market, Winter can actually bring some good opportunities for both buyers and sellers. For sellers, there are typically less other properties on the market, meaning less competition from other sellers. If your house is west-facing, it may be a good opportunity to showcase the great winter sunlight your house receives. However, this time of year can make issues such as mould, leaks, bad lighting and a dying garden more apparent. For buyers in a quiet market, there may be more room for negotiations and a lower selling price, if there are not many other interested buyers. Insider tip: When holding open houses in winter, aim to make your home warm and inviting and a place house hunters want to stay for a while and have a proper look around, rather than rush out immediately because it’s so cold. If you’re a buyer, pay particular attention to the potential issues mentioned above such as mould and leaks. Spring Like clockwork each year as the weather starts to heat up after a long, cold winter, so too does the property market. As it’s commonly known, Spring selling season provides some great opportunities for buyers. There are more properties on the market which means more choice and the greater chance of finding your dream home or a suitable investment. But it does mean more competition from other buyers which may reduce the chance of negotiating a lower price. If anything, the seller may be able to negotiate a higher sale price for themselves if they have more interested buyers. While autumn may typically have the most sales, it doesn’t stop home buyers from believing the hype and turning out in droves to spring time open homes. Sellers should pay particular attention to how they present their properties at this time of year, to make sure it is up to scratch with all the others on the market. The verdict From reviewing these trends, it may seem that certain seasons may provide an advantage or disadvantage for both buyers and sellers. However, it is important to be aware that the season or time of year will not solely determine a successful purchase or sale. There are so many other factors to consider including interest rates, location, the state of the property, price, demographics and any repairs required. However, if you take all of these factors into account it is possible to negotiate a successful purchase or sale all year round, and you shouldn’t let the seasons dictate your movements too much.

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The seven steps in obtaining a mortgage

BMT team — Tue, 14 Nov 2017 01:00:18 +0000

For most, getting a mortgage goes hand in hand with buying a home. But you just have to look at the number of products and lenders in the market to know that obtaining a mortgage is not always a simple task. While mortgages vary between lenders and based on individual circumstances, there are seven basic steps in obtaining a mortgage. Here we outline these steps and considerations to help you on your way. 1. Determine your budget First things first, you need to sit down and carefully map out your budget. Consider income versus expenditure and account for everything, including any regular fees or payments, additional forms of revenue and any shares or assets you hold in addition to everyday expenses. When you have carefully calculated your monthly or weekly budget, you should know exactly how much you will be able to put towards loan repayments. Don’t just consider how much you can afford now, but over the life of the loan should your circumstances change. For instance, if you or your partner takes time off work to raise a child, will you still be able to cover your mortgage repayments with this reduction in income? You should also factor in the other costs of buying a property when making your budget. These include stamp duty, legal fees, insurance and other associated costs, which can add up to approximately five per cent of the home’s sale price. Remember to account for the cost of the deposit and Lender’s Mortgage Insurance (LMI), which will be an additional ongoing cost should you require it. LMI is a requirement from most banks if your loan is greater than eighty per cent of the property’s price (i.e., you don’t have enough for a twenty per cent deposit). 2. What type of loan do you want? Mortgage type and features Next you must decide what kind of loan you want. Whether it’s a fixed rate loan, a variable loan, principle and interest, interest only or a combination of fixed and variable, whichever you choose should best suit your own individual circumstances. You must also consider what type of features you want in a home loan, such as redraw facilities, a 100 per cent offset account or free additional payments, as this may direct you to a certain type of loan and help inform your decision. 3. Choose a lender Once you have an idea of what you can afford and what type of loan you want, you need to shop around and do some research. When you consider the thousands of products on the market from a variety of lenders, it’s easy to see how this is can be a time consuming process. However you should make sure you shop around to compare and get the best deal. If this is a little overwhelming, you can always enlist the help of a Mortgage Broker who will do this comparison and find you a suitable product and lender. Either way, pay attention to the interest rate being offered (that’s the big one) as well as any other features such as zero establishment fees or frequent flier points. 4. Submit your application Once you’ve found a lender you want to go with, you’ll need to submit your application and attend an interview. You’ll be required to supply relevant documentation such as ID, bank statements and proof on income. From here the bank will assess your situation and decide whether you are a suitable candidate and meet their criteria. This criteria generally includes proof of stable employment and income, your ability to meet loan repayments and your real savings. For example, most lenders like to see that you have at least five per cent of a home’s value in real savings in your account, as this shows you have the ability to save and manage your money. 5. Mortgage pre-approval If this bank is satisfied you’re a suitable candidate, they will issue you with a certificate of pre-approval. This basically states that you have been approved for a loan when you do find a home (often subject to valuation). They will state what the amount is that you’ve been approved for, so you know the price point you need to be looking at in your property hunt. A pre-approval certificate is usually valid for a certain period of time, usually six to twelve months. If you’re getting close to or at the end of this period, you may need to re-apply or request an extension. 6. Get house hunting Now that you’re been given the green light from the bank and know how much you can spend, the search for your dream property begins. It helps to research the average prices in different suburbs – with the amount you’ve been approved for in mind – so you know which areas will be suitable to look in. 7. The buying process and finalising the loan While the buying process itself can be complex and time consuming, here we’ll stick to the process in relation to your mortgage. Once you’ve found the house you want and have made an offer, you need to contact your chosen bank to finalise the loan. This is why getting pre-approval is a better idea than finding a property you want first and then applying for a loan. If you’ve already been approved, you don’t have to wait around while the bank reviews your situation and potentially miss out on your dream home. Once the loan has been finalised and the property settles, it’s all yours! And you have decades of mortgage repayments to look forward to. As always, it can help to speak to a financial advisor when dealing with money matters, especially if you’re purchasing a property as an investment.

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