Soft home value results over April

According to the recently released RP Data-Rismark May 2012 Home Value Index, capital city dwelling values were down -0.8 per cent in the month of April following the stability witnessed over the first quarter of 2012, leaving national home values down -0.7 per cent year to date. 

Property values across the combined capital cities of Australia showed renewed softness in the latter half of April with dwelling values falling by -0.8 per cent after a stable first quarter.  Over the three months ending April 30 the RP Data-Rismark Index has seen values rise by 0.3 per cent.  On a year to date basis, dwelling values are now down -0.7 per cent. 

Values were down across five of the eight capital cities over the month of April, with Hobart (-2.9 per cent), Melbourne (-1.7 per cent) and Brisbane (-1.3 per cent) recording the largest falls. 

According to RP Data’s research director, Tim Lawless, the housing market gains seen throughout February and March, which delivered a flat first quarter result, have now been mostly offset by the -0.8 per cent fall over the month of April. 

Tim Lawless went on to say that segmenting the housing market performance by price point shows that the premium housing market remains the weakest across broad price brackets. 

However while April saw values reduce across most capital cities, rents continued to show modest improvements.  According to Tim Lawless, at the combined capital city level, the weekly rent on a detached house is up by 4.1 per cent over the year to April and unit rents are up by 3.7 per cent. 

For more detailed information about dwelling values and rents in your suburbs of interest, please feel free to contact your local CENTURY 21 real estate office to speak to a property professional for expert, clear advice.  

Have you considered a property manager for your investment?

With reductions to interest rates, subdued value growth and an array of attractive residential real estate purchase opportunities available, current conditions are certainly looking favourable for property investors.  What many investors may not understand however is that the investment process doesn’t necessarily stop once a purchase is made – a property must be effectively tenanted and maintained for your return to be maximised. 

For many busy investors, the most cost effective and time efficient way to manage a property is to use a professional property manager.  An expert manager will be able to manage all aspects of your investment – from ensuring it is occupied by high quality tenants to property maintenance and making sure that you and your property abide by legal requirements. 

Securing good tenants is important for investors.  A property manager will have the ability to find appropriate tenants and then determine whether or not they are suitable through proven screening systems and personal experience.  It is important to get tenanting right - high tenant turnover and vacant days tend to be expensive and can reduce your return on investment. 

Setting a market appropriate rental price is also a very important aspect of maximising your investment returns.  Property managers have the experience and market data necessary to manage the increase process – without driving tenants away. 

Another element for investors to consider is that investment properties require tenant inspections and the management of ongoing property maintenance issues as they arise.  Not only can these activities be time-consuming if you decide to take them on yourself, they can also be expensive.  Property managers have networks of contacts with which relationships have been established over time, the same as you will have in your own profession.  These contractors will often charge the manager less for repairs needed than if you as an owner were to select them out of the phone book.    

The process of renting out a property comes with a vast array of evolving legal requirements, covering subjects ranging from when rent is considered overdue to the use of double sided deadbolts on doors and smoke alarms.  These laws can be quite complex and are often followed by inconvenient (and potentially expensive) consequences if not followed properly.  As property managers deal with rental properties every day, they are well-versed with the legal requirements and can assure you remain abreast of your obligations. 

 As can be seen, renting out and managing a property can be a fairly complex process, particularly if it is not your field of expertise.  As such, many investors often find that the value of using an experienced professional property manager can outweigh the costs of doing so. 

For any further information regarding property management services or for attractive investment properties available for sale in your area, please don’t hesitate to contact your local CENTURY 21 office. 

Claiming depreciation deductions on your own home

In difficult economic times, many property owners with spare rooms in their homes may be able to generate additional income by renting these unneeded rooms out to tenants (where appropriate), including family members and friends.  

For those readers to whom this option might be of interest, I thought I would share the following piece provided by BMT Tax Depreciation.  It is an excerpt of an article which appeared in the April 2012 issue of CENTURY 21’s Property Investor.  

In the current economic climate, more and more home owners are renting out rooms within their properties to generate extra cash.  This strategy can be quite lucrative, especially when considering the extra tax deductions that become available.  Even when family members pay rent, by declaring the rental income in a tax return, a portion of the expenses and depreciation may be claimed as a deduction.  BMT Tax Depreciation is dedicated to helping home owners maximise their property depreciation deductions and improving their cash return.

The Australian Taxation Office (ATO) has a preferred method of calculating the proportion of expenses that can be claimed as a deduction under the Taxation Ruling Number IT 2167.  This ruling sets out the ATO’s general approach of apportionment based upon floor areas.  The ruling states that it is appropriate to add the floor area where the tenant has sole occupancy of up to 50 per cent to the general living area the tenant shares equally with the owner/occupier.  It is necessary to only include general living areas the tenant has access to.  

A portion of relevant property deductions can be claimed by the owner including property depreciation, which is a deduction available for the wear and tear on the fixtures, fittings and structure of a building.  A portion of other expenses such as insurance, rates and the interest payments made on the mortgage of a property may also be claimed.  

(Please visit the original article in Property Investor for an example of an owner-occupied house with two bedrooms generating income for the owner, showing the tax deductions available and the resulting improvements to the owner’s cash flow.)  

When renting a room out in an owner-occupied property, it is important to obtain a property depreciation report from a specialist Quantity Surveyor such as BMT Tax Depreciation.  This will ensure the tax deductions are maximised.  It is also important to discuss the options available with an accountant.  When a home is changed into a partial investment property, some Capital Gains Tax (CGT) may be triggered if the property is later sold.  However, there are scenarios which may reduce or create a total CGT exemption depending on the property’s first use, how long the property was lived in, how long it is income producing and if the owner purchases another home.  

For more information on BMT Tax Depreciation’s Australia-wide services, please contact 1300 728 726.