Capital city housing values update

 

According to RP Data-Rismark’s Hedonic Home Value Index, capital city dwelling values in Australia rose by 1.6 per cent over the last three months – however, during the traditionally quieter month of August, value growth flat lined. 

Seven of Australia's eight capital cities registered capital gains over the last three months with the exception being Adelaide.

According to RP Data research director Tim Lawless, Sydney is proving to be one of the most consistent performing capitals this year: 

"Sydney dwelling values have increased over five of the past eight months providing a cumulative capital gain of 1.9 per cent over the year to date. Canberra (+1.4 per cent), Hobart (+3.9 per cent) and Darwin (+8.4 per cent) have also yielded owners capital gains over the first eight months of 2012." 

"In contrast, other capitals, like Adelaide (-1.3 per cent), Brisbane (-1.4 per cent), Perth (-2.5 per cent) and Melbourne (-2.6 per cent), have recorded tougher conditions this year." 

"In May 2012, Melbourne home values were down 5.1 per cent in just the first five months of the year. However, the bounce in the period since the RBA's May and June rate cuts has helped Melbourne values claw-back about half of these losses to be off a more palatable -2.6 per cent," Mr Lawless said. 

Highlighting the improved affordability over the past quarter, Mr Lawless points out that almost every capital city has recorded capital gains over the last three months:

"Improved affordability since June has helped dwelling values rise across every capital city over the three months ending August 2012, apart from Adelaide. The big question is, 'can this growth be sustained?' On the one hand, winter is seasonally slow, so these results have been encouraging."

For more information about the residential property market in your area of interest, please contact your local CENTURY 21 Real Estate office for expert, clear advice.

 

Property Investment and self managed super funds

 

Self managed superannuation funds (SMSFs) are becoming an increasingly popular option for individuals looking to increase their retirement funds and to branch out into new forms of investment. In light of recent changes to the laws surrounding SMSFs, I’ve decided to share the following article by EBM Insurance, which appeared in the September edition of CENTURY 21 Wentworth’s Property Investor. 

Property - potentially a "super" investment

The taxman has clarified previously-confusing rules on renovating and improving investment property within self-managed superannuation. 

Combined with share market volatility, the Australian Tax Office ruling SMSFR 2012/1 could potentially boost the numbers of people borrowing within self-managed super funds to buy residential investment property. 

According to the ruling: 

- Cosmetic renovation, such as retiling, can be done as a "repair" under super law, even though it can't under income tax rules - and can be done within super using borrowed money.

- Improvements to a property, such as moving internal walls, are allowed if the "fundamental character" of the asset does not change - but can only be done using non-borrowed money. 

- Improvements which fundamentally change the nature of the asset, such as turning a single dwelling into a duplex, are not allowed if there is still a loan on the property. 

General Manager of RentCover, Sharon Fox-Slater, said that the recent decision is just one of many that apply to self-managed super, the rules for which are complex - so it's crucial to obtain professional advice before signing any contract, let alone paying a deposit. 

She added that it is important to have landlord insurance regardless of whether the property is held within a self-managed fund or separately - and that regular landlord insurance is suitable for property held within super. 

Some of the chief advantages of buying property within self-managed super include: 

- Access to an investment type seldom held by retail super funds. 

- The ability to use leverage (borrowed money) to buy an asset. 

- The ability to use salary-sacrificed, pre-tax dollars to pay off the loan. 

- The SMSF pays a maximum of 15 per cent tax on the rental income. 

- Personal control via the ability to select your own asset. 

- Capital gains tax savings if the property is sold, and 

- "Non-recourse lending", which means that the bank can't seize other assets to repay the loan in the event of a default. 

Some of the disadvantages include: 

- The performance of a single asset potentially dominating your retirement future. 

- Administration and compliance headaches and costs. 

- All the risks that normally apply to any property investment such as the market falling or poor property selection. 

- Banks require a bigger deposit, typically only lending 75 per cent of purchase price. 

- Bigger bank fees, and 

- The risk members might need to kick in extra money if cash flow is insufficient. 

For more information about EMB’s range of insurance products please visit www.ebminsurance.com.au. 

 

Rate cut good news for borrowers

 

At its monthly meeting in Sydney, the Reserve Bank of Australia elected to reduce the official cash rate by twenty-five basis points to 3.25 per cent. This decision was welcomed by CENTURY 21 and we expect that it will help to further stimulate the national residential property market at a time when the national market is already showing signs of recovery. 

Following three consecutive rate holds, the Reserve Bank’s latest decision brings official interest rates to their lowest level in three years.

Charles Tarbey, Chairman of CENTURY 21 Australasia, said that the decision should provide relief for many home owners with mortgages and further encourage would-be purchasers to enter the housing market – should the banks pass on the savings.”

The Reserve Bank cited Australia’s softening labour market and high exchange rate, as well as weakening global economic growth and a sooner than expected end to the resource investment boom as key reasons behind the decision.

“The Board judged that, on the back of international developments, the growth outlook for next year looked a little weaker, while inflation was expected to be consistent with the target,” said RBA Governor Glenn Stevens in his official statement following the decision. 

“The Board therefore decided that it was appropriate for the stance of monetary policy to be a little more accommodative.”

The Reserve Bank’s decision comes off the back of recently released RP Data-Rismark figures showing that capital city dwelling values rose by 1.4 per cent over September – the largest month-on-month increase capital city property markets have recorded in more than two-and-a-half years.

The Reserve Bank will no doubt be keeping a close eye on how the major banks respond to its latest move. The big four banks – Westpac, Commonwealth Bank, ANZ Banking Group and  National Australia Bank – have yet to reduce their lending rates.

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert, clear advice. Additionally, if you would like to speak to a mortgage professional about the impact of this rate cut on your mortgage, or to find out more about suitable loan packages for your circumstances, please contact CENTURY 21 Home Loans.