Budget breakdown: implications for property buyers and sellers

How will 2018’s Budget affect the national property market? For buyers and sellers alike, we take a look at what you need to know.
The 2017 Budget had a strong focus on housing supply and affordability. This year, housing took a back seat with no new, direct
measures for first homebuyers or renters. However, some of the changes will likely have an indirect effect on both the residential and commercial sectors.
Stable interest rates
Homebuyers can take comfort from the fact that the Budget isn’t likely to put immediate pressure on interest rates. President of the Real Estate Institute of Australia Malcolm Gunning says: “This expected interest rate stability comes at a time when housing prices in some of our major cities are showing signs of easing, leading to improved affordability for first homebuyers.”1
No change to negative gearing
The government’s decision to leave negative gearing alone brought sighs of relief from the real estate and development industries.
Gunning described this as an ideal outcome for the housing market1, considering the stringent changes introduced last year to quell investor demand.
“[It was] pleasing to see that the government recognises the important role the current taxation arrangements for negative gearing
and capital gains tax play in increasing supply, keeping rents affordable and easing the burden on social housing by leaving these unchanged,” he said.
More land for home building
The budget did commit to establishing a $1 billion National Housing Finance and Investment Corporation and to release more land suitable for housing.2
As well as unlocking some Commonwealth land for development, the government has taken steps to discourage investors from holding on to land3 that could be used for new homes. From July 2019, investors will no longer be able to claim expenses such as council rates and maintenance costs for vacant land that could be used for housing or other development. The aim is to reduce so-called ‘land banking’, a process that allows investors to hold on to land in the hope that its value will rise while simultaneously enjoying tax benefits granted on the basis that the land would be used for homes or commercial buildings. Under the new rules, the deductions will only apply once a property has been constructed on the land and is available for rent.
Easier access to cheaper housing
Housing is cheaper outside the major cities but lack of access can make it an unrealistic option, particularly for those who work in commercial centres. The government’s allocation of billions of dollars in transport infrastructure upgrades4 could help resolve this problem over the longer term.
Projects designed to attract homebuyers into less expensive areas include upgrades to roads on the Gold Coast, the North South Rail Link in Western Sydney, the Melbourne Airport Rail Link and continuing upgrades to the Bruce Highway in Queensland. Nationally, there are also plans to reduce the congestion5 that can make a daily commute from the suburbs so frustrating.
Helping Australians age at home
In last year’s Budget, the government introduced the Downsizer Contribution so that, from July 1 this year, homeowners over 65 will be able to invest up to $300,000 from the proceeds of the sale of their family home into their superannuation fund6. Along with a higher income in retirement, the move could also be seen as encouragement for singles and couples to sell, freeing up more family homes. There was some speculation that in this year’s Budget the government would use changes to capital gains charges for sellers as further motivation to downsize but, instead, it introduced a measure designed to help retirees stay where they are6.
Now every homeowner over the age of 65 has the option of taking out a reverse mortgage worth up to $11,799 a year for the rest of their lives. A reverse mortgage is effectively a loan that allows homeowners to access the equity they have built up in their home without selling their property. The loan is usually repaid when the house is eventually sold and there are limits in place to prevent people from owing more than their property is worth.

More information
If you’re thinking about buying, selling or taking out a reverse mortgage in 2018 or 2019, you might want to talk to your mortgage
broker about the recent Budget and how it could affect you personally.

Sources:
1 https://reia.asn.au/wp-content/uploads/2018/05/Media-
Release-8-May-2018-Budget-2018.pdf
2 www.realestate.com.au/news/budget-to-rein-in-propertyprices-
with-measures-to-increase-housing-supply/
3 https://budget.gov.au/2018-19/content/bp2/download/
bp2_combined.pdf
4 http://minister.infrastructure.gov.au/mcveigh/releases/2018/
may/budget-infra_01-2018.aspx
5 www.ato.gov.au/Individuals/Super/Super-housing-measures/
Downsizing-contributions-into-superannuation/
6 www.australianageingagenda.com.au/2018/05/10/budgettreasurer-
expands-governments-reverse-mortgage-schemeto-
full-pensioners/

HTW Month In Review Nov 2015

Highlights For The Melbourne Property Market This Month

– Investors are very active in Melbourne’s eastern suburbs, in particular Overseas Buyers in Glen Waverley. Typically due to Glen Waverley Secondary College’s academic reputation among the local and Chinese communities and the practicality of being near a major transport hub and shopping centre.
– Melbourne CBD town planners have approved the construction of over 20,000 apartments within the next 4 years compared to approximately 5,500 in Sydney’s inner city over the same future period
– The Melbourne unit market remains strong for Investors and the residential investment market is predicted to become stronger and is only at the early stages of growth
– Despite this, the RBA has concerns and HTW view the risk of a downturn in the Melbourne unit market as high with the potential problem of an oversupply of units within the CBD and inner city areas
– The mid-south eastern and Bayside regions appear to be attractive for investors who are fairly active and purchasing detached houses, townhouses, units and apartments
– The outer south east regions appear to be mainly attractive to first home buyers and families with
medium household income. Investors are much less active in these regions
Thanks to team Alphabroker www.alphabroker.com.au

HTW Month In Review October 2015

HTW’s Theme for the month for  October – Smokin’ hot price points….

Here are some of the highlights from the REVIEW

Lower entry level (Melton) Melton is approximately 35 kilometres west of the Melbourne Central Business District (CBD) and is serviced by a train line that runs to and from the CBD. The suburb is experiencing a significant demand for affordable entry level housing which has driven some growth. Affordability for first home buyers, young families and couples and the attractive record low interest rates are the main drivers in the area for sales of new land and house and land packages by developers.

Melton city’s population growth rate is predicted to be the second fastest growing in Victoria. Demographic research shows that the area is dominated by young families with over 70% of residents being aged less than 45 years old.

In the foreseeable future, Melton’s residential property market is expected to experience growth. This growth appears to be driven by an increase in the area’s population of potential buyers that priced out of the inner suburban Melbourne market and the low interest rates.

According recent Real Estate Institute of Victoria research, the median house price within Melton was $255,000 in June 2015. Below demonstrates a capital gain made possible due to a market movement.

164 Coburns Road, Melton 3-bedroom, 1-bathroom, 112 square metre floor area (no improvements between sale dates). Sold 13 June 2015 for $260,000 Sold 3 April 2014 for $215,000.

Ringwood is an established metropolitan suburb approximately 24 kilometres east of the Melbourne CBD. It consists of a mixture of established residential dwellings on traditional sized residential allotments generally built during the 1950s, 1960s and 1970s. We note that in more recent times, low and medium density unit development is taking place, particularly on the larger allotments and those close to Ringwood central. The area is well serviced by schools, shopping, parks, sports fields, walkways, arterial road access and public transport. The suburb is generally considered to be a mid socio-economic area. A feature of the suburb is the Eastland Regional Shopping Centre and close proximity to Eastlink providing direct access to the Melbourne CBD. The $700,000 to $1 million price sector seems to be running hottest in the Ringwood market for housing at the moment.

Below are some examples of what you can secure in Ringwood within different price brackets. Less than $500,000 will secure a single level conventional style dated brick 1- or 2-bedroom, 1-bathroom unit. $600,000 to $650,000 will secure a single level conventional style circa 1970 albeit fully renovated brick or weatherboard 2- to 3-bedroom, 1-bathroom dwelling on circa 600 to 800 square metres of land. (For example, recent sales include 14 Glencairn Avenue, Ringwood for $600,000 and 3 Margaret Street, Ringwood for $625,000.) Circa $700,000 will secure a single level conventional style original, unrenovated brick or weatherboard 2- or 3-bedroom, 1-bathroom dwelling on circa 700 square metres of land near Eastland Regional Shopping Centre. (For example, 11 Prospect Court, Ringwood sold for $737,000.)

Around $800,000 will secure a two-storey conventional style 1970s albeit fully renovated brick or weatherboard 4-bedroom, 2-bathroom dwelling on circa 590 square metres of land near Eastland Regional Shopping Centre (for example, 16 Prospect Court, Ringwood sold for $810,000).

There are a few factors driving these markets and price points at the moment including:

– Substantial upgrade in nearby infrastructure (i.e. Eastlink, Eastland Regional Shopping Centre, Ringwood Train Station and Bus Terminal);

– Historically low interest rate environment;

– Melbourne’s increasing population; – Substantial foreign investment/purchasing;

– Competition from potential purchasers priced out of adjoining suburbs.

Demand for property in Ringwood can be expected to cause an increase in overall property values for surrounding suburbs in the outer eastern housing market as property prices have increased substantially and buyers are pushed further out.

It is unknown whether the strong performance in Ringwood and its immediate surrounding areas will be sustainable over the coming year.

Recently in the city of Boroondara, new neighbourhood residential zoning has been introduced in accordance with the Neighbourhood Character Study undertaken by the Council. The new zoning restricts subdivision to land over 500 square metres (or 300 metres for NRZ2) and allows a maximum of two dwellings on a lot. The new zoning also restricts the maximum height for dwellings to eight metres.

Median house prices in Balwyn have risen 33% in the past five years due to high demand from foreign investors and also the desire to be in the popular Balwyn High School zone (Source: CoreLogic RP Data). The main price drivers in Balwyn, Balwyn North and Canterbury are:

– School zones, especially Balwyn High School zone

– Close to a number of public transport options

– Chinese and other foreign investors. The Victorian State Revenue Office introduced a 3% duty payable by foreign investors which came into effect on 1 July 2015. The duty has had no discernible impact on foreign investment.

– Record low interest rates

– Affluenza

The future of house prices in Balwyn appears to be unsustainable. Limited supply has resulted in overpriced housing and foreign investment will be curbed in the future, which could cause the market to stall. In the foreseeable future, the Balwyn, Balwyn North and Canterbury prestige residential markets however look likely to remain heated for the next 12 months.

If you haven’t already, you can subscribe to receive this report directly each month for FREE! Simply jump on the HTW website www.htw.com.au and follow the prompts. Thanks to alphabroker www.alphabroker.com.au

5 Common Traits of people with bad money habits

EmptyPocketsImage Source: Uni Campus Rec

Are you ready to examine your spending habits to see if they are harming you financial well-being?

Remember, you can fool other people most of time, but do you really want to fool yourself?  Do you lie awake at night worrying about how you can afford to pay your debts? If you fall in the category of the people described below, you should seriously consider how to change your spending habits.

Using credit cards to pay for expenses when you don’t have the money to pay off the card

Credit cards are such a convenient and easy way to purchase things you want. Do you use your card to make purchases even when you know you don’t have enough money in the bank to make the payment at the end of the month?

Unless you are sure that you can pay of the credit in full at the end of the month, don’t use it. Wait to make your purchase when you have the money in the bank.

Roland Bleyer of Credit World warns about commonly held myths about credit cards.

“Credit card holders will often charge a lot of money on their cards and then take their time paying it off under the false assumption that doing so helps their credit score. According to this logic, as long as the user stays within their spending limit, they are not doing any harm. Unfortunately, the opposite is true” Roland founded Credit World in 2005.

Not keeping track of your budget.

Assuming that you have made a budget, this is a total waste of time if you do not track your expenses against it. If you regularly spend in excess of your budget, you have either not been honest with yourself when you made the budget, or if you have, you need to adjust your spending to keep to it. Certified Financial Planner Jeff Rose advises; “When the month is over, categorize and add up your expenses. Many people overspend on the following categories: 

– Groceries 

– Clothing 

– Entertainment 

– Eating Out

These are categories you should monitor carefully.

Once you know how much you’re spending in your categories, make a few goals. Try lowering how much you’re allowed to spend in your problem categories incrementally, month by month.” Jeff is the CEO of Alliance Wealth Management.

Spending more than you want to earn reward points

Don’t get sucked into buying things you don’t really need just so that you can earn reward points. In this day and age almost every department store and supermarket has its own reward card system. Have you given any thought to how this financed? Are you in fact spending more to cover the costs of the reward you hope to earn? If you don’t need it, don’t buy it.

Leslie Tayne of Tayne Law Group P.C. warns;

“Provided they’re used responsibly, rewards credit cards can be an awesome thing. However, if you find yourself using a credit card just so you can rack up more points, you might be in for a world of trouble. This can be incredibly problematic if you’re trying to follow a strict budget or struggle to keep yourself from splurging on frivolous purchases.” Leslie is a business debt-related attorney and advisor.

Buying on impulse

If you are trying to get ahead with saving for a special purchase then always have a shopping list with you when you go shopping.  TV is constantly bombarding us with special super duper deals that you absolutely must have. Resist the temptation to buy on impulse and only buy what you need.

Using one credit card to pay off another

This is also known as robbing Peter to pay Paul and is a seriously bad habit. I am not referring to transferring all your debt on a high interest card to a low interest card. This can in fact help in the short term, provided that you pay it all out within the specified time. I am referring to using your normal Visa card, for example to pay out a normal Mastercard. You are merely fooling yourself it you believe that this solves any problems. Remember, the more cards you have, the easier it will be to run up serious debt.

Authors Bio

Barney Delcarmen is a freelance writer for CreditCard.com.au and successful businessman in his own right; drawing on his personal experience in life and in business he shares his insights into personal finance and money management.

CoreLogic RP Data observations over the last three months to August 2015

Best performing capital city: Melbourne +8.0%
Weakest performing capital city: Darwin -3.2%
Highest gross rental yields: Darwin houses at 5.5% and Darwin & Hobart Units at 5.5%
Lowest gross rental yields: Melbourne houses at 3.0% and Melbourne & Sydney units at 4.1%
Most expensive city: Sydney, with a median dwelling price of $773,000
Most affordable city: Hobart, with a median dwelling price of $320,000