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With affordability at its lowest level on record, first-home buyers have to think outside the square.
The home-ownership dream rarely used to feature a sibling in your bathtub and a parent on your certificate of title. These days though, first-home buyers are prepared to be flexible.
Housing affordability fell to record lows in the March quarter this year according to the latest Housing Industry Association-Commonwealth Bank report. Mortgage payments accounting for 30.7 per cent of total first-home buyer income these days!
Generations X and Y are also settling down later meaning for many home ownership is a solo battle.
It’s not surprising then that increasing numbers of first-home buyers are teaming up with siblings, parents or friends in a bid to break into the property market.
“There’s been a noticeable trend towards family members buying property together, as property prices are still very high, particularly for first-home buyers,” says Aussie Home Loans boss John Symond.
The number of family members taking out mortgages together has jumped from about 1% of all loans originated by ‘Aussie’ to 5 per cent over the past two years! Mortgage Choice has reported a similar trend. A survey carried out by the company last year revealed more than 6 per cent of people who bought property within the past two years had done so with family or friends. And of those who intended to buy property within the next two years, over 8 per cent intended to do so with family or friends!
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INVESTORS own around two million homes in Australia and every year thousands claim deductions they’re not entitled to and fall foul of the Australian Taxation Office.
The result can be a kind warning or a significant fine and large interest bill.
The tax office says investors’ should be responsible in getting their tax returns right and they can’t blame their accountant or plead ignorance if they get it wrong.
One of the most common mistakes investors make is claiming items that should be depreciated over several years.
According to the ATO, initial repairs to fix damage, defects or deterioration that existed when a property was bought are capital expenses that should be claimed as capital-works deductions over either 25 or 40 years.
Capital improvements such as re-modelling a bathroom or adding a pergola should also be claimed as capital-works deductions.
Other mistakes include:
Interest
Taxpayers sometimes use loans for investing and private purposes — for example, to buy or renovate a rental property or to buy a motor boat.
The interest expense on the private portion of the loan (the boat) is not deductible!
Legal expenses
Conveyancing expenses incurred when buying and selling a property are not deductible. These form part of the cost for capital-gains tax purposes.
Travel expenses
If you take a holiday and visit your investment property while you’re there, you cannot claim a deduction for the full trip.
The tax office says you may claim only those expenses directly related to the property inspection and a proportion of accommodation expenses.
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Property investors should start planning ahead to take advantage of the next upturn in the property cycle, that’s according to quantity surveying firm Asset Economics.
Property booms never last but neither do property busts.”
To take advantage of the next boom, investors need to ensure they’re buying for long-term capital growth but take in account the ripple effect.
As our next property cycle comes around, it‘ll be the most desirable sought-after areas that start growing first, and these are generally the most affluent areas too.
From there, capital growth starts to ripple outwards!!
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It’d seem the stars are aligned: low rates, population growth, low vacancy rates, strong rental market and a shortage of housing in the majority of capital cities.
Since the latter 2008, the number of loans to first home buyers has outweighed substantially those to existing owner-occupiers and investors as first-time buyers rush to take advantage of the increased government grant. These numbers are set to surge in the next two months after the Prime Minister indicated that the increased grant will end June 30. In previous interest-rate cycles, lending to investors and existing home buyers increased alongside that to first-home buyers.
Partly, the reason is that investors aren’t getting the first-home-owner grant, and when you’re laying your own money down instead of the government’s, you tend to think more carefully before deciding to take the plunge. Unemployment concerns and fears about how the economy will evolve this year are also key reasons why investors are not yet entering the market.
Consumer sentiment figures released earlier this month by the Westpac-Melbourne Institute Survey found pessimists still outnumbered optimists and, with the prospect of more unemployment, that’s unlikely to change anytime soon.
Interest rates are one of the crucial aspects investors consider. During the past month or so, several of the big banks have increased their fixed mortgage rates, even though variable rates are expected to go even lower.
Banks say it’s because of an increase in the rates in the wholesale market where they access funds. Not everyone accepts that that is the reason, but most acknowledge it’s a signal borrowing costs are near their lowest levels!!
Some economists believe fixed rates will continue to rise as banks manage their risk, and it’s just a matter of the speed at which it happens. Of course, fixed rates are not popular at the moment even with investors who traditionally use this option.
That’s not a surprise, given the cash rate is expected to fall to 2 per cent by the end of the year.
But fixed rates are a bit of a barometer of the longer term trend in interest rates, so they’re worth watching. It also pays to remember that just because the Reserve Bank of Australia cuts rates’, that doesn’t mean banks have to follow suit.
Only time can tell, whether or not property buying will be better next year!
Perhaps investors are waiting for a sign that unemployment will stop rising, or for first-home buyer activity to dry up!
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The Australian real estate market is being flooded by first-home buyers thanks to falling interest rates and slumping house prices.
Read the full article here: http://www.news.com.au/heraldsun/story/0,21985,25014496-5013926,00.html
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Stephen Nicholls from the Sydney Morning Herald discusses buying property in Bali, read about it here: http://www.domain.com.au/Public/Article.aspx?id=1232818695940&index=NationalIndex&headline=Your%20own%20slice%20of%20paradise
Paul Castran has also discussed it here: http://www.paulcastran.com.au/2009/02/03/buying-your-ow…ce-of-paradisebuying-your-own-slice-of-paradise/
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VICTORIAN property values have plummeted about $40 billion in the past six months.
Melbourne’s median house price of $450,000 mid-2008 is now down to $427,500, according to estimates.
And house price expectations across Australia have sunk to an all-time low, a new report says.
Victoria’s $800 billion residential property market has dropped 5 per cent - or $40 billion - overall since July, according to BIS Shrapnel calculations prepared for the Herald Sun.
The trend has opened the door for potential borrowers desperate for cheaper housing.
Read the full article here:
http://www.news.com.au/heraldsun/story/0,21985,24881569-5013926,00.html
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HUNDREDS, if not thousands, of people at risk of homelessness will gather outside strangers’ front doors across Melbourne this month.
More people search for a rental property in January than in any other month, according to rental trends data to be released today by realestate.com.au.
Melbourne’s average rental rate has risen in recent years.
In October 2005, tenants paid $277 on average to rent a house and $258 for a unit, based on RP Data statistics.
By October last year, average rental rates had jumped to $361 for a house in Melbourne and $326 for a unit. That’s an increase of about 33 per cent in three years.
Caroline James from the Herald Sun has written an interesting article which can be viewed here: http://www.news.com.au/heraldsun/story/0,21985,24868648-5013926,00.html
Mark