The five-bedroom contemporary Sydney Harbour home of Stephen Brown, the boss of the troubled 1st Fleet trucking company, and his wife, Corrine, comes with a $16 million asking price. Featured in the…
1st Fleet’s Stephen Brown owns just one-thousandth of his recently refinanced $16 million harbourfront Watson Bay property listing
May 13, 2012 By Leave a Comment
How will today’s rate cut help you?
May 1, 2012 By
Save more by revving up your loan repayment strategy
Provided lenders pass on all or most of today’s Reserve Bank cash rate cut, astute home loan holders who maximise this opportunity could save thousands of dollars in interest and shave months, or even years off their loan term, according to Australia’s largest independently-operated mortgage broker, Mortgage Choice.
Company spokesperson Belinda Williamson said, “We hope today’s move by the Reserve Bank to lower the cash rate by half of a percentage point to 3.75% does not become a non-event for variable rate borrowers. A decision by lenders to pull the rate lever will likely have a much needed, positive impact on property buyers’ plans and borrowers’ ability to repay their home loan quicker.”
“It is no secret that some lenders have shown a reluctance to pass on the full rate cut in a bid to safeguard their businesses against future funding costs. However, we are hopeful that in an effort to reignite the property market, entice new customers and in the spirit of competition, lenders will lower their home loan interest rates.
“Even if lenders, regrettably, pass on only part of the cash rate cut, astute borrowers who rev up their loan repayment strategy by keeping repayments at the pre rate cut level could save thousands of dollars in loan interest and shave months, or years off their home loan term.”
If a lender passes on the full 0.5% rate cut announced today, for someone with a $300,000 loan at 7.25% over 25 years, it would lower monthly loan repayments by around $96.
“If a borrower continued to repay their loan at the pre cash rate cut level, leaving the monthly savings of $96 in each repayment, it could save them $68,364 in total interest payable and may see them repay the loan two years and eight months earlier,” said Ms Williamson.
“If lenders choose not to pass on all, or most of the cash rate cut, borrowers should see it as a signal to shop around for a more competitive deal. Of course, they should not move from one lender and/or loan product to another without carefully weighing up the cost versus benefit of doing so.
“Health checking a home loan with a mortgage broker is a great way to ensure you are getting the deal suited to your needs and financial circumstances.”
The difference a rate cut can make to your home loan if you repay at pre rate cut levels:
To see the impact extra repayments can make to your home loan, visit Mortgage Choice’s Extra Repayments Calculator: http://www.mortgagechoice.com.au/extra-repayments-calculator.
RBA to lower the cash rate by 50 basis points to 3.75 per cent
May 1, 2012 By
At its meeting today, the Board decided to lower the cash rate by 50 basis points to 3.75 per cent
Financial market sentiment has generally improved this year, and capital markets are supplying funding to corporations and well-rated banks.
Market sentiment remains skittish, however, and the tasks of putting European banks and sovereigns onto a sound footing for the longer term, and of improving Europe’s growth prospects, remain large.
Recent data for inflation show that after a pick up in the first half of last year, underlying inflation has declined again, and was a little over 2 per cent over the latest four quarters.
CPI inflation has also declined, from about 3½ per cent to a little over 1½ per cent at the latest reading, as the weather-driven rises in food prices in the first half of last year have, as expected, now been fully reversed.
Since it last changed the cash rate in December, the Board has maintained the view that the setting of policy was appropriate for the time being, but that the inflation outlook would provide scope for easier monetary policy, if needed, to support demand.
In considering the appropriate size of adjustment to the cash rate at today’s meeting, the Board judged it desirable that financial conditions now be easier than those which had prevailed in December.
Full statement by statement by Glenn Stevens, Governor: Monetary Policy Decision
At its meeting today, the Board decided to leave the cash rate unchanged at 4.25 per cent.
April 3, 2012 By
Recent information is consistent with the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring. Several countries in Europe will record very weak outcomes, but the US economy is continuing a moderate expansion.
Growth in China has moderated, as was intended, and is likely to remain at a more measured and sustainable pace in the future.
Conditions around other parts of Asia softened in 2011, partly due to natural disasters, but are not showing signs of further deterioration. Some moderation in inflation has allowed policymakers in the region to ease monetary policies somewhat.
Commodity prices declined for a few months last year and are noticeably off their peaks, but have been relatively stable for a while now, at quite high levels. Australia’s terms of trade have peaked, though they remain high.
Financial market sentiment has generally continued to improve in recent weeks and capital markets are supplying funding to corporations and well-rated banks. At the margin, wholesale funding costs are tending to decline, though they remain higher, relative to benchmark rates, than in mid 2011. But the task of putting European banks and sovereigns onto a sound footing for the longer term remains large and Europe will remain a potential source of adverse shocks for some time yet.
In Australia, growth in domestic demand ran at its fastest for four years in 2011, driven by private spending. Nonetheless the balance of recent information suggests that output growth was somewhat below trend over the year. There are differences in performance between sectors, and considerable structural change is occurring. Labour market conditions softened during 2011, though the rate of unemployment has been little changed for some time.
Interest rates for borrowers remain close to their medium-term average. Credit growth remains modest. Housing prices have shown some signs of stabilising recently, after having declined for most of 2011, but generally the housing market remains soft. The exchange rate has remained high over recent months, even though the terms of trade have declined somewhat.
In underlying terms, inflation was around 2½ per cent in 2011. CPI inflation was higher than that but will fall over the next quarter or two. It is currently expected that inflation will be in the 2–3 per cent range over the coming one to two years. This forecast abstracts from the effects of the carbon price and also embodies an assumption that productivity growth in the economy increases somewhat as a result of the structural change now occurring. At its next meeting, the Board will have the opportunity to reassess the outlook for inflation, taking into account not only data on demand and output but also forthcoming information on prices.
The Board eased monetary policy late in 2011. Since then, its judgement has been that, with growth expected to be close to trend, inflation close to target and lending rates close to average, the setting of monetary policy was appropriate. The Board’s view was also that, were demand conditions to weaken materially, the inflation outlook would provide scope for easier monetary policy. At today’s meeting, the Board judged the pace of output growth to be somewhat lower than earlier estimated, but also thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy.
RBA Monetary Policy Decision
Cash rate unchanged at 4.25 per cent.
March 6, 2012 By
At its meeting today, the Board decided to leave the cash rate unchanged at 4.25 per cent.
Recent information is consistent with the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring. Several European countries will record very weak outcomes, but the US economy is continuing a moderate expansion. Growth in China has moderated as was intended, but on most indicators remains quite robust overall. Conditions around other parts of Asia softened in 2011, partly due to natural disasters, but are not showing signs of further deterioration. Some moderation in inflation has allowed policymakers in the region to ease monetary policies somewhat. Commodity prices declined for some months and are noticeably off their peaks, but over the past couple of months have risen somewhat and remain at quite high levels.
The acute financial pressures on banks in Europe have been alleviated considerably by the actions of policymakers, though there is more to do to put European banks and sovereigns onto a sound footing for the longer term and Europe will remain a potential source of shocks for some time yet. Financial market sentiment has continued to improve in recent weeks and capital markets are again supplying funding to corporations and well-rated banks, albeit at costs that are higher, relative to benchmark rates, than in mid 2011.
Most information on the Australian economy continues to suggest growth close to trend overall, with differences between sectors and considerable structural change. Labour market conditions softened during 2011 and the unemployment rate increased slightly in mid year, though it has been steady over recent months. CPI inflation has declined as expected and will fall further over the next quarter or two. In underlying terms, inflation is around2½ per cent. Over the coming one to two years, and abstracting from the effects of the carbon price, the Bank expects inflation to be in the 2–3 per cent range. This forecast embodies an expectation that productivity growth will improve somewhat as a result of the structural change occurring in the economy.
Interest rates for borrowers have generally risen slightly since the Board’s previous meeting, but remain close to their medium-term average. Credit growth remains modest. Housing prices have shown some sign of stabilising recently, after having declined for most of 2011, but generally the housing market remains soft. The exchange rate has risen over recent months, even though the terms of trade have declined.
With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy remained appropriate for the moment. Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy. The Board will continue to monitor information on economic and financial conditions and adjust the cash rate as necessary to foster sustainable growth and low inflation.
Turning your existing home into a rental property
March 5, 2012 By
There are many reasons why homeowners may choose to change their current principal place of residence (PPOR) into an investment property. Perhaps they are looking to upgrade to a larger – or perhaps downsize to a smaller – model, and wish to retain the original property as an investment, or maybe they have been geographically relocated due to work obligations. Regardless of the reason, there are numerous factors that homeowners, and subsequent investors, should be aware of when making the switch, especially in regards to tax.
To start with, let’s clarify exactly what the two main terms are that we are dealing with here. The ‘principal place of residence’ can be defined as being the one place of residence that is, among the one or more places of residence of the person within and outside Australia, the principal place of residence of the person. Put simply, a person can only have one principal place of residence in the whole world.
‘Investment property’ is property, whether land or a building, part thereof, or both, which is held by the owner (or by the lessee under a finance lease) to earn rentals or for capital appreciation or both.
The shifting of labels from PPOR to investment property occurs upon the homeowner’s physical relocation to the newly purchased property, that is, the new PPOR. Once this relocation has occurred and the first property is deemed to be an investment, there are several tax implications that the owner should to be aware of. Such tax issues include, but are not limited to, potential deductions as well as various possible capital gains tax exemptions that the owner may eligible to claim, that are not able to be claimed on the PPOR.
Deductions
Perhaps one of the simplest tax deductions that can be claimed is that as soon as the property is legally an investment – that is, it is no longer the taxpayer’s PPOR – any interest that is paid as part of the loan repayments for that property become a tax deduction. This deduction can be calculated at a rate of 2.5% per year in the 40 years following construction, for the construction costs of:
- buildings
- extensions, such as a garage or patio
- alterations, such as adding an internal wall, kitchen renovations or bathroom makeovers
- structural improvements, such as a gazebo, carport, sealed driveway, retaining wall or fence
For example, if you purchase a two-year-old investment property for $400,000, the deduction that can be claimed annually is $10,000 (2.5% of $400,000) for the remaining 38 years, or the proportion of that period that the property remains owned by that particular taxpayer.
CGT exemptions
Generally speaking, any capital gain or loss that is incurred as a result of disposing of, or selling, a PPOR is exempt from any capital gains tax (CGT) obligations.
However, there exist certain situations whereby at the time of sale of the property, the owner may be eligible for a partial CGT exemption. The two particular circumstances where the partial exemption is applied are:
- the property was not used as the owner’s main residence for the entire period of ownership (although in some cases specific absences are allowed, this is discussed further below); and
- the property was used for income-producing purposes, while it was the taxpayer’s main residence and if a loan was taken out to purchase the property the taxpayer could have deducted the interest paid on that loan
For the purposes of this particular article we are more concerned with the first instance. The example below demonstrates how the partial CGT exemption can be applied upon the disposal of an investment property that was once a PPOR.
A property was purchased on 1 July 2002 for $500,000. It was the owner’s PPOR until 30 June 2005 when it was then rented out until it was sold for $750,000 on 1 July 2007. The capital gain as a result of the sale was $250,000 and the owner is entitled to a partial tax exemption for the period in which they occupied the property. The exempt amount is calculated using the formula, amount of capital gain x number of years property was owner’s PPOR as a proportion of total years of ownership = amount of capital gain that is exempt.
In this instance the calculation is as follows:
$250,000 x 3yrs = $150,000
5yrs
As $150,000 of the total capital gain is exempt from tax, the amount of taxable capital gain is $100,000. Additionally, as the property was owned for more than 12 months the owner is entitled to a further 50% discount on the assessable amount, making the total capital gain amount that is assessable for tax purposes $50,000 upon the disposal of this property.
CGT – 6-year rule
As mentioned above, there are provisions that allow for an owner’s temporary absence from the PPOR which do not affect the owner’s eligibility for the full PPOR exemption; this is commonly referred to as the six-year rule.
The six-year rule provides that the property’s owner can be temporarily absent from the PPOR for up to a maximum of six years at a time, without losing the exemption, provided that no other property is treated as the PPOR during that period. The owner can use the property to produce assessable income during that time and reset the six-year period each time they move back.
How it works in real life
A property is owned and occupied by the owner for a period of three years, following which the owner is then posted overseas for work commitments and remains there for four years; during this time the owned property is rented out. The owner returns to the country and occupies their PPOR for a further three years until such time that they are again posted overseas, this time for a period of four years. Upon returning to the country a second time the owner then sells the property.
In this case, there is no CGT payable upon the disposal of this property as the owner was never away from the property for more that six years at a time, and no other property was treated as the PPOR during this period.
There are some definitive factors that must be considered in order for the six-year rule to apply. One of these is that you need to move from your PPOR for a good reason. Some examples of ‘good reasons’ include accepting a new job interstate or overseas, staying with a sick relative long term, or going on an extended holiday.
There are various other financial and tax implications to be considered when transferring a PPOR to an investment property; some of the main ones to be aware of have been explored above. It is important to remember that each individual situation is different and has a range of influencing factors. When considering making any kind of significant financial investment or transfer it is important to seek the professional advice of a lawyer and/or accountant in order to ensure that you make the best possible choices for your situation.
Expert Insight from: Michael Quinn, director of The Quinn Group, is an experienced lawyer, accountant and educator.
Advantages on Buying Brand New Homes
February 18, 2012 By
There is much more press surrounding renting than buying a new home in Australia at the moment. With the economy, more people are talking about renting because it is ‘safer’. However, this may not be the case. Here, we will explore the advantages of buying a new home and land package or new homes in more detail.
Less Maintenance
Many people forget that older homes need more maintenance work than brand new homes. So, when people buy an old property, renovation may be required.
The issue with this is that it is almost impossible to budget for the amount of time and money involved with maintenance work. This is why you hear the horror stories about people buying old properties and having to spend a lot getting it to a ‘normal’ state. Remember, a correctly built modern property will not need any major renovation for at least five years.
Building Codes are all met
Building codes are changing all the time to make newly built properties safer, more energy efficient and generally more appealing. This means that when you move into a new home, you know that you are going to be paying as little as possible on your energy.
It is believed that these codes, when compared to the old ones in the 80s, will save you in the region of 50% in terms of the energy that you use. Furthermore, new homes have better sound insulation as well.
First Use
When you move into a new home, it is clean and un-used. If you are moving into a home that has been lived in before, the chances are you will not be happy with something that has been left behind by the previous owner. For example, something that many people miss when they are looking around before purchasing is that an old home often has signs of smoke damage (from cigarette smokers) or damage from animals having lived in the home in the past. If this is an issue that you do not spot until it is too late, and something that bothers you, you will need to pay to get it sorted out.
If you can get your initial finances in order and can get the credit to buy a new home, then buying one is without a doubt the best choice you can make in terms of how much you will spend in the future.
First home buyers to lead the way in 2012
February 9, 2012 By
First time buyers are expected to be the major players in the property market this year, according to a nationwide poll of mortgage brokers.
The Loan Market poll of 252 of its brokers found that 36% of respondents expected first time buyers to dominate the housing finance market in 2012.
Investors came in at a close second, with 33% of respondents picking out Australia’s property investors as this year’s expected dominant force, while refinancers came in third with 30%.
“Our brokers are divided on which consumer group will dominate in 2012, but the majority think first time buyers will be the most active,” said Loan Market chief operating officer Dean Rushton.
He went on to add that dual interest rate cuts during the final quarter of 2011 have helped first home buyers to emerge from their hibernation.
“2011 was a savings year for many potential home owners and, with the likelihood of further interest rate reductions and softened property prices, 2012 appears to be primed for first home buyers to enter the market,” he said.
Last year also provided evidence that first time buyers are deciding to purchase investment properties as a means to getting a foot on the property ladder, rather than going down the traditional route of buying their own home, said Rushton.
‘Location, Location, Location’ – Finding Premium Investment Pockets within a suburb
February 5, 2012 By
‘Location, Location, Location’ would have to be the preferred catch cry of agents and spruikers from Darwin to Dunalley. It is also, the name given to a very popular and long running national television show! So there must be some truth to this; Location must be important, right?
Let us stop to think for a moment. Which locations are they talking about exactly? In addition, does location affect pricing and demand? Not all locations can be considered equal. Some are preferable, generate higher sales prices today, and have potential for comparatively higher capital gains in the future.
Sometimes when you are looking to purchase in a suburb, these preferred locations may be obvious. The suburb may border the ocean, beach, or there may be a lovely wide tree lined street. These may have long been the in vogue locations in the suburb. But sometimes they may be much more difficult to pinpoint. In these cases, you may be able to look at the different amenities that exist in suburb, where transport hubs are located, or where pricing may be changing in line with more expensive neighbouring suburbs.
Let us start with public amenities, in particular schools and parks. Generally, people are willing to pay a premium for properties that are located within a walking distance to facilities they feel add to their lifestyle, provide convenience, safety or security for their family. For many, this includes the convenience of living close to the schools they send their children, or parks/beaches/playgrounds where they walk their dog or play and socialise. But be careful, properties located too close to these amenities, may be less sought after. This could in part be attributed to the increased traffic from parents dropping off kids, the school bell ringing constantly throughout the day, or a lack of privacy caused by inquisitive dog walkers!
In these cases, I like the one street rule; one street away or up to 500 meters is great. Anything closer than 100 meters and I would be looking elsewhere.
In line with this demand, people value the convenience of living close to their local supermarket, transport hub or bus line. They also love the lifestyle aspect of living nearby their favourite café or restaurant. Once again, living on a busy street with bus access, or near the entrance to a shopping centre really can count against a property. Therefore, the same 100-500 meter band rule applies.
I also like to consider how prices are changing within a suburb. This may be difficult to tell when there are a limited number of properties on the market. In this case, you may be able to detect if a particular pocket within a suburb is piggy backing on a neighbouring suburb with an in vogue status, but not yet has the price tag to match!
In these cases, look for jumps in the number of renovations taking place. This may indicate the number of people buying in this zone who are aspirational, and cannot yet afford to live in the expensive neighbouring suburb. They want the next best thing, so look out for new cafes/delicatessens/shops opening up or general gentrification. An example I love to refer to is the Marrickville district in Inner West Sydney, and how is has undergone a renascence of late. Some (myself included) would argue that this can be attributed to the culture and price tag associated with its North Easterly neighbour; New Town.
So let us bring all this together, and formulate a strategy to help you profile your target suburb, and help you isolate pockets that will be in greater demand in the future (or already are):
- Locate any Blue chip areas, where prices have long held above the suburb median. These may be areas with ocean/beach frontage, excellent views, or leafy tree lined streets.
- Locate any suburbs, which have recently undergone gentrification, areas were prices have recently been up trending or aligning with the persona of a neighbouring premium suburb.
- Locate all amenities, transport and shopping in a suburb – and find pockets of housing that have excellent proximity to these facilities. However, remember; be wary not to purchase property, which is too close.
- Finally, find overlaps between these blue chip/gentrification zones, with excellent amenity pockets.
If you can find these overlaps within a suburb, and subsequently purchase property there, you may be optimising your potential to secure above average capital gains, when compared to the remainder of the suburb. This will also help to ensure that the property remains in high demand by tenants, consequently driving up rental returns. So with all this in mind, maybe ‘Location, location, location’, and the importance placed on it by agents, may be bedded in truth after all!
Brisbane house featured in Selling Houses 2012 premiere still awaiting buyer
February 1, 2012 By
The Brisbane home featured in the latest Selling Houses Australia 2012 series debut makeover still awaits new owners.
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Brisbane house featured in Selling Houses 2012 premiere still awaiting buyer
