By Paul Bennion, Managing Director, DEPPRO
The latest ABS figures show that the average size for a home loan in Victoria to purchase a new dwelling reached a record high of $438,500 during February 2018. This was a rise of $61,000 over the past year.
This surge in the average size of new home loans in Victoria is due to surging population growth and a lack of new housing supply to meet the demand.
Victoria is now the population boom state in Australia with the the fastest population growth nationally. Over the past year, the population of Victoria surged by 2.4% compared to a national average population growth rate of 1.6%.
Overall, the population of Victoria jumped by 147,400 people over the past year which is around the same population of Darwin.
With Victoria adding another Darwin to its population every year, it is easy to understand why land prices in cities such as Melbourne are surging thereby making it more expensive to build a new home.
Rising borrowing costs to build a new home in Victoria for owner occupier purposes has seen more first home buyers deciding to purchase an investment property as their entry point to the property market.
DEPPRO, which has an office in Melbourne, is finding that more first home buyers in Victoria are choosing this option because they are finding that they have very few out of pocket expenses as the rental income can generally cover the mortgage repayments due to very low interest rates.
In addition, people buying an investment property as their first home as opposed to an owner occupier home can qualify for major tax depreciation benefits.
DEPPRO has organised a large number of tax depreciation reports for first home buyers in Victoria who have chosen to buy an investment property rather than an owner occupier home.
These astute first home buyers are ensuring that they obtain the full tax benefits associated with buying an investment property by undertaking a tax depreciation report.
Buying an owner occupier home does not quality a first for home for tax benefits while buying an investment property can generate significant tax savings.
Depreciation is a legislative allowance introduced by the Australian Tax Office (ATO) that allows property investors to claim back the decrease in value of their properties and fittings.
Tax benefits obtained through obtaining an ATO complainant tax depreciation report can be equivalent to 60% of the total purchase price of the property.
For a first home buyer, this can result in tax savings of over $200,000 on the purchase price of a new property.
These tax savings are calculated over a 40-year period in the tax depreciation report with most tax benefits flowing during the years immediately after the purchase of the property.
A tax depreciation report costs around $600 (the cost of tax deductible) and it can generate thousands of dollars in tax savings each year.
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