Quiet Revolution Hitting the Property Market
By Paul Bennion, Managing Director, DEPPRO
Last financial year nearly half of all new private sector dwellings that received building approvals in Australia were higher density homes such as apartments, townhouses, villas and duplex housing.
Figures produced by the ABS show that during 2016/2017 some 102,885 higher density private sector dwellings were given building approvals compared to 114,236 approvals for private sector stand alone houses.
These are very significant figures as they highlight the quiet revolution that has occurred in the property market in Australia during recent years with a major shift towards higher density housing in Australia.
For example, just two decades ago, the medium/high density component of multi-unit commencements (units of three storeys or more) accounted for just 5 per cent of total housing commencements compared to around 25 per cent today.
There has been a number of key reasons why higher density living has become increasingly popular in Australia.
Firstly, Government is encouraging great higher density construction, especially in near city area to reduce the cost of urban sprawl. Various planning strategies have been implemented, and with infill sites predominantly accommodating mid and higher density dwellings, the policy focus has enabled the supply of multi-unit dwellings to greatly expand.
Secondly there is a greater concentration of employment opportunities in urban areas that in the past and this is encouraging more people to live in inner and near city areas. Also, people want to live close to amenities with a higher level of this social infrastructure that is generally found in the inner city.
Thirdly, families are generally getting smaller so they are requiring low maintenance housing such as apartments rather than detached homes on large lots. Baby boomers who are entering their retirement years also want to stay in their local area but in low maintenance homes and this trend is also encourage higher density living.
Finally, for some households, multi-unit dwellings represent a more affordable option to detached houses. Housing affordability pressures, principally related to the price of serviceable residential land, have forced the market to make more intensive use of available land. This financial pressure has resulted in more dwellings in a given area than there has been in the past.
This movement towards higher density living is particularly significant for property investors because over the coming years they will be purchasing this type of product as it becomes even more popular with consumers.
Investors who are planning to purchase a higher density home such as an apartment should consider the significant tax depreciation benefits associated with this type of property purchase.
While there are many issues concerning the depreciation entitlements on properties, in most cases, strata style homes such as new apartments provide a higher rate of depreciation than houses - all being equal.
Buying a new apartment, for example, can provide a taxpayer with considerable depreciation benefits because of the significant tax benefits they offer through depreciation.
Some DEPPRO clients are achieving that tax benefits obtained through depreciation can be equivalent to 60% of the total purchase price of the property. In some cases, these tax benefits can total $300,000 based on a purchase price of $500,000
A key part of ensuring that the investor obtains their full tax benefits is to have a professional depreciation professional prepare a comprehensive depreciation schedule.
Click the link below and complete the details to ensure your client receives a higher return on their cashflow.
Just a friendly reminder to all Vow Brokers writing Commercial Loan products the importance of writing on panel, rather than private funds! Issues around your insurance cover, where the private funds are coming from places brokers in a potential dangerous and risky position should the transaction go wrong.
Westpac has announced changes around disclosure of applicant expenses.
