There’s a quiet patch of <a href="https://www.apartments.com.au/developments/hawthorn-vic-3122">Hawthorn</a>, between the bustle of Glenferrie Road and the curve of the Yarra, that rarely sees change, and even more rarely, new apartments. But that’s exactly where <a href="https://www.apartments.com.au/developers/pomeroy-pacific-quattro-corp">PQD</a> is planting Kooyongkoot: a deliberate, 18-residence answer to the question of what downsizers actually want.

“This is something this pocket of Hawthorn has never seen before,” says Fil Gacesa, head of sales at PQD. “<a href="https://www.apartments.com.au/new-apartments/kooyongkoot-hawthorn-1-kooyongkoot-road-hawthorn-vic-3122">Kooyongkoot</a> will deliver just 18 large-scale apartments in the heart of Hawthorn. It is the true definition of resort-style living.”

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/59D7VxzltmM?si=1iCzRD7FRneKryfv" title="YouTube video player" width="560"></iframe>

That scale is central to the story. It’s what allows for two dedicated lift cores, short corridors, and a generous lightcourt that draws natural ventilation and sunlight into every residence. It’s also what makes room for the sort of amenity usually confined to high-density towers: a fully equipped wellness centre with infrared and traditional saunas, yoga and pilates studio, cold therapy shower, and treatment room. There’s a golf simulator, car and dog wash stations, and extensive storage too, not bolted on, but baked in from the start.

But more than the checklist, it’s the design intent that carries weight. “This project has been many years in the making,” says Mark Pomeroy, Director of PQD. “Not just in planning, but in listening, to what our buyers and the local community are looking for”.

[smartcode_project:default project_id=102717 project_image_fid=355289]

That listening shows up in the materials, oak floors, natural stone, V-ZUG appliances, and in how space is handled. Penthouses feature private rooftop terraces with pools. Terraces and garden residences embrace outdoor connection. Inside, the layouts skew large and open, geared for hosting, not just housing.

Architecturally, <a href="https://www.apartments.com.au/architects/cera-stribley-architects">Cera Stribley</a>’s approach is grounded. There’s no reaching for spectacle here. Instead, the building offers a sculptural calm, anchored by landscaping from Eckersley Garden Architecture.&nbsp;

“We wanted to create spaces that feel expansive, serene, and meaningfully connected to daily life,” said founding partner Chris Stribley elsewhere.

[smartcode_project:default project_id=102717 project_image_fid=355304]

That sentiment, calm, connection, echoes in the location itself. Kooyongkoot sits just a short stroll from Central Gardens, Fairview Park, and the Rivoli Cinema. Tram lines and schools are close, but the street is tucked, quiet, and leaf-lined.&nbsp;

“Residents of Kooyongkoot will be a short stroll from Fairview Park, Central Gardens, and the Glenferrie Road retail strip," Gacesa notes, "but you're also cocooned in this peaceful pocket behind extensive landscaping by Eckersley Garden Architecture.”

Kooyongkoot is set for completion in late 2026.

[smartcode_project_cta:default project_id=102717]

Staff Writer

The project that said no to compromise: Inside Kooyongkoot, Hawthorn

When long-time Ivanhoe locals Graeme and Catherine, decided it was time to downsize, they weren’t necessarily in a rush.&nbsp;

Like many in their stage of life, they had started thinking about apartment living, but anticipated making the shift in two to three years.

That timeline changed when they visited <a href="https://www.urban.com.au/new-apartments/candela-ivanhoe-40-upper-heidelberg-road-ivanhoe">Candela</a>, a new boutique development by <a href="https://www.urban.com.au/developers/salter-brothers">Salter Brothers</a>. The project ticked all the boxes they were looking for: location, quality design, and long-term lifestyle benefits, which prompted them to bring their decision forward.

“It was the right place at the right time,” they said. “We knew immediately it ticked all the boxes, and we didn’t want to wait.”

[smartcode_project:default project_id=342 project_image_fid=358855]

Their decision to downsize was driven by a combination of practical needs and lifestyle considerations. Their existing home, while much loved, had become increasingly difficult to maintain. It spanned multiple levels, included extensive front and back gardens, and was starting to show the wear that comes with age.&nbsp;

They were looking for a more manageable lifestyle, one with less upkeep and more freedom. A brand-new apartment with no maintenance requirements and the ability to simply “lock up and leave” gave them peace of mind and a greater sense of control over their future.

Financially, the purchase made sense as well. The available stamp duty savings, strong price-to-value offering, and timing of the settlement suited their plans, making the transition smoother and more cost-effective. The apartment's design and inclusions further supported their choice.

[smartcode_project:default project_id=342 project_image_fid=357493]

The layout was both functional and flexible: three bedrooms, a butler’s pantry, a separate laundry, and a large open-plan living area. It gave them the freedom to host a family, accommodate guests, or set up a home office. The expansive balcony and elevated views added to the appeal, providing a sense of openness and connection to the outdoors.

“It just had a really good flow,” Catherine noted, something they found lacking in many other apartments they’d considered, particularly in the established market.

Candela’s boutique scale was another deciding factor. With a smaller number of residences and a top-floor penthouse position, the couple felt the development offered the privacy and space they were looking for, without feeling isolated.

“We liked that it wasn’t a huge development. It felt well-balanced, modern but still with a sense of community, not overwhelming,” they said.

[smartcode_project:default project_id=342 project_image_fid=357508]

Equally important was the ability to remain in Ivanhoe, a suburb they know well and have deep roots in. After 46 years in the area, proximity to local parks, shops, and familiar faces mattered just as much as the apartment itself.

“We didn’t want to give up the community we’ve known for decades. Candela allowed us to upgrade our lifestyle while staying in the place we call home.”

With a Walk Score of 90, the village location supports a convenient, connected lifestyle. <a href="https://www.apartments.com.au/developments/ivanhoe-vic-3079">Ivanhoe</a> Station is just a eight-minute walk away, and the neighbourhood offers access to parks, cafes, restaurants, and schools along Upper Heidelberg Road, all within easy reach.

Beyond the apartment, the couple also saw value in the broader vision for Candela, one that integrates residential living with public spaces and local amenities.&nbsp;

The development introduces 58 new apartments as well as a mix of commercial and social spaces that integrate contemporary architecture with the suburb’s existing character.&nbsp;

At ground level, residents will find a charming café and a lifestyle wellness centre, perfect for unwinding and rejuvenating. Meanwhile, the rooftop garden offers a stunning vantage point for residents to enjoy breathtaking sunsets, host gatherings, or enjoy barbecues with family and friends. It's not just a place to live; it's a vibrant community where every moment is an opportunity to connect and create lasting memories.

[smartcode_project_cta:default project_id=342]

Why Ivanhoe locals are choosing to downsize to Candela

Mark and Roy Makari are expanding their presence in Sydney’s South West with a second major proposal for Leppington, this time envisioning a 900-dwelling mixed-use development just 850 metres from their previously lodged tower trio on Fifth Avenue.

Project management and construction management firm Creative Vision filed the plans for the&nbsp;multi-building project at <a href="https://www.apartments.com.au/new-apartments/230-rickard-road-leppington-nsw-2179">230 Rickard Road, Leppington</a>. The proposal seeks to establish a new focal point for the precinct through a high-density, transit-oriented development supported by diverse land uses.

According to the Scoping Report prepared for the Department of Planning, the scheme includes around 900 apartments across multiple towers, including 135 dwellings designated for affordable housing. A mix of market and subsidised apartments will be supported by ground-level activation through retail and office space, a childcare centre, and a hotel, forming a comprehensive urban precinct.

<img alt="Mixed Use Development 230 Rickard Rd Leppington" data-entity-type="file" data-entity-uuid="34797362-f3dc-4d84-8235-2657fc5f3bde" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Plan.png?VersionId=Uzckrz9tUpDQl5lX1_WMhjnv16bsr8wG" />

The Design Report by <a href="https://www.apartments.com.au/architects/studiosc-0">Studio SC</a> notes that the project “intends to deliver a high-quality, high-density built form that supports the vision for the Leppington Town Centre, integrating mixed-use outcomes and public domain upgrades.” The development is expected to be delivered in stages, although a precise timeline is yet to be confirmed.

The project will be assessed through a future State Significant Development Application, with the Scoping Report indicating the team will seek design excellence via a competitive process or through an expert design review panel. Early massing diagrams suggest a series of mid- to high-rise buildings framing a central landscaped spine, with emphasis on pedestrian permeability and public space.

The planning documentation flags a strong sustainability agenda, stating that the development will “respond to the urban heat island effect, incorporate water sensitive urban design, and prioritise active transport”.

<img alt="Mixed Use Development 230 Rickard Rd Leppington" data-entity-type="file" data-entity-uuid="369d7b54-1279-4cde-88ec-dcb215594414" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Podium_1.png?VersionId=QArL7B2kkLt63vl5xvL0FNV_ardAlez4" />

The proposal follows in the footsteps of the Makaris’ nearby Fifth Avenue site, where they’ve submitted plans for three towers comprising nearly 500 apartments, with 10 per cent dedicated to affordable housing. That project features commercial podiums, a childcare centre, and a new public park that would occupy more than a third of the site.

Both developments are situated within walking distance of Leppington Train Station and fall under strategic precinct plans promoting higher density housing. The town centre is undergoing substantial transformation, driven by state government planning reforms aimed at fast-tracking housing delivery.

Together, the two projects represent a combined ambition of nearly 1,400 new homes across just under two kilometres of central Leppington.

First look: 900-home mixed-use precinct planned for Leppington

Leading Australian integrated property development group, <a href="https://www.apartments.com.au/developers/aqualand-australia">Aqualand</a>, has released the signature penthouses crowning its landmark AURA by Aqualand precinct at 168 Walker Street in North Sydney, unveiling Il Magnate and La Divina as the largest and most luxurious penthouses in the suburb.

With prices anticipated to commence from $15 million, and each accompanied by a new Porsche Carrera 911 valued at over $500K, the residences mark the culmination of <a href="https://www.apartments.com.au/buildings/aura-by-aqualand-north-sydney-168-walker-street-north-sydney-nsw-2060">AURA by Aqualand</a>’s decade-long journey and the beginning of its final sales chapter. 
&nbsp; 
Their release follows more than $850 million in record-breaking residential sales and the building’s completion and occupation.

[smartcode_project:default project_id=30959 project_image_fid=358868]

The Richards Stanisich-designed 284 sqm Il Magnate and 224 sqm La Divina penthouses, collectively known as The Icons of AURA, are conceived as grand luxury homes rather than apartments, with expansive proportions, elevated materiality and curated identities that reflect their status as one-off residences.&nbsp;

Il Magnate features a grande master suite, complete with substantial walk-in dressing area and ensuite, three other bedrooms, second ensuite and another bathroom, powder room, open plan kitchen, scullery, substantial dining area and generous living room divided by a feature fireplace, and a multifunction wintergarden, which is ideal for a study and adjoining office breakout space. &nbsp;

Meanwhile, the La Divina residence offers the same amenities, sans the powder room, on a slightly smaller alternate floor plan configuration.

[smartcode_project:default project_id=30959 project_image_fid=358863]

Each occupies half of AURA by Aqualand’s topmost 28th level, comes with four secure car spaces and pairs sweeping Sydney Harbour panoramas with large-scale living spaces, refined detailing and a level of craftsmanship and amenity rarely offered in the North Shore market.&nbsp;

Penthouse residents will also receive Etymon’s ‘Black Key’ private concierge and lifestyle management service, an invitation only offering providing the ultimate in bespoke personalisation, including a range of everyday discrete services, from dinner party management, grocery deliveries, pet feeding or plants watered, dinners, snacks and coffee deliveries, event ticket sourcing, right up to organising travel visas and international airfares. Rarely seen in Australian properties, the service provides residents the benefits of living in a world-class luxury hotel-style home, akin to The Ritz, or the Waldorf Astoria.

[smartcode_project:default project_id=30959 project_image_fid=358862]

<a href="https://www.apartments.com.au/interior-designers/richards-stanisich">Richards Stanisich</a>’s Director, Kirsten Stanisich, said the studio set out to craft residences that feel profoundly considered, contemporary and deeply connected to their setting.

“From the outset, we approached these penthouses with the sensibility of a grand Parisian residence - generous in scale, elegant in proportion and designed to feel more like a handcrafted home than an apartment," Stanisich said.

“Their elevated position and sweeping harbour outlook informed every decision, creating a rare connection between urban sophistication and natural calm. We shaped each space with expressive materiality, sculptural forms and bespoke detailing that invite touch and interaction.&nbsp;

“The result is a pair of residences defined by volume, light and an inherent softness - refined, flexible and deeply personal. These penthouses are unlike anything else in North Sydney, offering a sanctuary of true luxury framed by some of the city’s most remarkable views.”

For Aqualand’s Head of Sales &amp; Marketing, Alex Adams, the collaboration with Porsche underscores the shared ethos behind the residences.

“Aqualand’s collaboration with Porsche underpins both brand’s sharing an obsession with craftsmanship, design excellence, and enduring value," Adams said.

“Our penthouses are created for those who appreciate the finer details and expect the extraordinary at every touchpoint. Including a Porsche simply extends that experience beyond the residence - it’s a continuation of the lifestyle our buyers already live.”&nbsp;

[smartcode_project:default project_id=30959 project_image_fid=292862]

Aqualand’s Managing Director, Jin Lin, said the penthouses represent both the pinnacle of AURA by Aqualand and an important design benchmark for the company’s future pipeline.&nbsp;

“These stunning penthouses reflect the purest expression of Aqualand’s design ambition," Lin said.

“The unparalleled design intent makes them not only the glistening crown of AURA by Aqualand, but the crown of North Sydney itself. They’re essentially a thank you gift to a burgeoning community that deserves this level of quality and architectural consideration.&nbsp;

“We’re leveraging the unrivalled standard set here as the foundation for what comes next, including our upcoming Anderson Street, Chatswood; 15 Blue Street, North Sydney and Central Barangaroo projects. Purchasers of these penthouses will essentially be living inside the blueprint of Aqualand’s future.

“These landmark residences demonstrate how far North Sydney has evolved and the strength of demand for highly curated, bespoke luxury homes. They’re more than penthouses, they’re legacy residences.&nbsp;

“With AURA by Aqualand now a thriving new precinct with residents well and truly settled, and our in-house world-class lifestyle amenity activated, Il Magnate and La Divina represent a once-in-a-lifetime opportunity to secure an extraordinary piece of North Sydney’s future.”

[smartcode_project_cta:default project_id=30959]

Joel Robinson

Aqualand launches North Sydney penthouses with free Porsche Carrera 911

<a href="https://www.apartments.com.au/developments/bokarina-qld-4575">Bokarina</a> Beach has quietly evolved into one of the Sunshine Coast’s most complete coastal lifestyle precincts, defined not just by proximity to the ocean, but by how residential living, local retail and everyday amenity are stitched together.&nbsp;

Gardner Vaughan Group’s <a href="https://www.apartments.com.au/new-apartments/bask-bokarina-38-bokarina-boulevard-bokarina-qld-4575">Bask Bokarina</a> now represents the final residential chapter in that transformation.

[smartcode_project:default project_id=141609 project_image_fid=333360]

Over recent years, the Bokarina Beach precinct has taken shape as a walkable, community-oriented neighbourhood, anchored by beachfront access, Lake Kawana to the west, and a growing mix of cafés, specialty retail and public open space.&nbsp;

With Zinc Bokarina already delivered next door by <a href="https://www.apartments.com.au/developers/gardner-vaughan-group">Gardner Vaughan Group</a> (GVG), Bask is the last opportunity to buy a brand new apartment within the precinct, effectively rounding out a fully formed coastal village.

GVG has positioned Bask to strengthen that lifestyle framework. Ten ground-floor retail spaces are planned beneath the residences, extending Bokarina Boulevard’s existing activity and reinforcing the area’s everyday convenience, from casual dining and coffee to local services, within a short walk of the beach.

[smartcode_project:default project_id=141609 project_image_fid=333359]

The residential component comprises 135 apartments across two buildings, Mydas and Caretta, with a clear shift toward larger three- and four-bedroom layouts and penthouses. That mix reflects a maturing buyer profile in Bokarina, where demand is increasingly led by owner-occupiers and active downsizers seeking space, permanence, and connection to place rather than short-term coastal accommodation.

Design and amenity have followed the same logic. Residents will have access to a heated plunge pool, gym, private dining room with a full kitchen, landscaped communal gardens with barbecues and a firepit, and a shared herb and vegetable garden, facilities intended to support daily use rather than resort-style turnover. Pet-friendly features, including a dog wash bay, acknowledge both buyer expectations and the area’s dog-friendly beach, located around 250 metres from the site.

[smartcode_project:default project_id=141609 project_image_fid=333366]

“Bokarina has become one of the Sunshine Coast’s most desirable beachside communities, and Bask represents the very last chance to buy new in this location,” GVG Director Sam Gardner said.&nbsp;

“Our focus has been to create spacious, functional apartments that meet the needs of locals who want to downsize without compromise, as well as those seeking a full-time coastal retreat.”

Positioned between the Pacific Ocean and Lake Kawana, Bask apartments have been oriented to capture outlooks toward the water or the Glass House Mountains, reinforcing the project’s connection to its natural surroundings. With parks, beachfront paths, hospitals, retail and public transport already in place, Bask arrives at a point where the broader precinct is no longer emerging, but established.

Construction is expected to complete in Q3 this year, with apartments ready to move into this Spring.

[smartcode_project_cta:default project_id=141609]

Bask to complete Bokarina’s Sunshine Coast lifestyle precinct as final apartments are released

depreciation

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Like a brand new car, new apartments and contents depreciate in value almost immediately but many investors are not aware of the depreciation benefits they are entitled to claim.
The Australian Tax Office enables investors to cover part of the purchase price by allowing them to claim depreciation on certain items like fittings and fixtures at the end of every financial year.
Although there is no percentage that fits all off the plan purchasers, Matusik Property Insights director Michael Matusik says up to 60% of the built cost of a new apartment can be tax-deductible over time.
Purchasers of off the plan apartments can take the contract of sale to a quantity surveyor to have a depreciation schedule put together, as the contract will detail inclusions such as price, size of the unit and size of the building.
A tax depreciation company can also inspect a property to determine the current value of every item and will then calculate how much value each of those items will lose every year for up to 40 years.
However, Multifocus Properties and Finance chief executive officer Philippe Brach says to get a definite schedule that an accountant can use, the property must be settled as the settlement acts as the starting date for the depreciation entitlement.
The depreciation report is submitted at the end of every financial year and is allowed to be back dated by up to two years.
BMT Quantity Surveyors director <a href="/expert-insights/finance/depreciation-tax-deduction-opportunity-for-investors-as-the-block-sky-high-reality-television-series-turns-serious">Brad Beer says on average investors can claim between $5,000 and $10,000</a> as a first full-year deduction.
Brach says for the first few years, depreciation will fall away rapidly but is largely compensated by rising rent revenue in keeping the cash flow constant.
“After about 10 years, depreciation will stop declining but rent will still keep rising, therefore the cash flow starts increasing,” says Brach.
Property investor <a href="/expert-insights/finance/the-benefits-of-depreciation-or-how-wear-and-tear-can-be-to-your-advantage">Cameron McEvoy</a> says the amount an investor can claim is always much higher in the first few years.
“It goes without saying that the figure for say year three, will be much higher than year 27.
“This is due to the gradual degrading value of items.
“More often that not, properties that are one to five years old have the most depreciable potential,” says McEvoy.
Brach advises that when looking at potential investment properties, fittings and fixtures should be taken into consideration when short-listing apartments as they will give high depreciation in the early years.
Off the plan buyers should be able to obtain a depreciation schedule from the developer free of charge to help them work out their numbers properly but if one is not available, a report can be constructed for around $300 to $1,000 through a depreciation specialist.
“Without a schedule, your cash flow may be way out of reality and you investment decision will be wrong,” says Brach.
The one-off report fee is also tax deductible.
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ntrotman-Et3xWpamVh

How to: Check your depreciation entitlements

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<div>No surprise that the Reserve Bank of Australia opted to leave interest rates on hold at 2% yesterday, preferring to "wait and see" how data flows play out in the months ahead.</div>
<div> </div>
<div>Not all that many surprises in the <a href="https://www.rba.gov.au/media-releases/2015/mr-15-11" target="_blank">media release</a> either in truth. </div>
<div> </div>
<div>Perhaps the most notable point was this:</div>
<div> </div>
<div>"The Australian dollar has declined noticeably against a rising US dollar over the past year, though less so against a basket of currencies. Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices."</div>
<div> </div>
<div>Although the Aussie dollar has touched a six year low against the US dollar at 74 cents, with commodity prices in an ongoing funk, the Reserve Bank wants to see further depreciation still. </div>
<div> </div>
<div><a href="/images/2015/07/08/audusd.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div><img src="/images/2015/07/08/audusd.jpg" alt=""></div>
<div> </div>
<div>
<div>Just how much further depreciation is open to interpretation, but given the strength of the wording one might safely assume that this means at least 10 per cent, and probably more.</div>
<div> </div>
<div>With the release also noting that "monetary policy needs to be accommodative" there is every chance that interest rates will fall again at some point within the next year.</div>
<div> </div>
<div>Futures markets are all but pricing in another cut over that time frame.</div>
<div> </div>
<div><a href="/images/2015/07/08/RBA.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div><img src="/images/2015/07/08/RBA.jpg" alt=""></div>
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<div>
<div>Asset markets</div>
<div> </div>
<div>The ASX 200 (XJO) surged by well over 100 points for no apparent reason to record its second strongest trade of the year to date.</div>
<div> </div>
<div>Another interesting development this week has been lenders tightening the screws further on investor loans.</div>
<div> </div>
<div>As of today Westpac - the Australian bank with the largest dollar amount of credit outstanding to investors - will reportedly apply a maximum 80 per cent loan to value ratio on its investment loans.</div>
<div> </div>
<div>This will make it comparatively more difficult for investors without substantial deposits to purchase property.</div>
<div> </div>
<div>To compensate we can expect that some lenders will instead encourage owner occupier loans, perhaps by dropping lenders mortgage insurance in some instances, or by dropping standard variable rates in others.</div>
<div> </div>
<div>The regulator APRA has evidently applied heavy pressure to banks and other lenders to slow the pace of credit growth to investors, and therefore the outlook for our property markets will shift accordingly over the period ahead.</div>
<div>
 With rock bottom interest rates all but assured through 2015 and 2016 we can expect to see a shallower but probably longer recovery in property markets, driven increasingly by owner occupiers.</div>
<div> </div>
<div>Another point of interest is that certain capital city markets have already been distorted by a steady flow of foreign capital, while simultaneously we also have a central bank which wants to depreciate the currency by a further 10 to 20 per cent. </div>
<div> </div>
<div>This may well be the action which opens the sluice gates...just sayin'.</div>
<div> </div>
<div>
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>. 
His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.
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pwargent-M4siyDbqQY

No surprise from the RBA: Pete Wargent

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There’s no doubt that depreciation can make a <a href="/guides/property-depreciation-continues-to-maximise-cash-flow">significant difference </a>to any investor’s cash flow, but how does it work? 

What is property depreciation?

As a property gets older, its structure and assets wear out – they depreciate. The Australian Taxation Office (ATO) permits owners of income-producing properties to claim this depreciation as a tax deduction.

What can be claimed?

Depreciation is claimed under two categories, capital works and plant and equipment. 

Capital works deductions are claimed on the building’s structure and any permanently fixed assets. Common assets that are claimed under capital works include driveways, walls, basins and roofs. 

Plant and equipment deductions are claimed on assets that are considered to be easily removable or mechanical in nature. Some common examples of plant and equipment assets include air-conditioning units, blinds, hot water systems and flooring. 

How is depreciation calculated? 

<a href="/guides/how-to-invest-in-property-in-2020-the-ultimate-guide">Property investors</a> can claim capital works deductions at a rate of 2.5 per cent for up to forty years. Capital works deductions generally make up an average of 85 to 90 per cent of a total depreciation claim. 

Depreciation for plant and equipment assets differs from depreciation of capital works. These assets are generally depreciated based on their effective life through the diminishing value or prime cost method. 

The diminishing value method is the most commonly used method of depreciation for plant and equipment assets. Under this method, depreciation deductions are calculated as a percentage of the asset’s depreciable balance. This results in higher deductions in the earlier years of ownership. 

Alternatively, the prime cost method calculates depreciation as a percentage of the cost. When the prime cost method is used, deductions are not as high in initial years but are spread out over time and produce a more even claim each financial year. 

Claiming depreciation with the low-value pool or immediate write-off

Depreciation deductions on plant and equipment assets can be claimed sooner through the low-value pool or as an immediate write-off. 

The low-value pool allows qualifying assets to be depreciated at an accelerated rate. Assets in the pool can be claimed at a rate of 18% in the first year, and 37.5% each following year. 

There are two different ways that an asset can qualify for a low-value pool:

<ul>
<li>
Low-cost asset: Is a depreciable asset with an opening value of less than $1,000. </li>
	<li>
Low-value asset: Is a depreciable asset that has a written down value of less than $1,000. This means the asset’s value was more than $1,000 in the year of acquisition but the residual value of depreciation is now less than $1,000.</li>
</ul>
The immediate write-off is also available for eligible low-cost assets. For individual residential investors, qualifying assets that cost $300 or less can be claimed as an immediate write-off. 

Depreciation and renovations 

Significant depreciation deductions can be claimed before and after a renovation has been completed on an <a href="/guides/looking-to-buy-an-investment-property-top-3-things-you-must-do-online-first">investment property</a>. 

A process called scrapping allows property owners to claim deductions for the un-deducted value of removed assets in the year they were removed. To take advantage of scrapping, a depreciation schedule must be arranged both before and after the renovation takes place. 

How does property tax depreciation boost cash flow?

Property depreciation is a non-cash deduction that essentially reduces a property owner’s taxable income. This means they pay less tax each financial year without paying for any additional costs. 

To claim depreciation, a tax depreciation schedule completed by a specialist quantity surveyor is essential.

Estimating depreciation deductions before buying an investment property

Owning an investment property is a balancing act of income and expenses. When deciding whether to <a href="/new-apartments">buy an investment property,</a> investors should consider obtaining a depreciation estimate of the property they are looking to buy. 
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Investor’s Guide to Residential Property Depreciation 

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GUEST OBSERVATION
Well, the dust has finally settled on the new legislation regarding the changes to depreciation that will apply to second-hand residential properties.
In this article we will dig deep into some of the questions we have commonly been asked since the 9th of May 2017, when the changes were announced in the Federal Budget.
Before we get into the nitty gritty let’s begin with a quick recap.
Property investors who acquire a second-hand residential property after May 10, 2017, that contain “previously used” depreciating assets, will no longer be able to claim depreciation on those assets. Depreciating assets, in this case, refers to things like ovens, dishwashers, blinds, etc.
As you already know, in 2017, the rule book on depreciation changed massively.
The Federal Government successfully voted on new legislation to change the way depreciation works, representing the biggest move in the industry that I’ve ever seen – and I’ve been a quantity surveyor for over 25 years!
The changes were effective as at 9 May 2017 at 7.30pm, when the federal budget was handed down. As you can imagine, they have huge implications for property investors and more importantly, the property equation, which we’ll go into later.
So, how have things changed exactly?
The best way to understand it is to break the changes down into nine simple key points:
<ol>
<li>If you acquire a second-hand residential property from 10 May 2017, which contains ‘previously used’ depreciating assets, you will no longer be able to claim depreciation on those assets. This refers to the plant and equipment portion of a depreciation schedule, including: Ovens, Dishwashers, Lights, Air-conditioners. Televisions, Carpets, Lounge suites, Blinds, Common property plant and equipment items. 
</li>
<li>However, the building allowance, or claims on the structure of the building, has not changed at all. You will still need a depreciation schedule to calculate these deductions, which typically accounts for 85% of the overall construction cost. The structure includes things like brickwork and concrete so there’s no change to that. 
</li>
<li>Acquirers of brand-new property will carry on claiming depreciation in exactly the same way as they have done so to-date – for both plant and equipment and structure. This is great news for the property industry, because a lot of developers rely on depreciation as part of their marketing strategy to attract investors. The government resisted making changes to depreciation on brand-new property because it did not want to halt construction, which would have impacted upon the supply of new property. A downturn in the construction industry would also have a knock-on effect – if tradies are out of work, they aren’t paying tax! 
</li>
<li>If you renovate a house while living in it, then sell the property to an investor, the assets will be deemed to have been previously used and the new owner cannot claim depreciation on the plant and equipment. 
</li>
<li>The proposed changes do not apply if you buy the property in a corporate tax entity, super fund (note self-managed super funds do not apply here) or a large unit trust. In other words, you can still buy a second-hand property in a company name and claim depreciation on it. You can buy a second-hand property in a super fund – as long as it’s a large one – and a large trust can buy a property as long as it has 300 members or more, and claim depreciation on that property. 
</li>
<li>The proposed changes only relate to residential property. Commercial, industrial, retail and other non-residential properties are not affected, so you can still buy a second-hand office or similar and continue to claim the second-hand carpet, exactly as you could before. You can’t do this for residential property, as I’ve explained above. 
</li>
<li>If you engage a builder to build a brand-new house, or do the work yourself and it remains an investment property, you will still be able to claim depreciation on both the structure and the plant and equipment items. This is because it’s brand new, and was brand new when you put in that oven. Therefore, you can still claim it because the costs are known. 
</li>
<li>If you engage a builder to renovate a property – or you do the work yourself – and it is also being used as an investment property, you will still be able to claim depreciation on it when you have finished the renovations. As above, this is because the assets you install are brand new, therefore you can still claim. But if you bought a property renovated by someone else and they lived in it for six months or a year and then sold it – you can’t claim depreciation on the oven and dishwasher, etc. in the future, because they have now been previously used. See the difference? 
</li>
<li>While investors purchasing second-hand property can now no longer claim depreciation on the existing plant and equipment, they will have the benefit of paying less capital gains tax when they sell the property. How? Well, when they replace or remove an item of plant &amp; equipment they would have been able to claim in depreciation under the previous legislation, the opening value of the asset can be claimed as a capital loss.</li>
</ol>
In my opinion, it seems like a lot of work to get the same result. The new rules have just moved depreciation from one line of the budget to another!
The good news is that the new legislation is ‘grandfathered’. That means that for everyone out there with an existing depreciation schedule, you can continue to claim exactly as you have been doing. So, if you bought a property prior to the budget – 9 May 2017 – nothing has changed. And if you have bought an investment prior to this date, and you don’t have a depreciation schedule, there’s never been a better time to get one! You might not get these allowances again.
One final point on grandfathering; if you bought a property prior to the budget and it is owner-occupied, and then you move out after 1 July 2017 – you will not be able to claim depreciation on the plant and equipment in that property.
Those items will be deemed to be previously used and caught in the net of the changing legislation – even though you acquired the property prior to the budget. So, these changes are kind of ‘half grandfathered’ if you ask me.
You will, however, still be able to claim the building allowance in this scenario if the property was built after 1987.
TYRON HYDE is a director of quantity surveying firm Washington Brown.
Read the <a href="https://www.washingtonbrown.com.au/blog/depreciation-budget-changes/?utm_source=ONTRAPORT-email-broadcast&amp;utm_medium=ONTRAPORT-email-broadcast&amp;utm_term=&amp;utm_content=The+New+Rules+-+We+wanted+to+make+sure+you+know&amp;utm_campaign=17092019" target="_blank">original article</a>.
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j.ballantyne1990-6AQqhLzZaK

Understanding new depreciation legislation on second hand residential property: Tyron Hyde

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Property investors are set to save time and money through the launch of the first-ever <a href="http://www.nationaldepreciationregister.com.au/" target="_blank">National Depreciation Register</a> (NDR) in Australia. 
The NDR, revealed as one of two major announcements by one of Australia’s oldest quantity surveying organisations, Washington Brown, at its Surprise 40th Birthday on February 23 at the Australian Museum, is an established database that includes most residential apartments in Australia and their depreciation costs.
The firm has made use of the extensive data it has accumulated over the past 40 years to create the NDR, which property investors will be able to access online, searching for their property in seconds and downloading a report quickly, after selecting the right affordable package for their needs.
The NDR was established in response to the changes to depreciation in the Federal Budget last year, which saw depreciation claims for second-hand residential properties purchased after May 10, 2017 limited to building allowances, with plant and equipment allowances no longer able to be claimed.
The changes left many property investors feeling confused about what depreciation costs they can claim moving forward, but the NDR provides a quick and easy way to find out for each property.
While investors will still need a property inspection to prepare a depreciation schedule for a house or a property purchased before May 9, 2017, it may not be required for apartment purchases after this date. You may simply be able to jump online to the NDR and get a report that way, without an inspection.
If you purchased a residential second-hand apartment after May 9, 2017, Washington Brown most likely already has the costs for your property on file, as you’ll only be able to claim deductions for building allowances. You don’t need to pay for an inspection, as the firm already knows the construction costs associated with your unit.
This is the first-ever NDR, so there has never been a faster, easier and more affordable way for property investors to claim the maximum depreciation costs for their investment property, maximising tax returns and putting more money back into their pockets.
To try it out and find your property depreciation report, visit <a href="http://www.nationaldepreciationregister.com.au" target="_blank">www.nationaldepreciationregister.com.au</a> .
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jrobinson-rf4aSBido9

First-ever National Depreciation Register launched by Washington Brown

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Tyron Hyde expects property investors may start looking into commercial and other forms of non-residential property following the passing of Federal Budget legislation on depreciation claims.
The chief of Washington Brown also expects investors will be looking into different structures to acquire the property – like companies, that have not been affected.
Parliament has passed the legislation yesterday which changes how depreciation deductions on a second-hand property can be claimed. 
Hyde says the six key takeaways from the legislation are:
1.   If you acquire a second-hand residential property after May 10, 2017, which contains “previously used” depreciating assets, you will no longer be able to claim depreciation on those assets.
2.   Acquirers of brand new property will carry on claiming depreciation exactly the way they have done so to date. This is great news for the property industry and the way it should be.
3.   The proposed changes only relate to residential property. Commercial, industrial, retail and other non-residential properties are not affected in the slightest.
4.   The building allowance or claims on the structure of the building has not changed at all. You will still need a Depreciation Schedule to calculate these deductions. This component typically represents approximately between 80 to 85 percent of the construction cost of a property.
5.   The proposed changes do not apply if you buy the property in a corporate tax entity, super fund (note Self-Managed Super Funds do not apply here) or a large unit trust.
6.   Perhaps the most interesting point: Whilst investors purchasing second-hand property can now no longer claim depreciation on the existing plant and equipment, they will have the benefit of paying less capital gains tax when they sell the property.
Tyron Hyde suggests while there has been some merit in regards to these changes, "a more balanced approached would’ve been more suitable."
"These changes will create a two-tiered property market in my view, where investors selling near-new property will struggle to compete with those selling new property.
"Developers should be dancing in the street, as there stock is now more appealing to investors.
"I suspect investors may start looking into commercial and other forms of non-residential property and also looking into different structures to acquire the property – like companies, that have not been affected."
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Depreciation legislation will change investor property preferences and help developers: Tyron Hyde

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The weekend finale of The Block Eslternwick saw comedian Dave Hughes buy the renovated home of celebrity couple and winners on the night, model Elyse Knowles and her boyfriend Josh Barker.
He paid $3.07 million for the home marketed as Regent House, which won Knowles and Barker the top prize, pocketing $547,000 in the process.
Hughes could stand to claim a maximum of nearly $2.4 million in depreciation deductions (below) as a property investor in his tax returns, as he has signalled he intends to rent the well-positioned top seller out.
Property Observer noted pre-auction that the forecast rentals were $2000 plus a week.
Price estimations were conservative by the marketing agents, while ANZ auction tipping website RealAs were way off the mark with their predictions given five days prior.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/10/30/Hughesmaximum.jpg" alt="">
The minimum estimation of available depreciation by BMT suggest he will be able to claim around $1.95 million over the property's timeline.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/10/30/HughesMinimum.jpg" alt="">
Two years ago the buyers of apartments in The Block: Blocktagon could claim an average of over $1.5 million in depreciation deductions.
The penthouse of Dean and Shay had the highest deductions available, with a minimum of $62,735 claimable in the first year and $1,621,688 claimed over the specified lifetime of the property.
For the buyers of The Block Triple Threat townhouses in 2015, the fully-furnished South Yarra properties with new interiors were able to claim between nearly $40,000 and $55,000 in depreciation benefits in the first year of ownership.
Tim and Anastasia's renovation offered the greatest deductions, with between $44,316 and $54,163 claimable in the first year. In total, their apartment offers a maximum deduction of $1,389,708.
Legislation allows the owners of any income producing property to claim depreciation deductions for the wear and tear of the building structure and the assets contained within.
Win a free depreciation report by signing up to Property Observer. Just <a href="https://www.surveymonkey.com/r/freedepreciationreport" target="_blank">click here</a>.
Download a free e-book on the relocating of entire homes.
 
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What depreciation the comedian Dave Hughes gets on his Block Elsternwick investment buy

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Two months after the Federal Budget announcement, property investors have received guidance on the Federal Government’s plan to tighten depreciation deductions available for residential properties.
Depreciation is the tax break for investors who own income-producing investment properties. Depreciation is an important, but sometimes overlooked, component of any investment property’s viability among the nation's two million landlords.
In what was described as an “integrity measure", the Government will limit plant and equipment depreciation deductions for investors in residential investment properties to assets not previously used. Plant and equipment items are usually mechanical fixtures or those which can be easily removed from a property such as dishwashers and ceiling fans.
Plant and equipment used or installed in residential investment properties as of the May 9, 2017 Budget night will continue to give rise to deductions for depreciation until either the investor is no longer owns the asset, or the asset reaches the end of its effective life.
Public consultation on the draft legislation will run until August 10.  
The measure is calculated to claw back $260 million over the next four years of the budget.
The key takeout is that if an investor acquires a second-hand residential property after May 10, 2017, which contains “previously used” depreciating assets, they will no longer be able to claim depreciation on those assets in future tax returns.
It address government concerns that some items were being claimed as tax write-offs by successive investors often in excess of their actual value.
The proposed changes only relate to residential property. Commercial, industrial, retail and other non-residential properties are not affected. 
The building allowance or claims on the structure of the residential building has not been changed. Investors will still need a depreciation schedule to calculate these deductions which typically represents between 80 to 85 percent of the construction cost of a property.
If investors renovate a property that is being used as an investment, they will still be able to claim depreciation on it after the renovations.
Perhaps the most interesting point, according to Washington Brown's quantity surveyor Tyron Hyde, is that while investors purchasing second-hand property can now no longer claim depreciation on the existing plant and equipment, they will have the benefit of paying less capital gains tax when they sell the property. 
Hyde noted what investors would have been able to claim in depreciation under the previous legislation, now simply gets taken off the sale price when it comes to capital gains tax calculations.
Finally it should be noted buyers of brand new property will carry on claiming depreciation exactly the way they have done so to date.
"This is great news for the property industry and the way it should be," Hyde said.
This article first appeared in The Daily Telegraph.
 
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jchancellor-FAypfDUnLy

Guidance on the Federal Government’s plan to tighten depreciation deductions

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GUEST OBSERVER
The property market has finally received some clarity in relation to the Government’s plan to reduce depreciation deductions for residential properties. It’s good news too, if you ask me. 
On Friday 14th July, the Treasury Office released a <a href="https://treasury.gov.au/ConsultationsandReviews/Consultations/2017/Housing-Tax-Integrity" target="_blank">draft bill</a> regarding how depreciation deductions on second-hand property can be claimed moving forward. They also invited interested parties to make submissions.
It's complicated to say the least, so I’ve tried to simplify this Bill and the key points. Here are my 9 Key Takeaways from the draft Legislation;
1. If you acquire a second-hand residential property after May 10, 2017, which contains “previously used” depreciating assets, you will no longer be able to claim depreciation on those assets.
2. Acquirers of brand new property will carry on claiming depreciation exactly the way they have done so to date. This is great news for the property industry and the way it should be.
We suspected this would be the case and I believe the property industry can collectively breathe a sigh of relief. 
3. The proposed changes only relate to residential property. Commercial, industrial, retail and other non-residential properties are not affected in the slightest. 
4.  The building allowance or claims on the structure of the building has not changed at all. You will still need a Depreciation Schedule to calculate these deductions. This component typically represents approximately between 80 to 85 percent of the construction cost of a property.
5. The proposed changes do not apply if you buy the property in a corporate tax entity, super fund (note Self-Managed Super Funds do not apply here) or a large unit trust.
This is interesting and I suspect a lot more people will start buying properties in company tax structures.
6. If you engage a builder to build a house and it remains an investment property, you will still be able to claim depreciation on both the structure and the Plant and Equipment items. 
7. If you renovate a property that is being used as an investment, you will still be able to claim depreciation on it when you have finished the renovations.
8. If you renovate a house, whilst living it in, then sell the property to an investor, the asset will be deemed to have been previously used and the new owner cannot claim depreciation.
9. Perhaps the most interesting point: Whilst investors purchasing second-hand property can now no longer claim depreciation on the existing plant and equipment, they will have the benefit of paying less capital gains tax when they sell the property. 
How? Well, in summary, what you would’ve been able to claim in depreciation under the previous legislation, now simply gets taken off the sale price in the event you sell the property in the future.
Here is an example of how this will work: 
Peter buys a property in September 2017 for $600k, included within the property was $25k worth of previously used depreciating assets.
As they were previously used, Peter can’t claim depreciation on those items.
Peter sells the property in 2022 for $800k, which included $15k worth of those depreciation assets.
Peter can now claim a capital loss of $10k ($25k-$15k) for the portion that Peter has not claimed in depreciation.
SUMMARY OF THE PROPOSED CHANGES
In my view the Draft Bill could've been a lot worse for both the property industry and the Quantity Surveying professions.
It will certainly address the integrity measure concern of stopping “refreshed” valuations of plant and equipment by property investors.
It may, however, create a two-tier property market in relation to new and second hand property.
You can see the ads now “Buy Brand New - We’ve Got The Depreciation Allowances”. 
It will still be just as critical for all property investors to get a breakdown of the building allowance &amp; plant and equipment values so you can:
A. Claim the building allowance (where applicable) and
B. Reduce the CGT payable when selling the property by deducting the unclaimed Plant and Equipment allowances.
The Quantity Surveying industry, just like the property development industry just breathed a huge sigh of relief.
I believe this integrity measure could've been better addressed and will be making a submission accordingly. 
But it wasn’t a bad ‘first run’ by the Government!
Tyron Hyde is a director of Washington Brown and can be contacted <a href="https://www.washingtonbrown.com.au/staff/tyron-hyde/" target="_blank">here</a>.
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What depreciation property investors can now claim: Nine key insights from the draft legislation: Tyron Hyde

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GUEST OBSERVER
If you have been following my tweets and Facebook comments, you would have noticed that I have been very vocal about the new budgetary measures and, in particular, the new rules on plant and equipment depreciation. Up until yesterday, it was obvious that large sections of the media were not aware of the full ramifications of what had been announced in last week's Budget. Indeed, headlines last week claiming that “Negative gearing was left untouched” could not have been further from the truth. Ultimately, these headlines left me in a state of bemusement with sections of our media which is cause for a blog of its own.    That all changed yesterday, where through the hard work of Australian Financial Review reporter, Su-Lin Tan, the full ramifications of what had been announced came to the fore via this front page story: Negative Gearing - Scalpel will cool apartment demand - experts
The new depreciation measures are significant as they massively reduce the ability of property investors to make deductions on their investment property, thereby reducing their ability to negatively gear.  These were the very words used by the Treasurer:
“And from 1 July 2017, the Government will improve the integrity of negative gearing by disallowing deductions for travel expenses and, for properties bought after today, the Government will also limit plant and equipment depreciation deductions to only those expenses directly incurred by investors.
To give you an idea of the impact on investors, the mocked up depreciation schedules below clearly show what was normally claimed, with the columns circled in red showing what can no longer be claimed if these new measures are passed. Both schedules assume a circa $500,000 price tag on the properties. 
This first property assumes a newly built situation where a Division 43 allowance (depreciation on buildings) can still be claimed.
<a href="https://www.propertyobserver.com.au/images/2017/05/17/v1.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v1.jpg" width="700" height="559">
The second example is of an older style property where a new renovation has been completed.  Both these depreciation schedules have been provided with thanks to Mike Mortlock from MCG Quantity Surveyors.
<a href="https://www.propertyobserver.com.au/images/2017/05/17/v2.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v2.jpg" width="688" height="580">
In both instances, plant and equipment depreciation are a significant component of the total deductible depreciation on a residential property. Literally, many thousands of dollars can no longer be claimed. Just keep in mind as well that these new changes only apply on residential property. Commercial property depreciation is still fully deductible.
<div>
The effective result is that tens of thousands of properties that were cash flow positive properties after the depreciation benefit will no longer be cash flow positive, keeping in mind these affect property purchases after May 9, so there is grandfathering. In its simplest terms, also consider the following scenarios: Property A
I own a new unit that was just built. I can claim the significant plant and equipment depreciation that comes with newly built dwellings. However, if I sell to you that unit tomorrow, you can not claim the plant and equipment depreciation. 
At this stage, it is not clear regarding the plant and equipment depreciation  that If I own an off-the plan development that is not complete and I then flip it on to you (before completion) whether you can claim the depreciation or not. The Federal Government needs to clarify this situation. Property B
I just bought a newly constructed unit after May 9, 2017. Normally, I would be able to claim the plant and equipment depreciation, however, at this point it is unclear under the new Budget measures whether I can going forward. A strict reading of the new measures suggests I cannot as it was the developer who originally purchased the plant and equipment.
This has been the view of some quantity surveyors while others believe the Government doesn’t intend to be so punitive. Once again, we are waiting for clarification. Property C
I own an older style property on which I recently completed a renovation whereby I purchased $200,000 worth of plant and equipment. I then sell this property to you, today. You cannot depreciate any of the plant and equipment that I have spent money on during the renovation.  
No further clarification is required here. This is exactly how the Government wishes the new measures to apply. In my view, this new measure, combined with recent APRA initiatives, plus the potential for the banks to pass on the new bank levy, will very likely result in a drop in property investor demand. When that drop happens is uncertain. But it could start at any time given once these changes are passed by the Senate, there will be a retrospective impact back to the May 9, 2017. So those people who purchased an investment property last weekend will likely be impacted by these new measures.
As quantity surveyor Washington Brown stated in their blog earlier this week, these new measures might actually have some unintended negative consequences for affordability in that:
<ol>
<li>
Property investors may now feel the need to hang onto their existing properties to continue claiming depreciation because if they sell that property they won’t be able to get as many deductions on their next one.
</li>
<li>
Developers rely on high depreciation figures in the early years to show investors how affordable an investment property can be. If these depreciation allowances are taken away, they will struggle to get pre-sales which are required by banks to fund the deal.
</li>
</ol>
I am also concerned for investors in a new property as it is likely that any secondary buyer will demand a discount on a resale to take into account that lack of deductible depreciation, which is significantly large on new dwellings. It’s a similar issue we had with Labor’s policy on negative gearing during last year’s election. As it is, off-the-plan investors regularly experience price declines in new properties when selling in the first few years of the property's life. These new measures may aggravate this reality which could then have a negative impact upon the supply of new housing stock in the long term.  
What the Liberals have announced is a light version of this policy in a way this will be a good test to see what would happen to dwelling prices and home affordability and rents under a no-negative gearing scenario. Are these measures good for First Home Buyers?  In addressing the affordability question one must ask do these measures, plus others announced such as the additional superannuation contribution scheme, the additional CGT discount on ‘affordable’ properties, the tax break for senior empty-nesters to sell their homes, the additional land supply, create the incentive for first home buyers to come back into the market? Well maybe, maybe not. Regardless, developers will need more first home buyers to take up the slack that investors leave behind. Potentially, first home buyers could do just that, which is what we all want. But they kind of need to. And if they don’t, the rent rises that may well follow could just force them to. This brings us to the final unintended affect – the rental market. Note the recent trend in falling building approvals.
<a href="https://www.propertyobserver.com.au/images/2017/05/17/v3.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v3.jpg" width="243" height="300">
We are nearing the peak in housing completions in this cycle which we believe will be early 2018. Yet vacancy rates in Sydney and Melbourne are still tight.
<a href="https://www.propertyobserver.com.au/images/2017/05/17/v4.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v4.jpg" width="700" height="384">
<a href="https://www.propertyobserver.com.au/images/2017/05/17/v4.jpg" target="_blank"></a><a href="https://www.propertyobserver.com.au/images/2017/05/17/v5.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v5.jpg" width="700" height="377">
This is happening because our population growth rates have exploded in recent years. Melbourne is now expanding by 120,000 people each and every year. Sydney's population is rising by 90,000 people. The growth rates are above and beyond what was expected and is causing systemic strains on our two largest cities.  For more on this I strongly recommend you read the recent blog on population from Macro Business  
Remember, this time last year there was a real fear of a unit oversupply. Forget that now for Melbourne and Sydney. There is no oversupply. And, depending upon how first home buyers respond to the Budget, there could be significant under-supply later in 2018-2019 which may cause rents to skyrocket. 
After all, rents in Melbourne are already well above expectations this year.
<a href="https://www.propertyobserver.com.au/images/2017/05/17/v6.jpg" target="_blank">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/05/17/v6.jpg" width="700" height="389">
<div>Our 2017 Housing Boom and Bust Forecasts</div>
<div>
 It was reported yesterday that SQM Research may be revising down its 2017 forecasts as a result of the changes. After careful consideration, our base case forecasts stay un-revised for now.   
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<div>
However, we believe that the probabilities have substantially increased that a peak in the price growth rates of the Sydney and Melbourne housing markets will happen this current June quarter and that the September and December quarters will record slower growth rates. The possibility of a modest price fall in either the September or December quarter has also increased. Subsequently, we now believe the lower end of our base case forecast range is likely to be reality. And, depending upon how and when the banks respond, we may revise our price forecasts down. For now, they remain on track with no current slowdown occurring in the housing market.
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<div>Louis Christopher is a managing director of SQM Research. He can be contacted <a href="https://www.sqmresearch.com.au/" target="_blank">here</a>.</div>
 
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