<p>Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.</p>

<p>Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;</p>

<p>David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;</p>

<p>“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;</p>

<p>[smartcode_project:default project_id=110291 project_image_fid=302785]</p>

<h2>Affordable product leads, premium demand remains resilient</h2>

<p>Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;</p>

<p>Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;</p>

<p>At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.</p>

<p>Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.</p>

<p>Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;</p>

<p>[smartcode_project:default project_id=148957 project_image_fid=364102]</p>

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

<p>Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.</p>

<p>David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.</p>

<p>“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;</p>

<p>Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.</p>

<p>[smartcode_project:default project_id=108869 project_image_fid=317905]</p>

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

<p>While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;</p>

<p>Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;</p>

<p>However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.</p>

<p>Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;</p>


Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<p><a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.</p>

<p>The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.</p>

<p>Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.</p>

<p>“Brisbane was the right step for Sammut,” Sammut said.</p>

<p>“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”</p>

<p><img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" /></p>

<p>Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.</p>

<p>The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.</p>

<p>“We are DA approved now which is very exciting,” Sammut said.</p>

<p>“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”</p>

<p><img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" /></p>

<p>Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.</p>

<p>“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.</p>

<p>The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.</p>

<p>“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”</p>

<p>The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.</p>

<p>The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.</p>


Sammut secures approval for debut Brisbane apartment development in Toowong

<p>Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.</p>

<p>Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.</p>

<p>The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.</p>

<p>“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.</p>

<p>“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.</p>

<p>“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”</p>

<p>The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.</p>

<p>“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”</p>

<p>From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.</p>

<p>“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”</p>

<p>The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.</p>

<p>“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.</p>

<p>Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.</p>

<p>“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.</p>

<p>“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”</p>

<p>The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.</p>

<p>“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.</p>

<p>Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.</p>

<p>&nbsp;</p>


Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

<p>Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.</p>

<p>The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.</p>

<p>It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.</p>

<p>With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.</p>

<p>“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.</p>

<p>“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”</p>

<p><img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" /></p>

<p>GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.</p>

<p>“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”</p>

<p>Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.</p>

<p>“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.</p>

<p><img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" /></p>

<p>&nbsp;</p>

<p>One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.</p>

<p>Green praised local policy settings.</p>

<p>“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”</p>

<p>One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.</p>

<p>“The way we will be able to achieve economies of scale is through size,” Green added.</p>


One Living enters Sydney's new apartment market with Northern Beaches site acquisition

<p>It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.</p>

<p>Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.</p>

<p>Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be</p>

<p data-end="683" data-start="511">"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.</p>

<p data-end="882" data-start="690">"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."</p>

<p data-end="882" data-start="690">[smartcode_project:default project_id=134646 project_image_fid=6109]</p>

<p>The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.</p>

<p>The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.</p>

<p>Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6110]</p>

<p>Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.</p>

<p>The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.</p>

<p>[smartcode_project:default project_id=134646 project_image_fid=6116]</p>

<p data-end="247" data-is-last-node="" data-is-only-node="" data-start="0">While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.</p>

<p>WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.</p>

<p>With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.</p>

<p>[smartcode_project_cta:default project_id=134646]</p>


WM Residences fills gap in Mordialloc townhouse market

Negative gearing

<html><body>
<p class="Default">It’s contentious: Should we keep negative gearing?</p>
<p class="Default">The Housing Industry Association has released research that said restricting access to negative gearing for investors buying residential property would reduce the amount of investment in housing, erode affordability and push rents higher.</p>
<p class="Default">HIA managing director Shane Goodwin said that discounting residential negative gearing in isolation is a retrograde step for tax reform in terms of efficiency and equity.</p>
<p class="Default">“New housing is one of the most highly taxed sectors in the economy, and the removal of negative gearing would only make that situation worse and discourage investment,” said Goodwin.</p>
<p class="Default">“This would in turn reduce housing supply and increase the cost of renting,” he said.</p>
<p class="Default">Goodwin says that negative gearing promotes private investment in the rental market, stimulating economic activity and taking pressure off social housing.</p>
<p class="Default">“With an aging workforce and future pressure on services, policy settings such as negative gearing that promote wealth creation and self-sufficiency in retirement should be promoted,” he said.</p>
<p>“It is important to remember that negative gearing is not the domain of so-called ‘wealthy investors’. Figures from the ATO demonstrate that 74% of tax payers receiving rental income have a taxable income of less than $80,000.”</p>
<p>The much debated topic has been<a href="/expert-insights/finance/room-for-debate-should-negative-gearing-be-abolished"> under discussion on <em>Property Observer</em> for years</a>.</p>
<p>There have been many suggestions of how it could be phased out, including grandfathering it out or just slowly toughening the rules. You can <a href="/expert-insights/finance/who-will-get-stung-by-negative-gearing-and-tax-changes">read some of those suggestions here</a>.</p>
<p>RESULTS:</p>
<p><img src="data:image/png;base64,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" 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jduke-EHk3XBmHkn

Restricting negative gearing would erode affordability, says HIA: Do you agree?

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<p>GUEST OBSERVATION</p>
<p>Positively geared property investing has become very popular over the last decade, but what exactly is it and how can you benefit from it?</p>
<p><span style="line-height: 1.3em;">Positive property is an investment vehicle that by definition pays the holding costs of a property and puts profit in the owner’s pocket. That is, it provides a passive income to you, the investor, from the first day of holding. This is called ‘passive income’ and it’s what makes it different from other forms of investing when you’re paying out each month.</span></p>
<p>When you begin investing, it pays to start with the end in mind if you want to be successful.</p>
<p>This includes two main aspects of planning. The first is being clear about your goals and motivations, and the second is understanding exactly what success looks like to you (for instance, retiring early, travelling more, working part time). The key is to understand exactly what you want your investment outcome to look like, as this will assist you in structuring and shaping a property portfolio that will get you there. Without a clear end, you won’t know the type of property to purchase and the required benchmarks to reach your goal, and it’s entirely likely you will fall short as a result.</p>
<p>A recent in depth study by University of Melbourne and Towers Watson found that only 53% of couples and 22% of single people are on track to achieve a comfortable level of retirement income - a grim prospect.</p>
<p>If you’re like most who look to property investing, you’ll want to continue living on your current household income into retirement, which really should be the minimum standard you consider. Even on $100,000 per year as a household income, 20 years into retirement works out at a requirement of $2,000,000. Sadly, Australians who have not created a stable investment portfolio through their earning lives will have no chance retiring with this sort of money put away.</p>
<p>Even if you are saving, the numbers are against you. Just 1% of Australians are considered “wealthy” in retirement.</p>
<p>It is crucial to prepare for a financially stable life by investing. Which brings us back to positive property.</p>
<p><strong>Here are four reasons that you should consider it:</strong></p>
<ol>
<li><span style="line-height: 1.3em;">It pays a profit from day one and builds a passive income<br><br></span></li>
<li><span style="line-height: 1.3em;">As your portfolio grows, your serviceability and passive income also grows<br><br></span></li>
<li><span style="line-height: 1.3em;">The extra income from positive property improves your lifestyle and future investment choices, providing you a stable base to build a portfolio, a life and a family<br><br></span></li>
<li><span style="line-height: 1.3em;">You can eventually look to achieve a goal of passive income where you are not controlled by your job, your budget or just “getting by”. Opportunities that didn’t exist beforehand can open up for you.<br><br></span></li>
</ol>
<p>Often when I see a new client, I ask them how much of a passive income they are seeking to achieve their goals. A very common figure is $100,000 per annum, which appears to be a pivotal point at which people consider replacing their working life for something else. It’s always exciting to see people cross this threshold and realise their options have changed.</p>
<p>By using the high yielding passive income method, investors can grow and expand their portfolio much more quickly than if they were paying out on a regular basis. It also means it won’t affect your lifestyle, and you’ll see a return far more quickly than if you were to go down a negatively geared path. </p>
<p>This doesn’t work in every location.</p>
<p>Highly positive properties are not, for instance, located in capital cities – if they were, everyone would be investing there and everyone would be a wealthy investor. They are usually spread between regional coastal and resource towns across the country.  </p>
<p>You must undertake your due diligence when it comes to finding the right town with the right outcome. You cannot find these in the inner city property regions, and you must accept that if you’re chasing positive property then you will likely be looking outside of areas you are familiar with.  Good due diligence will help you feel comfortable investing in these areas.</p>
<p>Picking the right property for now and down the track is also important. You must consider not only the individual property, but how it will affect your future purchases. Each property should be bought with the next in mind.</p>
<p>You need to get that yield and return figure right – you will want to pick a specialist in the area who deals with the corporate leasing market. They can maximise your return and, ultimately, your income.</p>
<p>It’s interesting to note that the property clock applies to all markets across the country, and has done so for as long as property prices have been recorded. When looking at the statistics, in particular the historical performance of Australian properties over the last 50 years, a clear and steady incline is noted.</p>
<p>Generally, every seven to 10 years, our capital cities run from the top of the clock, which you may call the peak, downwards to the bottom of the cycle. This then goes back up to the peak again, each time rising through its highs and lows, but taking strong and substantial steps forward in both capital growth and rental yield in each cycle.</p>
<p>In some of the largest property downturns of this century, investors have simply had to wait until the end of that cycle to receive capital growth.</p>
<p>Despite the long running success for many in property, only 5% of the Australian population own an investment property, with less than 0.2% owning more than four. Considering our access to lending, low interest rates and high wages, this is a staggeringly low number.</p>
<p>Many property investors purchase blindly – without considering their desired income and without having a stable base to invest from. Having a base of positive property will allow you to keep borrowing and not hit the serviceability glass ceiling that many hit when they reach two to three negatively geared properties.</p>
<p>My recommendation? Build a passive income first, with three to four positive properties generating $100,000 or more. Then look to diversifying into the capital cities either with negative gearing or through projects like flips and renovations.</p>
<p>Why? Because positive income acts as a risk buffer that not only allows you to do these active projects, but also allows you to protect yourself in the event that something goes wrong or interest rates increase.</p>
<p><strong><em>Ryan Crawford</em></strong><em> is group director of <a href="https://www.crawfordpropertygroup.com.au" target="_blank">Crawford Property Group</a>.</em></p>
<p><em>Ryan is one of Australia’s most successful property investors under 40 and a leading expert in positively geared property investment. In less than a decade, Ryan built a portfolio of more than 40 positively geared properties and is now dedicated to helping others plan and implement successful property investment strategies. </em></p>
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RyanCrawford-aLR2qkAu6t

Four reasons why you should consider positive property

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<p><span>Any move to scrap negative gearing would affect Australia’s “mum and dad” investors, according to research that shows 70% of those claiming the rebate earn less than $80,000.</span></p>
<p><span>With <a href="https://www.smartcompany.com.au/finance/42835-negative-gearing-could-be-putting-the-financial-system-at-risk-murray-inquiry" target="_blank">calls to scrap the tax</a> never far from public debate, the research shows the property tax break is not just for the wealthy, as often assumed.</span></p>
<p><span><a href="https://www.smartcompany.com.au/finance/investment/34310-should-negative-gearing-be-scrapped-experts-weigh-in" target="_blank">Negative gearing</a> allows investors to claim full tax deductions for interest costs and other property expenses when the investment is less than the cost of owning and managing the investment.</span></p>
<p><span>Statistics from the Australian Tax Office, provided by the Property Council of Australia, show 883,325 of the 1.266 million taxpayers claiming benefits from negative gearing earned under $80,000 in 2011-12.</span></p>
<p><span>Job classifications from the ATO show the majority of those are teachers, nurses, clerical and emergency workers and salespeople.</span></p>
<p><span>Nick Proud, executive director of the Residential Development Council, told <em>SmartCompany</em> many would also be small business owners or sole traders, but it is difficult to determine given the ATO’s classification by industry.</span></p>
<p><span>The statistics also show 73% of the Australians accessing negative gearing only own one property and a further 18% own two.</span></p>
<p><span>“The majority of these people are not property barons,” says Proud.</span></p>
<p><span>“They are average mums and dads, people who don’t want to leave it up to the government to look after their retirement.”</span></p>
<p><span>Proud says these investors are providing homes for people not far below their own earning capacity.</span></p>
<p><span>He says any action to remove negative gearing from the tax books will result in a slowing up in the interest in rentals, with rental numbers declining and an upwards pressure placed on rents.</span></p>
<p><span>He also says investors claim around $16 billion in other rental deductions for property maintenance through their negative geared properties.</span></p>
<p><span>“That flow-through to economy would happen straight way and we would see a significant decline in jobs,” says Proud.</span></p>
<p><span>Proud also says there would be a significant effect on the demand on public housing, with Australian Bureau of Statistics data showing a huge reduction in building approvals for such accommodation in recent years.</span></p>
<p><span>Brian Chant, managing director of Property Asset Planning, agrees scrapping negative gearing would have a detrimental effect on rent prices, job creation and public housing demand.</span></p>
<p><span>He tells <em>SmartCompany</em> negative gearing legislation has been in place from 1996 for good reason.</span></p>
<p><span>“Negative gearing is a fantastic opportunity for everyone, in any wage or income bracket,” says Chant.</span></p>
<p><span>“People love getting into property and what easier way to reduce your income tax.”</span></p>
<p><span>But Taxpayers Australia’s head of taxation, Mark Chapman, tells <em>SmartCompany</em> it may not be worth those in lower income brackets getting into negative gearing investments.</span></p>
<p><span>“I wonder whether so many people in those lower income thresholds misunderstand the extent of tax brackets,” says Chapman.</span></p>
<p><span>He says often these lower income earners hear “wonderful things about negative gearing”, but they don’t necessarily fully understand paying tax at a lower rate also means earning at a lower rate.</span></p>
<p><span>“If people in those income brackets go into property investment because they want to be property investors and have commercial judgement fine, but if they look at it as a means of saving tax, ultimately they will be disappointed.”</span></p>
<p><em>This article first appeared on <a href="https://www.SmartCompany.com.au" target="_blank">SmartCompany</a>.</em></p>
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krobb-aCrRNnPq6D

Who really claims negative gearing? ATO stats reveal it's not just a strategy for the wealthy

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<div class="WordSection1">
<p>GUEST OBSERVATION</p>
<p>Negative gearing is a form of financial leverage where the gross income generated by an investment is less than the cost of owning and managing the investment, including interest charged on the borrowings.<span style="line-height: 1.3em;">The negative </span><span style="line-height: 1.3em;">cash flow</span><span style="line-height: 1.3em;"> is then offset against personal incomes. </span></p>
</div>
<p><strong>Doesn’t negative gearing just help the rich get richer?</strong></p>
<p>According to 2011-12 ATO statistics, there were 12,736,030 individual taxpayers in Australia and 1,897,668 (14.9%) of them owned one or more investment properties. 73% of property investors own one property and only 4% of investors own four or more properties. For a property to be negative geared there must be a significant debt against it (they don’t own it outright).</p>
<p>In other words, an overwhelming majority of investors are ordinary mums and dads; they are attempting to fund their own retirement, as opposed to being a burden on Australia’s taxation system via government-funded pension.</p>
<p><strong>Doesn’t negative gearing reduce the amount of revenue available to governments each year?</strong></p>
<p>A report produced by REIA in August 2014, mentioned that a total of $7,860 million in losses were claimed by Australian property investors in 2011-12. The ATO also charged extra taxes on the $5,939 million worth of investment property profits.</p>
<p>Should changes ever be made to negative gearing and results in fewer property transactions each year, governments would stand to lose a lot more tax revenue from stamp duties, infrastructure charges, land tax, construction industry payroll taxes, and more. The existing $71 billion (and growing) spent each year on tax-payer funded pensions and allowances will increase significantly. </p>
<p><strong>What impact would the removal of negative gearing have on Australia’s housing supply?</strong></p>
<p>According to 2011 Census data, Australia has 9,117,003 residential properties and we are adding approximately 160,000 more each year. Negative gearing is a tax-policy linked to property – other policies include stamp duty, first home buyer incentives, tax rebates and incentives to purchase new property, land tax, and capital gains tax.</p>
<p>Tightening of any of these policies will directly influence consumer behaviour and become a disincentive to buying and holding property. As we’ve seen already with ‘new home building grants’, the introduction and removal of tax policies directly affects the construction industry (Australia’s biggest industry by direct and indirect jobs).</p>
<p><strong>What about Australia’s social housing problem?</strong></p>
<p>75% of residential properties in Australia are occupied by the owner. Of the remaining 25% that are rented only 5% are provided by governments. Governments can’t afford to fund social housing (some governments have actually been selling off parcels of properties in order to raise money for other reasons).</p>
<p>The National Rental Affordability Scheme (NRAS) is government admission of our social housing shortfall which governments can’t fund so they developed a policy designed to encourage others to do it for them. Removal of negative gearing would be a gross contradiction to this.</p>
<p><strong>How might the removal of negative gearing affect Australia’s welfare system?</strong></p>
<p>Australia’s financial literacy crisis is in our DNA - only 4% of people are financially independent by age 65. The federal government have said that we can't support our ageing population with our unsustainable reliance on tax-payer pensions. They have touted the possibility of the superannuation age increasing to 70. Stripping back incentives which encourage investment would only compound this country's problem.</p>
<p><em>Article continues on the next page. Please click below.</em></p>
<hr class="system-pagebreak">
<p><strong>Does negative gearing force property prices up and make it harder for first home buyers to get in to the market?</strong></p>
<p>Property markets are affected by dozens of factors. The factors which affect property values the most are related to the general economy, employment, and credit policies, not tax policies). When property markets perform strongly, like they have in Sydney in 2013-14, it is not uncommon for segments of the community to blame investors for driving values up and making bit harder for others to get in.</p>
<p>Negative gearing has been in place for generations and it is no more responsible for Sydney’s property price growth in 2013-14 than it was for its flat-line performance from 2001 to 2008.</p>
<p><strong>Doesn’t negative gearing make rents more expensive?</strong></p>
<p>In July 1985, in response to claims that negative gearing was the primary cause of property rents rising uncontrollably, the Hawke government quarantined negative gearing. During the two years that the quarantine was in place, ABS figures show rents rose by an average of 22%. The policy was reversed in 1987 and rents still rose by 21% over the next two years. A similar trend occurred with property values. As mentioned previously, tax policies have a smaller impact on property markets (values and rents) than most people think.</p>
<p><strong>What other potential impacts could occur if negative gearing was tinkered with?</strong></p>
<p>Propertyology often describes property investment as a business – the business of providing accommodation – and the investor’s role is akin to that of a company director (to make responsible decisions which are in the best interest of your balance sheet and profit and loss statement).</p>
<p>Negative gearing involves claiming interest expenses from borrowings plus other costs associated with maintaining an asset in much the same way that more traditional businesses do. Similarly, a share investor will claim the interest expense from their margin loan. Time will tell whether property investors will be singled out or not.</p>
<p><strong>A final word...</strong></p>
<p>Rumours of negative gearing getting scrapped arise almost every year – either in the lead up to a federal budget or whenever there is a major review of Australia’s taxation policies. It is the responsibility of governments to periodically review everything; nothing lasts forever. <span style="line-height: 1.3em;">The reality however is that negative gearing has existed in Australia for a few generations.</span></p>
<p>In the event that negative gearing was ever scrapped, there might be some short-term referred pain but the real estate body will eventually realign itself (once the dust settles, it will be business as usual again for most property investors).  The potential implications to scrapping negative gearing will be spread a lot further than property investor’s tax returns. Any government who is bold enough to make a change faces consequences far greater than the revolt of 1.9 million people at the election box. For these reasons, it is my view that negative gearing will survive further generations.</p>
<p><em><strong>Simon Pressley</strong> is managing director of <a href="https://www.propertyology.com.au/" target="_blank">Propertyology</a>, a full-time property market analyst, accredited property investment adviser, and Australia’s (REIA) Buyer’s Agent of the Year (2012+2013+2014)</em></p>
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spressley-sBoeMhannA

Scrapping negative gearing would have consequences far beyond an investor's tax return

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<p><span>The current tax treatment of investment property losses, through a combination of negative gearing and capital gains tax, has come under fire for putting the financial system at risk, according to the federal government’s Financial System Inquiry interim report.</span></p>
<p><span>Currently, <a href="https://www.smartcompany.com.au/finance/investment/34310-should-negative-gearing-be-scrapped-experts-weigh-in" target="_blank">negative gearing</a> means that interest costs and other property expenses are fully tax deductible, while capital gains tax on properties is applied with a 50% discount.</span></p>
<p><span>The Financial System Inquiry, headed up by David Murray, states in its interim report that these arrangements “encourage leveraged and speculative investment — particularly in housing”.</span></p>
<p><span>“Because of these tax arrangements, owners of residential property have an incentive to repay their mortgage as slowly as possible to maximise the tax deductions they can accrue,” says the report.</span></p>
<p><span>“Loans with interest-only periods help to maximise these tax deductions in the early years of a loan, although these loans also give borrowers more flexibility with repayments. The tax system, therefore, encourages individuals to take on more risk, which does have implications for risks to lenders.”</span></p>
<p><span>Aside from negative gearing and the asymmetric tax treatment, the report identifies additional tax-related factors that are also distorting the housing market.</span></p>
<p><span>“In addition to the more favourable tax treatment, individuals have an extra incentive to put more of their wealth into their primary residence because of the means test for the age pension, which excludes the primary home. This leads to higher allocation of wealth to housing and, for some, an inefficient level of consumption of housing services,” the interim report states.</span></p>
<p><span>Current arrangements also mean family homes are a key savings vehicle for many Australians.</span></p>
<p><span>“Returns on owner-occupied housing (including imputed rent and capital gains) are exempt from tax, although this is not unusual by international standards. This makes housing a very attractive vehicle for savings,” the report states.</span></p>
<p><span>The favourable tax treatment for property investment has created a situation of increasing mortgage indebtedness, which in turn has created risks for the financial system.</span></p>
<p><span>“Since the Wallis Inquiry, the increase in households’ mortgage indebtedness has been accompanied by banks allocating a greater proportion of their loan book to mortgages; the share of loans for housing has increased from 47% in 1997 to its current share of 66%,” says the report.</span></p>
<p><span>“A large enough disruption to the housing market could have significant implications for household balance sheets, financial stability, economic growth, and the speed of recovery in household spending and broader economic activity following a shock.”</span></p>
<p><span>Mark Chapman, head of tax with lobby group Taxpayers Australia, told <em>SmartCompany</em> the report is correct in identifying that tax deductions people claim over the life of a property are greater than the losses they claim at the end.</span></p>
<p><span>“For high income earners, it’s an astute way to reduce their tax rate. But 70% of those using negative gearing are not high income earners, and are required to buy an asset to get a tax deduction,” Chapman says.</span></p>
<p><span>“It needs to be reformed. From a tax policy perspective, [negative gearing in its current form] makes little sense. In most jurisdictions, offsets for losses on property investments can only be claimed against profits on other properties, or be carried forward against future profits.”</span></p>
<p><span>Philip Soos, a research Masters candidate at the School of Management at Deakin University specialising in property tax law, told <em>SmartCompany</em> that since 2001, most investment property rents have not been high enough to cover interest and expenses.</span></p>
<p><span>“Around 60% of investor loans are interest only. It’s a big leverage bet on a capital gain – as long as wages are high enough to sustain the rents,” Soos says.</span></p>
<p><span>“While the argument is that it encourages new property development, around 96% of all investment property loans by value are spent on existing properties.”</span></p>
<p><span>“Abolishing negative gearing would be better than reform, but that’s unlikely, so quarantining it or reforming it so it’s limited to new, rather than existing properties, is probably the best option,” says Soos.</span></p>
<p><span>Brian Chant, managing director of Property Asset Planning, told <em>SmartCompany</em> negative gearing has some important benefits when applied to new properties.</span></p>
<p><span>“I think it’s very effective when used on brand new property. It allows you to turn over the economy, and when you turn over the economy, you employ people. It allows you to build new homes and new affordable housing,” Chant says.</span></p>
<p><span>“It needs to be reviewed and discussed further, but when it’s applied to new homes, it’s brilliant.”</span></p>
<p><span>However, Property Tax Specialists' Shukri Barbara told <em>SmartCompany</em> reforming negative gearing too quickly could create its own risks.</span></p>
<p><span>“One important issue is the banks, who lend up to 90%, are heavily dependent on negative gearing. If you remove it too quickly, the values will drop and create the risk that people will sell their properties for less than they owe on their mortgages,” he says.</span></p>
<p><em>This article first appeared on <a href="https://www.SmartCompany.com.au" target="_blank">SmartCompany</a>.</em></p>
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asadauskas-o9wSWMRiAW

Negative gearing could be putting the Australian financial system at risk: Murray inquiry

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<p>It’s always refreshing to read an intelligent report, so when the Centre for Independent Studies released <em><a href="https://www.cis.org.au/images/stories/issue-analysis/ia146.pdf" target="_blank" title="Eight Housing Affordability Myths">Eight Housing Affordability Myths</a></em> by Dr Stephen Kirchner, we finally got to see why Australia’s housing debate is long overdue.</p>
<p>The only problem that comes from such a precise paper is that it will require government intervention which, as most would agree, is where the problems start. They just don’t get it – if they did, we would not have the glaring problems that we see today. Some of the interesting points raised are:</p>
<ul>
<li>Housing consumption and investment are both taxed and subsidised by all levels of government. The net effect of these taxes and subsidies on housing affordability is difficult to determine as it depends on the benchmarks used to assess what is taxed and what is subsidised.</li>
<li>Housing affordability is a relative rather than an absolute concept and there is no unique way of measuring housing affordability.</li>
<li>Much commentary on housing markets focuses on dramatic, ‘short-term’ changes in house prices, failing to put these changes into ‘long-term’ context.</li>
<li>The supply of new land for housing has declined over the last decade, with the average number of lots produced in the five largest capital cities declining by 21%.</li>
<li>The long-run increase in the price of new land for housing is indicative of the failure of state governments to increase land supply to accommodate rising demand for new housing.</li>
<li>A fundamental principle of economics is that if you tax something more heavily you will get less of it. This principle is well understood in relation to markets in goods and services, but it is often forgotten in relation to housing.</li>
</ul>
<p>Some will argue that today, we are seeing two very clear markets; namely the principal place of residence and the investment market which in Melbourne and Sydney has gone berserk.</p>
<p>More confusing, is that we keep reading reports that consumer confidence is in a downward spiral even though investors are in an absolute feeding frenzy for off the plan properties and to such an extent, that they will pay over and above the asking prices.</p>
<p>Now let’s bring out those conspiracy theories. It is clear that since the global financial crisis (GFC) that the mum and dad investors have stayed well clear of the share market and will continue to do so simply because they don’t trust it. This massive investor shift is now driving property values upwards and creating an unprecedented financial burden on the federal government in terms of negative gearing subsidies and Australia is just one of a few developed countries that allows negative gearing.</p>
<p><a href="https://www.rwm.com.au/files/2014/07/3-07-2014-3-44-05-PM1.jpg"><img class="aligncenter size-full wp-image-57102" src="https://www.rwm.com.au/files/2014/07/3-07-2014-3-44-05-PM1.jpg" alt="3-07-2014 3-44-05 PM" width="683" height="252"></a></p>
<p><a href="https://www.rwm.com.au/files/2014/07/10-07-2014-9-33-53-AM.jpg"><img class="aligncenter size-full wp-image-57104" src="https://www.rwm.com.au/files/2014/07/10-07-2014-9-33-53-AM.jpg" alt="10-07-2014 9-33-53 AM" width="630" height="312"></a></p>
<p>Today, 1.2 million negatively gear with the Australian Tax Office statistics revealing that property investors claimed $13.2 billion in losses in 2010/11 which was up from $10.1 billion the year before.</p>
<p>Given the huge run on investment property over the last few years it will be frightening to see what the negative gearing figures are for 2012/13 and 2013/14. <a href="https://www.businessspectator.com.au/article/2014/7/9/australian-news/why-negative-gearing-australias-biggest-policy-failure" target="_blank" title="Why negative gearing is Australia’s biggest policy failure ">Why negative gearing is Australia’s biggest policy failure </a>– “It is difficult to find a government policy that has been less successful at meeting its objectives than negative gearing on residential property. But unfortunately that is the nature of housing policy in Australia, where sound policies are ignored in favour of policies that encourage speculation, reduce home ownership and redistribute wealth towards the already affluent.”</p>
<p>Negative gearing by property investors reduced personal income tax revenue in Australia by $600 million in the 2001-02 tax year, $3.9 billion in 2004-05 and $13.2 billion in 2010-11 – so this itself leaves a pretty good clue as to how popular it has become. Negative gearing was introduced back in July 1985 and many argue that today, it is no longer relevant. Investors have taken the first home buyers out of the market and they can’t compete as it is not a level playing field.</p>
<p><a href="https://www.rwm.com.au/files/2014/07/9-07-2014-4-11-47-PM.jpg"><img class="aligncenter size-full wp-image-57106" src="https://www.rwm.com.au/files/2014/07/9-07-2014-4-11-47-PM.jpg" alt="9-07-2014 4-11-47 PM" width="573" height="345"></a></p>
<p>Then you have the foreign investors where an inquiry is currently underway, although the only way to really see what is happening is to extrapolate the relevant stamp duty records and cross pollinate this data – every sale in Australia pays stamp duty although for some strange reason this point has been missed by the inquiry. This data is readily available – although I doubt it will ever see the light of day.</p>
<p>So the debate should be “what benefit is negative gearing to the Australian economy when nearly all the other advanced economies don’t permit it”. Australian property markets would be decimated if it was abolished and would take the banks with them given the significant borrowings on each investment property which are crucial to maximise the negative gearing subsidies.</p>
<p>When the government brought in the GST in July 2000, this immediately brought about the decline of property developers as they had to pay the 10% GST on the construction costs. Maybe a possible answer is to remove the GST on construction, to see more construction which will increase employment and off-set this by scaling back negative gearing subsidies. In the long-term, this would lower property prices more particularly in the property investment sector. Or, do you place a limit on the number of investment properties allowed that can qualify for negative gearing subsidies?</p>
<p>Now we need to see a politician brave to start this conversation. Better still the Abbott government might even decide that they now need a Housing Minister.</p>
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robertsimeon-hRNTwJyXkQ

Why Australia urgently needs a housing debate

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<p>GUEST OBSERVATION</p>
<p>We all want a property portfolio that costs us nothing to hold. It’s the dream to be able to purchase more and more properties because every property pays for itself. So why do people opt for negatively geared property if the best option is a positively geared property portfolio?</p>
<p>The general argument is that negatively geared properties are that way because they are in areas offering higher capital growth but lower yields. For example, metropolitan areas where the value of the property is high in comparison to the rental income it receives. And the common notion is positively geared properties, are typically in regional or fringe areas of cities or may involve a dual occupancy, like a granny flat and as a result achieve higher rental yields in comparison to the overall value of the property.</p>
<p>However like all things there are exceptions to the rules and some properties with reasonable capital growth can still offer reasonable rental returns. For example, according to the Commonwealth Banks recent report on the state of the property market in Australia over the last 12 months:</p>
<p><a href="/news">Kelvin Grove</a> in Brisbane reported 4% capital growth and averages 4.7% rental yields.</p>
<p><a href="/news">Strathfield</a> in Sydney reported 13% capital growth and averages 4.5% rental yields</p>
<p><a href="/news">St Kilda</a> Melbourne reported 4.7% capital growth and averages 4.3% rental yields</p>
<p>And with RP Data’s latest economic report showing average nationwide unit rental yields while down are still achieving on average 4.7%, most investors would be looking at the current three year fixed interest rates under 5% and thinking we have hit the sweet point where you can achieve the dream and just keep adding properties almost ad infinitum.</p>
<p>So why is lending still a problem and why can’t investors just keep adding properties?</p>
<p>The first thing to keep in mind is the normal costs associated with owning an investment property, like real estate agency fees, council rates, strata fees. Then there are the ones that people often overlook like the unexpected hot water system replacement.</p>
<p>Let’s assume though that you achieve a rental return of 6% and the costs are no more than 1% so that you have net rental of 5%.</p>
<p>Won’t the lenders give you unlimited loans?</p>
<p>This is when the lenders start to apply their own stress testing to your borrowing and it can make a huge difference. For example while some lenders will allow you to consider the actual interest rate of your loans where the loans are fixed for more than three years others will apply the normal variable testing interest rate.</p>
<p>And what a difference, on a typical $500,000 loan the difference could be. Interest only payments with a fixed rate of 4.99% of $2,079 per month or calculated loan repayments of $3,530 per month where the lender loads the interest rate by 2% and applies principle and interest payments over 25 years.</p>
<p>That is a difference in rental payments of $1,451 per month in order to get the loan to match the rental income or put it another way, a net rental yield of 8.47%.</p>
<p>Now there are creative ways of increasing your rental yield like renovations, allowing the tenants to keep a pet or adding an extension or granny flat that will allow the property to generate an additional income stream.</p>
<p>So why do lenders look differently at your current loan repayments? We know it all comes back to the four credit rules or  four C’s of credit. That is each lender is weighting the importance of your ability to afford the loan repayments slightly differently depending on their expectation of where interest rates, unemployment and the general economy might be going.</p>
<p>So there is no right or wrong answer to the question about whether negative or positive is right or wrong because for every investor is comes down to personal circumstance, your individual goals and your ability to service your loans.</p>
<p>If you would like guidance on which lenders might be right for you or a free property report on the possible capital growth of your properties why not give us a call.</p>
<p><em><strong>Albertus Waldron</strong> is a partner at Chan &amp; Naylor. For a free portfolio review or guidance on which lenders might be right for you, you can contact <a href="https://www.chan-naylor.com.au/contact/" target="_blank">Chan &amp; Naylor</a>.</em></p>
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awaldron-dVhPXocinv

Why lenders are negative about positively geared property

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<p>Property investors feel the effects of interest rate changes just as much as home owners do, although that impact may be disguised in the short-term by negative gearing.</p>
<p>Investors receive a tax deduction on mortgage interest expenses, so paying more interest on an investment property loan may not seem as bad as when rates rise on the loan that funds the family home. A bigger interest bill means a bigger tax deduction, after all.</p>
<p>But interest rate increases do hit the bottom line of investment returns. Higher costs, without accompanying rent increases, reduce the income the investor receives each year. This means the investment must achieve a higher capital gain to produce the same total return.</p>
<p>Accounting firm, HLB Mann Judd has crunched some numbers for <em>Property Observer</em> that demonstrate the effect of interest rate rises on a fairly typical property investment.</p>
<p>The property in the example is worth $465,000 and achieves a weekly rent of $400. An investor buys the property with a loan of $418,500 (having paid for 10% of the property in cash). The mortgage is taken over 25 years with monthly repayments. In the example, the investor has decided to repay the principal as well as interest.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Loan details</h5>
</td>
<td valign="top" nowrap width="130">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Property Value</h5>
</td>
<td valign="top" nowrap width="130">
<h5 style="text-align: right;">$465,000</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="130">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Loan Amount</h5>
</td>
<td valign="top" nowrap width="130">
<h5 style="text-align: right;">$418,500</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Interest Rate</h5>
</td>
<td valign="top" nowrap width="130">
<h5 align="right">5.1%</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Term of Loan (years)</h5>
</td>
<td valign="top" nowrap width="130">
<h5 align="right">25</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="130">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Repayment Frequency</h5>
</td>
<td valign="top" nowrap width="130">
<h5 align="right">Monthly</h5>
</td>
</tr>
</tbody></table>
<p><span style="line-height: 1.3em;">The property generates an annual rental income of $20,800 and there are no periods of vacancy throughout the year.</span></p>
<p>Annual expenses total $6,306.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="177">
<h5>Estimated Annual Income</h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Estimated Annual Expenses</h5>
</td>
<td valign="top" nowrap width="151">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5> </h5>
</td>
<td valign="top" nowrap width="151">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5>Rental income (at $400/wk)</h5>
</td>
<td valign="top" nowrap width="94">
<h5>$20,800</h5>
</td>
<td valign="top" nowrap width="208">
<h5>Strata Levies ($470/qtr)</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$1,880</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Council Rates ($270/qtr)</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$1,080</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Water Rates ($160/qtr)</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$640</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Management Fees (5.8%)</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$1,206</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Repairs &amp; Maintenance</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$1,000</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5>Landlord Insurance Premium</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$500</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5> </h5>
</td>
<td valign="top" nowrap width="94">
<h5> </h5>
</td>
<td valign="top" nowrap width="208">
<h5> </h5>
</td>
<td valign="top" nowrap width="151">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="177">
<h5>Total Income</h5>
</td>
<td valign="top" nowrap width="94">
<h5>$20,800</h5>
</td>
<td valign="top" nowrap width="208">
<h5>Total Expenses</h5>
</td>
<td valign="top" nowrap width="151">
<h5>$6,306</h5>
</td>
</tr>
</tbody></table>
<p><strong style="line-height: 1.3em;">Case study – mortgage rate 5.1%</strong></p>
<p>In the first case, the interest rate on the loan is the Reserve Bank of Australia’s indicator rate for a discount variable mortgage, current as of May 2014, of 5.1%.</p>
<p>At that rate, the investor pays $2,471 a month for the mortgage, or $29,651 over the year. This comprises of $21,147 in interest and $8,505 in principal repayments.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Mortgage Repayments (at 5.1%)</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Monthly Repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$2,471</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Yearly Repayments*</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$29,651</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>*Comprised of :</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual interest repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$21,147</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual principal repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$8,505</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total cost of loan</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$741,286</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total interest paid</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$322,786</h5>
</td>
</tr>
</tbody></table>
<p><span style="line-height: 1.3em;">That means the property generates a taxable loss of $6,653 for the year. Taking into account the principal repayments, the property has generated an annual cash loss of $15,158.</span></p>
<p>The principal has reduced by $8,505 so there is $409,995 outstanding on the mortgage.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Taxable profit/loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Income</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">$20,800</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Expenses</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$6,306</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Interest Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$21,147</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Taxable Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$6,653</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Principal Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$8,505</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Cash Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$15,158</h5>
</td>
</tr>
</tbody></table>
<p><strong style="line-height: 1.3em;">Case study – mortgage rate 5.6%</strong></p>
<p>Say the interest rate was 0.5 percentage points higher at 5.6%, while rent and other expenses on the property remain the same.</p>
<p>Repayments on the loan are $2,595 a month, or $31,140 over the year. The amount of interest paid increases to $23,235 for the year. However, the amount that is repaid off the principal reduces to $7,905.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Mortgage Repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Monthly Repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$2,595</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Yearly Repayments*</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$31,140</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>*Comprised of :</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual interest repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$23,235</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual principal repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$7,905</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total cost of loan</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$778,503</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total interest paid</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$360,003</h5>
</td>
</tr>
</tbody></table>
<p><span style="line-height: 1.3em;">The annual taxable loss on the property increases to $8,742. The total cash loss is $16,647 and there is still $410,595 outstanding on the mortgage.</span></p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Taxable profit/loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Income</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">$20,800</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Expenses</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$6,306</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Interest Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$23,235</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Taxable Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$8,742</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Principal Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$7,905</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Cash Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$16,647</h5>
</td>
</tr>
</tbody></table>
<p><strong style="line-height: 1.3em;">Case study – mortgage rate 6.1%</strong></p>
<p>If the mortgage interest rate was higher again, at 6.1%, repayments on the loan would go up to $32,664 for the year.</p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Mortgage Repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Monthly Repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$2,722</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Yearly Repayments*</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$32,664</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>*Comprised of :</h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual interest repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$25,326</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual principal repayments</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$7,339</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="95">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total cost of loan</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$816,612</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Total interest paid</h5>
</td>
<td valign="top" nowrap width="95">
<h5>$398,112</h5>
</td>
</tr>
</tbody></table>
<p><span style="line-height: 1.3em;">The taxable loss for the year would be $10,832 and the cash loss, after principal repayments would be $18,171. Just $7,339 would have been paid off the principal, leaving a $411,161 outstanding on the mortgage.</span></p>
<table style="width: 460px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top" nowrap width="217">
<h5>Taxable profit/loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Income</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">$20,800</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Estimated Annual Expenses</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$6,306</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Interest Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$25,326</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Taxable Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$10,832</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5> </h5>
</td>
<td valign="top" nowrap width="101">
<h5> </h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Principal Repayments</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$7,339</h5>
</td>
</tr>
<tr>
<td valign="top" nowrap width="217">
<h5>Annual Cash Loss</h5>
</td>
<td valign="top" nowrap width="101">
<h5 align="right">-$18,171</h5>
</td>
</tr>
</tbody></table>
<p><strong style="line-height: 1.3em;">After tax comparison</strong></p>
<p>In the first example, the investor made a taxable loss of $6,653 and ended the year with $409,995 outstanding on the mortgage.</p>
<p>Let’s assume the investor’s annual taxable income (from employment and other sources) is $100,000. In the example where interest rates were 5.1%, the taxable loss on the property reduces the investor’s taxable income to $93,347 for the year, cutting the investor’s tax liability for the year by $2,462 and leaving them with an after-tax income of $70,862.</p>
<p>That means the after-tax cost of the investment (not including the principal repaid) is $4,191 and the total after-tax cash loss including the principal repaid is $12,696.</p>
<p>In the second example, the investment’s after-tax cost is $5,507 and the total after-tax cash loss is $13,412. The investor is $1,316 worse off at the end of the year in this case than if the interest rate was 0.5 percentage points lower.</p>
<p>In the third example, the after-tax cost is $6,824 and the cash loss after tax is $14,163. The investor is $2,633 worse off at the end of the year than when the interest rate was 5.1%.</p>
<p>Interest rate changes have a real impact on the returns from investment properties. To recoup higher interest charges, investors have a choice to increase rent, cut costs elsewhere (which might not be practical or possible), or cross their fingers for greater capital gains to compensate.</p>
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zfielding-GvX3Uq9KTa

Negative gearing disguises short-term impact of rate changes on investors

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<p>The federal budget certainly sent shock waves through the economy, but according to the ANZ-Roy Morgan consumer confidence index it appears to be recovering.</p>
<p>Consumer confidence has improved a further 2.4% over the past week, bringing the total improvement in confidence to 6% over the past month.</p>
<p>Also helping investors feel comfortable is the fact ME Bank are still offering a three year fixed rate at 4.69%, which gives investors more confidence about the future.</p>
<p>Property investors have already begun to re-enter the property market, but these two events are only going to add to the momentum. They will begin to change their thinking from ‘if’ they should buy property to ‘what’ they should buy and will be torn between the logic of two radically different investment strategies.</p>
<p>One says it’s always best to buy property that’s positively geared. This means that holding costs like council rates, insurance, maintenance and interest on the loan are less than the rental income received.</p>
<p>The second argument says it’s better to buy property that’s negatively geared, meaning that holding costs are greater than the rental income received. You fund the shortfall from your own pocket, giving you a ‘negative income’ which you then claim as a tax deduction.</p>
<p>In reality, these arguments are doomed to go around in circles. There’s no one right or wrong answer that applies to every investor. Each purchasing strategy has its upside and downside; both of which should be considered before making a decision.</p>
<p>Let’s start by looking at positively geared property. Generally speaking, the high-buy in price of most properties in capital cities means that to buy a positively geared asset, you must purchase in a regional or rural area where prices are lower. This may leave you with a relatively modest mortgage, making it easier to enter the property market, and easier to fund the holding costs from rental income alone.</p>
<p>The downside, however, is that positively geared property may have a lower capital growth rate. Every property’s value is determined by the ratio of two components: the land and the building. Land appreciates, or grows in value; whilst buildings depreciate or fall in value.</p>
<p>In regional and rural areas, land values per square metre tend to be low because there’s plenty of land available compared with the level of buyer demand. This means the building accounts for most of the asset’s value. The building may lose value faster than the land can gain value—hampering long-term capital growth.</p>
<p>Let’s compare this with buying negatively geared property. When the buy-in price is high, the land value probably is. This is the upside of negative gearing; you’re more likely to have purchased in an area with a limited supply of land relative to buyer demand. The land component makes up a higher proportion of the property’s overall value, giving the asset strong capital growth potential.</p>
<p>On the downside, buying a negatively geared asset means that whilst your long-term risk may be lower, your short-term risk may be higher because you have to find a way to fund the difference between holding costs and rental income from your own pocket. This can create cash flow pressure, particularly if you incur an unexpected expense such as an interest rate rise or urgent repair.</p>
<p>In short, it’s a case of short-term gain and possible long-term pain (positively geared property) versus short-term pain for possible long-term gain (negatively geared property). To decide which is right for you, it’s important to assess your financial circumstances.</p>
<p>First, consider your level of disposable income. If you have spare cash to cover the difference between your holding costs and rental income, buying a negatively geared property may be appropriate. On the other hand, if your budget is tight, negative gearing may be too hard an ask, and a positively geared property may be a better way to go. The capital growth won’t be as strong, but at least you’ll be in the market.</p>
<p>Second, consider how long you’ll be earning a good income. To ride out market fluctuations and recoup purchasing costs, property should be viewed as a long-term investment; at least seven to 10 years. If you’re close to retirement and a substantial drop in income isn’t far away, adopting a negatively geared strategy may not be viable. In this case, you should consider investment options that don’t require you to contribute funds from your own pocket. By contrast, if you’re many years away from retirement, you may have enough income over the long-term to fund the shortfall from your wage or salary. </p>
<p>Whichever gearing strategy you choose, go into it with your eyes open.</p>
<p><em><strong>Mark Armstrong</strong> is a director of <a href="https://ratemyagent.com.au/" target="_blank">ratemyagent.com.au</a>, Australia’s number one real estate agent rating website.</em></p>
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marmstrong-sd3emVLPPb

Positively or negatively geared property: Which strategy will work best for you?

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<p>GUEST OBSERVATION</p>
<p>No doubt this is one of the toughest federal government budgets we have seen in a long time. It would appear that the Liberal government have been true to their calling and were happy to make sacrifices across the economy in order to balance the books at some point in the future. </p>
<p>But just how does this budget affect property investors?</p>
<p>Well it’s with relief that no changes have been made to capital gains tax, depreciation or negative gearing. Now, I'm not a fan of negative gearing all that often, the purpose of investing in anything is to achieve good growth and income for the future.</p>
<p>However, I do like the little incentive us property investors are given when it comes to the all to controversial depreciation. Absolutely I'm biased. I benefit from depreciation so I'm not going to argue it shouldn't be in place.</p>
<p>Ultimately, I think it is a great way for the everyday Australian without a business to take advantage of some form of taxation benefit that the big guys get all the time. Currently $6 billion dollars a year is lost in tax revenue due to negative gearing.</p>
<p>However there was one sector in the property industry that got dealt the wooden spoon, and that’s the NRAS scheme. <a href="/expert-insights/finance/is-this-the-end-of-nras-frozen-fifth-round-of-applications">Round 5 of the National Rental Affordability Scheme will be frozen</a> pending a review. In my opinion this is a good move as it was lining the pockets of savvy developers and good property marketers while the everyday investor lined up to buy overpriced property to simply get some money from the government. Now I know there’s a lot more to it than that, however the scheme has been flawed in many ways. </p>
<p>The property industries push for ASIC regulation of the industry is seemingly unlikely in the near future as large budget cuts to the ASIC budget are handed down forcing large scale job cuts within the organisation. It doesn't look promising that the team at ASIC will want to take on more work with less staff and money. </p>
<p>Home owners or investors are generally a pretty small deal when it comes to federal budgets. It’s often the state budgets that can make big differences including stamp duty concessions and rates plus the ever tinkering of first home buyers grants. </p>
<p>Outside of investing, first home buyers taking advantage of the Labor government's First Home Savers Account (FHSA) <a href="/expert-insights/investing/first-home-saver-accounts-scrapped-what-now">will no longer be able to get tax breaks and co-contributions</a> as the scheme will be closed starting 1 July.</p>
<p>I think if anything, this budget should send a reminder to Australians of why investing in assets (not just property) is a necessity to gain financial freedom and retirement when you want it. With the pension age pushed out even further, serious holes in the future funding for pensioners, its clear we need to invest.</p>
<p><strong>JOSH ATHERTON</strong><em> is managing director of <a href="https://www.linkedin.com/profile/view?id=123928559&amp;locale=en_US&amp;trk=tyah" target="_blank">Portfolio Property Investments</a>.</em></p>
<p><em>You can connect with Josh on <a href="https://www.linkedin.com/profile/view?id=123928559&amp;locale=en_US&amp;trk=tyah" target="_blank">LinkedIn</a>.</em></p>
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