Paul Castran - CEO - Castran Gilbert

With affordability at its lowest level on record, first-home buyers are thinking outside the square.  And by outside the square, we’re talking inside the family!

The home-ownership dream rarely used to feature a sibling in your bathtub and a parent on your certificate of title. These days though, first-home buyers are becoming more flexible.

Housing affordability fell to record lows in the March quarter this year according to the latest Housing Industry Association-Commonwealth Bank report.                Mortgage payments accounting for 30.7 per cent of total first-home buyer income these days!

Generations X and Y are also settling down later meaning for many home ownership is a solo battle.

It’s not surprising then that increasing numbers of first-home buyers are teaming up with siblings, parents or friends in a bid to break into the property market.

“There’s been a noticeable trend towards family members buying property together, as property prices are still very high, particularly for first-home buyers,” says Aussie Home Loans boss John Symond.

The number of family members taking out mortgages together has jumped from about 1% of all loans originated by ‘Aussie’ to 5 per cent over the past two years!   Mortgage Choice has reported a similar trend. A survey carried out by the company last year revealed more than 6 per cent of people who bought property within the past two years had done so with family or friends. And of those who intended to buy property within the next two years, over 8 per cent intended to do so with family or friends!

INVESTORS own around two million homes in Australia and every year thousands of them claim deductions they’re not entitled to, falling foul of the Australian Taxation Office.

The result can be a kind warning or a significant fine and large interest bill.

The tax office says investors’ should be responsible in getting their tax returns right and they can’t blame their accountant or plead ignorance if they get it wrong.

One of the most common mistakes investors make is claiming items that should be depreciated over several years.

According to the ATO, initial repairs to fix damage, defects or deterioration that existed when a property was bought are capital expenses that should be claimed as capital-works deductions over either 25 or 40 years.

Capital improvements like re-modelling a bathroom or adding a pergola should also be claimed as capital-works deductions.

Other mistakes include:

Interest

Taxpayers at times use loans for investing and private purposes — for example, to buy or renovate a rental property or to buy a motor boat.

The interest expense on the private portion of the loan (the boat) is not deductible!

Legal expenses

Conveyancing expenses incurred when buying and selling a property aren’t deductible. These form part of the cost for capital-gains tax purposes.

Travel expenses

If you take a holiday and visit your investment property while you’re there, you cannot claim a deduction for the full trip.

The tax office says you may claim only those expenses directly related to the property inspection and a proportion of accommodation expenses.

Property investors should start planning right now to take advantage of the next upturn in the property cycle, according to quantity surveying firm Asset Economics.

“Property booms never last but neither do property busts.”

In taking advantage of the next boom, investors need to make sure they’re buying for long-term capital growth remembering to take in account the ripple effect.

As the next property cycle comes around, it‘ll be the most desirable as well as sought-after areas that start growing first, and these are generally the most affluent suburbs too.

From there, capital growth begins its ripple outwards!!

551 Punt Road SOUTH YARRA

Renovated from the ground up, no expense spared, this gorgeous home has been re-stumped and rewired with new double glazing.  It features a stunning gourmet kitchen opening on to a large family room at the rear overlooking a picturesque back garden with entertaining area …accommodation includes three huge double bedrooms plus study (master with ensuite) formal sitting room, all with 12 ft plus ornate Victorian ceilings!

There’s 4 open fire places perfect to share a glass of red, cosy up and fall asleep in front of this winter, stunning new timber floors with brass inlay and ducted heating! 

There’s off street parking for  a number of cars including a car port, as well as a double storey cottage / studio. 

This beautiful home is a truly beautiful example of a timeless triple brick “Victorian” superbly decorated with feature gold leaf!  

You’d think the stars would be aligned wouldn’t you: low rates, a steady population growth, low vacancy rates, strong rental market and a shortage of housing in the majority of capital cities.

Since the latter 2008, the number of loans to first home buyers has outweighed substantially those to existing owner-occupiers and investors as first-time buyers rush to take advantage of the increased government grant. These numbers are set to surge in the next two months after the Prime Minister indicated that the increased grant will end June 30. In previous interest-rate cycles, lending to investors and existing home buyers increased alongside that to first-home buyers.

Partly, the reason is that investors aren’t getting the first-home-owner grant, and when laying your own money down instead of the governments’, you think more carefully before deciding to take the plunge. Unemployment concerns and fears about how the economy will evolve this year are also reasons why investors aren’t yet entering the market.

Consumer sentiment figures released earlier this month by the Westpac-Melbourne Institute Survey found pessimists still outnumbered optimists and, with the prospect of more unemployment, that’s unlikely to change anytime soon.

Interest rates are one of the crucial aspects investors consider. During the past month or so, several of the big banks have increased their fixed mortgage rates, even though variable rates are expected to go even lower!

Banks say it’s due to an increase in the rates in the wholesale market where they access funds. Not everyone accepts that that is the reason, but most acknowledge it’s a signal borrowing costs are near their lowest levels ever!!

Some economists believe fixed rates will continue to rise as banks manage their risk, and it is just a matter of the speed at which it happens. Fixed rates are not popular at the moment even with investors who traditionally used this option.

It shouldn’t be a surprise, given the cash rate is expected to fall to 2 per cent by the end of the year.

But fixed rates are a bit of a barometer of the longer term trend in interest rates, so they’re worth watching. It also pays to remember that just because the Reserve Bank of Australia cuts rates’, that doesn’t mean banks have to follow suit.

Only time can tell, whether or not property buying will be better next year!

Increasing rents boosted the housing component of the Consumer Price Index (CPI) by   0.9 per cent for the quarter and the overall annual increase to 5.5 per cent, that’s according to  Australian Bureau of Statistics figures released this week.

The CEO of Real Estate Institute of Australia has said, “The majority of this increase in the housing component was driven by rents, which increased nationally by 1.7 per cent over the quarter and 8.4 per cent over the year. The cities where rents increased the most were Perth and Darwin with annual increases of 10.9 per cent and 13.5 per cent respectively!”

This rent increase in the recent quarter reflects low vacancy rates and the scarcity of rental properties across capital cities, combined with the decrease in building approvals and housing finance for investment.

The National Rental Affordability Scheme should hopefully relieve this figure, however the impact won’t be felt for quite some time.

“With an underlying demand for additional housing at around 200,000 dwellings per year and commencement of new dwellings of 147,000 in 2008, Australia will need to build significantly more homes than what has occurred to meet the rental demand.”

Housing affordability improved since the Reserve Bank rate cuts, although there’s been very little     flow-on benefit to those in the rental market.

“With lower interest rates and greater affordability, now’s the time for those within the rental market to seriously consider purchasing their own home.”

Sydney will be reinvented as a high-density metropolis serviced by mass-transit subways under a transport blueprint being developed by senior state and federal government bureaucrats.

Powerful new legislation underpinning a proposed metro network costing $13 billion will enable transport and planning officials to reshape the inner suburbs of Sydney, paving the way for apartment towers as high as 15 storeys as well as large-scale retail and office blocks.

To justify the multibillion-dollar investment, tens of thousands more people would have to live and work within walking distance of the proposed Parramatta Road metro stations, according to planning officials behind the overhaul.

Heritage inner-west suburbs such as Glebe, Leichhardt, Rozelle and Camperdown are to be among the first to face radical changes should both the $8.1 billion West Metro underneath Parramatta Road and the $4.8 billion CBD Metro go ahead.

Read the full article here: http://www.domain.com.au/Public/Article.aspx?id=1231003979729&index=NationalIndex&headline=Get%20ready:%20high-rise%20suburbs%20coming

VICTORIAN property values have plummeted about $40 billion in the past six months.

Melbourne’s median house price of $450,000 mid-2008 is now down to $427,500, according to estimates.

And house price expectations across Australia have sunk to an all-time low, a new report says.

Victoria’s $800 billion residential property market has dropped 5 per cent - or $40 billion - overall since July, according to BIS Shrapnel calculations prepared for the Herald Sun.

The trend has opened the door for potential borrowers desperate for cheaper housing.

The latest Mortgage and Finance Association of Australia/BankWest Home Finance Index shows almost two in three Victorians expect the value of their biggest asset to erode in the first three months of this year.

"The expected decline in prices will help address the chronic problem of housing being unaffordable for a lot of Australians, and first-time buyers are likely to be enticed back into the market," MFAA chief Phil Naylor said.

Recent Real Estate Institute of Victoria sales results show the volatile economic climate is producing winners and losers.

Read the full article here:

http://www.news.com.au/heraldsun/story/0,21985,24881569-5013926,00.html

MELBOURNE’S last big auction day of 2008 ended with a mad scramble from buyers and sellers hoping to get contracts signed before Christmas.

The weekend clearance rate of 57 per cent from more than 600 auctions was still low, but up on the previous week.

Industry experts said the scramble, fuelled by interest rate cuts, showed that the property downturn might be easing.

Read the full article here:

http://www.news.com.au/heraldsun/story/0,21985,24799115-5013926,00.html

Paul Castran

Times are tough but some experts believe we’re through the worst of it.

Can you hear it? It sounds like a distant ring, a peal of bells, not of Yuletide bonhomie but of changed fortunes in that most solid of staple investments, bricks and mortar. Shares are so yesterday. Stockbroking is a dirty word. Nobody’s talking margin loans. But could the property market be a bellwether of better times?

At least some of the notes are on song. The Reserve Bank dropping the cash rate to 4.25 per cent and perhaps going even lower. Figures this week from the nation’s largest mortgage broker, AFG, indicate NSW first-home buyers are back in the market, with November’s loan approvals up 113 per cent on August. And Sydney house prices - despite all the doomsday scenarios - actually gained 0.51 per cent in the October quarter. There was also a 1.6 per cent increase in the number of loans for established homes in October.

"The property market has moved through the bottom of its cycle," says RP Data’s head of research, Tim Lawless.

Read the full article here:

http://www.domain.com.au/Public/Article.aspx?id=1228585093137&index=NationalIndex&headline=Long%20daze%20on%20market

Paul Castran