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How a Potential Interest Rate Reduction Could Change Your Property Investment Strategy in Australia

Interest rates play a pivotal role in shaping the dynamics of property investment in Australia. As the Reserve Bank of Australia (RBA) evaluates economic indicators, a potential interest rate reduction can have significant implications for investors. Understanding these impacts can help property investors refine their strategies to maximize returns and mitigate risks.

Understanding Interest Rates and Their Impact

Interest rates affect the cost of borrowing, influencing how much investors can afford to pay for properties. A reduction in interest rates typically lowers mortgage repayments, increasing cash flow and making property purchases more accessible. For investors, this means enhanced purchasing power, as the same amount of money can now secure a larger or more valuable asset.

Enhanced Cash Flow

One of the most immediate effects of an interest rate reduction is improved cash flow. Lower interest payments mean that investors retain more income from rental properties. This surplus can be reinvested into additional properties, renovations, or saved for future opportunities. Improved cash flow is especially beneficial for investors relying on rental income to cover mortgage repayments and other expenses.

Greater Affordability and Increased Demand

With interest rates lower, more buyers may enter the market, leading to increased demand for properties. This heightened demand can drive property prices up, creating both opportunities and challenges for investors. Those looking to buy may find it beneficial to act quickly to secure properties before prices rise further. Investors should also be prepared for potential competition in the market, which may necessitate a reassessment of acquisition strategies.

Revising Investment Strategies

A shift in interest rates compels investors to re-evaluate their strategies. Here are several key areas where adjustments may be necessary:

Property Selection: With lower borrowing costs, investors might consider upgrading their target property types. For example, they may move from entry-level apartments to more substantial family homes or multi-unit developments. A focus on properties in high-demand areas or those with development potential could yield significant returns.
Diversification: An interest rate reduction may encourage diversification into different property markets or asset classes, such as commercial real estate or rural investments. By spreading investments across various sectors, investors can mitigate risks associated with market fluctuations and enhance overall portfolio performance.
Increased Leverage: Lower interest rates create a conducive environment for leveraging existing equity. Investors can refinance properties to access additional capital for new purchases or renovations, enabling them to scale their portfolios faster. However, it’s essential to weigh the risks associated with increased debt against potential rewards.
Focus on Long-term Investments: With the potential for sustained low-interest rates, investors may shift their focus towards long-term investment strategies. This could involve purchasing properties in growth corridors that are likely to appreciate over time or investing in developments that promise substantial future returns.
Emphasis on Cash Reserves: While lower rates improve cash flow, it’s crucial for investors to maintain adequate cash reserves. Economic conditions can change rapidly, and having liquidity allows for flexibility in navigating unexpected expenses or market shifts. Investors should prioritize building a financial buffer to weather potential downturns.

Market Timing and Opportunity

Timing the market can be challenging, but a reduction in interest rates might present unique opportunities. Savvy investors can take advantage of softer market conditions, such as during economic slowdowns, to secure properties at lower prices. Understanding local market trends and conditions will be crucial in identifying the right moments to buy or sell.

Risk Management

While the prospects of a lower interest rate can be enticing, it’s essential to remain cautious. Increased borrowing can lead to over-leveraging, which poses risks if market conditions shift. Investors must ensure they have a comprehensive risk management plan, considering factors like property vacancy rates, maintenance costs, and changes in rental demand.

Conclusion

A potential interest rate reduction in Australia can profoundly impact property investment strategies. Enhanced cash flow, increased affordability, and the opportunity for diversification can provide significant advantages for investors. However, it’s vital to approach these changes with careful consideration and a strategic mindset. By adapting to shifting economic conditions and maintaining a long-term focus, property investors can position themselves to thrive in a dynamic market landscape. As always, thorough research, professional advice, and prudent financial management remain key components of successful property investment.

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The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Camden Professionals, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

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Future Outlook for the Western Australia Property Market

As Western Australia’s property market navigates the evolving economic landscape, it’s crucial for investors, buyers, and industry professionals to understand the projected trends and identify promising investment opportunities. With the state showing signs of resilience and growth, the outlook for the WA property market over the next 12 months looks promising. This article explores the key trends shaping the market and highlights the suburbs poised for investment success.

Economic and Market Trends

Robust Economic Performance

Western Australia’s property market is significantly influenced by the state’s economic health, which remains strong due to its thriving resources sector. The demand for minerals and energy resources continues to drive economic growth, contributing to a positive property market outlook. Ongoing government infrastructure projects and urban developments also bolster economic activity, supporting the property sector.

Population Growth and Housing Demand

WA’s population growth is a critical factor for property demand. Increased migration from other states and international arrivals are expected to drive demand for both residential and rental properties. This growing population, particularly in urban areas, will likely continue to influence property market dynamics, creating opportunities for investors.

Housing Supply and Affordability

The supply of new housing in WA has been a concern, with limited new developments impacting affordability. However, the state government is addressing this through various initiatives aimed at increasing housing supply. While affordability remains a challenge, the anticipated increase in housing supply should help balance the market and potentially ease price pressures.

Property Price Trends

Property prices in WA have shown signs of recovery, following a period of stagnation. With strong economic performance and sustained demand, moderate price growth is expected over the next year. However, price increases may vary by location and property type, influenced by local market conditions and infrastructure developments.

Interest Rates and Financing

Interest rates are a key factor in the property market, affecting borrowing costs and buyer sentiment. While rates are currently low, any changes in monetary policy could impact market dynamics. Potential buyers and investors should stay informed about interest rate trends and their implications for financing and investment decisions.

Top Suburbs to Invest in Western Australia

As the WA property market evolves, certain suburbs are emerging as attractive investment opportunities. Here are some key suburbs to consider for investment over the next 12 months:

Perth CBD and Northbridge

Perth’s central business district and Northbridge continue to be strong investment areas due to their vibrant culture, proximity to amenities, and ongoing urban redevelopment. The area’s appeal to both residents and investors, combined with infrastructure projects like the Metronet rail expansion, makes it a prime location for long-term investment.

Fremantle

Fremantle, with its historic charm and coastal appeal, is gaining traction among investors. The suburb’s ongoing revitalization projects and growing popularity as a cultural and tourist destination contribute to its potential for capital appreciation. Additionally, Fremantle’s strong rental demand makes it an attractive option for buy-and-hold investors.

Joondalup

Joondalup, located in Perth’s northern suburbs, is an appealing choice for property investors due to its significant growth and development potential. As a major commercial and educational hub, Joondalup benefits from infrastructure improvements and a growing population. The area’s development projects, including the expansion of the Joondalup Health Campus, enhance its investment appeal.

Burswood

Burswood is experiencing substantial growth and transformation, driven by its proximity to Perth’s central business district and major infrastructure projects like the Optus Stadium and Crown Resort. The suburb’s ongoing urban development and increasing property values make it a promising area for investment.

Mount Lawley

Mount Lawley, known for its character homes and vibrant community, remains a sought-after suburb in Perth’s property market. The area’s appeal, coupled with its proximity to the city and quality local amenities, contributes to its strong investment potential. As urban development continues, Mount Lawley is expected to see further growth and property value appreciation.

Conclusion

The Western Australian property market is poised for a positive outlook over the next 12 months, supported by robust economic performance, population growth, and ongoing infrastructure projects. While challenges related to housing affordability and interest rates may arise, the overall market conditions suggest steady growth. By focusing on key suburbs such as Perth CBD and Northbridge, Fremantle, Joondalup, Burswood, and Mount Lawley, investors can capitalize on the opportunities presented by WA’s evolving property landscape. Staying informed about market trends and local developments will be essential for making strategic investment decisions and achieving long-term success in the WA property market.

effectively and make the most of your renovation investments.

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Western Australian Government Incentives for Home Buyers

In Western Australia, prospective home buyers can benefit from a range of government incentives designed to make home ownership more accessible and affordable. These programs are especially valuable in today’s competitive housing market, where rising property prices and increased living costs can pose significant barriers. Here’s a look at some of the key incentives available to Western Australian home buyers in 2024.

First Home Owner Grant (FHOG)

The First Home Owner Grant is a significant initiative aimed at assisting first-time buyers. As of 2024, eligible Western Australian first home buyers can receive a grant of up to $10,000. This grant is available for new homes with a value up to $750,000. To qualify, buyers must meet certain criteria, including being an Australian citizen or permanent resident and purchasing their first home. This financial boost can help cover upfront costs such as deposit requirements and initial expenses.

First Home Loan Deposit Scheme (FHLDS)

The First Home Loan Deposit Scheme is another key program supporting new buyers. It allows eligible first-time buyers to secure a mortgage with a deposit as low as 5%, without needing to pay for lenders mortgage insurance (LMI). This scheme is particularly beneficial in reducing the financial burden of saving for a larger deposit, making home ownership more attainable for those who might otherwise struggle to meet traditional deposit requirements.

HomeBuilder Grant

The HomeBuilder Grant was introduced to stimulate the housing sector and support home buyers during challenging economic times. In Western Australia, the scheme provides a grant of $15,000 for new home builds and substantial renovations. To be eligible, construction or renovation contracts must be signed by specific dates and meet other criteria, such as the value of the property not exceeding $750,000. This grant can significantly offset the costs associated with building a new home or undertaking major renovations.

Stamp Duty Concessions

Western Australia also offers stamp duty concessions to ease the financial strain on home buyers. For first home buyers, there are exemptions and discounts available on stamp duty for properties valued up to $500,000. Additionally, if the property is purchased for a price between $500,000 and $750,000, a partial concession may apply. This helps reduce the upfront costs of purchasing a property and makes home ownership more financially feasible.

Keystart Home Loans

Keystart Home Loans is a state government initiative providing low-deposit home loans to eligible Western Australians. This program is particularly aimed at those who may not meet traditional lending criteria due to low deposits or other financial constraints. Keystart offers competitive interest rates and flexible lending options, making it easier for buyers to enter the property market.

Conclusion

Western Australian government incentives play a crucial role in supporting home buyers, offering various financial aids and concessions to make home ownership more attainable. Whether through grants, concessional schemes, or low-deposit loans, these programs are designed to alleviate some of the financial pressures associated with buying a home. Prospective buyers should explore these opportunities to take full advantage of the support available in their journey towards home ownership.

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Why Property Investment in Western Australia Is More Lucrative Than in Victoria and NSW

When it comes to property investment, Western Australia (WA) presents a compelling case for investors compared to Victoria and New South Wales (NSW). While Sydney and Melbourne have traditionally dominated the Australian property market, WA’s unique economic and market conditions offer several advantages that can make property investment in the state more lucrative.

Affordable Property Prices

One of the most significant advantages of investing in WA is the relatively affordable property prices. In Perth, the capital of WA, property prices are notably lower than those in Sydney and Melbourne. This affordability means that investors can enter the market with a lower initial capital outlay. In contrast, high property prices in Victoria and NSW often limit investment opportunities to more affluent investors or result in smaller properties with less potential for significant returns.

Higher Rental Yields

WA’s property market is particularly attractive due to its higher rental yields compared to Victoria and NSW. Perth, in particular, has offered some of the best rental yields in Australia. This is largely because, while property prices in Perth are more affordable, rental demand remains strong, particularly due to the state’s mining industry and FIFO workers. Higher rental yields mean better cash flow for investors, which can significantly enhance the profitability of a property investment.

Strong Economic Growth and Demand

Western Australia’s economy is buoyed by a robust resources sector, including mining and energy industries, which drive substantial economic growth and job creation. This economic strength supports a steady demand for rental properties as people relocate to WA for work opportunities. In contrast, Victoria and NSW face challenges such as high living costs and saturated property markets, which can limit rental growth and reduce investment attractiveness.

Favorable Market Conditions

WA’s property market is characterized by a period of correction and recovery, providing a more stable and potentially profitable investment environment. After experiencing downturns, the WA market has been on a path of gradual recovery, presenting opportunities for investors to benefit from rising property values. Conversely, Victoria and NSW have seen property booms and subsequent corrections, which can create a more volatile investment climate and increased risk for investors.

Tax Benefits and Lower Transaction Costs

Investing in WA can be financially advantageous due to favorable tax conditions and lower transaction costs. WA has competitive land tax rates and a more affordable stamp duty structure compared to Victoria and NSW. These factors reduce the cost of acquiring and holding investment properties, which can significantly impact overall investment returns. Additionally, WA’s state government often provides incentives for property development and regional investments, further enhancing the appeal for investors.

Potential for Long-Term Growth

The long-term growth potential in WA’s property market is substantial. The state is investing heavily in infrastructure projects, including transport networks and urban developments, which are expected to drive further economic growth and property value increases. Perth and regional areas are benefiting from these developments, which can lead to substantial capital gains over time. In comparison, the property markets in Victoria and NSW may face more uncertainty due to factors such as high debt levels and market saturation.

Diversification Opportunities

WA offers diverse property investment opportunities, ranging from metropolitan apartments in Perth to regional properties in areas like Bunbury and Geraldton. This diversity allows investors to tailor their property investments to their risk tolerance and financial goals. In contrast, Victoria and NSW’s property markets can be more homogeneous, which may limit diversification options and potentially expose investors to higher market risks.

Less Competition

In WA, investors might face less competition compared to the highly competitive markets of Victoria and NSW. This reduced competition can lead to better buying opportunities and less pressure on property prices, allowing investors to negotiate better deals and secure properties at more favourable terms.

In summary, property investment in Western Australia offers several advantages over Victoria and NSW, including more affordable property prices, higher rental yields, and favourable market conditions. With its strong economic performance, lower transaction costs, and potential for long-term growth, WA presents a compelling case for investors seeking lucrative opportunities in the Australian property market. By leveraging these benefits, investors can enhance their returns and build substantial wealth through property investment in this dynamic state.

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Tax Implications of Subdividing Land in Australia

Subdividing land in Australia can be a lucrative way to maximize the value of a property, but it also comes with a complex web of tax implications. Understanding these tax consequences is crucial for making informed decisions and ensuring compliance with Australian tax laws.

Capital Gains Tax (CGT)

When subdividing land, the primary tax consideration is Capital Gains Tax (CGT). The CGT applies to the sale of any property that is not a primary residence.

Subdivision and CGT:

Subdividing land itself is not a CGT event. However, selling the subdivided land is. Each subdivided plot is treated as a separate asset for CGT purposes.
The original cost base of the land needs to be apportioned between the subdivided lots. This can be based on factors like market value, area, or other reasonable methods.

Timing and CGT:

The timing of the CGT event is crucial. CGT is triggered when the contract for sale is signed, not when settlement occurs.
If the land was acquired before 20 September 1985, it is generally exempt from CGT. However, the subdivided lots are considered new assets, and CGT will apply upon their sale.

Main Residence Exemption:

If the land being subdivided includes your main residence, the main residence exemption may apply to part of the land. However, this exemption does not extend to additional lots created through subdivision.

Discounts and Concessions:

Individuals and trusts may be eligible for a 50% CGT discount if the land has been held for more than 12 months.
Small business owners might qualify for additional CGT concessions, such as the 15-year exemption or the retirement exemption, under certain conditions.

Goods and Services Tax (GST)

GST may apply to the sale of subdivided land, particularly if you are considered to be conducting an enterprise.

New Residential Premises:

If the subdivided land is used to build new residential premises, GST may apply to the sale of those premises.
Selling the subdivided land without developing it may still attract GST if the seller is registered for GST and the sale is considered part of their enterprise.

Margin Scheme:

The margin scheme can reduce the amount of GST payable on the sale of subdivided land. It calculates GST on the margin (the difference between the sale price and the acquisition cost) rather than the full sale price.
To use the margin scheme, certain conditions must be met, and it must be agreed upon in writing by both buyer and seller.

Income Tax

Depending on the nature and scale of the subdivision project, the profits from the sale of subdivided land may be treated as ordinary income rather than a capital gain.

Isolated Profit-Making Scheme:

If the subdivision and sale of land are part of an isolated profit-making scheme, the profits may be treated as ordinary income. This means the entire profit, not just the capital gain, is subject to income tax.
Factors such as the intention at the time of purchase, the frequency of transactions, and the scale of development are considered to determine if the activity constitutes a business.

Developer Activities:

If you are considered a developer, the proceeds from the sale of subdivided land will be treated as business income and taxed accordingly.
Holding costs, development expenses, and other business-related deductions can be claimed against this income.

Other Considerations

State Taxes and Duties:

Subdivision may trigger state-based taxes and duties, including stamp duty and land tax. The rules vary between states and territories, so it is essential to consult local regulations.

Council Rates and Levies:

Subdividing land can also impact council rates and may incur infrastructure levies or contributions.

Compliance and Record-Keeping:

Meticulous record-keeping is essential. Document all costs associated with the subdivision, including legal fees, surveyor fees, and development costs, to ensure accurate tax calculations and compliance.

Conclusion

Subdividing land in Australia offers significant financial opportunities but requires careful consideration of the tax implications. Engaging with experienced tax advisers and understanding the CGT, GST, and income tax rules can help you navigate the complexities and optimize your tax position. Always stay informed about the latest regulations and seek professional advice to ensure compliance and maximize the benefits of your subdivision project.

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Perth Property Prices Set to rise 11%

Perth’s soaring property prices look set to continue to rise over the next 12 months, with conditions unlikely to change until more homes are built.

Limited new housing construction and a low number of properties available for sale have created a tight market. Additionally, rising material and construction costs have squeezed margins for developers, further stalling new developments.

Population growth in WA, with fewer residents leaving and more people moving in from other states, has intensified the demand for housing. High interest rates, the highest in 12 years, are also contributing to the difficulty of new housing projects. These factors suggest that housing prices in Perth are likely to remain high, with limited availability continuing to put pressure on the market.

According to PropTrack, property prices in the WA city are set to increase between 8 and 11 per cent, following growth of 18.9 per cent over the past year — the largest increase in the country. Nationally, house prices are expected to grow by about 5 per cent over the next 12 months.

PropTrack economic researcher Cameron Kusher said low housing availability continued to be a significant contributor to ballooning prices.

Perth house prices are predicted to rise between 8 and 11 per cent in the coming year
One economist says limited housing stock coupled with increased demand has contributed to the price hike
It comes after a 19 per cent increase in Perth property prices over the past year
Perth’s house prices have risen nearly $1000 a day – by far and away the most of any capital city, new major national agency data shows.

“There’s not a lot of new housing being built, and the available stock for sale in Perth is very low,” he said.

Another issue in Perth is that people aren’t listing their properties for sale, resulting in a scarce number of established properties on the market. Additionally, Western Australia’s population growth has exacerbated the stock shortage. Fewer people are leaving Western Australia for other states and territories, while more people are moving into the state, driving up demand for housing.

New builds in short supply

Currently there are about 23 per cent less houses on the Perth property market than the same time last year, with Perth experiencing the biggest annual decline of available houses across all of Australia’s capital cities.

But Mr Kusher said little was likely to change in the short term, with high interest rates and increasing material costs pushing up the price of the limited number of new homes being built.

“So, people are preferring to buy existing properties rather than new ones, as the premium for new homes is significantly higher than usual,” he said. “Margins have been squeezed because material and construction costs have risen so dramatically.”

Mr. Kusher noted that this issue is not unique to Perth. “It’s a challenge across the country. New housing isn’t being built because interest rates are the highest, they’ve been in 12 years, making new developments more difficult,” he said.

Source: PropTrack, ABC news

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Property Investor Tips for the new Financial Year

2023 is already shaping up to be quite a challenging year for property investors and landlords, with the impacts of interest rate rises beginning to bite and economic uncertainty dampening the market. There are, however, tried-and-tested ways for investors to get ahead. Get the latest tips for property investors.

Recalibrate your investment strategy

Investors who want to succeed this year must focus on strong capital growth areas with high rental demand. With immigration opening up in Australia, the government expects some 235,000 immigrants so focus on areas with strong population growth potential and look for properties with high rental returns. With vacancy rates at an all-time low around the country, high rental yields can offset any potential rises in interest rates.

Learn from mistakes

Time is an investors’ biggest asset, and one mistake investors should avoid over the next year or two is buying into big projects with two to four-year sunset clauses.

With banks constantly changing their lending criteria and developers uncertain of market conditions there is a considerable risk that some developments may not proceed. When this happens your deposit money is tied up and you lose years of potential compounding capital growth.

Another mistake is zeroing in on mining towns where mining is the only industry. With changes in government and new energy all the rage, mining towns could become a thing of the past, severely affecting property prices and rent returns.

Tap the right people – brokers, agents, and managers

While it is not impossible for one to succeed in the property investing space without tapping agents and brokers, it still pays to have the right people on the team. First Brick Property Buyers Agency director Kyrillos Mansour said there are merits to getting a mortgage broker, especially for investors who are starting to build their portfolio.

A well-informed mortgage broker can significantly benefit investors — they can compare hundreds of loan products and find the best-fit solution for the investor’s individual situation and needs. With a mortgage broker, the arduous task of speaking with multiple banks can be eliminated, reducing the hassle of the loan application process. Buyers agents are as important for investors – Mr Mansour said a knowledgeable and data-driven agent can immensely help investors decide where to purchase.

In scenarios where the investor is proactive and has a data-driven approach, bbuyers’agents may not be necessary, but their experience in negotiating and transacting hundreds to thousands of properties can still aid in securing a better deal. They can help investors make informed decisions, free from emotional biases. This is one of the advantages of investors who tap buyers agents over those who take the do-it-yourself route.

Meanwhile, those with established portfolios are highly encouraged to get a property manager.

Here are some of the other benefits of getting a property manager.

Professional management. With their professional background, managers can ensure that properties are well maintained and running smoothly, maximising the return on investment for the investor.
Compliance. Property managers are knowledgeable about various laws and regulations.
Tenant relations. With property managers, investors are able to secure quality tenants. Managers also handle the lease negotiation and any disputes that may arise.
Financial management. Investors can stay on top of the financial performance of their properties with the help of managers who take over the jobs of rent collection, bookkeeping, and preparation of financial reports.

Improve the marketing of the property

In a competitive market, improving the rental listing is key to ensuring that the property stands out. Consider the following strategies:

If the property is newly bought, ask the selling agent for existing professional photos, floorplan, and videos of the property.
For existing properties, spend some money on professional photography for the listings. Add lifestyle shots showing nearby amenities to boost the appeal of the listing.
Show the property during the daytime and early evening.
Have advertised openings with pre-qualified applicants.
Be flexible to allow the maximum audience to see the property.
Pay for a premium listing to highlight online.

Retain quality tenants

Maintaining a good relationship with tenants is a must. First, fix any problems in a timely manner.

investors must understand that losing a good tenant can dent their finances. For example, if a good tenant cannot pay an extra $50 a week to bring it to a market rent of $600 per week and you decide to list the property for rent on the open market, the costs to re-let the property could be up to $2,400 to the landlord. You may lose a good tenant and obtain a bad one, you just never know. Do your calculations and ensure it is worth the risk.

Think of green upgrades

Energy efficient upgrades can be attractive to potential renters as they can see a reduced electricity bill benefit and result in a tenant occupying the property longer and therefore reducing vacancy.

However, not all upgrades can provide bang for your buck. For instance, investors must weigh the pros and cons of solar panels. Solar panels can cause roof leaks and future maintenance or replacement costs but if the landlord is paying for the electricity, this can be a way to increase cash flow. You need to weigh up the cost of installing the devices against the savings to determine viability.”

Keep in mind that it takes time, energy, and fossil fuels to create these green upgrades, which also have a limited shelf life. Still, there are some practical green upgrades that are not as costly and can be easy to do, like having energy-efficient appliances. Sealing windows and doors is also a good upgrade, as it can help reduce airflow inefficiencies and improve the overall quality of air inside the property.

Get the property insured

A study from the Insurance Council of Australia showed that only around three in five rental properties across the country are covered by landlord insurance. There is no denying the importance of landlord insurance, which protects investors from potential lawsuits, any potential loss due to damage, and other risks.

When choosing landlord insurance, make sure the policy covers accidental damage caused by the tenants as well as loss of rent. Shop around or engage a good insurance broker to do the work for you. Make sure you choose an insurer who specialises in landlord insurance.

A landlord insurance policy usually covers the dwelling itself and other structures within the property. However, it might also be useful to add some optional coverage to the policy including vandalism, burglary, renovation, and building codes.

Take advantage of tax breaks

Investors must also learn to not just keep all the receipts for works done on the property but to also record all fees, including interest and bank costs.

You may also want to consider buying the property through a family trust or even a self-managed superannuation fund (SMSF). If you don’t already have one, seek out a qualified accountant who understands property investment and can recommend the best purchase structure according to your situation. Use a depreciation schedule to help increase your tax deductions.

A new home will give greater depreciation benefits than an older home. You only have to get a schedule done once and give it to your accountant who will use the depreciation to reduce your taxable income.

Conduct a home loan review

Given the changes in interest rates over the past months, investors must revisit the terms and features of their home loans. Interest-only payments is something worth considering on the back of rising rates. This will free up more cashflow and ensures lower repayments. As long as the total value of the property increases during your time as owner, you will see good capital growth with this option.

Taking advantage of an offset account is also a good route to take, as it can help provide a safety net for when unexpected maintenance costs arise.

It’s also a good idea to increase your frequency of repayments. Over time, this limits the amount of total interest owed on your property.

Checking your tenancy agreements

When finalising the tenancy agreement, landlords must:

Have everything clearly laid out in writing to avoid any future complications
Prepare for the worst and reduce your risk to achieve the best
Include all necessary clauses
Seek professional advice from the property manager and/or solicitor before signing the agreement
Always keep a copy of the signed agreement for your records and future reference
Know when all appliance warranties expire to ensure they are not replacing something that is under warranty – this also creates future replacement expectations

Know the people you are renting to

Confirm the tenant’s identity by cross-checking with government IDs
Understand their level of employment and ensure their ability to pay rent
Ask what their future plans are – how long do they intend to stay?

Prepare for the worst-case scenario

Determine the appropriate number of days you must give the tenant to vacate the property after giving them notice
Know your rights to the bond payment in the event of damages
Know what actions you need to take if a tenant decides not to vacate the property and ensure the property manager has experience in these situations

How can we help? if you have any questions or would like further information, please feel free to give our office on 08 9221 5522 or via email – info@camdenprofessionals.com.au or arrange a time for a meeting so we can discuss your requirements in more detail.

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What is happening in the Perth property market

It took a median of 10 days to sell a property in June, the fastest time on record, according to the latest data from REIWA. Are you thinking about investing in the Perth property market? Find out the latest trends in property investment.

The fastest selling suburbs were Greenfields and Parmelia (three days); Balga, Dudley Park and Port Kennedy (four days); and Bertram, Cooloongup, Armadale, Carlisle and Leeming (five days).

The number of properties available for sale in Perth fell to 5384 at the end of June. This was 4.4 per cent lower than May, and 37.5 per cent lower than 12 months ago. House prices also rose marginally to $551,000 over the 12 months to June according to CoreLogic’s Perth home value index. The index increased 0.9 per cent in June and 2.8 per cent over the past three months.

REIWA president Joe White said the median house price is expected to rise further in coming months.

“Demand remains strong and is being fuelled by population growth, along with more people turning to the established homes market due to the delays and rising costs in the building industry and the challenges of the rental market,” he said. “The trend for house prices shows a steady increase and we will see more significant growth towards the end of the year.

The top-performing suburbs for house price growth in June were:

Beeliar (up 3 per cent to $625,000)
Hammond Park (up 2.6 per cent to $533,500)
Dawesville (up 1.9 per cent to $550,000)
Cooloongup (up 1.8 per cent to $417,500)
Caversham and Armadale (up 1.4 per cent to $547,500 and $329,500 respectively).

Palmyra, Butler, Waikiki and Cloverdale all recorded growth over 1 per cent.

Across the capital cities, Perth is the only capital where home values are at record highs.

Rental Properties

Median rents reached new heights in June hitting a record $580 per week, up from $570 in May and $500 at the same time last year. The median unit price also set a record. It rose $20 over the month to $520 per week. This was $80 higher than June 2022.

There were just 2146 properties available for rent at the end of June, a 7.4 per cent increase on May, but 5.7 per cent lower than June 2022.

The suburbs that saw the most growth in their median rent price in June were:

Claremont (up 44 per cent to $828 per week)
Sorrento (up 43 per cent to $1000)
Victoria Park (up 33 per cent to $600)
Inglewood (up 28 per cent to $600)
West Leederville (up 23 per cent to $750).

Overall, Perth’s median dwelling rent price remained unchanged at $550 per week, reflecting a large number of leases around the price range. Data showed it took a median of 16 days to lease a rental during May, one day slower than April, and two days slower than three months ago.

While the upward shift is minimal, Mr White noted it’s an early sign pressure on the rental market is easing.

“For example, while the number of listings is about 6 per cent lower than in June 2022, this is a big improvement compared to the past few months when it’s been about 20 per cent lower year-on-year,” he stated. He reiterated building completions are playing a role in the increase in listings, citing reports from the institute’s agents of more tenants moving out from their rental properties into the principal residences and consequently, freeing up some supply.

“We are also seeing an increase in requests for additional occupants as tenants seek to split the rising rent costs as well as address the difficulty of finding a property in current tight conditions. This is also easing some of the pressure on the market,” Mr White said.

Source: REIWA

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Camden Professionals

Perth Property Market – Why Perth Property prices are stable

We are developing a property investment series in the next coming weeks. In this edition we are reviewing the Perth property market outlook. Perth’s property market is defying the odds with house prices up 0.07 per cent in August despite rate hikes and falling national house price values, new figures show.

The PropTrack Home Price Index, to be released on Thursday, shows Perth was the highest performing capital city for house price growth and one of just two capitals not to record falls last month. The report also revealed substantial house price growth of 9.03 per cent in Perth across the last year.

Darwin was the second strongest performer, recording a rise of 0.03 per cent in house values in August, while Hobart Melbourne and Sydney suffered the biggest falls with house prices down 0.71, 0.57 and 0.54 per cent respectively.

Perth Pricing outlook

More than 60 suburbs across the Perth region managed to record median house sale price growth during July, new data has revealed. Perth is one of the few capital cities in the country that has seen continued growth in home values since the Reserve Bank of Australia made the decision to increase the cash rate, according to Damien Collins, president of the Real Estate Institute of Western Australia (REIWA)

The Perth market typically slows in winter but a large number of Perth suburbs are still seeing growth despite the three recent interest rate rises. Perth recorded a 0.2 per cent increase to its home value index, according to the latest numbers from CoreLogic.

Perth is one of the few capital cities in the country that has seen continued growth in home values since the Reserve Bank of Australia made the decision to increase the cash rate. According to the Real Estate Institute of Western Australia, the state’s strong economy, growing population and affordable housing positions the WA marketing in a much better position to manage the increased costs of servicing a loan than east-coast counterparts.

Added to this there is also a housing and labour shortage simultaneously. Due to low stock levels and properties are not being built quick enough, competition amongst buyers will remain high and prices will continue to rise,” says Damien Collins.

Top Perth Suburbs in July 2022

The stand-out suburb for the month of July was Brabham, which recorded gains of 10.1 per cent — and led to the suburb reporting a new median house price of $333,750.

Taking out the second spot this month was Alkimos, where the average property price is now $371,250 — an increase of 4.6 per cent.

Lakelands (up 4.1 per cent to $385,000), Banksia Grove (up 3.7 per cent to $420,000) and North Perth (up 3 per cent to $865,500) rounded out the top five for July.

Why the predicted housing price crash may not happen in Perth

A recent hysterical prediction by ANZ Bank claims Perth property prices will fall 13 per cent over the next year, swiping $70,000 from the median priced home.

Demand

According to market analysts, Perth property prices will stagnate over the next year, rather than fall due to supply and demand issues that are unique to Perth.

Firstly, demand for housing in Perth is strong, shown in part by having the highest rents relative to property values in the country
High rents encourage renters to buy their own home, because a mortgage doesn’t cost too much more than a lease. This boosts entry-level demand.

From the landlord’s perspective, high rents improve profitability. Not only does it help them weather interest rate rises, but it encourages them to pay more for the investment property in the first place Perth’s high rents will continue attracting investors, including many from the east, feeding another pool of demand. New demand will also come from an anticipated increase in skilled migrants, who are expected to come to Perth for its ample job opportunities.

Supply

Housing supply, however, is not growing fast enough. Based on the State Government’s own population projection, the Real Estate Institute of WA estimates the existing shortage of 8000 homes will more than double within four years.

There is another big reason why properties won’t fall in value as they will on the east coast, homes are already undervalued. While house prices are hotly overinflated over east, Perth is selling below replacement cost in many cases, especially following a 20 to 40 per cent hike in construction costs over the past year.

The market is slow to reflect change, but pressure is mounting for higher build costs for new homes to translate into bigger prices for established ones. The market is slow to reflect change, but pressure is mounting for higher build costs for new homes to translate into bigger prices for established ones.

Perth dwellings are undervalued by 10 per cent which supports the notion there is pressure on prices to increase — not drop. The real impact interest rate rises will have on property prices will be through borrowing capacity.

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Camden Professionals

Investing in the Perth Property Market in 2022

While the overall Perth property market achieved a healthy 13 per cent increase in 2021, a number of Perth suburbs saw gains of more than 25 per cent over the same period. There are challenges facing certain sectors of the investment property market due to the impact of Covid -19. For property buyers, last year, the property market for apartments in Perth was in a good spot for local buyers, as record-low vacancy rates and low interest rates made it cheaper to buy than rent in some areas.

With Western Australia continuing to be the most affordable state to live in, interest in Perth apartments is growing and new policy recommendations from the Property Council of Australia (PCA) has highlighted ways to fight the issues currently impacting the apartment development pipeline.

Challenges in 2022 | Apartment Buildings

Unfortunately, the impact of COVID-19 on supply chains and the skilled worker shortage has now put more than 10,000 new apartments on hold, as well as $2.2 billion of pre-approval apartment projects. The potential undersupply and likely impact on pricing will be factors that potential investors should take into account of.

The demand for housing in WA and Perth is expected to grow WA looks to open its borders in February, demand is expected to continue upward as interstate Australians and international migrants look to relocate to WA. The WA government is seeking to attract east coast residents to consider relocating to WA. Changes in Government policy have prioritised population growth in WA, targeting skilled worker migration and removing investment barriers for them.

With 52,000 job vacancies in WA, despite the unemployment rate hitting its lowest point since 2012 and forecasts predicting local population growth will not meet current workforce vacancies until 2024, there is an urgency to encourage migration to fill these roles as soon as possible.

As the State Government’s $185 million Reconnect WA package works to let WA safely re-engage with the world once borders open, this is the perfect chance to use Perth’s stable economy and housing affordability as a major boon for attracting skilled workers.

There are also proposals to make permanent and expand the stamp duty concession. Establishing permanent stamp duty concession for apartments will encourage investment in the market, bringing rental prices down while spurring the demand for apartments.

The Perth Property Market Outlook

The impact of the border reopening will have a major impact on the Perth and WA property market. It is a smart move to consider investing in the Perth property market, now before the anticipated influx of new residents and investors from the East coast who have been steered clear of the local market.

According to Damian Collins, Real Estate Institute of Western Australia (REIWA) president, revealed this data and said that “2021 was a big year for the Perth property market overall and an even bigger year for the 10 best-performing suburbs”. Five of the 10 suburbs on the list had median house sale prices above $1 million, with three of them reaching the $1 million milestone in 2021, according to the REIWA report. It is expected that upward trajectory of Perth’s property market would be sustained, and there are suggestions of a double-digit price growth for the next 12 months.

Woodlands reached the $1 million price bracket for the very first time this year, whilst Wembley Downs’ median price pushed past $1 million for the first time since 2019, and North Beach’s median price pushed past for the first time since 2017. Woodlands landed on the top spot for price growth, with its median house price increasing 35 per cent to $1.23 million.

Shenton Park came in second with a price rise of 32.1 per cent, and Hillman ranked third with a price increase of 29.1 per cent.

REIWA’s top 10 suburbs for price growth in Perth for 2022

SUBURB	MEDIAN HOUSE SALE PRICE 2020	MEDIAN HOUSE SALE PRICE 2021	GROWTH RATE
1. Woodlands	$911,250	$1.23 million	35.0%
2. Shenton Park	$1.27 million	$1.677 million	32.1%
3. Hillman	$250,000	$322,800	29.1%
4. Darlington	$620,000	$800,000	29.0%
5. Wembley Downs	$975,000	$1.25 million	28.2%
6. North Beach	$900,000	$1.15 million	27.8%
7. Lockridge	$260,000	$330,000	26.9%
8. Mullaloo	$675,000	$855,000	26.7%
9. Swanbourne	$1.5 million	$1.875 million	25.0%
10. Brookdale	$252,000	$315,000	25.0%

*Data is based on Landgate settled sales as at 12 January 2022.

Sales Results for January 2022 shows no signs of slowing down in the Perth Market. If you are thinking of buying your first home or an investment property, you need to download our Top Tax Tips Guide for Property Investors.

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Source: REIWA

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Perth Property Market – Why Perth Property prices are stable

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