Posted by Rob Honeycombe on 5 July 2009
Life in the ‘burbs isn’t for everyone. The trimmed hedges, rolling front lawns and brick lowsets may be perfect for some but, for others, they’re a nightmare of endless mowing and maintenance. If the idea of a 40-minute commute sucks the life right out of you, here are some tips on finding an affordable home in the city.
Look for the uglies. Real estate is like a high school dance and the pretty ones do go first, and for higher prices. Why? Because most of us can’t use our imaginations (or are too lazy). Simple, really simple, renos and 5 tins of paint can make a massive difference to the purchase price. We’ve seen $3,000 spruce-ups add $30,000 to value – and more often than you’d think. If your housewarming needs to be a cocktail affair with the place looking schmick you mightn’t agree – but it can be just as much fun to invite friends over for a ‘paint and pizza’ night!
Brisbane’s inner city is full of brick apartment buildings from the 1980s and earlier. These were the days when only investors bought in the city – and they weren’t winning awards for their stunning architecture. In many cases the buildings look tired and there are no ensuites, lifts or gyms. On the plus side, they often have big rooms and great locations – and the renovation tasks are manageable on a budget. Think carpet, paint, window dressings and the kitchen when you can afford it.
Try Highgate Hill, Paddington, Bowen Hills (an area that’s got an enormous future) or Spring Hill. Old high-rises may not be fashionable property but they’re almost always close to transport and shops. When you get to sell there’ll be a ready market of investors and first home buyers – regardless of the ups and downs that might slow sales of other property.
Train-spotter? You will save big money if you buy alongside one of our many train lines, and if you pick the line (avoiding the freight routes) it can be okay. Main roads are another option but in our experience this noise is more constant and harder to live with. With either rail or roads it will take you longer to sell when the time comes as your pool of willing buyers is that bit smaller.
Those tight-budgeted house buyers needn’t give up either. Some of the ‘transition’ suburbs like the ‘Gabba, East Brisbane and Kelvin Grove have a reasonable number of affordable homes. You might have to live near a panel beater or a wholesaler for a time but this is Brisbane’s inner city and change will come sooner than you think.
# We wrote this article for the real estate pages of ourbrisbane.com
Tags: Bowen Hills Brisbane, Brisbane apartments, Brisbane housing affordability, East Brisbane, first home buyers, home maintenance, Kelvin Grove Brisbane, ourbrisbane.com, Paddington Brisbane, renovation, Woolloongabba Brisbane
Posted in Brisbane's sales market, Highgate Hill, Woolloongabba, architecture and renovation | No Comments »
Posted by Rob Honeycombe on 18 March 2009
If you’re going to do a thorough review of Australia’s taxation system then everything’s got to be reconsidered. So with Treasury head Ken Henry’s rummaging around in the tax-breaks closet we weren’t surprised to hear negative gearing again pulled out for discussion. One of our landlord clients rang us concerned, online investor blogs have started a nervous chatter and the weekend’s Courier Mail headlined with “Negative gearing attacked for driving up property prices”.
What is it? The ATO says “A rental property is negatively geared if it is purchased with the assistance of borrowed funds and the net rental income, after deducting other expenses, is less than the interest on the borrowings“. So it costs more for you to own the property than a tenant will cover with rent payments.
Okay so we’re real estate agents, we have a vested interest in encouraging property investment. But so does the 32% of Australia’s population that rents. Who will provide their housing if we discourage investors?
A recent get-together of unions, welfare reps, conservationists and consumer groups discussed the Henry Review. The group, calling themselves “Community Tax Forum”, says Australia is a low taxing nation. Blaming negative gearing for high home prices their spokesperson said, “There’s no doubt we’ve got the most generous system in the world for rental investors”. Maybe they have images running through their heads of wealthy old landlords banging on poor pensioners’ doors demanding more rent…
The Real Estate Institute prepared a paper on the topic as far back as June 2008. Their findings: 72% of property investors using negative gearing earn $63,000pa or less. Just 11% earn over $95,000pa. Most are Mum and Dad investors building their retirement nest eggs. The Property Council says negative gearing costs the tax man $2billion a year, but taxes on property generate $29billion.
Of course Paul Keating had a crack at this tax break in July 1985, limiting a property investor’s interest deduction to that property – that is, not letting them claim the loss against other income. Either people forget too easily or they choose to ignore history’s lessons. Following the 1985 change new housing construction plummeted and rents rose 32% in Brisbane, 37% nationally. By 1987 Mr Keating had backflipped and rental supply eventually caught back up to demand.
Property investments don’t stay ‘negative’ as rents rise and principals are repaid, and at some point they’re sold with capital gains tax incurred by the investor. So in time the Treasurer will get his pound of flesh. And in the meantime our nation’s tenants can enjoy more reasonable rents.
Despite our role as real estate agents we would welcome your opinion! Do you agree with tax breaks for property investors?
Tags: Australian Taxation Office, Brisbane housing affordability, Brisbane rents, negative gearing, taxation
Posted in Brisbane landlords, Brisbane's rental market, property taxes and rates etc | 3 Comments »
Posted by admin on 18 March 2009
Fresh back from a seminar today with leading market commentators RP Data, here’s a bunch of recent stats we noted down: Brisbane’s current rental vacancy rate is just 1.3%. That works out to less than 5 days per year so Senior Research Analyst Cameron Kusher says that’s just people moving in and out – with no real vacancy at all.
We’re now Australia’s second most affordable capital city for both apartments and houses (last year’s 3.4% drop in our median house price helped) and Cameron says while rental yields are growing investors are generally still thin on the ground. And while we all saw a big slowdown in property across Brisbane last year RP Data confirmed how few sales actually occurred: Our sales volumes for 2008 were down 84% on our ten year average!
Tags: Brisbane house prices, Brisbane housing affordability, Brisbane vacancy rates, RP Data
Posted in Brisbane landlords, Brisbane's rental market, Brisbane's sales market | No Comments »
Posted by Rob Honeycombe on 29 May 2008
The term’s been used so much lately you could be forgiven for switching off when you hear it – “housing affordability crisis”. But for those feeling like a home purchase is slipping from their grasp, all news on the topic is welcome. And buying that first home might now be a little easier for some, with the Federal Budget’s fine-tuning of the new First Home Saver accounts, now due to kick off in October. Designed to encourage a savings habit Mr Swan will tip in 17% of what you deposit to a max $850 each year, and the earnings of your account will be taxed at just 15%. With that lower earnings tax this might be a good way for family to help you on your way – plenty of parents with 20-somethings still living at home will think it’s a great deal! There’s a bunch of rules (you don’t get govt pennies without them). Your minimum annual deposit is $1000 and max $10,000, and you can’t withdraw anything to buy that home until you’ve had 4 years of deposits. You’ll still qualify for the first home owner grant on top.
Will there be plenty of takers? We hope so, but the four year minimum doesn’t fit the ‘want it now’ approach of today. Recent non-government schemes like “Option 2 Buy” weren’t successful either mind you and they offered an instant solution. Under that now-dead format you got the company to buy your choice of home, you lived in it and made payments to them, and had an option to buy it yourself at a pre-agreed price within 5-7 years. “Option2Buy” went into liquidation earlier this year after a massive advertising campaign and plenty of attention. We read that when they went under the authorities rushed to check the impact on customers – but discovered there were none. Zero!
There’s still others out there offering similar rent-buy plans including one that tempts by offering the customer all capital gains while they “rent” the home. The rent though is apparently somewhat higher than market…
On the ground we’re witnessing more of the group-purchases, with siblings and even friends getting together to buy property. Not our position to advise or warn people but there’s some obvious risks when life takes each of the buyers in different directions. But with prices still rising we’d expect to see more of this. No doubt there’s some parents back home encouraging them too!
Tags: Brisbane housing affordability, first home buyers
Posted in Brisbane's sales market | No Comments »
Posted by Rob Honeycombe on 8 May 2008
With the Treasurer warming up for his Queensland state budget on June 3rd it’s timely to ‘blue-sky’ how our pollies could actually be helping with housing affordability. What’s well-reported is the vast undersupply of housing, with market analyst Michael Matusik putting Queensland’s annual shortfall at 44,900 homes. Interesting to note is the revenue our state generates from property – with more than $3.7billion (yes billion) flowing from stamp duties on sales, land taxes and duties on mortgages.
Despite plenty of talk in 2000 that the GST could eventually replace state taxes, some 28% of our state’s revenue still comes from taxes and duties, with an unhealthy dependency on the property industry.
Would reducing some of these help our housing affordability crisis? While the government is scrapping mortgage duty (now down to 0.2% and nil from January 1st 2009) it’s stamp duty where the state really hauls in the bucks, up 16% this year to $2.8billion. While you pay no duty to buy listed shares, a property investment of $450,000 will land you a stamp duty bill of $14,225. It may be cheaper than other states but it’s still a huge disincentive to investors, and that impacts on tenants through higher rents. Should an investor pay more stamp duty than an owner occupier? ($600 more in the above example). There’s a third of our population that rent so surely we need incentives to create new housing for them.
Victoria this week moved to further reduce their stamp duty rates, and they remain the only state to offer a genuine incentive to build new property. In the Garden State buying off the plan means hefty savings in duty compared with established property – the amount is calculated only on what exists at the date of contract, usually just the land. It’s a simple idea, offers an immediate encouragement to bring new housing supply online and Queensland could do the same thing on June 3rd. Construction costs are still rocketing ahead with home builders and developers struggling to make new housing viable, and we’ll all grow old waiting for that to change.
With stamp duty revenue soaring up along with housing prices our government’s had a huge, largely unexpected windfall over the past three years. Solid moves to encourage new housing supply must surely be on their agenda.
Tags: Brisbane housing affordability, Brisbane housing supply, construction costs Brisbane, Michael Matusik, stamp duty Queensland
Posted in property taxes and rates etc | No Comments »
Posted by Rob Honeycombe on 21 November 2007
Great to see both contenders for this Saturday’s election have released policies aimed at giving first home buyers a ‘leg up’ into the market. Neither party though seems to be proposing any ‘watershed’ solution for the major hurdle to affordability – supply. The Real Estate Institute of Australia estimates our national undersupply this year alone is 20,000 homes. And household numbers are growing much faster than the population (with divorces, later marriages, oldies living longer etc). So in the major growth areas like inner-Brisbane a shortage of properties means buyers and tenants alike are really feeling the pinch.
Each of the Coalition and Labor has announced “home saver account” schemes to give first time buyers a tax-benefited way to save for a deposit. There’s some neat ideas in each of their proposals: under 18’s for example can get $1000 inside their birthday card from Mum or Grandad, and the grown-ups get a tax deduction for the account contribution. And if a parent co-purchases with the first-timer their portion would be Capital Gains free when the home’s finally sold (or the kids buy them out). As agents it all looks good to us!
But as Treasurer Pete says “If people with more money were just chasing the same number of houses, the price of the houses will go up.” The Property Council’s done some great work analysing how to improve the supply of homes (see www.affordablehome.com.au ) and they’ve rightly highlighted the massive infrastructure costs borne by each new home buyer. It might be more politically acceptable to load developers with costs rather than increase general taxes or rates. But the reality is that end purchasers wear these costs, and this drives prices up and supply down. Each new building must cover its own water, sewerage and other direct works. But as a community we need to ask if we expect buyers of new properties in our inner city to fund the upgrading of surrounding footpaths and roads and libraries and parks?
According to the Property Council the infrastructure costs on a new Brisbane apartment have risen 500% over the past 11 years. That’s government putting its hand further out for contributions to local amenity, and more often than not they’re amenities the whole community makes use of every day. Add in the new minimum standards for housing with requirements like water efficiency items, fire safety requirements and increased sound attenuation – all needed but adding to the cost. Then tip on other government fees and charges, and new properties have a whopping built-in cost – even before the buyer pays their stamp duty. As a community we need to ask if we really do want to improve housing affordability, and allow more of our population to own their own home. If so we need our governments at every level to wind back the recent increases in new property costs, and share the burden across all tax payers. Hardly an election winner is it?!
We’d like your view – should indirect infrastructure costs be paid by new property buyers or funded out of general taxes? Tell us what you think!
Tags: Brisbane housing affordability, Brisbane housing supply, capital gains tax, first home owners, Property Council of Australia, stamp duty Queensland
Posted in Brisbane's future & new infrastructure, Brisbane's sales market, property taxes and rates etc | No Comments »
