On the up: What will higher interest rates mean for real estate investors in New Zealand and further afield?
The Land of the Long White Cloud is shaping up to raise rates and the country may well be a bellwether for the Australia...
Growing confidence in the Australian property market is underlined by the latest ABS lending figures which show a jump in borrowing activity by investors.
Blogger: Paul Bennion, DEPPRO tax depreciation specialists
The ABS home loan figures for the March quarter 2013 show that the value of home loans secured for property investment housing in Australia totalled $17.45 billion.
This compared to $15.99 billion during the March 2012 quarter, representing an increase of over $1.4 billion or 9.1% over the year.
At the same time, the average size of home loans has also increased during the past year. In March 2012, the average size of a home loan was $289,600 and by March 2013, this figure had grown to $301,100.
Low interest rates and the expectation that interest rate will fall even further has been a key issue that has encouraged investors to increase their borrowings over the last year
Property investors in Australia are now collectively borrowing on average over $1 billion each week to purchase investment properties.
A significant new trend that DEPPRO is recording has been the fact that investors are now choosing to purchase more expensive investment properties.
Traditionally, investors are very active in the sub $500,000 price range because these lower priced properties are more affordable and returns are high.
However, because interest rates are now so low and property prices in the $500,000 to $800,000 are still very competitive, DEPPRO is finding a growing number of investors now buying in this more expensive price range for future capital growth prospects.
The tax depreciation benefits of these more expensive properties can be quite significant especially is they are new or relatively new and that is why it is important for investors to ensure that they obtain a tax depreciation schedule to claim these legitimate tax savings.
Most investors do not realize that tax benefits obtained through depreciation can be equivalent to 60% of the total purchase price of the property.
Currently, DEPPRO estimates that only a small minority of property investors claim their full tax depreciation benefits by obtaining a depreciation schedule from an authorized company.