RBA rings alarm on high debt levels
Risks to financial stability could be building as house prices and debt levels keep rising, the Reserve Bank has caution...
The growing confidence in the Australian property market is underlined by the latest ABS lending figures which show lending to investors has now reached a record high.
Blogger: Paul Bennion, Managing Director, DEPPRO tax depreciation specialists
The latest ABS home loan figures for November 2013 show that the value of home loans secured to purchase established homes for investment purposes totaled $9.34 billion.
This was a record monthly high and a jump of more than $2.2 billion compared to November 2012 when investment lending for established homes was recorded at $7.09 billion.
Low interest rates and the expectation that interest rates will remain stable has been a key issue that has encouraged investors to borrow more money to purchase investment properties over the past year.
Recent comments by the Reserve Bank that interest rates are likely to remain stable for some time will only encourage further activity by property investors in the property market.
Property investors in Australia are now collectively borrowing on average over $2 billion each week to purchase investment properties.
A significant new trend that DEPPRO is recoding has been the fact that many more investors are now adding to their existing property portfolio by buying additional investment properties.
Typically, we have seen our long term clients who have around three or four investment properties purchasing at least one additional investment property over the last year.
In particular, DEPPRO is undertaking tax depreciation schedules for more expensive properties as these clients have generally achieved high enough equity levels in their existing portfolios to purchase to purchase more expensive homes.
Investors are now targeting higher priced established properties because the upper end of the property market underwent a significant market correction following the Global Financial Crisis and properties prices are therefore now very competitive in the top end of the real estate market.
These long term investors believe that the upper end of the property market will rebound and deliver high rates of capital growth when the real estate market gains even further momentum.
The tax depreciation benefits of these more expensive properties can be quite significant especially if 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.