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House price outstrips inflation rate by 8 to 1

House price outstrips inflation rate by 8 to 1

House price outstrips inflation rate by 8 to 1

By Paul Bennion | 01 February 2017

The latest house price figures for Australia’s capital cities reveal that the property market in the past year outperformed the rate of inflation by a margin of eight to one.

In 2016, the combined capital city home price growth rate was 10.9 per cent, according to CoreLogic data. 

That’s compared to an annual inflation rate for the eight Australian capital cities of 1.3 per cent.

Sydney property owners fared the best, with property prices rising by a ratio of nearly twelve to one over the past year. Melbourne property owners also achieved a strong outcome, with property prices rising by a ratio of around ten to one compared to the annual inflation rate.

Even in capital cities, such as Brisbane, that achieved more modest rates of capital growth, the ratio of capital growth to the annual inflation rate was nearly three to one.

These figures are important for property investors because one of the key reasons many people decide to invest in real estate is to protect themselves against the impact of inflation so they can build personal wealth over the long term.

It is also important to keep in mind that these figures do not take into account rental growth. In Sydney, for example, average weekly house rents jumped by nearly 7 per cent in 2016.

The fact that property values are now rising at a much faster rate than inflation in most capital cities is encouraging more mum and dad investors to purchase several investment properties.

Astute property investors can build a successful property portfolio at a much faster rate if they fully claim all their allowable tax benefits and, in particular, those related to depreciation that can be substantial.

These tax depreciation deductions can add up to several thousands of dollars each year in tax benefits for an average property investor.

To qualify for these tax deductions, an investor must have a fully compliant tax depreciation company undertake an onsite inspection of the property and compile a depreciation report based on this inspection.

Depreciation is a complex area of taxation. It requires a professional company to undertake a depreciation report because of the constant rule changes.

The ATO is now taking a more aggressive approach with tax deductions made by residential investors and has asked a large number to provide more details about their claims relating to property investments.

Property investors should check that the company undertaking their tax depreciation schedule is a member of the Australian Institute of Quantity Surveyors (AIQS).

Employing a company, such as DEPPRO, that is a member of AIQS assures consumers that their tax depreciation report is completed in a professional manner.

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RELATED TERMS

Inflation

Inflation determines the decline of purchasing power for a given currency over time, as well as the general level of price for goods and services.

Investment

An investment is an asset or item purchased with the expectation that it will generate income or appreciate in value in the future.

Property

Property refers to either a tangible or intangible item that an individual or business has legal rights or ownership of, such as houses, cars, stocks or bond certificates.

Rates

Rates refer to a fixed price or an amount charged by sellers or providers for their goods and services.

About the author

Paul Bennion

Paul Bennion

Paul Bennion is the managing director of DEPPRO tax depreciation specialists.
DEPPRO Pty Ltd is Australia’s leading property depreciation company, specialising solely in the preparation of tax depreciation reports for residential, commercial, industrial and leisure investment... Read more



House price outstrips inflation rate by 8 to 1
House price outstrips inflation rate by 8 to 1
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