Is the property market set to become a renter's paradise?
Weekly rent increases fall below inflation rate, putting renters in control.
Blogger: Paul Bennion, managing director, DEPPRO
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A major residential building boom has resulted in oversupply of rental properties that is creating a ‘renter's paradise’ for people wanting to rent homes in many capital cities throughout Australia.
The latest figures produced by CoreLogic show that average housing rental growth for the combined capital cities in Australia increased by just 0.4 per cent during the past year ending October 2015.
This rate of growth is much less than the national inflation rate of 1.5 per cent and means that many property investors are faced with increasing their rents at a level that is well below cost of living increases.
In particular, investors in Brisbane, Perth and Darwin are under the most pressure with CoreLogic figures showing that over the past year the rental market in these capital cities are the worst performers nationally.
During this period rents in Brisbane rose by just 0.3 per cent and fell in Perth by 6.5 per cent and 12.9 per cent in Darwin.
The reality is that it will take some time for this rental glut to be absorbed due to declining rates of overseas migration. To help boost their cash flow, landlords will need to maximize their cash flow by ensuring their claim their full tax allowances if they are not already doing so.
This is especially the case for the thousands of first time investors who may not be fully familiar with the generous tax benefits that apply to property investment.
It is estimated that only a very small proportion of residential investors make use of the tax depreciation entitlements that are available to all investors on all investment properties.
Many investors fail to understand that the tax benefits from depreciation can be just as important as rental income and that tax benefits obtained through depreciation can be equivalent to 60 per cent of the total purchase price of the property.
In the current soft rental market, even investors who own rental properties for an extended period of time should undertake a financial assessment to see if they can qualify for unclaimed tax depreciation benefits.
Property investors who already have a portfolio of investment properties should consider that they can claim tax depreciation benefits retrospectively if they have not done so in the past.
DEPPRO has been able to assist property investors who have several investment properties achieve tax benefits of more than $100,000 by claiming depreciation allowances for previous financial years.
While tax depreciation benefits are most generous for new properties, older properties can also qualify for significant tax depreciation benefits.
For example, a property that is more than 50 years of age could still qualify for thousands of dollars each year in tax depreciation benefits for the owner.
Anyone who has purchased an older property for investment purposes should therefore carefully consider the significant taxation benefits that can be achieved before beginning any construction work.
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