Australia’s strong population growth rate over recent years has led to an underlying shortage of housing despite a recent boost in new home construction.
Blogger: Paul Bennion, Managing Director, DEPPRO tax depreciation specialists
New figures produced by RP show that the overall capital city population increased by 313,387 persons yet just 114,825 dwellings were approved for construction for the year ending June 2013.
After the figures were adjusted for average household size plus the assumption there should be 15% more dwelling approvals to replace demolitions, RP Data estimated there should have in fact been 137,005 dwellings approved for construction. This finding meant that there was a deficit of 22,180 capital city dwelling approvals.
In Perth, for example, the research found that there was just 1 new home approved for every 3.26 residents while in Brisbane the comparative figure was 3.45.
This underlying shortage of housing in Australia has also been recently highlighted by an extensive 70 page report completed by Goldman Sachs entitled, “A Study On Australian Housing: Uniquely Positioned Or A Bubble.”
s the report points out, in the 20 years between 1985 and 2005, Australia built an average of 150,000 homes each year for every 240,000 increase in population. This ratio translates to 60 per cent of a new home constructed for each new person. However, in recent years, this trend has significantly changed with only 30 per cent of a home being constructed.
DEPPRO predicts that the growing shortfall in Australia’s housing will be met by the growth in new apartments which are more affordable than traditional houses to purchase and faster to construct.
As part of this trend, DEPPRO has found that a growing number of our clients are now purchasing new apartments compared to traditional stand alone houses for investment purposes.
However many property investors who purchase apartments and units for investment purposes are still the most common group of investors who fail to obtain the full tax depreciation entitlements.
These first time investors fail to understand that the tax benefits from depreciation can be just as important as rental income. This is particularly the case with people buying an apartment because one year’s depreciation allowance could be equal to several years of rental income.
Knowing how much tax depreciation benefits a property will generate, for example, can assist property investors plan for future cash flow that can then be used to buy additional properties.