Investors are now buying into the Brisbane property market because rental returns still remain high and properties overall remain competitively priced, with the potential for strong capital gain.
Blogger: Paul Bennion, managing director, DEPPRO tax depreciation specialists
Growing activity by property investors has resulted in the median house price in Brisbane surging to a record high of $477,352 during the June 2014 quarter according to the latest figures produced by Australian Property Monitors.
Overall, Brisbane's median house price increased by 6.9 per cent during the year to June 2014 and this increase has been part of a steady recovery. On a quarterly basis, Brisbane's median house price rose by 1.5 per cent – the eighth consecutive quarter of price growth for the city. Brisbane achieved the third highest quarterly and yearly rate of growth of any capital cities (behind Melbourne and Sydney).
At the end of 2013, we predicted that the Brisbane property market would recover during 2014 as a result of increasing activity by investors.
So far during 2014, this prediction is proving to be correct and this recovery should continue with interest rates now expected to remain low for an extended period of time.
However, the potential for even stronger capital growth is huge because, for example, the median price of a house in Brisbane is now $330,000 lower than Sydney ($807,880). The national median house price now stands at $627,940, which is well above the median house price for Brisbane.
Property investors are taking advantage of these very competitive house prices and have become very active in the Brisbane property market during 2014.
Investors are now buying into the Brisbane property market because rental returns still remain high and properties overall remain competitively priced with the potential for strong capital gain.
In particular, we are finding that there is strong demand amongst investors for older homes which can be easily renovated in the Brisbane property market as evidenced by the large number of depreciation reports we have completed for such properties over recent months.
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 carefully consider the significant taxation benefits that can be achieved through depreciation before beginning any construction work.
Investors wanting to take advantage of opportunities in the Brisbane property market during 2014 should therefore ensure that they boost their cash flow through obtaining their full tax depreciation benefits.
In doing so, this will mean that they can more quickly build a property portfolio and achieve wealth creation in a shorter period of time.
It is still estimated that only a very small proportion of residential investors make use of the tax depreciation entitlements, which 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.
About 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 properties.