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An increase in demand for high-density living comes as a result of important demographic changes.
Blogger: Paul Bennion, managing director, DEPPRO
Australia is experiencing a boom in apartment building, which is highlighted by the latest ABS figures on new residential building approvals.
They show that during the last financial year, the value of building approvals for apartments topped $19.9 billion.
This was a jump of more than $4.4 billion compared with the previous financial year when the value of building approvals for apartments stood at $15.5 billion.
The surge in spending on new apartments has continued into the current financial year, with the value of building approvals averaging around $2 billion every month.
Property investors have been a major factor behind this surge in spending on apartments as they traditionally favour this asset class due to higher rental returns and lower maintenance costs compared with larger family homes.
In addition, there has been greater demand from renters for higher density homes due to important demographic changes, such as the increase in single family households.
DEPPRO has been finding that property investors throughout Australia have been capitalizing on this trend in greater numbers over recent years especially in the capital cites of Brisbane, Sydney and Melbourne.
The generous tax depreciation benefits associated with buying a new apartment has also been encouraging more investors to purchase apartments.
While there are many issues concerning the depreciation entitlements on properties, in most cases, strata-style homes such as new apartments provide a higher rate of depreciation than houses – all being equal.
Buying a new apartment, for example, can provide a taxpayer with considerable depreciation benefits because of the significant tax benefits they offer through depreciation.
Some DEPPRO clients are achieving that tax benefits obtained through depreciation can be equivalent to 60 per cent of the total purchase price of the property. In some cases, these tax benefits can total $300,000 based on a purchase price of $500,000.
A key part of ensuring that the investor obtains their full tax benefits is to have a professional depreciation professional prepare a comprehensive depreciation schedule. Even an older style apartment can also qualify for substantial tax depreciation benefits if a depreciation schedule is undertaken for the property.
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