Australia sees current housing shortage of 250,000

A great article for for homeowners looking for investment property advice. According to research provided by ANZ, the Australian housing market currently remains in significant undersupply.
Over the national forecast we have a shortage of around 250,000 home, and while lower then previous estimates this shortfall is assured to remain above 200,000 beyond 2018.

Even with the recent residential and property investment booms, in the markets of Sydney, Melbourne and Brisbane in the greater part of the last three years, home-building levels have only just reached a point suitable for current population growth.

That was largely due to an increased completion rate for apartments in Melbourne, Sydney and Brisbane.

“The surge in higher-density housing construction has driven housing construction levels to match annual underlying housing demand for the first time since 1995,” ANZ senior economists David Cannington said.

The last time the Australian housing market was deemed in balance was in 2001. Since then annual residential builds have grossly under marked supply by roughly 18,000 homes, sky rocketing to about 250,000 on the latest estimates. “To erase this shortage would take more than a year of housing construction at current unprecedented levels with no increase in the underlying housing requirement, i.e. no population growth,” Mr Cannington said.

Despite this it is expected easing of construction activity this year, meaning the supply imbalance would only see little change over the coming years, even if population growth slows.
Australia’s homes in need

NSW – 100,000
WA – 44,000
Victoria – 42,000
Queensland – 25,000
SA – 13,000
NT – 6,000

Why property investment? Here is just one of many reasons

As we all know population growth is inevitable, Australia is a young fast growing country with no signs of slowing down. Population growth is a key factor when considering investment property and your financial future.

Australia’s current population is 23.9 million and climbing, we are currently seeing a new born just under every two minutes, and one death just under every 4 minutes. We are also receiving a net gain of one international migration every two and a half minutes, this is currently giving us an increase of 1 person every one and a half minutes.

When learning how to get started in property investment, knowing this information is a huge asset. Natural growth and overseas immigration has always been good news for property investment. With having this brief layout of information in mind, do you think housing will/could lose its demand?

Great news of Interest Rates.

Great news for investors today as the RBA has decided to keep interest rates at historical lows of 1.75%. Reading through the RBA commentary we can determine what factors have influenced the RBAs decision not to move. While the labor market is expanding and more jobs are being created, overall wage growth has kept inflation low. This has eased the cost of living for families.

Lower interest are not only good news for investors but also for Australian businesses looking to put money into expansion. Our low dollar means that exports are also looking stronger.

With interest rates so low at the moment and yields so high, it has never been a better time to buy and hold investment property. If you buy the right property at the moment it should be cash flow positive.

Are you missing out on an extra $5,784 off your tax?

As the laws currently stand investors are allowed to claim expenses incurred in holding their investment property against their normal income earned. However, a recent study showed that many people are missing out.

According to statistics released by the Australian Taxation Office (ATO), 2.8 million property investors claimed deductions relating to their rental property over the 2012 – 2013 income year.

Among these investors, just over one million received an average capital works deduction of $2,113 while almost two million property investors claimed an average deduction of $1,179 for depreciation of plant and equipment, making the total average deprecation claim made by property investors who claimed both years an average of $3,292.

Comparing with the statistics released for the 2011-2012 income year, there was an increase close to 100,000 in the total number of investors claiming deductions for their rental properties.
Despite this increase in people claiming, there was next to no change in the overall deductions claimed for capital works or plant and equipment assets. The average capital works deduction compared with the previous year increased by $83 and the average plant and equipment deduction increased by $40.

Based on data collected from tens of thousands of quantity surveyor’s depreciation schedules, the average deduction found claim within this time was $9,076 for both plant and equipment and capital works, an increase of $5,784 that investors could be claiming.

It can therefore be reasonably presumed that investors are not calculating or claiming their depreciation deductions correctly. This “missed claim” could easily equate to an extra $50 per week in the average investor’s pocket, if done correctly.

I would advise everyone to check their claims thoroughly and have an expert prepare a QS report to no deductions are missed.

Property investment to beat inflation

Inflation is that nasty thing that erodes away the buying power of our money. Why 30 years ago, you could buy your lunch and drink etc and still have change out of $5. Hence the idea that keeping money in cash in a Milo tin under your bed is seriously flawed due to the fact that that money is actually losing value every day that it sits there. Even money held in cash in a bank getting interest is maybe just keeping its head above water as the interest received may not even be as high as the rate of inflation.

The idea of investing is to not only to allow your “savings” to keep its head above water but to also significantly beat inflation. You are therefore building wealth.
One of the best ways to do this is to invest in growth assets like property. Property is one of the better assets to invest in because it is very safe but tends to grow consistently much faster than inflation.

For example, the latest national CPI figures for Australia’s capital cities show that during the year ending March 2016, the annual inflation rate was 1.3%.

During this period, the combined capital city home prices increased greatly by 7.3%, close to six times the annual inflation rate.

It is widely known that over a long term, property values have increased at a much faster rate than inflation.

The figures above are important to property investors as they are the key reason why many people decide to invest in real estate. To protect themselves against the impact of rising inflation and to generate personal wealth over the long term.

With the weekly wages in Australia recording very modest rates of growth, property investment is an excellent way for you to build ongoing wealth.

However, when looking for investment property it is very important to undertake careful research and get some qualified advice as to how to structure your purchase and build your portfolio.

House prices to go up 10%

A very positive comment was made by Christopher Joye from the Australian Financial Review recently when he referred to house prices. “House prices are going nuts again” was his comment.
Joye advised that he had uplifted his growth forecasts for 2016 based on the back of the further cut in interest rates down to 1.75%.

“..given the current yield curve expectations for a second cut in 2016, my central case is house prices run at three to five times wages, which represents growth of between 6% and 10%.”
The numbers tell the story:

  • 4% capital gain in the past quarter already
  • Brisbane and Adelaide alone have shown an increase of 7.4% and over the last 12 months another 5.6%, according to Corelogic RP Data, which Joye has noted seemingly modest, is 3.5 and 2.7 times the pace of wages growth.
  • RBA Interest rates at historical lows (1.75%)

With the predicted changes to superannuation and low interest rates, property across Australia could be in for a further boost. Especially those markets such as Brisbane and the Gold Coast that are on their upward cycles.

Interest rates on hold

At the reserve bank of Queensland’s meeting today, the board has voted to leave the cash rate unchanged for now at its low of 1.75%.

The RBA took into note commodity prices that are above recent lows, but follow very substantial declines over the past couple of years. This has also been accompanied by Australia’s loss in trade.

Recent data collected in Australia suggests an overall growth is continuing, despite declines in business investment. Areas such as domestic demand, as well as exports, have been expanding at a pace on par or above trend.

Inflation in Australia has been quite low. Subdued growth in labour costs and low pressure of cost elsewhere in the would the reserve bank expects this to remain the same for quite some time.
We have also seen some positive effects on the housing market because of the lower then average rates – increases in building approvals, higher rental yields and improving house prices. Unfortunately, low interest rates will not stay low forever. Investors should take this into consideration when making an investment to ensure they can afford a drop in income when rates begin to rise again, taking out a fixed rate loan will reduce this risk.

Profitability of Property

Corelogic RP data is at it again releasing the latest ‘pain and gain report’ for Australia, and you might be able to tell by the name the report outlines total loses and profits of property in the last quarter of trade.

It is a very interesting report which reiterates that what a solid investment property is. The results show that the overwhelming majority of owners that sold made a profit. I would like to compare these details of those that invested in shares and see how many people made a profit vs how many made a loss. I’ll bet a 1000 to 1 that the results are not even close.

The results showed that “one third (31.9%) of homes resold for more than double their previous purchase price. Across those homes which resold at a profit, the total value of this profit was recorded at $12.9 billion with the average gross profit recorded at $239,855. The data also highlights the fact that ownership of property, whether for investment or owner occupier purposes, should be seen as a long-term investment. Across the country, those homes that resold at a loss had an average length of ownership of 6.2 years. Across all sales recording a gross profit the average length of ownership was recorded at 10.2 years, while homes which sold for more than double their previous purchase price were owned for an average of 17.5 years”

In regards to South East QLD: Just over the last quarter of march 2016, 95.7% of houses across the great Brisbane area have been sold at a profit of purchase price, units have seen 85.9% sold at a profit to original price. The Gold Coast has a lossmaking resale percent of just 13% meaning out of 100 houses sold in the March quarter 87 were sold at a profit to original purchase price. The median profit on the Gold Coast was $97,000 over this time with the median profit in the Brisbane area reaching $152,000.

There are a couple of take homes from these findings:

  1. Property is a long term investment
  2. You should on average double your money at least every 17 years
  3. Focus on growth but try an bring the cost of ownership down (cash outflows) so that you are able to hold multiple properties for the long term

First Home Buyer but no deposit? We can help!

If you are a First Home Buyer looking to get into the market but do not have a deposit then we may be able help you.

Did you know that the government has just increased the “First Home Builders Grant” from $15,000 to $20,000 from the 1st of July 2016? Although that may not be enough for you to enter the market, if you combine that with a cash builders rebate, it may just be enough to get you into your new home.

So, if you are tired of paying rent, have a job and want to live in your very own brand new home, then please contact us on 1300 148 178 or and we may be able to help you.

Brisbane continues to impress investors

Brisbane continues to lead the country for strong capital growth rates according to the latest findings from the quarterly PPA update.

Brisbane’s constant population growth and low unemployment rate are factors that continue to make the city Australia’s number one place to invest. Residential population growth in Brisbane over the past decade or so has grown by around 27%. That’s approximately 400,000 new residents in the CBD with this number expected to double over the next 20 years. That will take the city’s population from 1.7m up to almost 3m people by 2035.

The strong population growth coupled with great affordability makes it excellent value for investors. House prices rose by a little as 15% from 2008 to 2015 while income over the same period grew 31%. Couple this with falling interest rates and Brisbane’s residential stock remains extremely inexpensive. Its affordability index is currently sitting at a very strong 27%.

If you are thinking about getting into this market, it would be advisable to get in before the market rises too much as per Sydney and Melbourne.