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PO Box 319
Toongabbie NSW 2146
Tel: 1300 66 12 11
Mob: 0404 037 663
Fax: 02 8214 6592
Email: admin@powerport.com.au
Web: www.mortgageworldaustralia.com.au
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Hello,
Welcome to our latest newsletter. Although the Reserve Bank didnt increase the cash rate during their May meeting the volatility continues. Most lenders have increased their variable rates independent of the Reserve Bank yet again in the past month. The big question is when the upward spiral in interest rates is going to end.
The general consensus among economists quoted in the media is that the worst of the funding crisis is over. They are also predicting that the Reserve Bank may start cutting rates mid to late 2009 despite inflation running at 4.2% p.a. Despite the high inflation figure the Reserve Bank didnt increase rates since they believe that the economy is slowing down and over time the inflation rate will come down. There are no guarantees when it comes to interest rates so we just have to hope that the economists are correct!
If you are struggling with home loan repayments in these challenging times it is best to try and solve the problem before it is too late. Please contact me if things are getting difficult. There may be a cheaper home loan available or you may want to think about fixing your interest rate to ensure your repayments dont become too much to manage.
Enjoy this newsletter and feel free to share it with family and friends.
Warm Regards
Patrick OBrien
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| Patrick O'Brien |
| Mortgage Broker |
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1. Borrow Through Super
2. Going, Going, Gone . . . at the right price
3. The Price of Housing
4. Tax Return Time for Investors
| Investing your superannuation in direct property could now be an option in your retirement strategy, thanks to recent changes to the laws governing self-managed superannuation funds. |
The changes provide an opportunity for a self managed super fund (SMSF) to borrow money to acquire a beneficial interest in an asset, i.e., property. Otherwise known as gearing, it is a wealth creation strategy that enables you to invest more money than you could if you had to rely solely on your own resources.
Prior to this reform, property could be purchased within a super fund but it usually had to be bought outright as the fund was not allowed to borrow a portion of the total cost. For this reason, many investors with self-managed super funds have up until now primarily focused on the share market or indirectly invested in property via property funds or trusts.
As its name suggests, a self-managed super fund gives you control of your super destiny, but its complex rules can be daunting to the uninitiated. Expert advice is necessary and will help facilitate a smooth set-up, as well as ensure any borrowing and investment falls within the rules of the fund.
If you are considering any type of borrowing for investment purposes, we are happy to provide information to help get you started and referrals to other professionals if required.
| Going, Going, Gone . . . at the right price |
| When selling your home, the difference between making a disappointing return or earning a tidy fortune can be as simple as knowing how to stand out from the crowd. |
Property figures show the number of homes being put up for sale is on the increase, yet potential buyers are staying away from the market due to concerns about rising interest rates.
With more properties on the market and fewer buyers, it is more important than ever to outshine your competition. Here's a few suggestions:
1. Make a good first impression
Your home needs to make a prospective buyer feel confident and excited right from the start. This means repairing whatever you can both inside and out, from chipped paint and wandering weeds to dirty windows and dripping taps.
Cast a critical eye over your home and make a list of ways you can smarten it up. Ask a friend for their objective suggestions or hire a home stylist to help with the presentation.
To gain the maximum interest in your home, stylists advise it should be spotlessly clean, full of light, free of clutter and smelling good. Some even recommend displaying vases of fresh flowers around your home or baking a batch of cookies before your open house!
2. Find the right price
It is said that a mispriced home often sits on the market longer and eventually sells for less than a similar, correctly priced home. When finding out how much your home is worth, do your own research as well as asking for a valuation from a number of real estate agents.
Online services like Australian Property Monitors (www. apm.com.au) or Residex (www.residex.com.au) are a great resource for up-to-date property information. For a fee you can receive property reports which will help you evaluate how much your home is worth, how much it will be worth in 12 months time and the sales history of your street and suburb.
You can also pay professional property valuers to come to your property and give you an independent valuation. The Australian Valuers Institute (www.valuersinstitute.com.au) can recommend a valuer.
3. Choose an expert agent
You want a real estate agent who will work hard to sell your home, preferably for more than the market price!
Rather than simply choosing the agent who tells you your property is worth the highest price, look for their ability to negotiate and work the best sale.
When it comes to not giving your property away too early, experience and negotiation skills are a must. A sound knowledge of the local area, a track record of selling and a good marketing program are essential criteria.
| Buying a home in an Australian city could cost you more than it does in London or New York. That's the surprising finding of a recent study of international housing affordability by American public policy consultancy, Demographia. |
From the 227 cities throughout the world surveyed, 18 Australian cities were ranked in the top 50 of severely unaffordable markets.
The increase in house prices in Australia has pushed housing affordability to an all time low. Demographia rated urban markets as 'severely unaffordable' when house prices were more than five times the household income. In Australia, housing prices were found to be 6.3 times annual household earnings, compared with 5.5 for the UK and 3.6 for the US.
Sydney receives the dubious honour of being Australia's most expensive capital city, where buying a home will cost 8.6 times the average annual household income. Not far behind is Perth (7.6), followed by Melbourne (7.3), Adelaide (6.5), Brisbane (6.4), Hobart (6.3), Darwin (5.9) and Canberra (5.3).
Mandurah in Western Australia receives the distinction of Australia's most expensive urban area, where houses cost 9.5 times the average annual household income. Queensland's Sunshine Coast rates not much better at 9.3, and the Gold Coast ties with Sydney at 8.6 times the average household income, although the QLD data may be distorted by the large number of retirees who have relocated to these areas over recent years.
The Demographia study and those like it leave little doubt that Australia is in the midst of a housing affordability crisis. What is not so clear is why house prices are so high.
On one side of the debate are those that argue high prices are the result of government policies restricting the supply of land. By easing up on land-zoning regulations that restrain growth on the outer fringe of our cities, it is believed that the increased supply will cause house prices to fall.
Others argue that heightened demand is to blame. A decade of low interest rates is thought to have played an important role in fueling demand for housing. Other factors like the halving of capital gains tax, economic growth and strong immigration levels are thought to have encouraged more people into home ownership.
Whatever the reason for Australia's housing affordability crisis, it is agreed there are no magic bullet solutions. The Rudd government has announced a number of housing affordability measures (see below), which it is hoped will go some way towards easing the crisis.
Did you know?
A number of housing affordability measures have been announced by the Rudd government:
For investors, there is a new National Rent Affordability Scheme that funds tax incentives to build up to 100,000 low-cost rental properties.
For new home buyers, there is a housing affordability fund designed to help with infrastructure and council costs.
For aspiring home buyers, there is an $850 million policy for low-tax First Home Saver Accounts to help you save for a deposit.
| Tax Return Time for Investors |
| With tax return time getting closer, there is no better time to tidy up the office, organise all your receipts and start looking for all your allowable deductions for your investment property. |
If you are due a tax refund, getting organised before the end of June may mean you could have your tax cheque in your hand before the end of July.
The most obvious tax deduction is the interest on your investment loan. This can be deducted in the year it is paid. Other expenses that can be claimed in the same year as paid include council rates, insurance, renovation costs and repairs.
Be aware the common error of claiming as a deduction a repair that is actually an improvement to the property. A repair must directly relate to damage that occurred as a result of renting out your property. Replacing a part of a fence damaged in a storm is classified as a repair, for instance, but replacing the whole fence is seen as an improvement to the property.
While property improvements, alterations or extensions cannot be claimed as immediate deductions, you can still make your money back by claiming them as capital works depreciation. This involves writing off the cost of the item over a set number of years - the effective life of the asset.
You can also claim depreciation of items such as dishwashers, carpets and furniture. New items will have a greater impact on your tax claim. Older items may have already used up their "effective life" and not be eligible for a tax claim.
You may want to consider employing a property surveyor to prepare a depreciation schedule that your accountant will use each year to maximise your depreciation claims. The largest and most important component of the depreciation schedule is the historical cost of the construction of the property. The construction cost typically comprises 90% of the tax savings available. For residential investment properties, construction must have commenced on or after July 18, 1985.
Where construction commenced between 18 July, 1985 and 15 September, 1987 depreciation is applied at 4% of construction costs and is claimable for 25 years. Where construction commenced after 15 September, 1987 depreciation is applied at 2.5% of construction costs and is claimable for 40 years. In both cases substantial tax savings are possible.
Guidance about what you can and can't claim can also be found in the Australian Tax Office free guide 'Rental Properties' at www.ato.gov.au.
| Mortgage & Finance Association of Australia |
Mortgage World Australia is a full member of the MFAA. As a member we must adhere to an Industry Code of Practice, which requires professionalism, ethical behaviour, transparency and a commitment to you, the borrower.
This helps to ensure that your best interests are at heart whenever we make a finance recommendation.
- Bankwest have brought back their Rate Tracker Home Loan which offers a 0.90% p.a. discount off the average standard variable rate of the big 4 banks for the first 3 years of the loan. There is also no early repayment penalty on this loan which means you can refinance after 3 years without being charged a hefty exit fees.
- As of Monday 13th July RAMS are offering a FlexiFix product where up to a maximum of 50% of the loan amount can be fixed for 2 years at 4.99% p.a. rolling over to the Smartway Variable rate after 2 years. Variable portion can only be taken as a Smartway Variable loan which currently offers an interest rate of 5.49% p.a.
- St.George are offering a 0.15% p.a. discount off their fixed rate home loans if taken under their Advantage Package. Westpac are offering a 0.20% p.a. discount off their fixed rates under their Premier Advantage Package.
- Although most lenders are no longer offering cheap low doc interest rates RAMS are still very competitive in this market.
- Go into the draw to win $10,000 in Cold Hard Cash by either booking an appointment with us, using our services to take out a home loan or by referring a friend. Competition ends on 31st July 2009.
Disclaimer: This newsletter is intended to provide general news and information only. Readers should rely on their own enquiries before making any decisions regarding their own interests. Please do not rely on any part of this newsletter as a substitute for specific legal or financial advice. All material is copyright 2010.
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