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How to build the perfect home

Some 214,000 homes were built in Australia in 2018, proof that our love affair with owning our own home continues unabated. And while some of us opt for architect-designed homes and others for builds they manage themselves, the house and land package market is booming.

But for the novice, the whole process might seem a bit daunting. To help, here are five basics to consider.

1. The funds

It all starts with money. Set a workable budget, taking into account extras like landscaping and finishes. Ensure you understand the commitment and seek advice from your banking institution.

2. The estate

Most new estates are located on the suburban fringe and are greenfield sites – land that hasn’t been developed. Yeramba Estates has been developing land since 1962 and has a golden reputation of delivering quality land in great locations.
Look at how the estate suits your lifestyle: consider proximity to transport, schools, shopping centres, playgrounds.

3. The block

Blocks will differ in size, orientation and gradient, which can all impact your costs and the plan of your house. Orientation particularly can impact your energy usage, which will affect your hip pocket. Yeramba take pride in revealing all aspects of the land for sale to ensure you know exactly what you are purchasing.

4. The builder

Research the builder. Check out their previous projects, and ask for customer testimonials. Build time, pricing for post contract variations, penalties for late delivery – all good questions. Your new home is in their hands.

5. The floorplan and the finishes

Get your floorplan exactly right – it needs to blend functionality and style, and suit your lifestyle. Remember that you’ll spend most of your time in the living areas, so they should take priority.
Most builders have selection centres, where you can play with external materials and colours, creating a facade that has character, charm and individuality.

First Home Owners are better prepared to purchase

First home buyers are continuing to stake their claim on markets across the country with many usurping their competition by being better prepared to purchase.

The latest Australian Bureau of Statistics figures show that about 18 per cent of all housing finance commitments is to first homebuyers.

Lending landscape

Lenders now require more information, including a realistic assessment of living expenses, before determining whether to approve or deny a property loan.

Of course, the vast majority of home buyers and investors need finance to purchase property, but the one group who needs it the most is first-timers. Whereas, upgraders and investors might have some equity they can draw on to sweeten a deal, prospective First Home property owners generally do not, which means they have strict price points that they can afford to buy in.

The problem often is that they don’t know what those financial goal-posts are before they start searching.

While generic calculators can be useful, they are no substitute for an actual financial assessment of someone’s borrowing capacity, which generally can lead to a loan pre-approval.

What actually is a loan pre-approval?

A loan pre-approval is when a lender has provided provisional approval for a borrower up to a certain figure based on a rigorous assessment of their finances.

It’s important to understand that it’s not an approved property loan so you can’t go all crazy.

The lender will still need to have the property valued, as well as complete all the required paperwork, before they will approve a loan on that specific property.

So, you might be asking yourself what’s the point of a loan pre-approval at all?

Well, you see, it provides a level of certainty around what price you can afford to pay for a property as well as gives you confidence that your loan application – subject to the property valuation – is likely to be approved.

The rise and rise of the millennials as the new home buying forces

With the re-emergence of the 1st home buyer it seems that it’s a new breed that’s the driving force behind this.

The Millennial population, who are typically born between 1981 and 1996, represent the most influential age cohort in today’s residential property market.

The Millennials are a significantly larger group than Generation X, those born between 1965 and 1981. The oldest Millennials have entered the 25 to 34-year-old age group over the past decade.

This population growth helped create demand for the record level of new units and apartments that have been built over the past decade. Millennials have provided a steady stream of tenants to occupy these dwellings or, for some at least, first-time homebuyers buying more affordable properties in our two major cities.

A new dynamic

The ageing of the Millennial population over the next decade is expected to create a new dynamic for the residential property market.

Changes in dwelling needs

Consequently, it’s likely this family stage of life will bring about a change in dwelling needs as Millennials seek larger dwellings and more of them move from renting into owner occupation.

The boom in apartment construction over the past decade has been key in accommodating the Millennial population as young renters and first-time homebuyers, but the housing market will need to change again over the next decade to be able to accommodate Millennials in their next stage of life.

Historical demographic trends indicate that they will be looking for larger family dwellings and more of them seeking to buy rather than rent.

Where next for Millennials?

It’s not known if Millennials, many of whom now live in the inner suburbs and other high amenity areas, will follow their predecessors into the outer suburbs and regional areas in search of a house or if they will prefer to stay in the inner and middle ring suburbs.

The challenge for the market to accommodate demand from this group is to provide a more diversified range of housing options in a proximate location at an affordable price yet designed well enough to accommodate a family.

Excerpt of excellent article about Millennials by Andrew Mirams – www.intuitivefinance.com.au


Central Coast affordability

Comparative affordability

Sydney and Melbourne – the nation’s largest property markets – have endured price corrections over the last 12-18 months. However, these corrections follow on from accelerated property growth: prices in Sydney and Melbourne increased by almost 50% in the last five years to a median house sales price of $960,000 and $783,000, respectively (CoreLogic). So, looking beyond the softening of the last year-and-a-half, it’s still a challenge for buyers without equity – made even tougher by the Royal Commission spooking lenders – to afford to buy in many areas of our capital cities.

But buyers and investors who look beyond the city limits will comfortably purchase a home in a regional area without the mortgage pressure of a capital city postcode. (Indeed, you might be able to buy several properties for the same price as one on Sydney or Melbourne).

But let’s compare the more populous areas. In the Hunter Valley (the region’s population is well over 600,000, with the main area of Newcastle accounting for around 440,000) the median house price is $530,000, 44% lower than Sydney’s equivalent median. The Central Coast – in some parts, only an hour by train to Sydney – is home to more than 300,000 residents and a median house price of $759,000, or 20% lower than Sydney.

With thanks to Mathew Tiller on Jan 31 2019, LJH Newsletter 2019 Vol 25

A quarter of first home buyers also considering purchasing investment property

New research from Westpac reveals a quarter of first home buyers are considering buying both an investment property and an owner-occupier home. Westpac’s latest Home Ownership Report shows first home buyers (FHBs) are feeling more confident than ever about their prospects of home ownership.

The report found 29 per cent of FHBs are considering buying both an investment property and an owner-occupier home. and the rise of positive sentiment among FHBs is hardly surprising.

This surge in confidence and positivity among first home buyers is great to see, and not surprising considering house prices have on average dipped by 2.7 per cent over the past year to date, primarily driven by the Sydney and Melbourne markets. Despite this optimism, a key barrier to first home buyers achieving their dream home remains saving enough for a deposit and upfront costs.

Market research group Propertyology has also noticed an increased interest in property investment from FHBs. Simon Pressley, managing director of Propertyology says more young people are prioritising investing earlier in life, and are turning to ‘rentvesting’.

“Rentvesting is arguably most popular among people in their mid-20s to 30s, especially those living in Sydney, because they’d rather not wait any longer than is essential to get a foot in the property ladder,” said Mr Pressley.

“For first-time property buyers, rentvesting enables you to get into the property market sooner with a smaller deposit, as opposed to taking several years to accumulate a bigger deposit and the market climbing even higher.”

Director of Right Property Group, Steve Waters, says there are many advantages FHBs have when buying an investment property.

“Young investors are usually tech savvy and can easily access and analyze data. They think quick and are fast to comprehend the available information,”

“Another advantage of being in your 20s and 30s is you haven’t yet hit your peak earning potential, so there’s usually some extra cash flow in your future to look forward to. Most of all, you get to start early and gain experience.”

4 upsides to downsizing

While it’s tempting to hold onto the family home because of the sentimental value, the reality is that it may be holding you back from a better lifestyle and a more comfortable financial situation. Downsizing could allow you to find a home that’s more appropriate to your lifestyle, while also freeing up time and money to use elsewhere.

  1. More funds to invest to create security in retirement or improve your lifestyle.  

Downsizing allows you to unlock the equity in your current home to use for investment purposes. If you are lucky, you may be at a point where you’ll be able to pay for your new home with cash.

  1. Fewer expenses.  

Downsizing can drastically reduce your expenses, from cutting your mortgage repayments to slashing your living costs. Energy is one area where you are likely to notice real savings when you move to a smaller property.

Let’s face it – bigger properties can be hard work.

Not everyone wants to spend their life maintaining a larger property or garden. Just think of what you could do with the time it takes to clean and maintain that great big house.

  1. Lifestyle benefits.

Looking for a sea change or a tree change? Downsizing could provide a great opportunity for you to live in a more desirable location, like beachside or countryside but most importantly in housing that is more suitable for your needs.

  1. Tax breaks.

In a recent Federal Budget, the Government announced plans to encourage older property owners to downsize. This is intended to help free up larger homes for younger, growing families.  Retirees are able to inject substantial sums into superannuation if they sell their home after they reach the age of 65.

The existing voluntary contribution rules for people aged 65 and older (work test for 65-74-year-olds, no contributions for those aged 75 and over) and restrictions on non-concessional contributions for people with balances above the lifetime limit do not apply to contributions made under the downsizing cap.

To qualify, you must have owned your property for 10 years. What’s great about this new initiative is that both members of a couple can take advantage of the measure for the same home. That’s double the current allowance for a couple downsizing to a new home.

However, keep in mind that the proceeds contributed to superannuation will be included in the assets test for any age pension qualification.

Original article by PAUL CHEVERALL

 

Stamp Duty Reform – What Does This Mean For You?

The NSW Government has proposed reduced stamp duty for residential property, in a move it is labelling ‘the most significant reform in a generation’.

Under the proposed changes, which are planned to come into effect from July, 2019 – the seven price brackets that determine how much stamp duty is paid will rise in line with inflation. NSW will be the first state that will index stamp duty brackets to CPI, a change that will promote savings on residential property transactions.

NSW Treasurer, Dominic Perrottet stated that the reform will ‘benefit many buyer types, from first homebuyers, downsizers or upgraders’. The reform, which seeks to peg stamp duty to CPI, will ‘reduce the tax burden on homebuyers’.

Although the stamp duty savings will be modest in the short term, over the long term, they will be substantial which will make it easier for people to realise the dream of owning their own home.  Director of Residential Sales at Colliers International, Peter Kerras outlines that ‘the reforms on stamp duty may allow purchasers to use more of their savings upfront towards the purchase of a property given the reduced burden of stamp duty’.

Under the First Home Owners Grant, which was introduced in 2017, first home buyers pay no stamp duty on new homes up to $600,000, before it shifts to a sliding scale between $600,000 – $800,000. However, it is unclear how the First Home Owners Grant may be impacted by the proposed changes in stamp duty. Peter Kerras goes on to state that ‘the reform will be beneficial, particularly for purchasers that cannot access the current First Home Owners Grants.’

It goes without saying that the State Governments move to reduce the burden of stamp duty for purchasers of residential property will greatly assist both buyers and sellers of property in NSW.

By Daniel Atkins for Colliers International

 

Property investors: did you get your tax deduction?

In a recent article by Anthony Keane, he advised that many of Australia’s 2.1 million rental property owners are missing out on thousands of dollars of tax deductions each year by failing to correctly calculate depreciation.

New figures from BMT Tax Depreciation show that since tax time started on July 1, its investor clients have achieved depreciation claims averaging $8893 per property. That’s much more than the latest Australian Taxation Office records showing average annual claims totaling $3600 for capital works (construction costs), plant and equipment as many investors failed to seek adequate advice.

“Thousands of dollars of legitimate tax deductions are being left on the table each year,” he said.

Big ticket items such as ovens and carpets often provided the biggest deductions, but investors should not ignore smaller items worth less than $300 — such as bins and smoke alarms — that could be claimed in full immediately. Capital works deductions were often $5000 in the first year.

Depreciation made owning rental properties more affordable, especially in the early years where there were the most cash flow pressures.

New rules introduced last financial year have taken some of the shine off depreciation deductions, but thousands of dollars can still be claimed by many property investors.

@keanemoney

Originally published as This mistake can cost thousands at tax time

 

Central Coast is emerging as a new House Price Hotspot

Sydney’s prices remain the most expensive in the country by some distance, and this has prompted growing demand for areas outside of the capital as buyers search for affordability.

The Central Coast has been a key target given its proximity allowing residents to work in Sydney, and it’s prices are expected to rise by 3.6% in 2018 and 8% in 2019.

 

from Moody’s Analytics and Corelogic data

 

ATO formalises GST property settlement changes

The government recently decided to make some revisions to the process of paying Goods and Services Tax (GST) when acquiring residential properties.

Although the amount of the tax remains the same, buyers of new homes after 1 July 2018 are expected to take care of remitting their GST payments to the Australian Tax Office (ATO).

The Property Council of Australia Chief Executive Ken Morrison said that this was one of the biggest modifications to the way GST is being collected on property since its introduction twenty years ago.

“Previously, this was done by the developer. The overwhelming majority did the right thing and passed the GST they collected through to the ATO, but this measure has been introduced to deal with the minority who didn’t, through so-called ‘phoenixing’,” shared Morrison.

Affecting 70,000 property transactions a year, the new directive will oblige homebuyers to do extra work in order to guarantee their property’s settlement. Some of these additional steps will include submitting forms to the ATO and separating the GST from the purchase price of the property. 

“People buying property after 1 July should talk to their solicitor or settlement agent to ensure they have the right arrangements in place to meet this new requirement and ensure a smooth settlement process,” Morrison reminded those who wish to buy property.

Morrison added that The Property Council came prepared for the announcement as they had been investing in systems and staff training to aid the introduction of the new process and to minimise disruption or inconvenience to their customers.

For contracts entered before July 1, 2018, transitional agreements are already in place.