Newsletter - Inner Circle December 2017
Buy before Christmas… if you can!
The silly season is almost upon us, and activity in the property market is proving to be strong in the lead up, with buyers and sellers both looking to transact before everything shuts down later this month.
With only a few weeks to go before Christmas, now is an opportune time to see if you can bag a bargain before the year is out. Given the deadline, both real and psychological, many vendors want to ensure their property is sold by then, so they can switch off from ‘selling mode’ and enjoy their well-deserved holiday break. This means no more open for inspections, keeping the house clean or appeasing unhappy tenants, and it’s often a great start to the new year for them.
While many sellers are keen to offload their properties before Christmas, stock levels are still actually frustratingly tight, so as a buyer you’ll have to find the right property first. Keep an eye out for properties that pass in at auction between now and the end of the year. It may be worthwhile jumping on them ASAP if you know the vendors are highly motivated to sell before Christmas. If you’re bidding at an auction, make sure you know how to handle the situation; don’t get caught up in the fear of missing out or desire to buy before the holidays, as you could easily end up paying over the reserve and not even know it.
There is great potential for bargains at this time of year given the Christmas deadline, but remember, for it to be an investment grade property, it still needs to be the right property, in the right location, with the right attributes to ensure it will grow strongly and rent easily, well into the future.
If you need help with finding the right property, with bidding or post-auction negotiations, engage a licensed buyers agent to guide and assist you. To find out how we can help, contact us today.
The vacancy tax is good in theory, but won’t be in practice
A new levy for vacant properties in 16 of Melbourne’s local government areas will come into effect on January 1 next year. The tax will see owners pay 1% of a property’s capital improved value if their property is left vacant for more than six months of the year. Exemptions apply to deceased estates, holiday homes and properties being renovated.
The levy is expected to raise more than $80 million over four years for the State Government, but the professed aim is to get people to either rent their properties out or sell to free up much-needed housing.
In theory, the idea of a levy for vacant properties is a great idea. In fact, I met with the State Minister for Housing, Disability and Ageing, the Hon. Martin Foley, back in 2015 and pitched the vacancy tax concept (among others) to address the problems of homelessness and affordable housing in Melbourne.
My ideas included incentivising CBD apartment investors to offer their properties at reduced rents for affordable housing, with a capital gains tax break for doing so. Given many of them won’t make any capital gain in the short to medium term, this was a win-win scenario, however we now know which path was chosen.
While I believe in the vacancy tax per se, all and any legislation is only as good as those who enforce it and in this case, it will be problematic. Why? The main reason is that it will be tricky to police, as it relies largely on self-reporting, and while there are penalties for failing to tell authorities your property remains vacant, it’s going to be hard to trip people up.
How many non-English speaking foreigners will know about this or even understand the onus is on them to declare the vacancy or occupancy of their own properties, given that this is a self-reporting tax? Many owners corporations can’t even track down overseas based owners to pay their share of the fees, let alone the government educating them of their tax-reporting obligations.
The other problem is that this version of legislation will only encourage landlords to offer short-term stays or Airbnb tenancies. It doesn’t go far enough to ensure these properties are offered for full time and permanent rental, which is where the biggest tenant shortage problems exist.
Not unlike the new underquoting laws, the lack of common sense legislation, policing and enforcement is the biggest issue and will result in little revenue being generated.
It would have been more financially beneficial to taxpayers for the government to legislate the assumption that all properties are vacant and the landlord then has to prove occupancy via an approved methodology provided by the relevant enforcing body.
As buyers’ agents, our job is to find good properties for you to buy and negotiate on your behalf to secure the right price. A big part of finding suitable growth properties is analysing the entire market to determine the location you should focus on. This involves also considering what’s happening in the wider market including policy decisions such as the introduction of the vacant property levy, and the impact they will have.
While property can be a very solid and safe investment, it’s not as simple as finding any old property and buying it. There are a multitude of factors to consider to get your purchase right and ensure strong returns and capital growth going forward.
Our clients put their trust in us to use our expertise to select the right additions for their portfolio. One of our clients, Miranda, has come back time and time again, and recently we purchased property number four on her behalf.
This time around, we bought a four-bedroom, three-bathroom, two-car park renovated property before auction, in the highly sought after suburb of Preston. Uniquely this property consists of a three-bedroom, two-bathroom, one-car park house and an attached self-contained studio with a lock-up garage. Combined, the two spaces in the property earn $620 per week rent, however given the properties share power, gas and water, the landlord is required to pay $6,000 per year in utilities, resulting in a pretty poor current return.
Our solution was to recommend terminating both tenancies, leasing the property to a single tenant only for $700 per week, saving $6,000 per year in utilities, while earning an extra $4,160 per year in rent.
The extra $10,160 income per year means Miranda will now earn a healthy 5% yield on her well located ‘capital growth’ property, allowing her to pay down her debt more quickly.
If you want help with adding a quality investment like this to your portfolio, contact us for an obligation-free discussion.
Dubai-based clients Katrina and Marinus engaged our services to help them get their foot into the ever-rising inner city property market.
With a clear capital growth and add-value strategy we commenced our search and within three weeks had bought this gorgeous three-bedroom Federation home in Coburg for them. This will be a great renovation project for them in years to come, cementing their presence in the Australian property market.
If you want results like this, click here to book a time with us discuss your requirements. It’s 100% obligation free.