Dear fellow investors,
Welcome to the monthly June 2015 edition of the Investors Prime Real Estate newsletter!
I have some awesome articles for you this month, compiled from my personal network, which comprises of some of the sharpest minds in property investing in Australia.
1. The Property Bubble Myth Exposed. By Konrad Bobilak
2. Off-the-plan contracts and material changes to plans of subdivision: What you need to know as a buyer or developer. By Peter Bazzani
3. Using your super to buy Real Estate. By Nathan Free
4. Can your SMSF do a Property Development? By Angelo Panagopoulos
5. Depreciation for renovations made easy. By Bradley Beer
MARKET WRAP UP
There is a buzz in the property market in June, with auction clearance rates hovering around 80 to 85 per cent for Melbourne and Sydney. Many property experts and analysts such as Louis Christopher, of SQM research, are forecasting at least 15 per cent price growth in the Sydney market this year, and up to 12 per cent in the Melbourne property market.
Which is very good for property investors, not so good for those trying to secure properties at a bargain price!
Despite this performance, the housing bubble speculation has continued to dominate headlines, but many commentators keep forgetting that the Australian property market and our banking system are quite unique. Check out my article called ‘The Property Bubble Myth Exposed’.
Also this month there has been extensive coverage in the media on the issues surrounding the unaffordability of the current housing market, especially in Sydney and Melbourne, with calls by the Labor Government to review the current negative gearing incentive and capital gains tax.
This led to the Finance Minister, Mathias Cormann, asserting that any changes to negative gearing or stamp duty would only result in a tougher private rental market.
The term ‘negative gearing’ when it comes to property investing, occurs when you borrow to invest in an income producing asset and the cost of borrowing exceeds the returns (income) from that asset. Or in other words, the interest that you pay on your loan, plus all other cash and non-cash expenses exceed the rental income of your property over a period of time, usually a finical year. In this instance negative gearing allows you to claim tax benefits against other income sources. Very cool stuff!
It seems to me that the Labor Government, and The Greens for that matter, are suffering from amnesia as the last time negative gearing was scrapped during the Hawke Government, which banked on the hope that private investors would dump their investment properties (due to their inability to offset their losses against their incomes), in fact, found the reverse effect.
What actually happened is that property investors in Australia did not sell their investment properties as was hoped; rather they increased the weekly rental of their properties, virtually overnight, equivalent to what they missed out on via negative gearing. In light of the failed impact of the reversal of negative gearing, mainly due to the public outcry, the legislation was reversed almost instantly, with negative gearing being reinstated…and here to stay!
It was a typical monumental and embarrassing blunder for the Hawke Labor Government, one that can be added to the inexhaustive list of government blunders that have engineered over the years by the various Labor Governments!
One of the constant lies that I hear constantly perpetuated by the various Labor Governments and The Greens, is that negative gearing is used predominantly by rich and greedy property investors who are locking first home buyers out of the property market; nothing could be further from the truth.
The latest statistics from the Australian Tax Office (ATO) for the 2012-13 Financial Year tell us that;
Of all taxpayers who declared rental income;
- Around 64% were negatively geared or declared a net loss.
- Around 36% were positively geared or recorded a net profit.
Here are the actual income tax brackets of the 64% property investors who claimed negative gearing;
- less than $18,200 (12.7%)
- $18,200 to $30,000 (1.3%)
- $30,000 to $80,000 (37.6%)
- $80,000 to $180,000 (35.6%)
- More than $180,000 (12.8%),
It’s patently obvious from the statistics above that the greatest income bracket of property investors who claimed Negative Gearing, some 37.6% were on incomes between $30,000 to $80,000.
Now remember that 72.9% of all property investors in Australia only own 1 investment property…
The reality is, that the largest group of Australians who take advantage of negative gearing, are actually average income earners with 1 investment property; it’s the mum and dad property investors who are wanting to get ahead.
Scrapping negative gearing would not solve the current housing affordability crisis, only an increase in supply would. Scrapping negative gearing would, however, severely disadvantage middle income earners and restrict their ability to build wealth – which is the antithesis of aiming to retire without having the need to rely on the Government pensions…pensions which might not even be there in a decade.
And that’s my two cents worth on negative gearing!
NEW WEBINAR RECORDING – HOW TO BUY PROPERTY WITH NO MONEY DOWN!
Just in case you missed last week’s webinar called;
HOW TO BUY PROPERTY WITH NO MONEY DOWN!
How to get developers to pay the deposit on your next property purchase and settle with No Money Down!
Here is the Link to the recording;
Here is a quick recap of what was covered;
By watching this unique webinar, YOU’LL LEARN 6 WAYS TO BUY PROPERTY WITH NO MONEY DOWN.
- 10% Deposit rebate from the developer at the settlement of the property.
- 10% Gifted deposit from the developer when buying property.
- Getting 100 per cent Finance, and influencing the Valuation Process.
- Residential Lending plus Personal Loans in order to obtain 100 percent Finance.
- Equity Partners and Joint Ventures (JV’s)
- Long Term Settlement, Of-The-Plan and Settling on the Valuation, not the Contract Price.
And here is the really cool part of this webinar:
Not only did I cover each one of the 6 above topics in great detail, I also showed actual deals that I have personally put together for some of my private clients this year.
So make sure you watch it before I take it down in the next few days.
That’s all from me, till next month!
Kind regards,
KONRAD BOBILAK
CEO and FOUNDER
Investors Prime Real Estate
Level 1/181 Bay Street, Brighton, VIC 3186