First National Basso Real Estate Update Market July 2020
WHAT COSTS ARE INVOLVED IN BUYING YOUR FIRST HOME?
When you’re buying your first home, there are a range of costs you need to have on your radar, but there are also government grants to help you along the way. In this edition of our newsletter, we’ll deal with costs.
After you’ve saved your 20 percent deposit, it can be easy to get carried away and forget about the additional sums that come with setting up and maintaining a home.
To help you stay on track and aware of those extra payments, here are some of the most common costs to keep in mind.
Home loan costs
If you’ve been slaving away to save for a deposit, finally getting a hold on of the finance to purchase your home might seem like the end of the road. But the fun doesn’t stop there. Be aware that you’ll also need to make a number of fees for arranging the home loan, such as a settlement charge, service fees, and, if you’ve chosen a fixed-rate mortgage, a tidy sum to lock the rate in place.
It’s worth getting some advice on this, especially if you want to set down a repayment schedule.
While it’s important to be across all the legal ins and outs of the sales process, costs for a solicitor or conveyancer can stack up quickly. This isn’t something you’ll want to skimp on, though. They can organise the title transfer, be present during negotiations and help you decipher the contract – and, in fact, they make the legalities of the sales journey a whole lot simpler for you!
Stamp duties are commonplace when buying a property. They are a tax on the purchase price of the house or the value of the mortgage and can be a significant proportion in many cases.
Each state or territory government typically has its own levy, so investigate what you’ll need to pay when buying your first home. Keep in mind that there’s often a set timeframe in which you’ll need to pay, which is generally before settlement – stay within it and all will be well! It’s crucial to be prepared when going into your first home purchase. If you’ve got any more questions, we can help you understand what you’ll need to pay before and after the transaction.
For answers to all your questions about buying your first home, visit www.firstnational.com.au, and download our Home Buyer’s Guide.
As anybody hunting for a new home will tell you, COVID-19 restrictions and a reluctance – amongst homeowners – to test the market have made the task of buying very difficult in recent months. In fact, the number of homes for sale nationally reached historic lows in early May.
The Market ‘resilient with material correction’ then What?
CoreLogic head of research, Tim Lawless, says ‘Considering the weak economic conditions associated with the pandemic, a fall of less than half a percent in housing values over the month shows the market has remained resilient to a material correction. With restrictive policies being progressively lifted or relaxed, the downwards trajectory of housing values could be milder than first expected.’
Mortgage arrears remain static and although some 400,000 Australians have taken the opportunity to defer or pause repayments, recent history implies most homeowners have some level of buffer to protect against negative equity.
As indicated earlier, national home values are 8.1% above where they were 12 months ago. In fact, only two capital cities – Perth (-2.1%) and Darwin (-2.6%) – have values lower than this time last year.
Regional markets hold firm while capitals weaken marginally
Throughout May, regional markets resisted reductions in values although momentum did slow. The strength of regions in recent years is now more than a ‘trend’ as Australians take advantage of areas with strong employment prospects and lower entry prices.
Melbourne, Perth, Sydney, Brisbane, and Darwin all posted marginal falls, however, these were adversely skewed by the most expensive market quartiles in Melbourne and Sydney, where values came off 1.3% and 0.6% respectively. That compares to falls of 0.6% in Melbourne’s mid-market and 0.3% in the most affordable quartile versus (-0.6%) and an actual rise of 0.1% in Sydney’s most affordable quartile.
First National Real Estate anticipates the market will alternate over spring, with pent-up property demand a likely precursor to stable or lowering prices – Australian expert economists having flagged a prolonged downturn and falls in property prices of between 10% and 30%.
First National Real Estate’s CEO, Ray Ellis, is adamant that with total real estate listings at their lowest levels and demand exceeding supply during the COVID-19 lockdown, listing volumes – while now rising – will remain below normal, thereby leading to strong demand in spring.
‘Unquestionably, while Australians have been in isolation and working from home, they’ve been researching their next move’ says Mr. Ellis.
‘They’ve been considering future plans like upsizing, downsizing and leaving cities for regional locations, and it seems they’re planning to bring forward plans that had previously been considered things they’d do in the distant future.
Unemployment is considered to be elephant in the room by commentators predicting house price falls, but as the Real Estate Institute of Australia has pointed out, when there was a sustained period of unemployment above 10% during the 1980s and 1990s, median house prices remained stable or, by and large, increased.
‘Even though May’s housing data shows a slowing in house prices growth, and small falls in some segments – as we predicted – the data has been adversely skewed by larger adjustments happening in the upper quartile of the marketplace than in the more affordable prices ranges’ says Mr. Ellis.
MORE IMPORTANT THAN EVER TO CLAIM DEPRECIATION
COVID-19 is placing financial strain on many property investors nationally so, it’s more important than ever that investors do all they can to maximise their cash flow in these unprecedented times.
Property depreciation unlocks hidden cash flow from your investment property as a non-cash deduction, meaning that investors don’t need to spend money to be eligible to claim it. Here’s what you need to know.
Depreciation is the natural wear and tear of a building and its assets over time. The Australian Taxation Office (ATO) allows owners of income-producing properties to claim this depreciation as a tax deduction under two categories – capital works and plant and equipment.
Capital works deductions relate to claims for the wear and tear that occurs to the structure of a building and any fixed items like the walls, doors, and driveways.
Plant and equipment assets refer to a property’s easily removable fixtures and fittings like carpet, blinds, and hot water systems. Depreciation deductions for these assets are calculated based on their individual effective life set by the ATO.
If you have owned an investment property for a number of years and haven’t claimed depreciation, you could be missing out on thousands of dollars. A BMT Tax Depreciation Schedule allows you to adjust previous tax returns to ensure that you claim every dollar you’re entitled to.
If you renovate your investment property, it’s important to organise a tax depreciation schedule. When you renovate, you can claim any un-deducted deductions for eligible assets in the year of removal through a process called scraping.
The easiest and best way to claim depreciation on your rental property is to get a tax depreciation schedule prepared.
BMT Tax Depreciation is the most trusted depreciation specialist in the industry, having completed 650,000 tax depreciation schedules for residential and commercial properties Australia wide.
A detailed site inspection is essential to achieve the highest possible deductions while maintaining full ATO compliance. To learn more about depreciation and the deductions you could be entitled to, ask us to arrange a quote or contact the expert team at BMT on 1300 728 726.
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