Greetings from Scoutable and welcome to our April Wrap Up.
April saw 2,217 properties scheduled for auction across Sydney, with an average clearance rate of 57%. Melbourne saw 2,358 properties scheduled, with an average clearance rate of 58%. Brisbane saw 384 properties scheduled for auction with an average clearance rate of 39%. In comparison, April last year had an average clearance rate of 69% (4,756 properties), 69% (5,852 properties) & 51% (666 properties) respectively.
The data above shows a drop in clearance rates of 12% in Sydney, 11% in Melbourne and 12% in Brisbane for the April year on year comparison.
It is important to note that auction activity comes to a near halt over the Easter period. As Easter fell in March 2018 and April 2019, the year on year monthly comparison is skewed.
The Federal election is scheduled to take place in a few weeks on May 18. Many news outlets and polls are expecting Labor to win the election. Labor has proposed policies which will have a potential impact on the property market.
Negative Gearing
According to news.com.au, 1.3 million people or 10% of taxpayers use negative gearing to claim a tax break.
Negative gearing is when the interest on the loan is higher than the net rental income, meaning the investor is making a loss. The loss is claimed as a tax deduction. The net rental income is the rental income minus the expenses associated with owning the property, such as maintenance, management and depreciation.
For example, your loan interest repayments are $30,000 per annum and you have $5,000 per annum of property expenses. If your rental income is $20,000 per annum, this gives a loss of $15,000. This means you can reduce your taxable income by $15,000. For someone who is earning $100,000 per annum, their taxable income will now be $85,000 per annum. You will reduce your tax payable and save just under $6,000.
Labor is proposing to remove the right to claim these losses (negative gearing) to all established properties from 1 January 2020 (new build properties not affected). Any investment property purchased prior to 1 January 2020 will continue to be able to claim negative gearing.
Capital Gains Tax
When you sell your investment property you are required to pay tax on the profit.
Capital gains tax does not apply to your principal place of residence.
Currently, the capital gains tax rule provides a 50% discount (as long as you have owned the property for one year). For example, you purchase an investment property for $1,000,000 and sell it over one year later for $1,200,000, your profit is $200,000. Applying the 50% discount, you must add $100,000 to your taxable income in the financial year that you sold the property. Labor proposes to reduce the discount from 50% to 25%. Following the above example, you will add $150,000 to your taxable income.
Any investment made prior to 1 January 2020 will remain at the 50% discount rule.
With the possibility of a labor win, it may be a good time to consider investing before 1st January 2020.
If you would like to discuss negative gearing or capital gains tax further, or are thinking of buying or investing in Australian property, get in touch to learn about Scoutable's services and how we can assist with your property search.
Until next month,
Kellie Landrey | Principal Buyers Agent
IN THE NEWS
WHICH PARTY WINS THE PROPERTY ELECTION?
https://www.realestate.com.au/news/which-party-wins-the-property-election/
CO-LIVING - THE NEW TREND
https://www.smh.com.au/lifestyle/life-and-relationships/personal-space-but-not-too-isolated-the-emerging-trend-of-co-living-20190404-p51awv.html
NOW'S THE TIME
https://www.dailytelegraph.com.au/feature/special-features/time-to-buy-in-sydney-property-market-experts-say/news-story/13749764a2518a06369e3b96c4383ee3
PROPERTY OF THE MONTH
6/131 HASTINGS PARADE NORTH BONDI
Sydney’s Bondi Beach is famous for its beautiful beach, vibrant dining and retail facilities, along with its proximity to the CBD. North Bondi is considered amongst locals as the more family orientated section of the beach due to the calmer water. The suburb provides solid rental returns for investors, with low vacancy rates and above average potential for capital growth.
Apartment six at 131 Hastings Parade is located 8.4km from Sydney’s CBD and a few hundred metres from the beach via neighbourhood shops. The apartment is situated on the top floor of a small Art Deco complex of eight apartments. The layout comprises entry hall, master bedroom, bathroom, open plan kitchen / living / dining, small second bedroom and balcony. The property is north and east facing. There is a shared laundry and no parking.
The price guide is $1,000,000, with a rental guide of $750 per week. Should these figures be achieved, the resulting gross yield would be 3.9%.
The apartment ticks many investment boxes - small block, top floor, two bedrooms, close to the beach, retail facilities and public transport.
If you'd like to know more about this property or any others, please get in touch.
