Greetings from Scoutable and welcome to our February Wrap Up.
February saw 2,989 properties scheduled for auction across Sydney, with an average clearance rate of 81%. This is up 23% from last year's February average clearance rate of 58% (1,766 properties).
Melbourne saw 3,900 properties scheduled, with an average clearance rate of 77%, up 26% from last year's 51% average (2,227 properties).
Brisbane saw 451 properties scheduled for auction, with an average clearance rate of 56%, up 16% from last year's 40% average (353 properties).
The property market is performing well. Clearance rates are significantly up from last year, and whilst stock levels have increased as well, key inner city locations are light on stock which is fuelling the strong clearance rates.
The lack of stock levels in key locations around Australia could get a boost over the coming months with the new Capital Gains Tax (CGT) changes for non-residents.
Mid December last year saw the Government pass a law for all Australians who are non-residents at the time they sell a property. The new law will mainly affect Australian expats who owned a property before moving overseas. For all my expat clients, please check with your accountant for further advice.
OLD LAW
When you sell an investment property you pay CGT. The profit from the sale (minus capital expenses – e.g. agents commission) is added to your taxable income in the year the property sold. This is discounted by 50% if you are an Australian resident at the time of sale.
For example:-
Purchase Price: $1,000,000
Sale Price: $1,200,000
Australian non-residents* - $200,000 is added to your Australian taxable income in the year of sale
Australian residents - $100,000 is added to your Australian taxable income in the year of sale
*CGT discount is not available for any period after 8 May 2012 during which someone is a non-resident. If you purchased an investment property prior to 8 May 2012, there will be an apportionment of CGT discount for the relevant periods.
You do not pay CGT on the sale of your primary residence.
There is also a ‘six year absence’ rule. This rule applies if you lived in a property prior to it becoming an investment property, have no other principal place of residence and sell it within six years of not living in the property. You would qualify for CGT exemption as the property will be considered your primary residence which has no CGT.
NEW LAW
The new law makes any property sale a CGT event regardless if the property is your primary residence or an investment property if you are not an Australian resident at the time of sale.
The new law has removed the ‘six year absence’ rule for non-residents. Further, the new law will not count any period that the property was lived in prior to moving overseas.
For example, a couple purchased a terrace in Surry Hills for $500,000 in 2000. They live in the property until 2014 at which time they moved to Singapore and have leased the property out since then. The terrace was valued at $1,000,000 in 2014 and now worth $1,500,000. Under the old law, the couple could have sold the terrace in 2020 within the ‘six year absence’ rule and pay no CGT. That is a massive difference between no tax and $1,000,000 added to your taxable income!!
Alternatively, if the couple wanted to sell the property next year in 2021, having passed the ‘six year absence’ rule, the CGT payable would have been calculated from the date the property became an investment property in 2014, when the property was valued at $1,000,000. The CGT payable would have been calculated on $500,000.
As you can see the new law is not good news to Australian expats who have held a property which has had significant capital growth. The way around this is to not sell your property until you become an Australian resident for tax purposes again.
The government has given home owners until the 30th June 2020 to sell their properties under the previous laws, if the home owner purchased the property prior to 9 May 2017. This has caused many Australian expats to rush to sell.
If you would like to know more please visit the ATO website.
https://www.ato.gov.au/general/capital-gains-tax/international-issues/Foreign-residents-and-main-residence-exemption/
The law only applies to non-residents. Australian residents can still claim the 50% CGT discount on investment property sales and pay no CGT on their primary residence sale.
If you, or someone you know, are in the market for a new home or investment property, engage Scoutable. We know property and we'd love to find the perfect one for you.
Until next month,
Kellie Landrey | Principal Buyers Agent
IN THE NEWS
SYDNEY AUCTIONS OUT OF CONTROL
HOUSE PRICES SURGE
https://www.abc.net.au/news/2020-03-02/house-prices-surge-in-february/12015772
DREAMY BUSHLAND RETREAT FOR SALE
https://www.realestate.com.au/news/bowen-mountain-bushland-retreat-built-for-former-austar-ceo-john-porter-could-be-yours/
PROPERTY OF THE MONTH
36 MARTIN ROAD, CENTENNIAL PARK
Centennial Park is located four kilometres south-east of Sydney’s CBD. Most of the suburb is taken up by the 'Centennial Parklands' from which the suburb takes its name. Centennial Park started out as a reserve to protect the ponds and swamps which formed Sydney’s water supply, prior to 1880s when the Nepean water supply took over. Centennial Park opened in 1888. To fund the management of the parklands, 101 acres of land adjacent to the park was sold off in 1904. The streets that were created were Martin Road, Robertson Road, Lang Road and Cook Road. Strict building codes were applied to the land, no terraces or wooden buildings were allowed to be built, only brick or stone houses with slate or tiled roofs. The majority of these quality homes remain and the suburb attracts premium prices.
The property of the month is situated on Martin Road, built in the Arts and Crafts architectural style. The dwelling provides five bedrooms, four bathrooms, multiple living areas, swimming pool, pool house, beautiful gardens and parking for two cars. The property sits on 904sqm of land. The price guide is $10 million and scheduled for auction 28th March.
If you'd like to know more about this property or any others, please get in touch.
