Greetings from Scoutable and welcome to our Quarterly Wrap Up.

I hope you are well.

MARKET UPDATE

Summary of CoreLogic’s Hedonic Home Value Index, which was released on the 1st July, is given below.

Australian dwelling values increased by 0.7% in June 2024, marking an 8.0% rise for FY2023-24 and boosting the median value by $59,000 to $794,000. The housing market's strength is primarily attributed to tight supply levels, which continue to exert upward pressure on prices despite various economic challenges such as high interest rates and cost of living pressures. This growth follows a stark contrast to the previous year, which saw a 2.0% decline. While the market has shown resilience, monthly growth rates have moderated since mid-2023, stabilising between 0.5% to 0.8%.

Rental growth, though decelerating, remains above historical averages, especially for houses. Unit rental growth in major cities like Sydney, Melbourne and Brisbane has slowed notably due in part to reduced overseas migration and affordability constraints. Despite these trends, national rental yields have stabilised around 3.5% for capitals and 4.4% for regional areas.

The undersupply of housing remains a critical factor supporting rising property values, despite concerns about economic conditions and affordability. New listings are increasing nationally, yet demand continues to outpace supply, keeping overall stock levels below historical averages.

Looking ahead, while risks to the housing sector are increasing, continued upward pressure on home values is expected in the near term. Challenges such as high household debt and potential mortgage stress are being monitored closely, though the majority of homeowners remain financially resilient amid current market condition.

TAX TIME

We have discussed the available tax deductions for property investors in recent years. Here we are again at tax time (where has the year gone)! We think it is timely to go over the information again.

Firstly, let’s have a look at how you are taxed as a property investor.

Income Tax – any money (rent or otherwise) you receive from your property is added to your taxable income
Land Tax – is payable based on the unimproved value of the land you own and is calculated on what your land would be worth if it was vacant (doesn’t include the value of the building). Land tax is payable on all investment properties you own (not on your principal place of residence), based on the unimproved value in excess of the land tax threshold. For example, in NSW, the threshold is $969,000 (if you own multiple properties the land value is accumulated). This means, the total land value of your investment properties needs to be above $969,000 before you are required to pay land tax. Note the threshold is increasing to $1,075,000 for the 2024/2045 tax year
Capital Gains Tax (CGT) – Capital gains tax is required to be paid on any profit made from the sale of your investment property. The applicable rate of CGT is the same as the income tax rate which you pay (unless of course the profit received increases your taxable income to a higher tax bracket). If however, you have owned the property for more than 12 months, and are an Australian resident, you have access to a 50 percent discount on the capital gain.

Deductions

Management costs – including agent fees, advertising costs, commissions
Strata fees, council rates, water rates
Insurance
Repair and maintenance
Depreciation
Land tax
Legal expenses
Loan interest - Investors can claim the interest charged on a loan for an investment property and any bank fees for servicing that loan. You can’t, however, claim your repayments on the principal sum

Capital Deductions - When you sell your investment property, expenses you incurred when purchasing and selling the property, for example, selling costs (advertising, agent's commission, legal fees) and purchasing costs (stamp duty, legal fees, buyers agent's fee), can be deducted from any capital gain on the sale which would lower the CGT payable.

Please note, this is not tax advice. You should consult a tax professional for all your investment property tax enquiries.

Further information is available via the ATO website: -
https://www.ato.gov.au/General/Property/Residential-rental-properties/Rental-expenses-to-claim/

If you would like to discuss your property investment, or the property market further, please get in touch.

Until next quarter,

Kellie Landrey | Principal Buyers Agent