Newsletter July 2004 July 2004 RETURN
In this edition: We will briefly cover various issues and as always give insight into some of the hidden consequences of property issues, as the headlines don’t always tell the story. - The real effects of drought on metropolitan property. - Are property values correcting or in a free-fall? - The Docklands, more to it than meets the eye. - Investors in NSW slugged by stamp duty on the sale of property. - Changes ahead for Real Estate across the board. - Properties we strongly recommend as high performing investments.
A message from the editor Watch this space It seems the market is finally in for change and we can hardly wait. As long term service providers we never appreciate times when fundamentals that are so important to property ownership go out the window. We see the following areas affected: 1. Values are correcting for the “b level” properties that have become over valued. 2. Properties on the market and sale turn over in general will fall dramatically. 3.The amount of people in Agency practice will decrease, talent will prevail. 4. New legislation will tidy up the methods in which business will be conducted. 5. On going training in ethical practice will be an ongoing requirement for Estate Agents. 6. The rorting caused by unscrupulous property and financial planning schemes will be viewed skeptically. 7. The long term ethical Agencies will rightfully be the darlings of a very suspecting public. This is all good for the industry and public alike. We wish you well in your property dealings. Jason Marston
Property Investors Note 2004-2005 ATO Audit Project ATO Audit Project concerning common reporting mistakes for rental property returns The Tax Office has issued a fact sheet outlining common rental property mistakes that are being made by taxpayers. As the ATO is currently targeting rental properties, we expect these areas to be an audit focus: claims for initial repairs and renovation costs; interest on private borrowings – i.e., not apportioning interest on a loan taken out for both income-producing and private purposes; not apportioning travel costs where a visit to inspect the rental property is combined with another purpose, such as a holiday; claiming deductions for a property that is not genuinely available for rental, or not apportioning deductions where the property is rented for only part of the year;including the cost of the land in capital works deductions (i.e., as part of the cost of constructing the rental property); and claiming depreciation on construction costs. The ATO has just released a concise policy for allowable deduction and depreciable write offs and any Taxation return concerning investment property should be prepared with the help of an appropriate professional. Prepared by: Mr Brett Hotchkin B A Hotchkin & Associates 4/38 Margaret Street, Moonee Ponds 3039 ph. 9370.7711
REIV, membership requirements The use of one of our most important resources is now more a contentious issue than ever before. Water flows and usage are now high on the agendas for local, state and federal governments. Restraint in consumption is surely needed yet at what cost to property. Stage 2 water restrictions now in place are having a major effect on property in general. Properties being sold are now severely devalued by dead or dying gardens and the damage from ground shrinkage or foundation failure is now commonplace. The total cost to metropolitan property is now in the $10,000,000’s and rising. Repair bills to modest properties now regularly exceed $25,000 and we ask, who will fit the bill. As usual small homeowners will bear the brunt of the cost without taxation relief. The Bracks government has been strongly criticized for restoring flows to the Snowy and Murray rivers during a drought and at the same time initiating the most severe water restrictions in living memory. Governments in general are refusing to make the hard decisions that provide a larger or more efficient storage supply for all. Its great to appear popular, but we can just imagine their response when they are asked when they can’t provide enough water at present how do they expect to provide for the extra1,000,000 people or so that will be living in Melbourne in the coming years. I guess we can leave that to the next government.
Depreciation: The new parameters Over time in this newsletter, we have been consistent in our predictions of a continuing environment of strong capital gains in the Inner City. We only predict on the basis of sound economic data. Much media hype has surrounded the much needed cooling of the market from overheated conditions. Reports of crashes have clearly been exaggerations of true data and are generalized at best. Quality inner city property is outperforming Melbourne in general. What is occurring is that property without the proper fundamentals of value can no longer be overpriced and still sell, they have simply shrank back to the alistic levels they should always have been. We see this market as a terrific buying opportunity, to secure blue chip, long term assets at sound levels. Investors looking to purchase prime property with all the elements that provide future value gains will do handsomely. Some of the best performing portfolios managed for our clients have been the result of taking opportunities in markets typical to the current conditions. These actual statistics may help convince some people. REIV statistics on Median prices – March Quarter Area 2000 2004 % gain North Melbourne 287,500 481,000 67.3 Kensington 260,250 385,000 48.0 Flemington 262,250 400,000 52.5 West Brunswick 263,000 423,500 61.0 Ascot Vale 326,250 432,000 32.4 Moonee Ponds 285,000 452,000 58.6 Essendon 341,000 533,500 56.5 To invest and out perform the market contact Jason Marston personally on 0403 344 444
The Docklands, have they got it wrong?There is no doubt the Docklands redevelopment has attracted much comment from both seasoned and newly appointed property commentators. Are all the negative comments accurate? The developers who have sold out release after release would disagree, as would the Managing agents who have experienced long term tenancies and minimal vacancy rates for apartments other than in their initial release to the rental market. We do acknowledge that when 50-150 properties are released to the market at once, it will take time for them all to be taken up and sometimes values suffer. When properties are released the second time round in normal market cycles they do not have to compete en mass and perform admirably. What we see as the main point of interest for the docklands that every one has missed is the tremendous amount of professional employment present in the development and how that will have a positive effect on the abutting areas. It will easily exceed 10,000 highly paid employees, 5000 are now housed in the NAB site alone. This is a huge impact on demand for both rental and sale markets in neighbouring suburbs such as Nth/West Melbourne, Kensington/Flemington and Yarraville/Newport. As a result we see these suburbs out performing the general Melbourne market on this basis alone. It may be fashionable to question property on a snapshot basis when on a once only scenario, huge amounts of property need to be subscribed by both the rental and sale markets. The reality is that when the properties return to a normal cycle of demand and supply they will be market leaders. Our two pieces of advice are: a. like most other major CBD harbourside districts in the world, when the development is completed and the supply of new property ceases, the values will soar &; b. the neighboring areas will perform tremendously.
As touched on in this newsletter, it can be very beneficial to be active in this market, yet one must be astute in the selection process. We are very confident for our clients that wish to invest in the areas of North and West Melbourne. Proven indicators support this, yet our biggest reasoning surrounds the capacity for property values to improve. Broken down, the criteria for property Investment should include: Don’t buy because of perceived value, buy because of the capacity to increase in value. If you wish to invest in property selected by strict performance guidelines, contact Jason Marston 9381 9381.
In this edition: We will briefly cover various issues and as always give insight into some of the hidden consequences of property issues, as the headlines don’t always tell the story. - The real effects of drought on metropolitan property. - Are property values correcting or in a free-fall? - The Docklands, more to it than meets the eye. - Investors in NSW slugged by stamp duty on the sale of property. - Changes ahead for Real Estate across the board. - Properties we strongly recommend as high performing investments.
A message from the editor Watch this space It seems the market is finally in for change and we can hardly wait. As long term service providers we never appreciate times when fundamentals that are so important to property ownership go out the window. We see the following areas affected: 1. Values are correcting for the “b level” properties that have become over valued. 2. Properties on the market and sale turn over in general will fall dramatically. 3.The amount of people in Agency practice will decrease, talent will prevail. 4. New legislation will tidy up the methods in which business will be conducted. 5. On going training in ethical practice will be an ongoing requirement for Estate Agents. 6. The rorting caused by unscrupulous property and financial planning schemes will be viewed skeptically. 7. The long term ethical Agencies will rightfully be the darlings of a very suspecting public. This is all good for the industry and public alike. We wish you well in your property dealings. Jason Marston
Property Investors Note 2004-2005 ATO Audit Project ATO Audit Project concerning common reporting mistakes for rental property returns The Tax Office has issued a fact sheet outlining common rental property mistakes that are being made by taxpayers. As the ATO is currently targeting rental properties, we expect these areas to be an audit focus: claims for initial repairs and renovation costs; interest on private borrowings – i.e., not apportioning interest on a loan taken out for both income-producing and private purposes; not apportioning travel costs where a visit to inspect the rental property is combined with another purpose, such as a holiday; claiming deductions for a property that is not genuinely available for rental, or not apportioning deductions where the property is rented for only part of the year;including the cost of the land in capital works deductions (i.e., as part of the cost of constructing the rental property); and claiming depreciation on construction costs. The ATO has just released a concise policy for allowable deduction and depreciable write offs and any Taxation return concerning investment property should be prepared with the help of an appropriate professional. Prepared by: Mr Brett Hotchkin B A Hotchkin & Associates 4/38 Margaret Street, Moonee Ponds 3039 ph. 9370.7711
REIV, membership requirements The use of one of our most important resources is now more a contentious issue than ever before. Water flows and usage are now high on the agendas for local, state and federal governments. Restraint in consumption is surely needed yet at what cost to property. Stage 2 water restrictions now in place are having a major effect on property in general. Properties being sold are now severely devalued by dead or dying gardens and the damage from ground shrinkage or foundation failure is now commonplace. The total cost to metropolitan property is now in the $10,000,000’s and rising. Repair bills to modest properties now regularly exceed $25,000 and we ask, who will fit the bill. As usual small homeowners will bear the brunt of the cost without taxation relief. The Bracks government has been strongly criticized for restoring flows to the Snowy and Murray rivers during a drought and at the same time initiating the most severe water restrictions in living memory. Governments in general are refusing to make the hard decisions that provide a larger or more efficient storage supply for all. Its great to appear popular, but we can just imagine their response when they are asked when they can’t provide enough water at present how do they expect to provide for the extra1,000,000 people or so that will be living in Melbourne in the coming years. I guess we can leave that to the next government.
Depreciation: The new parameters Over time in this newsletter, we have been consistent in our predictions of a continuing environment of strong capital gains in the Inner City. We only predict on the basis of sound economic data. Much media hype has surrounded the much needed cooling of the market from overheated conditions. Reports of crashes have clearly been exaggerations of true data and are generalized at best. Quality inner city property is outperforming Melbourne in general. What is occurring is that property without the proper fundamentals of value can no longer be overpriced and still sell, they have simply shrank back to the alistic levels they should always have been. We see this market as a terrific buying opportunity, to secure blue chip, long term assets at sound levels. Investors looking to purchase prime property with all the elements that provide future value gains will do handsomely. Some of the best performing portfolios managed for our clients have been the result of taking opportunities in markets typical to the current conditions. These actual statistics may help convince some people. REIV statistics on Median prices – March Quarter Area 2000 2004 % gain North Melbourne 287,500 481,000 67.3 Kensington 260,250 385,000 48.0 Flemington 262,250 400,000 52.5 West Brunswick 263,000 423,500 61.0 Ascot Vale 326,250 432,000 32.4 Moonee Ponds 285,000 452,000 58.6 Essendon 341,000 533,500 56.5 To invest and out perform the market contact Jason Marston personally on 0403 344 444
The Docklands, have they got it wrong?There is no doubt the Docklands redevelopment has attracted much comment from both seasoned and newly appointed property commentators. Are all the negative comments accurate? The developers who have sold out release after release would disagree, as would the Managing agents who have experienced long term tenancies and minimal vacancy rates for apartments other than in their initial release to the rental market. We do acknowledge that when 50-150 properties are released to the market at once, it will take time for them all to be taken up and sometimes values suffer. When properties are released the second time round in normal market cycles they do not have to compete en mass and perform admirably. What we see as the main point of interest for the docklands that every one has missed is the tremendous amount of professional employment present in the development and how that will have a positive effect on the abutting areas. It will easily exceed 10,000 highly paid employees, 5000 are now housed in the NAB site alone. This is a huge impact on demand for both rental and sale markets in neighbouring suburbs such as Nth/West Melbourne, Kensington/Flemington and Yarraville/Newport. As a result we see these suburbs out performing the general Melbourne market on this basis alone. It may be fashionable to question property on a snapshot basis when on a once only scenario, huge amounts of property need to be subscribed by both the rental and sale markets. The reality is that when the properties return to a normal cycle of demand and supply they will be market leaders. Our two pieces of advice are: a. like most other major CBD harbourside districts in the world, when the development is completed and the supply of new property ceases, the values will soar &; b. the neighboring areas will perform tremendously.
As touched on in this newsletter, it can be very beneficial to be active in this market, yet one must be astute in the selection process. We are very confident for our clients that wish to invest in the areas of North and West Melbourne. Proven indicators support this, yet our biggest reasoning surrounds the capacity for property values to improve. Broken down, the criteria for property Investment should include: Don’t buy because of perceived value, buy because of the capacity to increase in value. If you wish to invest in property selected by strict performance guidelines, contact Jason Marston 9381 9381.