A Tax Depreciation blog by Paul Bennion.
If you think you noticed a surge in apartment developments over the last year in your capital city, you will not have been mistaken as the latest ABS figures reveal that building approvals for apartments in Australia reached an all-time high last financial year.
Overall, building approvals for apartments during 2015/2016 totalled 80,878 which was a surge of more than 20,000 compared to 2013/2014.
On an hourly basis, 10 apartments were being approved to be built every hour last financial year.
In dollar terms the total value of building approvals for apartments last financial year in Australia was a whopping $23 billion.
Property investors continued love affair with apartments has been driving an unprecedented boom in their construction throughout Australia over the past few years.
Overall, apartment sales in capital cities such as Sydney, Melbourne and Brisbane have been very strong during the past three years mainly driven by investors who are taking advantage of record low interest rates to capitalise on rising property prices.
In particular, off the plan sales have been vibrant as many investors believe that when the apartment development is eventually completed they will achieve a significant profit due to rising property prices.
However, if you are buying an off the plan apartment or established apartment, there a simple tips you should consider to ensure you achieve the best financial outcome.
TIPS ON BUYING AN APARTMENT FOR INVESTMENT PURPOSES
- Make sure you claim your full tax benefits associated with owning an apartment for investment purposes. For example, tax depreciation benefits can be substantial and can add up to several thousand dollars each year in tax savings for a single apartment.
- When buying an off the plan apartment, it is important to research the track record of the developer to ensure they deliver what they are promising. One good tip is to speak to some of their previous clients who also bought off the plan and now hold a fully completed apartment from the developer.
- Check the exact internal floor space of the apartment. The price of the apartment should be measured in the cost per square metre and this will give you a good comparison compared to similar apartments in the same area.
- Before purchasing an apartment, check the average weekly rent for a similar apartment in the same location. This will give you an indication of future rental returns.
- Check the quarterly strata fees and if there are any plans to upgrade the complex.
- Check how many apartments in the complex are owner occupiers. Owner occupiers tend to take a much more active interest in the upkeep of the complex. If more than 50% of the apartments are owned by owner occupiers then the complex should be well maintained.
- The views that the apartment can offer is important. If you are buying an apartment with good views, check that nothing in the future will interfere with these views i.e. the construction of a new building in front of your apartment.
- Parking is also very important when buying an apartment. Check that your apartment has a dedicated car bay and the ownership structure of car bays in the complex.
- One bedroom apartments as opposed to two and three bedroom apartments are very popular because more people are tending to live alone.
- Obtain finance approval before making an offer on an apartment as this will increase your negotiation position.
- Remember that if you are buying an older apartment for renovation purposes, you may have to obtain approval from the other owners for certain improvements i.e. the installation of air conditioning.