A Property blog by Paul Bennion.
It has been very well publicised over recent months that property investors are now very active in the Australian property market due to rising property prices and future expectations of capital growth.
This very high level of investor confidence in the Australian property market is underlined by the latest ABS figures which show that lending to purchase established homes for investment purposes totalled $8.8 billion during February 2015.
This represents an increase in property investment lending of $1.3 billion compared to February 2014 when it totalled $1.5 billion.
Over the past two years there has been resurgence in property investor activity with overall borrowings to purchase established homes for rental purposes jumping by a massive 49%.
The decision by the RBA to cut official interest rates to an historic low just 2.0% earlier this month will encourage even more property investor activity as borrowing costs are now so low. It is hard to believe that back in 2008, official interest rates were 7.25%!
This growing confidence amongst property investors is underlined by a continued upswing in tax depreciation reports DEPPRO is preparing for clients especially in Brisbane, Sydney, Melbourne and Perth.
We are finding that this trend is been led by older Australians who have large cash savings and are deciding to buy property because the returns on their cash savings in the bank are now very low due to rock bottom interest rates.
Investors wanting to take advantage of opportunities in the Australian property market during the coming year should ensure that they boost their cash flow through obtaining their full tax depreciation benefits.
In doing so, this will mean that they can more quickly build a property portfolio and achieve wealth creation in a shorter period of time.
It is estimated that only a very small proportion of residential investors make use of the tax depreciation entitlements which are available to all investors on all investment properties.
Many investors fail to understand that the tax benefits from depreciation can be just as important as rental income and that tax benefits obtained through depreciation can be equivalent to 60% of the total purchase price of the property.
Property investors who have a portfolio of investment properties should also realise that they can claim tax depreciation benefits retrospectively if they have not done so in the past. DEPPRO has been able to assist property investors who have several investment properties achieve tax benefits of over $100,000 by claiming depreciation allowances for previous financial years.
While tax depreciation benefits are most generous for new properties, older properties can also qualify for significant tax depreciation benefits.
For example, a property that is more than 50 years of age could still qualify for thousands of dollars each year in tax depreciation benefits for their owner.
Anyone who has purchased an older property for investment purposes should therefore carefully consider the significant taxation benefits that can be achieved before beginning any construction work.