A Tax Depreciation blog by Paul Bennion.

The latest ABS figures for building approvals reveals that New South Wales (NSW) leads the boom in apartment living that is currently becoming increasingly popular throughout Australia.

Overall, the figures show that during May 2016, there were nearly as many building approvals for apartments in Australia than traditional stand alone houses.

They revealed that there were 9,190 building approvals for higher density homes such as apartments and units in May 2016 compared to 10,515 for houses.

However, if we look at a State by State breakdown of these ABS figures, they reveal that building approvals for apartments far out number building approvals for houses.

During, this one month period, there were 3,353 building approvals for apartments in NSW compared to 2,668 for houses.

In contrast, during the same period in WA, building approvals for apartments stood at only 424 compared to 1,256 for houses.

NSW is leading the charge in apartment living due to the fact that apartments offer a more affordable entry point into high priced property markets such as Sydney.

However, this trend towards apartment living is also gaining strength in Victoria and Queensland where there are now nearly as many apartments being built as houses.

Apart from housing affordability reasons, major changes in demographics such as more people living alone and smaller families are driving this demand for higher density homes such as apartments.

This long term trend towards smaller house hold sizes is underline by the fact that during 1911, the average number of people living in a private dwelling was 4.5%, then fell to 3.5 by 1966 and is now around 2.7 persons per household.

Property investors throughout Australia have been capitalizing on this trend by purchasing higher density homes such as apartments and town houses in greater numbers over recent years. This is because the rental demand for these type of higher density homes is growing due to these changing demographic dynamics.

The number of depreciation reports our company undertakes for investors who purchase an apartment tends to peak during July and August because many people decide to buy an apartment for investment purpose after visiting their accountant at the start of the new tax year.

Indeed, many of the deprecation reports we prepare for clients who purchase an apartment are completed to maximize their tax benefits in line with the start of a new financial year during July and August.

Completing their tax returns focuses their mind on the tax advantages relating to owning a property such as negative gearing and depreciation.

While there are many issues concerning the depreciation entitlements on properties, in most cases, strata style homes such as new apartments provide a higher rate of depreciation than houses – all being equal.

Buying a new apartment, for example, can provide a taxpayer with considerable depreciation benefits because of the significant tax benefits they offer through depreciation.

Some DEPPRO clients are achieving that tax benefits obtained through depreciation can be equivalent to 60% of the total purchase price of the property. In some cases these tax benefits can total $300,000 based on a purchase price of $500,000.

A key part of ensuring that the investor obtains their full tax benefits is to have a professional depreciation professional prepare a comprehensive depreciation schedule. Even an older style apartment can also qualify for substantial tax depreciation benefits if a depreciation schedule is undertaken for the property.