A Finance blog by Paul Bennion.
Timing can be everything in real estate and picking the best time to purchase a property can save you thousands of dollars as well as give you greater number of properties to choose from.
One key point investors should remember is that there is traditionally frenzy amongst property buyers wanting to purchase investment homes in the period leading up to and after the start of the new financial year.
This trend is underlined by the fact that more than 60% of the property depreciation reports which DEPPRO prepares are during the months from June to September.
However, the number of depreciation reports we undertake for investors who purchase an apartment tends to peak during July and August.
This is 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 own a property such as negative gearing and depreciation.
Apartments are generally favoured by investors as an asset class because they are easier to maintain and generally have higher rental returns than a traditional family home.
The growing significance of apartments in the overall Australian property market is highlighted by the fact that spending on apartments in Australia jumped to over $100 million to $10.2 billion during the last financial year.
When we put these figures in context, the value of building approvals for apartments accounted for around 25% of total expenditure on residential housing nationally during 2012-2013.
In particular, the ABS figures show that there were strong increases in building approvals for these higher density homes in Western Australia, New South Wales and Queensland during the last financial year.
With investors now representing up to 40% of all property buyers in some areas of Australia, apartment sales are expected to surge even higher from the start of the new financial year.
Anyone who is considering buying an apartment for investment purposes should therefore consider making a decision now rather than waiting until activity in this sector of the property market increases later in the year.
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 tax payer 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 of the property.
Even an older style apartment can also qualify for substantial tax depreciation benefits if a depreciation schedule is undertaken.
Anyone considering employing a depreciation company to undertake a tax depreciation schedule should ensure that they are a member of the Australian Institute of Quantity Surveyors (AIQS).