Thursday, April 7, 2011

Latest Property News from Ted Hanson

Friday 08 April 2011
Mixing style and substance

A portable wine cellar with a door like an oversized white board is not the ideal decorator accessory. Finding a discreet corner to park theirs was Melanie Dymond's challenge when she and her husband, Marino Candusio, found their 1890s Balaclava home.

Read the article

Cash rate perfect at 4.75

There seemed to be little surprise this week at the Reserve Bank's decision to again hold the Official Cash Rate (OCR) steady at 4.75 per cent.

In a statement announcing the outcome, Reserve Bank Governor Glenn Stevens seemed almost sanguine about the impact on Australia's economy of events overseas, such as the recent natural disasters in Japan or the political upheavals on the African continent. Storm and flood events through summer in Australia, likewise, are not expected to have any long-term effect.

While he acknowledged that Australia's terms of trade are at "their highest level since the early 1950s and national income is growing strongly", Governor Stevens said that the Bank expects that inflation over the year ahead will continue to be consistent with the 2-3 per cent target.

"Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices", Governor Stevens said.

"In the household sector thus far, in contrast, there continues to be caution in spending and borrowing, and a higher rate of saving out of current income."

He concluded by suggesting that, "overall, looking through these temporary effects", the current policy is likely to be appropriate for the next few months.

Approvals ebb and flow
Building approvals fell through the floor in Victoria throughout February, causing the national figures to drop for the second month in a row, according to data released this week by the Australian Bureau of Statistics (ABS).

The total number of dwellings approved fell 7.4 per cent in February 2011, in seasonally adjusted terms, after falling 11.6 per cent in January.

This figure was largely due to the results from Victoria, which recorded 23.1 per cent fewer dwelling approvals this month, Queensland (with approvals down 11.8 per cent) and Western Australia (down 7.4 per cent).

Tasmania (44.6 per cent), South Australia (35.8 per cent) and New South Wales (7.7 per cent) recorded increases in seasonally adjusted terms.

Private sector houses approved rose 0.2 per cent in February with rises in New South Wales (7.4 per cent), South Australia (4.8 per cent), Queensland (1.1 per cent) and Western Australia (0.4 per cent) while Victoria fell (-6.9 per cent).

The value of total building approved rose 13.7 per cent in February in seasonally adjusted terms. The value of total residential building fell by 2.9 per cent while non-residential building rose by 59.3 per cent.

The ABS notes that while recent natural disasters have not adversely affected participation by providers in the collection or the quality of estimates in this release, these events may have had an impact on the number of approved dwellings and the value of approved work in February.

Turning a home into an investment property

In this increasingly mobile world we live in, more and more Australians are becoming property investors by changing their home or principal place of residence to an income-producing investment property.

A variety of circumstances will dictate when a home becomes an investment property - the owner may move interstate for work; travel for an extended period overseas; they may simply decide to purchase and occupy another property or it may be financially beneficial to rent out their home and rent somewhere else themselves.

Turning your principal place of residence into an income-producing property creates a different scenario at tax time - expenses such as interest costs, rates and management fees will become tax deductible, making owning the property more affordable. The rent also becomes assessable income.

Brad Beer, of tax depreciation quantity surveying firm BMT, suggests that another tax deduction available for the owner while the property is income-producing is depreciation on the fixtures and fittings and the capital allowance on the structure of the property - if it was built within qualifying dates.

"It is important to include any capital improvements that were made, even if they were completed while the property was a PPR", Mr Beer says.

"There are still potential claims for these items when the property becomes an investment." He cited the example of a client who purchased a property in 2006 and promptly decided to put in a new bathroom and kitchen.

"In 2008 he decided to travel and work overseas and rent his property out", Mr Beer said.

"He was surprised to find that the new kitchen appliances, cupboards, tiles and bathroom accessories substantially increased his yearly deduction for depreciation and building write-off."

Mr Beer noted that while a `principle place of residence' is exempt from Capital Gains Tax (CGT), this may change when a home becomes an investment property and is eventually sold.

"There are a number of scenarios which will reduce or create a total CGT exemption.

"It is important to discuss this with an accountant as each scenario is different depending on the property's first use, how long the property was lived in, how long it is income-producing and if the owner purchased another principal place of residence", he advises.

Renovations close to record high
Australian homes have new life and limbs after nearly $31 billion worth of renovation work was recorded last year.

These figures - the highest level in four years - were released recently in the HIA National Outlook, a comprehensive quarterly report card on the residential building industry.

According to HIA Chief Economist, Dr Harley Dale, activity in the renovations sector is expected to hold largely steady this financial year.

"Growth of 2 per cent is forecast in 2011/12 and 5 per cent in 2012/13, taking renovations activity to a worth of over $33 billion, close to a record high," Dale said.

While the renovations side of the coin is in relatively healthy shape, attention was drawn to renewed weakness in new home building since mid-2010.

"Housing starts are forecast to fall by 15 per cent to a level of 143,430 in 2011," Dale said.

As housing starts have only increased in two of the last ten years, HIA called once again on the Federal Government to re- engage in housing policy reform, including the introduction of stimulus measures to boost new housing, and the examination of how best to decrease the exorbitant taxes, charges and fees that are currently levied on housing.

Handy hubbies win out

It seems that everyone gets along better when men clean up their act - or at least the house.

Studies have found that children who help with chores do better socially, and that their mothers are likely to be `friendlier' with their fathers for picking up a mop.

One US survey, conducted by sociologists Scott Coltrane and Michelle Adams of the University of California, found that school-aged children who do household chores with their fathers are likely to have more friends.

Separate research from Dr. John Gottman at the University of Washington found that when men help with housework, their wives see it as a sign of love and caring and are therefore more sexually attracted to them.

Data from the Child Development Supplement of the Panel Study of Income Dynamics has shown that although women still trump men in domestic work, men now do more than in past generations.

Even if the tasks are simple things like shopping and dropping the kids off, and other household chores are haggled over, the simple participation helps strengthen relationships.

This view of involvement runs in line with other findings that the average modern father spends more time with his school-aged children per weekend day than in earlier decades, and is more likely to openly express feelings of love and affection towards his children.

Tales of a thousand and one naps

Ever wished you had a magic carpet, coaxing you to sit down so it could whisk you off and away?

Like a scene from Aladdin, East Meets West is a sofa with the appearance of a Persian rug frozen in the motion of lifting itself off the ground. Designed by Tonio de Roover, the lounge brings the mystical east into the living rooms of the west, playfully inviting you to jump on. Your body may not take flight, but who's to say your mind won't?

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