This week we look at two suburbs in Western Sydney that are both offering solid rental yields and one of them has also posted 9% growth in the past year. And in the first instalment of our interview with Scott Beynon from the Master Builders Association, Scott talks to us about what whether the Rees government’s stimulus measures are enough to sustain a recovery in residential construction activity. And in this weeks tax tip we look at the ATO’s rules around short term traveller accommodation and which investment properties qualify for the tax benefits.
In the news this week, the Australian Bureau of Statistics released data showing a 2.2 per cent fall in the number of finance commitments on owner-occupied houses in May. Economists had expected a 1.3 per cent rise. And the Australian Industry Group/Housing Industry Association Performance of Construction Index fell 4.3 points in June from the month before, to a read of 42.6. The result remaining below the 50 mark separating expansion from contraction. More specifically, the construction of houses fell 1.3 points in June to a read of 44, with apartment building faring the worse, falling 13.1 points to 35.3 for the month. However economists say that Government stimulus like the boost to the First Home Owners Grant, halving of stamp duty in NSW for the purchase of dwellings under $600,000, and the RBA’s decision to keep rates steady at three per cent, will continue to generate activity in the housing sector.
This week we are looking at the property markets of two Western Sydney suburbs that are both posting solid rental yields. We are firstly looking at the unit market in Lakemba which is located about 16 kilometres west of Sydney’s CBD and along with the housing market in Villawood, which we will look at afterwards, is recoding some of the best rental yields available in Sydney at the moment. Let’s have a look at the numbers. Just 36% of Lakemba’s population are Australian born. 53% of Lakemba’s dwellings contain married couples and families. Stand alone houses account for 28% of dwellings while units account for 62% and and rental properties make up 49% of the housing market. The median unit price in Lakemba is $194,000 dollars, which is a gain of a over 9% compared to a year ago. The average growth rate over the last 5 years is negative -1.8% each year while over a ten year period it is almost 6% per annum so the market has posted impressive growth this year compared to recent years. Units are taking about 82 days to sell. The weekly asking rent price is $280, which is an increase of 12% compared to a year earlier, bringing the gross rental yield to a solid 7.5%.
Now let’s have a look at the house market in Villawood. Villawood is located just under 30 kms west of Sydney’s CBD. 49% of Villawood’s residents are Australian born. 46% of properties are lived in by married couples and families. 64% of properties are stand along houses, units make up another 23%. Rental properties make up 54% of the housing market. The median house price in Villawood is $285,500 dollars, which is -3% less than a year ago. The average growth rate over the last 5 years has been negative -5% each year while over a ten year period it is 6% per annum so clearly there hasn’t been a great growth story in recent years. The weekly asking rent price is $345, bringing the gross rental yield to 6%, which is better than a lot of Sydney at the moment. And now to the Tax Tip for this week from Depreciator - Tax Depreciation Schedules. This week we are having a look at what the ATO’s definition of ‘short term traveler accommodation’ is. You may know that if your investment property is deemed short term traveler accommodation, then you are eligible for 4% depreciation on the building over a 25 year period instead of the more common 2.5% rate over 40 years. The ATO only allows an investment property to be deemed short term traveler accommodation if the apartment cannot be lived in by a full time tenant. Generally speaking, if there are kitchen facilities then it is likely to NOT be short term traveler accommodation, even if you only lease your apartment to travelers on a short term basis. This means that even if you bought a serviced apartment and lease it out like a hotel room, you still may not be able to claim it is short term traveler accommodation. The ATO has identified a number of characteristics that you can check to make sure you are depreciating your investment property correctly. And its a good idea to check this with your accountant or tax professional.
