This week we look at two suburbs in Adelaide that are paying a gross rental yield of 6%. And we speak with Stephen Albin, NSW CEO, Urban Development Institute of Australia about the kind of cities we will be living in as our urban population grows to a projected 20M by 2031. And in this week’s tax tip we look at initial repairs and how they need to be treated when you do your tax return this year.
Despite the economic slowdown, house prices across the country rose slightly in the last financial year. Data released by property value company Residex showed that national house prices increased 1.15% in the 12 months to June. Unit prices also rose, up 3.9% over the same period. The rise in house prices was also recognised in the minutes from the Reserve Bank of Australia's July board meeting which cited an increase in house prices in almost all areas over recent months. RBA assistant governor Guy Debelle believes that life is starting to return to the non-bank lending market. Evidence of this has been seen by a pick up in demand for residential mortgage backed securities.
This week we are looking at two suburbs in Adelaide that are paying a gross rental yield of 6%. The first is the house market in Smithfield Plains to the north of the city. Then we look at the unit data for Salisbury East, located about 18kms north of the CBD. Let’s have a look at the numbers.
65% of Smithfield Plains’ dwellings are occupied by families while lone person and group households make up the balance. Stand alone houses account for 84% of dwellings in the area with semi-detached houses and flats accounting for 16% of property. Rental properties make up 57% of the housing market. The median house price in Smithfield Plains is $183,000 dollars, which is 0.8% MORE compared to a year ago. The average growth rate over the last 5 years is 10.6% each year while over a ten year period it is 15.5% per annum. Houses are taking about 119 days to sell and when they do they are selling for a 8% discount to listing price. The weekly asking rent price is $210, an increase of 15.1% compared to a year earlier, bringing the gross rental yield to a 6%.
Now let’s have a look at the unit market in Salisbury East. It’s an older population with 35-44 year olds making up the biggest proportion of residents. 72% of properties are lived in by families. 82% of properties are stand alone houses and rental properties make up 23% of the housing market. So clearly this is an owner occupier heavy suburb. The median unit price in Salisbury East is $172,500 dollars, which is 0.6% less than a year ago. The average growth rate over the last 5 years however has been 5.9% p.a. while over a ten year period it is 10.6% per annum. The weekly asking rent price is $197.50, which is a jump of almost 32% on a year ago, bringing the gross rental yield to 6%.
And now to the Tax Tip for this week. In this week’s tax tip, we are discussing the tax implications of doing renovations to a property you have just bought, directly after sale. This is common if you buy a property that is cheaper because it needs work before it is able to be leased. Costs that are incurred on an investment property BEFORE it is rented out are considered to be capital by the ATO and need to be depreciated. Even if the costs include repairing things like the oven or hot water service or even a whole wall, they need to be depreciated and not deducted as a repair. To be able to claim repair costs, the asset needs to be generating income - which means it needs to have been leased out for some time by a tenant. And of course, this is general information only and you should always check with your accountant or tax professional before making tax related decisions - it could save you thousands.
