In property news, Home owners will have to fork-out around an extra $40 a month in mortgage repayments, following the RBA’s decision to again raise interest rates, lifting the Official Cash Rate by 25 basis points to 3.5%. All four major banks have responded to the central bank’s rate rise by increasing variable mortgage interest rates and some deposit accounts, with the ANZ Bank leading the charge.
In other news, the ABS reports that building approvals rose 2.7% in September, the eighth month of positive growth in building activity. In another report the Bureau says the weighted average price for established houses across the eight capital cities increased 4.2% in the September 2009 quarter. Leading the increase weighted average was Sydney with a 4.3% increase, Melbourne with 4.7% and Perth with 4.5%. And the Federal Housing Minister Tanya Plibersek says that State Government and Local Government Council Industry taxes are squeezing first-home buyers out of the market. Minister Plibersek has been backed by the Urban Development Institute of Australia, saying that government levies were contributing to the housing shortage by making development unprofitable.
Suburb in FocusIn our suburb in focus section each week, we look at interesting property markets around Australia which could be of interest to property investors and this week we are looking at two affordable Melbourne suburbs that have posted extraordinary growth in the last year.
We’re looking at the house market in Attwood but first up is the unit market in Sunshine which is located about 13kms west of Melbourne’s CBD. Sunshine has about 8,000 residents. 63% of dwellings contain families and 64% of families include children. 80% of properties are stand alone houses and 31% are rental properties, which is quite high. Sunshine has a long history of being a centre for manufacturing and industry but in recent years industry in the suburb has declined, leaving an unemployment rate of around 11% in 2006. The median unit price in Sunshine is $255,000 dollars, which is an increase of over 45% compared to a year ago. There were 23 units sold in the 12 months to September 30 and 85 rented out. The median rental price is $190 bringing the gross rental yield to 3.87%
Now to the house market in Attwood which is located about a 20 km drive north of Melbourne’s CBD and had a population of just 3,000 in 2006 and has a very low unemployment rate. Attwood is mainly made up of housing estates with stand alone houses accounting for 87% of properties. 83% of properties are families and 79% of families include children. Just 10% of homes in the suburb are rental properties. The median house price in Attwood is $485,000 dollars, which is over 40% higher compared to a year ago. There have been 33 houses sold in the 12 months to September 30. The median rent price for a house in the suburb is $320 which brings the gross rental yield to 3.43%.
Tax TipThis week we are looking at the question of how much to spend on renovating your investment property. Now the main goal of renovating an investment property is to build more value into your property and to attract good tenants who will pay higher rent. Some renovators spend more on assets like carpet, electrical appliances, air conditioners and security systems than they do on capital items because of the depreciation benefits. The other advantage is that tenants will be attracted by these extra benefits and will allow you to charge a premium rent.
The biggest risk is over capitalising and to avoid doing that it’s a good idea to compare the value of your investment property with the median selling price in your area for the type of dwelling and then don’t spend more than the difference. If you already have good tenants and are happy with the rent being charged, then the only time you may consider doing renovations is at the point of sale and again, it’s important not to spend more than you need to.
