NewsBig news of the week was the 25 basis point rate hike to the Official Cash Rate by the RBA. The central bank says it will leave the door open for further rate rises as the economy continues to improve. Westpac became the first big bank to pass on the rate rise to its customers, however much to the disdain of Treasurer Wayne Swan the bank lifted its variable mortgage rate by 45 basis points, well above the RBA’s 25 basis points.
In other news the ABS released figures showing a slight fall in building approvals for October, down 0.6% from the month before. And according to the Housing Industry Association, new home sales fell 6% in October, driven lower by higher interest rates and a slowdown in first home buyer activity.
Suburb in FocusIn our suburb in focus section each week, we look at property markets around Australia that could be of interest to property investors and this week we are looking at the two highest rental yield suburbs in the ACT. We’re looking at Reid but first up is Belconnen.
Belconnen is located about a 9km drive north west of the centre of Canberra. It is a popular suburb of Canberra to live in as it has shopping facilities and is a commercial district as well. Belconnen had a population of just over 3,000 residents in the last census and many professionals live in the suburb. 36% of dwellings contain families and the most common family type is couples with children. 48% of properties are units or apartments and 44% are semi detached properties. 63% of dwellings are rental properties. The median dwelling price in Belconnen is $347,000 dollars, which is an increase of 5.95% compared to a year ago while the 3 year growth is 23.5% so growth has been solid. The median rental price is $360 bringing the gross rental yield to 5.39%.
Now to the property market in Reid which is an inner city suburb of Canberra and located just 1.5kms from the city centre. In 2006 Reid had a population of just 1,600 people and its residents are public sector professionals. There are equal numbers of family and lone person households. Units and apartments account for 63% of properties while 30% are stand alone houses. 47% of homes in the suburb are rental properties. The median property price in Reid is $415,000 dollars, which is 3.75% higher compared to a year ago and the three year growth is over 22%. The median rent price for a house in the suburb is $465 which brings the gross rental yield to 5.83%.
Tax TipAt this time of year, a lot of people think about buying an investment property based on where they holiday. And while some real estate developers and agents claim you can make depreciation deductions at the higher rate of 4% if leased out for short term traveler accommodation but, the ATO takes a different view. The ATO doesn’t allow the average holiday investment property to be considered short term traveler accommodation. A general rule is that if the property has any kitchen facilities, it probably won’t qualify because it can be used by long term tenants, even if it is only used as traveler accommodation. Rather the standard depreciation rate of 2.5% applies to holiday homes that can be lived in.So if you’re on holidays this year and want to invest in the area, be disciplined. Check the advice you are being given and do the sums – listing all the expected expenses and income and a conservative capital growth figure and see if it adds up. And ask your accountant or tax advisor for specific information about whether a property is likely to qualify for the 4% depreciation deduction for short term traveler accommodation.
