Lelde Smits:This week we begin a series looking at council areas with the greatest increase in hold periods over the last five years, starting in Victoria. And, continue our interview with Andrew Tunbridge from Ponton Valuations and Consultancy. In our tax tip we look at how you can avoid capital gains tax when renting your house.
News RP Data says the number of years people hold on to properties has increased sharply across the nation with properties in Melbourne showing the longest hold period. According to RP Data’s research analyst Cameron Kusher, between the years 2000 and 2005, the average holding time for a property remained relatively flat at around 6.5 years for houses and 6 years for units. However, since then, the average length of tenure has shown a consistent upward trend. Data for the year to August 2010 shows that houses sold over this period were owned on average for 8.3 years while units were owned for 7.2 years. Nationally, the average hold period for houses has increased by 1.7 years during the past five years and by 1.4 years for units.
Suburb in Focus This week we begin a series looking at looking at council areas with the greatest increase in hold periods over the last five years, starting in Victoria. A hold period represents the time between when a property is bought and sold, and can be an indication of the appreciation rates and desirability of the area.
First let’s look at Indigo, a council area in Victoria’s north east, near the New South Wales border. According to figures from RP Data, houses in Indigo recorded the largest hold period in Victoria. In 2010 the average hold period is currently 11 years, which compares with 6.7 years in 2005.
With a population of 14,798 in the last census, Indigo rests between the Murray River and Australian Alps. Major towns in the shire include, Rutherglen, Chiltern, Beechworth and Yackandandah. The picturesque natural landscape and historic character of the council area has established it as a popular destination for visitors, with the local economy mainly driven by tourism and farming. Gourmet produce is in abundance, from markets to restaurants as well as the renowned wine region of Rutherglen. Indigo is an example of old and new, with a focus on sustainability as well as preserving the cultural significance of the regions buildings and gardens. The emphasis on culture continues with an array of arts festivals throughout the year. Indigo also boasts a low crime rate and a reputation for tidiness, with its regions recently awarded state and national ‘Tidy Town’ awards.
Turning to the figures, houses in Indigo recorded the largest hold period in Victoria. In 2010 the average hold period is currently 11 years, which compares with 6.7 years in 2005. The median price of a house in Indigo has risen 11.6 per cent in the five year period, to $240,000 in 2010.
Our next council area is Maribyrnong, located only five to ten kilometers west of Melbourne’s city centre. RP Data figures reveal houses in Maribyrnong recorded the second largest hold period in Victoria. In 2010 the average hold period is currently 10.5 years, which compares with 7.6 years in 2005.
With a population of 63,141 in the last census, Maribyrnong is an inner west metropolitan council area that includes the suburbs of Maribyrnong in the north to Yarraville in the south as well as Tottenham and Bray-brook to the west and Footscray and Seddon to the east. The environment is defined by the Maribyrnong River, a tributary of the Yarra River and spotted with period homes and parks. Maribyrnong boasts one of the most ethnically rich populations in Victoria, with such diversity reflected in the array of cultural culinary influences. As the population has increased, past industrial sites have transformed to new residential developments and growth is likely to continue; an extra 16,000 new residents expected in the next twenty years. Residents have plenty of recreational options, including the Maribyrnong Aquatic Centre, a range of sporting clubs and bike tracks. While frequent public transport services allow residents to readily access the rest of the city.
Taking a look at the figures, houses in Maribyrnong recorded the second largest hold period in Victoria. In 2010 the average hold period is currently 10.5 years, which compares with 7.6 years in 2005. The median price of a house in Maribyrnong has lifted 75 per cent in the five year period, to $555,000 in 2010.
InterviewThis week we continue our interview with Andrew Tunbridge from Ponton Valuations and Consultancy.
Tax Tip And now to the Tax Tip of the week from Depreciator - the Tax Depreciation Schedule specialists. We look at how you can avoid capital gains tax when renting your house.
One downfall to renting out an investment property is the capital gains tax or CGT that will be payable upon the sale of your property. CGT is the tax charged on capital gains that are obtained from an asset. You are liable to pay this tax when your capital gains exceed your capital losses in an income year.
There are legal ways to avoid paying CGT while renting out your house, and CGT exemptions are allowed by the Australian Taxation Office, in certain scenarios. Only your main place of dwelling will be exempt from CGT therefore you can’t own two properties, live in one for a couple of years and then alternate between that property and your main residence while avoiding paying CGT on both houses.
Usually, if you purchased a house after 20 August 1996, you have to have lived in it when it was first bought and not rented it out to be entitled to a full exemption. This is because by renting the property out straight away, the ATO deems you to have acquired the property purely as an investment to produce income. Provided the above terms are met, you are exempt from a CGT if you rent out your home for less than six years.
If you’ve held a property for over 12 months and the ATO has deemed you subject to CGT, you are entitled to a 50 per cent discount. Ultimately, capital gains tax is dependent on individual circumstances and as such claims can become quite complex. Especially when you own a number of properties and increase the frequency with which you move from one property to another.
As always, do remember to consult with a tax accountant or tax professional before making any tax related decisions.
