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May 2014

 

Welcome to our May Newsletter


The Reserve Bank of Australia decided to keep the official cash rate on hold at 2.5 per cent at its May board meeting. This decision supports the RBA

This is great news for homeowners and property buyers as property markets around the country remain buoyant. In the pre-Easter weekends in April, auction numbers around the country reached a new high for 2014. In fact, the number of auctions during this period was 40 per cent above average, according to ANZ Property Research.

A record number of auctions were held in March, with approximately 5,300 homes going under the hammer Australia-wide. New listings were also up by 32 per cent, whilst auction clearance rates dipped slightly to average around 70 per cent for most capital cities.

As more and more properties come onto the market, it's likely that the rapid rises in house prices that we've been seeing in the Melbourne and Sydney property markets over recent months will slow.

Average median house price rises in April reached just 0.3% across the country, whereas in March, the average house price rose by 2.3 per cent nationally, taking the total home price growth for the first quarter of 2014 to 3.5 per cent. On average, national home prices are still up by around 10 per cent compared to a year ago.

New housing construction looks set to enter a boom period over the next 12 months, with analysts predicting a rise as high as 30 per cent in new project starts. This continues the trend where, in the past year, new building approvals rose by as much as 34.6 per cent. The increased number of new homes coming on to the market should also help to keep home price growth under control, which is great news for both investors and first home buyers looking to enter the market at the lower end.

The question on everyone's lips is will the Federal Budget cuts squash the property market recovery?  

Analysts agree that this seems unlikely. Whilst consumer confidence may suffer slightly at first, the property market should remain strong given the low interest rate environment.  Whilst analysts are predicting that there may be interest rate rises in late 2014 or early 2015, these increases should be incremental, with interest rates remaining low for quite some time to come.

For more information about building wealth through property investment, property market trends and how the current low interest rate environment could effect your personal financial situation, please give us a call.

Sincerely, the Team at Great Aussie Dream

 
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Lending & Tax Time: Jargon explained


Well, the tell-tale signs that we are near the end of the financial year are upon us! Advertisements for EOFY sales are everywhere we look, search parties for those mislaid receipts, and the usual tax time property jargon such as "depreciation" and "negative gearing" being bandied around the water cooler.

Real estate at tax time has its own language and terminology which can be very confusing, particularly if you’re new to the investment process. Here’s a guide to the key phrases used at this time of year when we are thinking about your property investments, and what that means for your tax!

Capital Gains Tax (CGT)
A capital gain, or capital loss, is the difference between what it cost you to acquire an asset and what you received when you disposed of it. Selling assets such as real estate is the most common way you make a capital gain or capital loss. In other words, you make a capital gain when you sell a house for more than you paid for it.

You pay tax on your capital gains. So, when you make money from the sale of a property, it forms part of your income tax and is not considered a separate tax.

Most real estate is subject to CGT. This includes vacant land, business premises, rental properties, holiday houses and hobby farms. Your ‘main residence’ (family home) is generally exempt from CGT unless you rented it out for a time or it's on more than two hectares of land.

If you are a property owner, capital gains tax may become an issue when you make a profit from selling your property. But there are a couple of standard exemptions which could assist. For more information, we can help you with a referral to an accountant, or visit the Australian Tax Office website.

Negative Gearing
The term 'negatively geared' sometimes causes confusion, especially among people new to the intricacies of property investing. Negative gearing occurs when the costs of owning a property – interest on the loan, bank charges, maintenance, repairs and capital depreciation - exceed the income it produces. Simply, at the end of the day, the investment property in question will run at a loss and you need to make up that shortfall from your own pocket.

Negative gearing can be used as an investment strategy in order to reduce your taxable income, maximising available tax benefits. If the property becomes cash flow positive (see below), this profit is added to your taxable income and you may have to pay more tax depending on the structure of your investments.

Depreciation
Like the name suggests, depreciation is the decrease in value of an item over time. An example of a depreciating asset is your car, which is said to reduce in value a great deal from the time you drive it out of the dealership.

When it comes to investment properties, depreciation can certainly work in your favour. If your investment property depreciates, you can claim against the decreased value of your investment. Negative gearing and depreciation allowances are popular ways to reduce your tax liability. There are various rules around this in all States, so please speak to a professional, or we can get you in touch with the experts!

Cash flow positive
The reverse of negative gearing, your investment property is considered to be cashflow positive if your income generated from the property is greater than your outgoings - after you’ve taken into account tax deductions. Tax deductions include things like interest paid on your loan, depreciation, maintenance and service costs.

Equity
Equity is the difference between what your residence or investment property is worth and how much you owe on it.

Put simply, if your property is worth $300,000 and you still owe $100,000, you have $200,000 in equity. Over time, as you reduce the amount you owe on your home or the value of your home grows, your equity increases. Equity is a very good thing to have as it can be used to leverage further property purchases without your having to save a new deposit.

Of course there are lots more real estate and legal terms you will come across at tax time and when investing in property. We recommend you seek professional advice. Contact us to learn more.

 
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The importance of a valid will


Death is certainly not something we like to think about. Confronting mortality is uncomfortable by any measure, but the importance of making a valid will cannot be underestimated. Perhaps one of the most significant documents you will ever produce, your will ensures that any property or assets belonging to you goes to the right people and places.

It’s understandable that planning for the inevitable can be difficult, so here we delve into why you need a valid will, and steps you can take to ensure your estate is looked after (taken care of?) the way you would want.

Why do I need a will?
First of all, answer these questions:

  • Do you care who gets your property if you die?
  • Do you care who gets your money if you die?
  • Do you care who is appointed guardian of your minor children if you die?
  • Do you have any burial instructions?  

If you answered 'yes' to one or all of these questions, then you should probably have a valid will. Wills are not just for the "rich". Regardless of how much or how little money/assets you have, a will ensures that whatever personal belongings you do have will go to family or beneficiaries you designate. Without a will, these decisions can be made for you.

A will allows you to:

  • Choose who administers your estate,
  • Control how your assets are distributed,
  • If you have a child under 18 years of age, appoint their guardian,
  • Give directions for what happens next in terms of the disposition of your body and organ donation, and
  • Save your loved ones time, money and emotional energy administering your estate.

What happens if I don’t have a will?
If you die without making a valid will, you leave what is known as an "intestacy". This means you have not validly disposed of some or all of your assets.
Many people believe the Government takes their assets if they die without a will. This isn't always true. It should only happen if you have no living next of kin. However, if you die without a will, your assets will be distributed according to a formula. This might mean that your assets do not end up with the person you would have chosen.

Some good information can be found on the state trustees website www.statetrustees.com.au.

What are the requirements of a valid will?
The requirements for producing a valid will varies from state to state. For example, if you are in a de facto relationship, under the laws of Western Australia, this would receive no recognition in the distribution of assets. Witnesses to a will in Queensland and New South Wales may find that any benefits given to them may be invalid. Or, in Victoria, a witness can still be a beneficiary but suspicions may be raised in regards to a person who is both a witness and beneficiary of a will. We recommend you seek professional advice, or do your research on the State Act that is relevant for you.

The following elements must be adhered to in order to create a legal will:

  • You must be least 18 years of age,
  • You must have an intention to make the will, meaning you want to make the will and you are doing so voluntarily without pressure from someone else,
  • You must understand what is in the will, and approve of its contents, and
  • Two witnesses must sign, and acknowledge the will in the presence of the person making the will.

It is also important to use clear and explicit language. If you meet these requirements, the will has become valid.

Whilst, there are no requirements that you use a professional to draw up your will, it is advisable that a legal practitioner confirms you have met all the necessities. Another option is a simple 'Make your own will' kit available from your local newsagency.  

What should I put in my will?
Any property and assets belonging to you! Start big, with your home or other properties, and then work your way to other valuable assets and items that you care about and want to pass on.
Partnerships, companies or properties in which you are a trustee cannot be included.

When should I review my will?
Births, deaths, marriages, divorces and property purchases! Basically, whenever you experience a significant life change it is recommended you review your will and make sure it is up to date and what you still want.

In most States, marriage revokes a will, but there are slight variations, so it’s useful to check what the possible effects of marriage is on a will in your state. When a marriage ends in divorce, in most cases any benefits to a former partner in a will are revoked, but it is also worth checking what this means for your specific situation.

Whilst it's never fun to think about the inevitable, your will is very important. If you have property that you have been paying off for years or other assets, you want it to go to the right person once you're gone. For more information or a referral to someone who can assist with your will, please get in touch today.

 
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Investing in a holiday home


As the cool of winter sets in, thoughts of the beach may be far from your mind. However, winter is often a great time to look at buying a beach house or holiday home. There's a lot to think about when purchasing a holiday home. Where should I buy? What should I buy? How do I buy?

Generally, there are two camps when it comes to holiday homes:

  • Those planning to use and enjoy the property themselves, and
  • Those seeking financial gain from their investment.

Sometimes it's a mixture of the two, but one factor will probably carry that little bit more importance for you. Before you start, you need to know what your motivation is in purchasing the property, as that will inform the decisions you make from the outset. The research and preparation you need to undertake will vary, depending on your end goal.

If you are purchasing an investment property, your search should focus less on personal preferences and more on features that will maximise the return for your investment. If you're buying for you and your family, you will need to look at how this house or apartment might suit your needs!

Either way, below we have highlighted some key specifics you need to think about when it comes to owning your own little slice of paradise!

Can I afford it?
Setting a budget, getting your credit in check and securing pre-approval of your loan will you save you the grief of looking at houses you can't afford, and put you in a better position to make a serious offer when you do find the right place. That is where your mortgage broker comes in, chat to us today about how much you can borrow and how we can help you.

Where should I buy?
Answering this question is absolutely key, and will very much be influenced by whether you are looking for you, or looking for a weekender to rent out! As we said, know your goals from the outset.

Looking at holiday home locations there will always be the "firm favourites", those places we are all familiar with and are already a popular place to visit, and the "emerging destinations", normally lesser known, where the purchase prices may be cheaper but you may face less demand, at least initially, for your rental.

Once you know where you might like to buy, find out more about the area. Research any future developments planned in your preferred area, then think about accessibility and season duration.

Internet forums are a great way to get an insider's view into buying in an area. Drive around the neighbourhood at different times of the day and night and see how you feel.  

But, how do I rent it out?
There are three main ways you can rent out your holiday home – owner managed, property manager, or a combination of the two.

Some owners do all the marketing online, on websites such as www.stayz.com.au or www.takeabreak.com.au, or take bookings over the phone, whilst letting the property manager take care of things on the ground.

Owner managed gives you the opportunity to screen potential travellers and decide who would be a suitable guest in your rental. But, someone needs to be there to manage arrivals and departures, cleaning and maintenance.

The most important thing is finding the method that will work best for you.

Pitfalls and traps for new players
Turning a property into a holiday rental can be tough, but it can be very worthwhile! There is a lot to think about, from legal preparation, applicable tax deductions, what you need to know about taking payments, maintenance planning and housekeeping. We are here to help support you with your financial goals, so if a holiday home or rental is something you are considering, please get in touch with the team on the details below.

 
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Wine review

Rosemount District Release McLaren Vale Cabernet Sauvignon 2012

One of the most awarded wines for 2014, this fantastic red is a real show stopper. It’s a deep, brooding, full red, for those who are into the cabernet experience. You'll find the fruit is very generous in the mouth, with flavours of cassis, chocolate, mocha, mint and tobacco leaf. The fine, drying tannins are Bordeaux-like and give the wine almost perfect balance. If you're looking for wine to store in your cellar, then this is it and at this price, you should certainly be thinking about putting some away for later!



Rating : 5 stars
RRP : $19.99

 

App review

Dropbox

Dropbox has been around for a little while now, but if you're not familiar with it, you should be! Dropbox is a free service that lets you store all your large photos, documents and videos. You just install it on your computer and any file you save to your Dropbox can be accessed by all of your devices – you just use the Dropbox app on your phone to access it anywhere, anytime. Save photos or videos to your Dropbox and share them with friends with just a couple of taps. Save attachments to emails and edit documents easily. Automatically backs up your files, so even if you lose your phone, your stuff is always safe on Dropbox.



RRP : FREE
Available on :  iPhone, iPad and Android and via your web browser

 
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Great Aussie Dream

T 1300 72 68 48
F 02 4733 4115
E info@gad.com.au

www.greataussiedream.com.au

Australian Credit Licence Number: 387787 | ABN: 84129326352

 

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