The process of purchasing your first home either to live in or invest is both exciting and daunting. Navigating your finances, home loan, and finding the right property partner is challenging. Even though it takes a bit of time to get the hang of, investing in Australian property can bring major returns and allow you to use your equity to further expand your property portfolio. Here are my Top 3 reasons why Australian property is a great investment.
1. AUSTRALIA HAS A UNIQUE TAX SYSTEM
It is one of the few tax systems in the world where you can claim most costs associated with the investment. By keeping good records from the start, investors can claim expenses back as deductions. These include:
- Management and maintenance costs (including interest on loans) - can generally be claimed immediately; that is deducted from your current year’s income.
- Borrowing expenses (associated with the purchase of the property) - such as loan establishment fees, title search fees, and costs of preparing and filing mortgage documents.
- Depreciation (a depreciating asset) - an asset that has a limited life expectancy and can reasonably be expected to decline in value over time. E.g. furniture, appliances etc. This is only applicable to brand new property, so buying off the plan now has a considerable advantage.
- Capital works expenditure (deductions for construction expenditure) – these deductions apply to capital works such as an extension i.e. adding a room or garage, alterations i.e. removing/ adding an internal wall, and even structural improvements such as adding a gazebo or car port.
- Negative gearing- where the deductible expenses (including interest on loan) exceed the income earned from the property. In this case, investors may be able to claim a deduction for the full amount of rental expenses against your rental and other income – such as salary, wages or business income.
2. POPULATION GROWTH
Along with its unique tax system, our beautiful country has a rapidly growing population. Since Australia’s first federal immigration portfolio was created in 1945, over 7.5 million people have settled here, with the overseas-born resident population now estimated to be 28.2% of the nation’s population (as per ABS 2015/2016). What this means is that demand for property is continuously increasing. Outside of its positive impact on the economy, and shaping of society, immigration to Australia assists property investors in securing tenants with ease, and immediately start benefitting monetarily from their investment. From an investor’s point of view, keeping an eye on the factors that drive population growth can prove advantageous. High population growth in areas where there is limited housing supply is ideal for investors – this means upward pressure on prices and rents.
3. ROBUST BANKING AND BUILDING SYSTEMS
Rounding off my Top 3 reasons, is our nation’s robust legislations in areas of building-codes and banking. The Building Code of Australia (BCA) ensures a uniform building code applicable to construction throughout Australia. The code sets out the minimum requirements for dimensions and specifications for certain types of construction to make sure the living conditions are safe. In conjunction to the BCA are the Australian Standards of Building, that ensures the quality of materials and execution of quality works. Within the area of banking, the Australian Prudential Regulation Authority (APRA) oversees banks, credit unions, building societies, general insurance and reinsurance companies and other institutions. APRA’s mission is ‘to establish and enforce prudential standards and practices designed to ensure that, under all reasonable circumstances, financial promises made by institutions we supervise are met within a stable, efficient and competitive financial system.’. The presence of a regulator like APRA ensures that financial institutions are not engaging in risky lending, with a primary focus of protecting the financial well-being of the Australian community. The most critical point when investing in property is finding a trusted property partner. Calla Property uses a robust research methodology that accurately identifies the right property, at the right time, in the right location. Get started and book an appointment with one of our property specialists by calling 0482 080 189 today.