Inflation data shows no rate increase needed, says real estate group

CPIThe March 2011 quarter Consumer Price Index (CPI) for the housing group, increased 1.3 per cent, compared to the all groups increase of 1.6 per cent. These figures increased 4.8 per cent and 3.3 per cent respectively over the twelve month period. Whilst the housing group is up from the 0.6 per cent level of the previous quarter, the annual rate of increase is the lowest since the September quarter of 2007.

Contributing to the annual increase of 4.8 per cent for the housing group, were substantial increases in the price of utilities – 11.7 per cent for electricity, 12.8 per cent for water and sewerage and 6.2 per cent for property rates and charges.

Rents increased by 4.5 per cent for the year on a weighted average eight capital city basis and the cost of house purchase increased 2.6 per cent.

President of the Real Estate Institute of Australia (REIA), Mr David Airey said, “The Reserve Bank of Australia (RBA) consumer prices measures of weighted median and trimmed median are 2.2 per cent and 2.3 per cent respectively for the year – well within their target zone of 2-3 per cent.”

“The March figures include increases of 16 per cent for vegetables and 14.5 per cent for fruit, which are to be expected as one-off occurrences, following this year’s flooding and cyclones in
Queensland and Victoria,” he continued.

“The message for the RBA is clear; rates do not need to be increased next week. Increasing rates will only cause greater mortgage stress for home owners and discourage buyers,” Mr Airey concluded.

Story Source: http://au.ibtimes.com

Tags: CPI, economy, finance, interest rates, money, property

Any changes to negative gearing could see a rush by investors for the exits

 

By allowing ordinary taxpayers to deduct their losses from investing in residential property against their other (mainly wage and salary) income, the current system provides a significant tax incentive for people to invest in rental accommodation across Australia.

Encouraging this demand, by the simple laws of the market, does hold property prices higher than they would otherwise be. But it also ensures a significant supply of rental housing, which also holds down rents.

As the Treasurer looks at a range of measures to cut the deficit, there are reports that senior Labor figures have had discussions with some union leaders about plans to bring in measures that could change the current tax arrangements.

Suggestions have ranged from a new sales tax on property investors to cutting back the negative gearing incentives for investors who have more than one investment property.

The ideas are being mooted as part of a strategy to make housing more affordable — while at the same time they might have the advantage of cutting back on some tax concessions that, in theory, could also help to reduce the budget deficit.

While property markets will eventually react to changes in tax arrangements, any changes will involve some risky politics.

There is a real danger that a “soak the rich” style approach to cutting back negative gearing will lead to a significant reduction in the availability of rental housing, which will only be overcome — over time and after some significant market disruption — by an increase in rents.

The people most likely to be hit by the dislocation of the investment housing market as it adjusts to cope with new tax changes — and expected future cutbacks on tax concessions — will be those who can least afford it. . . people who rent.

Those investors who might be discouraged from the investment housing market by the changes can just as easily sit back and put their money into a term deposit and get 6 per cent risk-free guaranteed (as opposed to the current average rental yield on investment property of between 2 per cent and 4 per cent).

They will have none of the hassles of dealing with tenants and real estate agents, nor will they have to pay stamp duty, land tax, conveyancing fees, insurance and repair bills.

But for the millions of Australians who will be making the decision of whether to buy or sell residential property in coming months, Swan needs to make the federal government’s position clear.

If not, would-be sellers would be better off getting rid of their property as fast as possible and buyers would be wise to hold off buying until they have a clear guarantee about what the federal government’s plans are.

Any change to the current negative gearing arrangements would only mean one thing — cutting or eliminating the tax benefits of investing in rental property.

With property prices cooling off in many areas, some investors are already rethinking their plans for investment in residential property — even with the incentive of the tax concessions provided by negative gearing.

Any further changes — or feared changes — could see a rush by investors for the exits.

Even a small reduction in the government’s tax concessions could lead to a much more substantial reduction in investment.

Investors who look at residential real estate as a long-term investment might well take the view that any announcements made this year may be the thin edge of the wedge, the beginning of a more substantial cutback in the negative gearing arrangements in coming years.

And with property, as everyone knows, in a falling market, it is a case of first out, best dressed.

As the latest figures from the Australian Taxation Office show, there are almost 1.7 million taxpayers out of a total of 12.3 million in Australia who report they have at least one rental property.

A rough calculation of figures provided by the ATO of how many taxpayers have one or more properties shows that these 1.7 million taxpayers own at least 2.3 million properties.

Put a potential 2.3 million properties on the market across Australia and one will certainly achieve a big fall in property prices.

That, or some version of it, may be what those advocating a cutback in the current concessions are trying to achieve. But there will be a lot of market pain getting there for everyone with an exposure to the housing market.

For a start, it could also take out of the market a potential 2.3 million properties that are currently occupied by renters.

Over time, of course, the total rental market will decline somewhat as lower house prices will make it easier for some existing renters to buy their own home.

And rents will rise to the point where investors may be willing to come back into the market.

Of course, an abolition of negative gearing would not suddenly result in 2.3 million properties coming on the market, because not all investors will decide that having money in residential property is no longer worthwhile.

But the figures do provide some indication of the potential implications for any treasurer who starts to tinker with the system.

The ATO figures show that almost 1.2 million taxpayers have only one investment property.

A decision to cut out negative gearing for those with more than one property, according to the ATO figures, would affect 475,000 taxpayers.

These collectively own at least 1.1 million properties, which is still a fair swag of real estate that might come on the market if investors with more than one investment property were discouraged.

And for those who think that investing in residential property is only a rich man’s sport, the figures show that by far the biggest swag of properties are owned by people earning $80,000 a year or less.

As the accompanying table shows, there were just over 1.1 million taxpayers in 2008-09 (the latest figures available) who hold rental properties that are losing money (in other words, the cost of interest and other expenses outweighs the rental income).

These are the ones, of course, who are taking advantage of negative gearing.

Of those, the biggest single grouping is people who are earning between $34,000 and $80,000 a year. Just under 80 per cent of the total number of taxpayers who own properties that are losing money earn $80,000 or less.

Story by Glenda Korporaal  www.theaustralian.com.au/

Tags: economy, finance, investment, money, real estate

 

 

New Series–C&G Focus Interviews–Sam Gamon

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This is the first in our series of C&G Focus interviews, with Director and Auctioneer Sam Gamon our premiere interviewee. Get to know our friendly team better, and find out what creates the fire in our bellies. Here’s Sam!

1.      What makes Chisholm & Gamon unique, setting you apart from other competitors?

Teamwork amongst staff, passion, friendly attitude, customer focus & care, enthusiasm, integrity.

2. What are your most prized business skills personally?

Honest advice, fun & exciting auctions, dedication, years of experience & local knowledge.

3. How did your lightbulb moment in realising your career come about?

Torsten convinced me to follow in the family foot-steps (I’m 4th Generation)

4. What is your earliest memory?

Making steering wheels out of broom sticks & paper plates in the back garden at Spray St, Elwood where we lived as kids.

5. What would your last meal be?

Spaghetti bolognese.

6. What is your best tip for choosing business partners and staff?

Look for people who enjoy being part of a community, are thoughtful when it comes to others and have plenty of energy & zest for life.

7. What is your favourite sound?

When I call “SOLD” at an auction.

8. Who would you like to invite to dinner?

David Bowie

9. What is something unexpected that has come from your work at Chisholm & Gamon?

Many long-standing friendships with clients I’ve met through real estate.

TAGS: Chisholm & Gamon, Sam Gamon, Torsten Kasper, David Bowie

Elwood College

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We’re lucky in Elwood to have such a well-respected and friendly secondary college in our midst. Today’s Chisholm & Gamon Blog focuses on Elwood Secondary College and their impending Open Evening.

Elwood Secondary College is a close-knit community which prides itself on its low class sizes and high teacher-to-student ratios. A culturally diverse and co-educational school, your children will have the opportunity to meet others from around the globe in the International Student Program (Brazil, Germany, Korea, Japan, China are just some of our visiting students’ countries of origin). Elwood Secondary College offers a range of diverse programmes for students, with a focus on languages, drama, music and sports. With an impressive 100% VCE pass rate for Year 12 students (90% of those gained their desired tertiary education placement), Elwood Secondary College is a great choice for local families. Chisholm & Gamon have long been associated with this quality school, and we urge you to pop along (with the kids of course) to their next open school event.

Open Evening: Tuesday 3rd of May 7:30 – 9:00pm. If you can’t make it along in the evening come by on Wednesday 4th of May at 9:30am or 5:30pm – call 9531 9566 for further details.

TAGS: Elwood Secondary College, Open Evening, VCE, International Student Program

One small debt mistake can cost you a home loan

 

Home loan declinedFranchise owners for Australia’s largest independently-owned mortgage broker, Mortgage Choice, continue to meet people planning to buy property who have no idea their credit file may hold details that will see their home loan application declined.

Some are unaware certain aspects of their debt history, including bill defaults and applications for loans and credit cards, are on file and made available to lenders and other credit providers.

Mortgage Choice spokesperson, Kristy Sheppard said, “There is still a lack of knowledge about the existence of individual credit files and that one or two debt-related mistakes, such as a missed or late bill payment, are often enough reason for someone to be denied a home loan.”

“Younger borrowers are especially likely to be oblivious to the importance of keeping their credit file clean. Defaults and credit applications are usually displayed loud and clear to lenders researching a potential customer’s suitability for and ability to repay a home loan.

“Be aware that if you have been active in applying for credit within the last five years and/or have not met deadlines with bill or other debt payments in that time, you have a credit file. Some records are kept on file for seven years.

“The good news is defaults are preventable in many cases. If you are unable to meet repayments it is up to you to contact your lender or credit provider and make arrangements to pay the outstanding balance before a default is noted on your credit.”

Mortgage Choice suggests these top five tips for keeping your credit file clean:

1. Understand where your money is going and pay on time. Know your cashflow back to front and ensure responsible payment of your credit cards, bills and personal loans by contributing the funds required before the due date. Make time to monitor your accounts closely and look for any discrepancies. Once familiar, you will understand your spending habits better. Do you know the exact balance of your credit card and other loans, their interest rates and fees? Do you keep utility bills on the top of your ‘to do’ pile and file them after paying?

2. Make it automatic. Missed and late payments are one of the most common defaults on a credit file. Paying bills and minimum repayments before or on time will help prevent unwanted fees. A good way to ensure you don’t miss one is to set up auto transfers from your savings account.

3. Don’t go overboard. It is easy to go over your credit limit, miss paying bills or fall into the habit of thinking “another debt won’t hurt”. You can quickly lose track of spending and fall behind, which is when defaults appear on your credit file. Have a budget and stick to it. Lost motivation? Consider what life will be like if you can’t apply for a home loan or other credit in years to come.

4. Just say no. Credit providers may tempt you to increase your limit. Resist unless absolutely necessary; don’t increase spending simply because you can. If you are only just getting by you should think about reducing your limit until in the clear and perhaps cut up your credit card/s.

5. Pay more than the minimum. By repaying only the minimum required amount on your credit card or personal loan you end up paying a great deal in interest and may never pay it off. Paying debts off in full or making repayments above the minimum amount and restricting your spending will help ensure you pay your balance off and do not tarnish your credit file.

To order a copy of your credit report visit www.mycreditfile.com.au.

Call Mortgage Choice customer service on 13 MORTGAGE. Or, visit MortgageChoice.com.au, Facebook.com/MortgageChoice or Twitter.com/MortgageChoice.

Tags: finance, loans, mortgage, property, real estate

 

 

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