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Category: Real Estate News

How the political parties’ policies are having a detrimental effect on most Australians and the economy

Owning a home has been the dream of most Australians for decades, and many have made great sacrifices to achieve that goal. As our population increased and the economy grew, so did the value of property, giving people greater equity in their homes.

Owners used this capital growth in various ways, for example:

To borrow against it to:

  • do extensions
  • supplement retirement income or superannuation
  • offer as assistance or security for their child/ren to purchase a home
  • start a business
  • buy a second property to negative gear (thereby providing rental accommodation for those who could not afford to buy at less than the holding costs for the tenant)

To sell to:

  • upgrade to a better home
  • downsize to use the balance for retirement income
  • start or invest in or expand a business
  • other reasons.

The owners are the ones who worked hard and took risks and should benefit from their investment. Some used their equity to leave to their children when they died.

Many changed houses about every seven years with changing economic circumstances. For a long time, the cost of changing houses was reasonable and didn’t reduce the equity much.

Many of the buyers did various things to enable their purchase:

  • Lived with their parents for a few years
  • Took two jobs
  • One party (the carer) took a part-time job
  • Made sacrifices in clothing and food
  • Plus, plus, plus.

Many started with very old, small houses not expecting a modern 4 x 2 with all the mod cons.

A distinction needs to be made between WA and the east coast. Interestingly, most commentators do not seem to realise that WA exists, or is part of Australia but with a very different economy and market.

WA experienced above-average increases in the early 2000s, which collapsed due to the:

  • GFC in late 2008
  • end of the mining construction boom in 2010.

Most falls were around 20% to 30% and turnover virtually halved. Since then, the market has been fairly stagnant – up a bit, down a bit.

Last year, we saw the first signs of possible increases due to:

  • The announcement of multi-billion-dollar mining construction contracts
  • Mining exploration going gangbusters
  • Record $ value of grain harvest
  • WA starting to get more GST (which shouldn’t be used to prop up states or territories that haven’t encouraged and built up their economies for years).

The increase in confidence in WA has been dampened by negative publicity by the eastern states’ media who just lump WA with the east coast, and for 10 years have experienced years of unsustainable above average price rises (like what happened in WA from 2000–2008).

This constant negativity in the eastern states is affecting the growth of confidence and recovery in WA.

How are government policies affecting real estate?

  1. The major problem is the exorbitant stamp duty for locals of 5.25% on every purchase. This reduces the equity for the owner and, when added to the agent’s commission of approximately 2% plus GST, it virtually reduces the capital to a point where it is not worth selling or changing residences for many years, if at all. The government takes the owner’s equity and prevents them from initiating the abovementioned actions that create more activity and employment.
  1. The well-meaning but misguided policies to make housing more affordable can push existing owners into negative equity if, after selling and paying costs, the owners owe more than they have borrowed. This wipes out all the hard work and sacrifices made by the owners to raise a deposit and reduce their mortgage. Often after selling, instead of having $1,000s, they find they still owe the bank money. This will affect thousands if not millions of people’s decisions on making the sacrifice to own their own home. Politicians would be better off exploring and implementing the technologies that enable housing to be built far more economically (even 50% of today’s costs) or building them at prices that are affordable for those who cannot afford traditional construction.
  1. Negative gearing is very misunderstood by politicians and self-interest groups. It provides housing at a much lower cost to those who cannot afford or do not want to buy a particular home. The owner/investor receives rent less the cost of:
  • Foregone interest on the deposit
  • Interest payments on the mortgage
  • Interest on stamp duty and settlement costs
  • Rates and taxes
  • Building maintenance
  • Garden maintenance.

Why would anyone do this and call it an investment? In the past, when capital growth was at a reasonable level, the investor’s return was:

  1. Some tax relief on their losses each year (this would be about half the amount that their costs exceeded their rental income).
  2. Capital growth on the sale of the property less the costs of selling. Of which, they would pay nearly half in tax.

With capital growth falling (even being negative) and turnover declining, most buyers and investors will decide to pull out of owning/investing in real estate, thus reducing prices and turnover even further. Government income from property transactions will fall dramatically.

Politicians would do well to:

  • Reduce stamp duty to 1 to 2%
  • Remove the capital gains tax.

This would give the control of capital back into the hands of the individual and remove billions from governments who waste most of it on big (and often wasteful) projects. It would be great if individual home owners (entrepreneurs) invested the capital gains into profitable business and created employment as they watch their profits closely.

This is opposed to governments who take money they haven’t earned and give billions to bureaucrats to run huge projects without any skills in getting the best contracts. Invariably they just tax us more to pay for their mistakes whereas private business go broke if they don’t watch the bottom line.

To auction or not to auction..

Auctions are a very popular method of selling property in the eastern states, however, their offer and acceptance contracts are quite different to what we have in Western Australia which has led to their popularity in those markets.

Traditionally, property sales in the Western Suburbs have predominantly been by private treaty. The increase in the number of properties in the area being offered for sale by auction over the last 5 – 10 years has been an interesting development. Whether or not it has increased the likelihood of properties being sold is arguable.

I have long believed that the best way to sell your property is by private treaty. Auctions require an unconditional offer being made at the time of auction and for the prospective buyer to have the required deposit on hand. This immediately eliminates a large proportion of prospective buyers.

In my experience, the diversity of properties within the Western suburbs plus the diversity of buyers needs and wants means that it can often take some time for properties to sell. It is a fallacy that the best offer will be made within the first few weeks of marketing a property. You might entice buyers who have been actively looking for some time, but they are not necessarily the ones who will make the best offer. Often selling property in the Western Suburbs takes time and patience.

There are a few occasions when auctions can be beneficial. There is a high demand for land value blocks in good locations and often these are good properties to auction, particularly if they also have development potential.

Some agents suggest auctioning to vendors who may be unrealistic about the value of their property. They use the auction as an indicator of what the market is willing to pay. Not only is it an expensive way to try and convince vendors to reduce their price, but it is also not a true representation of what buyers are willing to purchase a property for. They may be willing to pay more if the settlement time was longer, or the offer could be made conditional to suit their situation at the time.

So, to auction or not? In my opinion, in most cases not. Except if you have a land value property, development potential or a property that has appeal to a wide range of buyers.

Why Dalkeith is (arguably) the best suburb in Perth

If you are one of the few who are fortunate enough to afford property in Dalkeith, then you are privileged to be living in what I regard to be the best suburb in Perth.

Within close proximity and easy access to the city of Perth, the Swan River and the ocean beaches, it is one of the few suburbs that enjoys the benefits of three of the WA’s best features. Being on a peninsula (the Swan River surrounds the suburb on three sides) gives it a more equable climate with the breezes off both the river and the ocean. It remains a low traffic area with quiet leafy streets and its proximity to high quality public and private schools it makes it a highly sought-after suburb for people with school-aged children.

Dalkeith is a fairly small suburb that has many large nature reserves and parklands including Masons Gardens, Cruikshank Reserve and Bishop Reserve. In fact, it has 8 parks that cover 17% of the total area, making it one of the leafiest suburbs in Perth.

Because of these reasons, Dalkeith retains a village life appeal. Kids can safely play on many of the quiet streets and there is a great sense of community among those who live there. The small shopping areas on Waratah Avenue add to the village feel yet the range of boutique shops and recently revamped IGA add convenience and interest.

There’s an eclectic array of homes and people in the suburb which only adds to its character and appeal. From original homes in original condition to modern family homes and riverfront mansions – owned by young families, retirees, foreign investors, multi-generational Australians and new immigrants.

I think statistics show that approximately 70% of all purchasers buy for the high quality and diversity of education facilities in the immediate area. For these reasons Dalkeith remains my favourite suburb in Perth and is why I am passionate about selling property in the area.

A new generation in real estate

Gordon Davies Real Estate is proud to announce a new generation in real estate with two new additions to their sales team.

Alison Sayer (nee Davies) has finally decided to join her father in sales. Alison has experienced the real estate industry from the ground up. Her first part-time job was working in her dad’s real estate business at the age of 15. Throughout the years she has worked in all aspects of the business, developed a passion for property and enjoys the many opportunities the industry provides to meet and help people.

Having spent her childhood growing up in the leafy, quiet streets of Dalkeith, Nedlands and Claremont and now living in Swanbourne, Alison has extensive knowledge of the area and its people. With a Bachelor of Science from the University of Western Australia and diverse career in business marketing, management, digital technology and design she has inherited Gordon’s work ethic and honest approach. She is warm, personable and able to create and sustain relationships with people from all walks of life.

Alison’s experience in digital technology has brought a new focus to the business by enhancing customer relationships and marketing using the latest technologies.

Claire Young is a local sales consultant with a wide knowledge of the Western Suburbs. Having grown up in the wheatbelt and helping on the family farm she learned the importance of hard work and patience. Claire graduated with a Bachelor of Commerce and has previous experience working in government providing her with a good foundation for commercial transactions and dealing with regulations.
Claire knows the Western Suburbs well having lived in the area over the last 30 plus years. She has completed a number of renovations and has experienced managing investment properties. Claire values honesty and open communication. She puts her clients first and focuses on their goals.

Alison and Claire are benefitting from the wisdom that Gordon has gained from over 50 years in the industry and applying a fresh approach. It signals the start of a new era for what has been a highly successful real estate business selling property in Dalkeith, Nedlands and surrounding suburbs.

Capital Gains Tax

Parent Liable to Capital Gains Tax on Half-Share of Townhouse.

An individual has been unsuccesful before the Australian Appeals Tribunal (AAT) in aruging that he should not have to pay Capital Gains Tax on the sale of a Townhouse he owned jointly with his son because, he argues, he was only holding his interest in the property to protect his inexperienced son from selling it on a whim.

The individual had purchased the property for his adult son to live in and transferred the property to himself and his son as joint tenants. After living in the townhouse for a few years , the son moved out to another property. The townhouse was then sold and all of the funds were used to pay down the mortgage on a new property.

The individual argued that he received no proceeds from the sale and that he held his interest in the property in trust for his son, or alternatively, that an exemption under the CGT law should apply.

The AAT did not accept the arguments and held that as a joint tenant the individual was liable to CGT on 50 per cent of the net capital gain on the sale.

Residency Requirement for CGT Home Exemption Failed

The Administrative Appeals Tribunal (AAT) has denied an individual’s claim that an exemption from capital gains tax (CGT) should apply to a property that he and his ex-de facto partner had sold. The individual has purchased land in 2002 with his then partner, and construction of a house on the land commenced in April 2004. However, the couple ended their relationship in September 2004.

Despite this, the individual argues that they had moved into the house in around May or June 2005 to meet the requirements under the law to sell the property without being subject to CGT.

The AAT found that the evidence before it failed to establish that the house became the individual’s main residence “as soon as practicable” after construction was completed, and failed to establish that the house continued to be his main residence for at least three months after that. In this case, both requirements had to be met in order for the exemption to apply.

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