Archive for October, 2010

Is renting a better option than buying your own home

This is not the easiest question to answer with a simple yes or no but it does depend on your own values and circumstances.

One of the biggest disadvantages of renting is that you have no control over where you live other than for the duration of the lease. It doesn’t matter whether you lived at the one place for fifteen years and paid rent on time without fail – if the landlord decides to sell and the new buyer wants to live in the house once the lease runs out, then you have no choice. It’s time to move.

Or maybe you are tired of the fact that the rent keeps going up but when you question it, the answer is a polite but blunt “take it or leave it”.

And then there is the frustration you feel when you realise that where you are living doesn’t really feel like home because you can’t even hang a picture without having to worry about being told to take it down.

But there is more to the argument than just these issues.

When you rent, the money you pay is dead money. You get no benefit from it on a long term basis but the landlord obviously does otherwise they wouldn’t own the investment property you’re renting in the first place.  You see, your rent money helps makes them wealthier because they gain from the value of the property increasing. It’s their financial position that is improving – not yours.

Most people would prefer not to be renting but you do need to think through the options. Renting does have its advantages and is the right choice for some people who like the freedom to be able to move around and not have to worry about fixing anything that breaks and does have it’s place but for most people, the dream of owning your own home still comes out in front even though emotions may be the biggest factor involved.

If you want info on depreciation on older buildings, charging tenants for water usage, tips on paying off your loan quicker or selected property reports and more, then visit www.mynewsletterbuilder.com/email/newsletter/1410572341.

Even better, why not subscribe to receive future editions.

A simple enough question that has taken quite a bit of digging around to get an answer!

The recent increases in water usage charges in Queensland has prompted many investors to question whether they have the right to charge their tenants for the water that they use.

There are three parts to the answer:

1. the property must be individually metered for water,
2. the property must be certified as water efficient by a plumber, and
3. the lease agreement must state that the tenant must pay for water.

The first point is the most important one. If you decide that you do wish to pass on the charges to your tenant, the first thing to check would be whether the property is individually metered and although this shouldn’t normally be an issue with houses, it may not be as straightforward with duplexes and townhouses. If it is not individually metered, the cost of the water usage cannot be passed on to the tenant apart from the standard excess.

You should also talk to your property manager about the practicalities of introducing a charge for the water usage.

The next step is to have a plumber certify that the property is water efficient. There is a form available that can used by a plumber to provide this certification but we have been able to secure a quote from Jason Robinson of Robinson Plumbing & Gas Fitting for providing this certification but the cost does depend on what needs to be done.

As a general guide, Jason has indicated a cost of $195 to test the property and issue a certificate if everything is in order. He is also able to advise the cost of equipment that may be required such as aerators, Dual Flush cisterns,  Tap Basin set and Mixer Taps as he is well aware of the requirements and is able to inspect properties from South Brisbane to Burleigh on the Gold Coast. He can be contacted on 0415 905 094.

Keep in mind that the Water and Sewerage access charges are no longer charged with general rates levied by the relevant council but are now included with the water charges and it is our understanding that these access charges must be met by the owner and cannot be passed on to the tenant.

This article has been provided based on our interpretation of the legislation that applies.

Always is the key word here and it is a big one because there will be times when house prices do not rise and even times when it falls with these fluctuations being referred to as volatility. It has been this volatility that has seen substantial changes in prices overseas in America and England.

The important question however for us is how volatile is the Australian housing market and this is the question that was addressed by Christopher Joye – Managing Director of investment, research and advisory business Rismark International – earlier this year. He examined the volatility of a range of asset classes from 1982 through to December 2009 and found that the annual volatility of the Australian housing market was relatively low. In fact, the volatility of the Australian share market has been 5.6 times higher than that of the housing sector.

He also pointed out that most of the economic crises we have seen in recent years (the 1987 crash, the Long Term Capital Management bailout, and the 2001 tech wreck) involved the equities markets. Even the Global Financial Crisis saw the stock markets of Australia, UK and US fall by 40-50%, but the housing market decline by just 4%, 14% and 30% respectively.

There has been a lot of discussion of late that the Australian housing market is expensive but this was based on  using house price data from capital cities and comparing it income data from across the whole country. Since house prices tend to be higher in cities, this overstated the real price to income ratio. If these city house prices were compared to the incomes of people living in the cities, they were much more reasonable.

There has also been considerable debate on the “housing shortage” but interestingly the Federal Government’s National Housing Supply Council second State of Supply report in April 2010 estimated the cumulative undersupply of housing stocks in Australia at 178,400 and predicted that this undersupply would grow to 308,000 by 2014.

Predicting the future is always a hazardous business. The performance of any market can be affected by a range of factors and a strong housing market in one city can be offset by a weaker market in another city. Nevertheless, the demand and supply fundamentals and Australia’s persisting economic strength continue to suggest that the Australian housing market has solid foundations and is likely to continue to at least hold its value for the foreseeable future.

Based on information supplied by La Trobe Financial.

Be warned!

One of the conditions of the First Home Owners Grant in Queensland is that you must live in a property for at least six months after you buy it. Most people are aware of this but sometimes what is overlooked in that they must live in the property for twelve months to be eligible for the stamp duty exemption made available by the State Government.

If you don’t meet this condition, then the State Revenue Office will find about it and will come looking for part or all of the stamp duty that is now payable as the conditions of the exemption have not been met!