The NSW property market has undergone an interesting swing in the past 12 months or so. While prices in regional areas have remained strong, a number of inner suburban areas have flattened or dropped.
House and land packages in particular are experiencing heightened interest as a range of buyers are recognising an untapped potential for future growth and return on investment. This potential has been spurred on by a range of influencing factors, including:
- Government incentives
- Expansion of infrastructure and amenities
- Shift towards remote offices and working from home
- Quality of life in regional areas
- Larger block sizes
With so many positives in their favour, house and land packages are fast becoming an attractive proposition for those looking for short and long term gains. After all, as with any investment opportunity, it all begins with the bottom line.
When doing the sums on investing in established homes over house and land packages there is a strong case to make for the latter. To begin with, only paying stamp duty on the land component of a house and land package can means thousands in savings.
Additionally, recent changes to government regulations surrounding depreciation of P&E (basically fixtures and fittings) in investment properties mean that as the original purchaser you may be eligible to claim many thousands of dollars in depreciation each year.
Negative gearing is the ability to claim on a property which has been purchased at least in part, by borrowed funds and where the nett income from rent after expenses is lower than the interest on the borrowed amount.
Property investors use negative gearing to reduce their personal income tax and this reduction is substantial. In the years 2010 – 2011 alone, negative gearing reduced personal income tax revenue by $13.2 billion.
At tax time you can also claim deductions for costs incurred whilst renting out the property such as agent’s fees, maintenance and replacement of appliances.
- Pay the rent
- Take care of the property
- Want to remain long term.
Advertising and agency costs can add up so having settled and happy tenants makes good financial sense.
Comparing an inner-city apartment with a similarly priced, substantial outer suburban house and land package can be startling. With rental expectations around the five percent mark for the house and land compared to almost half that for apartments, you begin to see where the real value lies. Add to this what you actually get for your money; a substantial family home compared to a tiny floorspace apartment.
The newly built home will also be backed by a builders warranty for the first few years of its life. A tiny apartment with ongoing body corporate fees, attracting lower rental yields and low quality of tenants, just can’t compete.
Set And Forget
A major attraction for investors is putting their money into property which won’t place a constant drain on their bottom line. With tenants rightly being entitled to live in a home where everything works and is in good order, older properties can be a constant money pit for landlords. It can seem as soon as one problem is fixed another one arises – from a new dishwasher to a replacement air conditioner.
A new home should remain maintenance free for many years. At the design stage they can be optimised to be economical to run and to withstand the harsh demands of a high turnover of tenants by including:
- Stone benchtops
- Wear resistant flooring
- Solar panels
- Low maintenance landscaping with hardy plantings
On top of all the aforementioned benefits, house and land package provide investors with a physical asset which will grow in value and can be utilised as a residence at a later date. No matter what stage of life you are at, consider the advantages of investing in property as a clever way to begin the path to a comfortable and lucrative retirement.