Market Update – February 2016

Positive Spin On Negative Gearing
Speculation and suggestions from both sides of the political fence on changes to negative gearing are the latest headlines. With an affected pool of two million Australian property investors news of changes to the tax breaks are always heavily scrutinised and analysed by anxious owners.
Some of the positive news we can take from any proposed changes include:

Suggested change one: Capital Gain Tax Discount will be reduced from 50% to 25%
Positive note: As with the current ruling Capital Gains is only paid when you actually make a Capital Gain, and for those who invest in property know it is a long term strategy for creating wealth and if you never sell, you don’t pay Capital Gains Tax.

Suggested change two: Tax breaks will only be able to be offset for newly built properties that have been purchased after June 30 2017.
Positive note: Purchasing a newly built home has been, and would continue to be, a good idea as the depreciation is greater on a newly built home which provides greater tax deductible items.

Any suggestions of the market skyrocketing from investors scurrying to buy before the introduction and then a dramatic crash in second hand dwelling prices is ludicrous. The market has a large enough buyer base of non-investors and positively geared investors to dictate the market value regardless of new changes.

Regardless of any newly proposed changes to the negative gearing tax breaks offered to Australian investors, real estate will still be one of the greatest long term wealth creation vehicles on the planet, so “don’t worry— be happy” and keep buying property.

The local real estate market for February has seen similar demand and supply as the last few months with strong buyer activity coupled with a shortage of available homes for sale. The driving indicators of a sellers’ market are still very evident based on:

(1)  lower number of properties than current buyers;
(2)  property is selling in shorter time frames than usual; and
(3)  the prices being achieved are higher.

Unit sales in Tweed Heads is still very strong—in the mid 300’s whilst Banora Point house sales are also still in demand in the $450,000 – $550,000 range. A select number of buyers in the $800,000 plus range are still active, and unsatisfied, which is encouraging higher prices for premium quality homes.

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