The LNP Government has announced that it will be honouring its election commitment and reviving the principal place of residence (PPR) duty exemption from 1 July 2012. The original PPR exemption was abolished for contracts formed from 1 August 2011.

The Society expects legislation to reinstate the duty exemption to be introduced into Parliament during the first sitting commencing 15 May 2012.

It is not presently certain whether the new PPR exemption will operate identically to the previous exemption and QLS will keep members informed.

Should a Buyer wait or still buy in the interim?

To allow you to compare apples to apples, if we are to assume that the PPR rate will be reintroduced at the rate of 1% on the first $350,000 of Purchase Price then the difference in duty payable on the purchases prices listed below will be as follows:

The unknowns are:

Ø the PPR rate may not be introduced at the same rate (i.e 1% on the first $350,000).

Ø The LNP have previously flagged that the budget may not be delivered until September 2012 – so there is a chance that the concession may not be reinstated officially until September.

Obviously Sellers will still wish to sell and Buyers buy property prior to 1 July 2012.  The likely difference in concession may be useful information for you as Agents and the Sellers to be aware of when negotiating sale prices.

Now we all continue to hold our breath and wait for the big four banks to pass it on to consumers.

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to lower the cash rate by 50 basis points to 3.75 per cent, effective2 May 2012. This decision is based on information received over the past few months that suggests thateconomic conditions have been somewhat weaker than expected, while inflation has moderated.Growth in the world economy slowed in the second half of 2011, and is likely to continue at a below-trendpace this year. A deep downturn is not occurring at this stage, however, and in fact some forecasters haverecently revised upwards their global growth outlook. Growth in China has moderated, as was intended, andis likely to remain at a more measured and sustainable pace in the future. Conditions in other parts of Asiasoftened in 2011, partly due to natural disasters, but have recently shown some tentative signs of improving.Among the major countries, conditions in Europe remain very difficult, while the United States continues togrow at a moderate pace. Commodity prices have been little changed, at levels below recent peaks but whichare nonetheless still quite high. Australia’s terms of trade similarly peaked about six months ago, thoughthey too remain high.Financial market sentiment has generally improved this year, and capital markets are supplying funding tocorporations and well-rated banks. At the margin, wholesale funding costs have declined over recentmonths, though they remain higher, relative to benchmark rates, than in mid 2011. Market sentimentremains skittish, however, and the tasks of putting European banks and sovereigns onto a sound footing forthe longer term, and of improving Europe’s growth prospects, remain large. Hence Europe will remain apotential source of adverse shocks for some time yet.In Australia, output growth was somewhat below trend over the past year, notwithstanding that growth indomestic demand ran at its fastest pace for four years. Output growth was affected in part by temporaryfactors, but also by the persistently high exchange rate. Considerable structural change is also occurring inthe economy. Labour market conditions softened during 2011, though the rate of unemployment has so farremained little changed at a low level. Recent data for inflation show that after a pick up in the first half oflast year, underlying inflation has declined again, and was a little over 2 per cent over the latest fourquarters. CPI inflation has also declined, from about 3½ per cent to a little over 1½ per cent at the latestreading, as the weather-driven rises in food prices in the first half of last year have, as expected, now beenfully reversed. Over the coming one to two years, and abstracting from the effects of the carbon price,inflation will probably be lower than earlier expected, but still in the 2–3 per cent range.As a result of changes to monetary policy late last year, interest rates for borrowers have been close to theirmedium-term averages over recent months, albeit tending to increase a little as lenders passed on the highercosts of funding their books. Credit growth remains modest overall. Housing prices have shown some signsof stabilising recently, after having declined for most of 2011, but generally the housing market remainssubdued. The exchange rate remains high even though the terms of trade have declined somewhat.Since it last changed the cash rate in December, the Board has maintained the view that the setting of policywas appropriate for the time being, but that the inflation outlook would provide scope for easier monetarypolicy, if needed, to support demand. The accretion of evidence over recent months suggests that it is nowappropriate for a further step in that direction.In considering the appropriate size of adjustment to the cash rate at today’s meeting, the Board judged itdesirable that financial conditions now be easier than those which had prevailed in December. A reductionof 50 basis points in the cash rate was, in this instance, therefore judged to be necessary in order to deliverthe appropriate level of borrowing rates.

The Veda Quarterly Consumer Credit Demand Index has shown the first increase in mortgage enquiries since 2009.

Enquiries rose 1.5% year-on-year, driven by strong increases in Queensland, NT and WA.

Veda head of consumer risk, Angus Luffman, predicted that house prices could begin to see a recovery if mortgage demand was sustained.

“Turning points in mortgage enquiries usually occur one to three quarters ahead of turning points in house prices, an early warning sign which could indicate that after a continued decline, mortgage enquiries may have bottomed out.

Veda mortgage enquiries are closely related to the number of housing finance approvals so this is a trend to watch, particularly if you are hoping for a future pick-up in house prices,” Luffman said. Overall credit demand continued its decline, falling 4.8% year-on-year.

Credit card applications were particularly weak, falling 8% year-on-year. Personal loan applications fell 1.4%, but saw an 8.3% increase in WA.

Source: Your Investment Property Magazine,  yourinvestmentpropertymag.com.au

It may come as a surprise that Australia’s mining centres were not the biggest growth areas last year, but that is what a new report from the Housing Industry Association (HIA) has revealed.
The HIA/JELD-WEN Population and Residential Building Hotspots report shows that the Australian Capital Territory and Victoria were Australia’s fastest growing metropolitan and regional areas in 2010/11.
A `hotspot’ is defined as a local area where population growth exceeds the national rate (which was 1.4 per cent in the year to June 2011) and where the value of residential building work approved is in excess of $100 million.
Victoria registered nine of the top twenty national hotspots in 2010/11.
The performance of the ACT was equally impressive, claiming the number one hotspot in the country (Canberra City) plus number six spot. Western Australia had five hotspots in the top twenty, Queensland had three and the Northern Territory had one.
HIA Chief Economist, Dr Harley Dale said that the ACT and Victoria were the two strongest housing markets going into 2010/11. “The prominence of these two regions in the latest hotspots list highlighted their potential for further out-performance”, Dr Dale said. “This potential was realised with new home building activity in particular remaining the strongest in the country throughout 2010/11 and 2011/12.” Canberra City was Australia’s top building and population hotspot in 2010/11 with $131.7 million of residential building work approved and a population growth rate of nearly 40 per cent.
The second-placed hotspot was Whittlesea North in Victoria with over $717 million worth of residential building work approved and a population growth rate of 17.4 per cent.

Wyndham South placed third where in 2010/11 the value of residential building work approved hit over $441 million and the population growth rate was 14.0 per cent. The top five list was rounded out by Griffin-Mango Hill in Queensland, followed by Cardinia-Pakenham in Victoria.“There were ninety hotspots around Australia in 2010/11, clearly demonstrating the potential for considerably higher levels of residential construction activity than is occurring,” Dr Dale concluded.

Source: Quartile Research, www.quartileresearch.com.au

Which countries’ residents are raiding the Australian market? Read on for the surprising results.

According to the latest figures from the Foreign Investment Review Board (FIRB), released in its Annual Report 2010-11, the British love affair with all things Australian certainly seems to extend to property, with FIRB approvals for investments in real estate by UK residents topping the scales at $4,610m.

China’s inroads into the Australian property market saw it take the second spot ($4,093m), followed by the USA ($3,404m). Malaysia ($1,863m) and the Netherlands ($1,691m) complete the top five. Approvals by country of investor in 2010-11

Source: Your Investment Property Magazine,  yourinvestmentpropertymag.com.au

It appears Bob Manning will be easily romping home with 54%, 44 of 98 booths in the local Council Elections. You can stay updated during the night at the following link for Mayor  http://elections.lgaq.asn.au/electionResults_Cairns_M.html

In the ex-Douglas Shire otherwise known as Division 10, which includes Port Douglas,  the incumbent Julia Leu looks to easily hold her position. The link for more up to date counting on the local Cairns Council Elections is http://elections.lgaq.asn.au/electionResults_Cairns_C_Division%2010.html

Property has to resonate with the heart and the mind, but when making a purchase it is fundamental to make a financial decision before making an emotional one. Unfortunately, some buyers get so excited about buying a property they often make choices with their heart – which are usually poor ones.

Before purchase it is essential to know the median house price, capital growth rates and rental yields of your area. Without such knowledge a poor purchase could be made – potentially resulting in little or no capital growth or rental income for months at a time, thereby leaving you out of pocket.

While taking action is normally better than doing nothing, buying over-priced property can set you back years financially. I recommend that prospective purchasers see at least 100 homes in the area in which they intend to buy. A purchase that will provide capital growth of 7 – 10 per cent and yields of about four to five per cent is the key for investors that want to build long-term wealth.

My personal experience in investing has been an incredibly fruitful and lucrative journey. It took me only nine years to gain financial freedom through property investing alone.

Property has to resonate with the heart and the mind, but when making a purchase it is fundamental to make a financial decision before making an emotional one. Unfortunately, some buyers get so excited about buying a property they often make choices with their heart – which are usually poor ones.

Before purchase it is essential to know the median house price, capital growth rates and rental yields of your area. Without such knowledge a poor purchase could be made – potentially resulting in little or no capital growth or rental income for months at a time, thereby leaving you out of pocket.

While taking action is normally better than doing nothing, buying over-priced property can set you back years financially. I recommend that prospective purchasers see at least 100 homes in the area in which they intend to buy. A purchase that will provide capital growth of 7 – 10 per cent and yields of about four to five per cent is the key for investors that want to build long-term wealth.

My personal experience in investing has been an incredibly fruitful and lucrative journey. It took me only nine years to gain financial freedom through property investing alone.

1. Do your research

Look at as many properties as possible to get an idea about prices in your area, what adds value, which types appreciate faster, how to get a good deal (getting properties at much lower than market value), and what are the pitfalls of a too-good-to-be-true deal.

2. Get the property valued before you buy

Even if you’ve done sufficient research buyers can still pay overinflated prices for properties. I always pay for an independent valuation every time I buy.

3. Get the property valued before you renovate

One of the biggest misconceptions investors have is that the more capital they spent on a property, the more profit they will make. This isn’t always the case. A valuer can tell you what your property is worth now, what it will be worth after planned renovations, and whether your new $30,000 kitchen will actually add $30,000 to your property’s value.

4. Get a good property manager

This is the best way to maximise your rental income and to ensure that it rises with the market. Most self-managed properties are under-rented as owners are often hesitant of upsetting tenants. The property manager will also be able to keep on top of maintenance and other issues to do with the property.

5. Location, location, location

Look for areas with potential for high growth and yields. Important things to look for are proximity to public transport, leisure activities (parks, beaches and lakes), work and schools. Pay for some independent research which will tell you what the highest-rated suburbs are – it’s worth it!

6. Buy “better” properties

Physical factors to look for when researching properties are good-sized bedrooms, off-street parking, good positioning and a uniqueness that sets the property apart from others in the street. These will ensure the property grows in value and desirability.

7. Buy blue chip

Cheap properties are often cheap because they are not in great demand and there’s plenty to choose from. It’s often worth paying market value for a better property in a top suburb than it is to get a discount for something that no one else really wants.

8. Buy at, or below, market value

There are ways to acquire good properties below market price.  In a flatter market, for instance, clearance rates are around 50 per cent, making properties harder to sell. Here, buyers have greater bargaining power. Unrenovated properties in good areas can fetch lower prices and provide good yields post-renovation.  Another way is to buy in an emergency sale situation such as when vendors need to sell to finance a recent buy or relocation and are hard-pressed to do so.

9. Get a good mortgage broker

As an investor a good broker should be one of the most important professionals on your team. If I can borrow 80 per cent of a property’s value rather than 70 per cent, it means my limited deposits go 50 per cent further as I only need to put 20 per cent down rather than 30 per cent. It’s not always about getting the cheapest rate, and the more legwork the broker does for me the more time I can spend finding a better property.

10. Stick to your strategy

Work out what works for you. Once you find the strategy, stick to it, while also remaining aware of other opportunities and taking on good advice. A good strategy doesn’t have to be complicated – it’s often the simple things that work best.

About Chris Gray

Chris Gray has nearly 20 years’ experience in property investing and education.

10 tips for maximising capital growth and yields

Chris is CEO of Empire, which searches, negotiates and renovates properties on behalf of time-poor professionals. He is host of Sky News Business Channel’s “Your Property Empire” every Friday, and was Financial Judge on Network Ten’s “The Renovators”.

He provides property investment tips and commentary in his regular column, “The Buying Guy”, published throughout News Ltd newspapers. For more please visit www.yourempire.com.au

Unlocking Your Super To Buy Property

Century 21 Port Douglas Real Estate has always believed that residential property investors were somewhat disadvantaged by the superannuation system as we were traditionally disallowed from unlocking the equity in our super to invest into property – our favoured investment vehicle.

In late 2007 amendments were made to superannuation legislation making it possible to borrow money and buy property with super (under certain conditions).

With the nine per cent superannuation guarantee to be eventually increased to 12 per cent by 2019, more money than ever before is set to be pumped into the super accounts of individuals moving forward.
The creation of a Self Managed Super Fund (SMSF) will help individuals unlock this equity and may be suitable for those who want to have more control over their superannuation and favour property as an investment.
According to James Gerard, Partner at PSK Financial Services, an accountant usually handles the setup of the SMSF and will apply for the ABN and TFN, and create a trust deed for the super fund.

Once setup, the individual then goes to the bank to open an account in the name of the SMSF.  Once that is completed, superannuation funds need to be rolled over to the newly created SMSF.
Once the money is in the SMSF, investments can be made.

According to Mr Gerard, the key tax advantages of holding property within super are:

- Paying a zero per cent tax rate on the rental income in retirement (15 per cent tax rate prior to retirement);
- The ability to buy and sell property tax-free in retirement (up to 15 per cent capital gains tax prior to retirement).
While outright property purchases can be made from the SMSF, under the right conditions money can also be borrowed to purchase property.
A bank could lend the money to the SMSF (via a bare trust) or a member of the fund could obtain a loan from the bank using the equity in a currently owned property and then on-lend that money to the SMSF in an arm’s length transaction.
Loans for buying property in super must be ‘limited recourse’ loans, such that if the trustee defaults on the loan, the amount that can be recovered by any other party is limited to the value of the asset.  Banks are generally willing to lend up to 80 per cent of the purchase price for a property purchase inside of super.
Head of Century 21 Home Loans, Harry Bozin, said: “For people who are interested in buying property through a SMSF, it is important to sit down with a mortgage consultant to determine your borrowing capacity, based on the money currently in your fund.
“For those who are interested in purchasing a business asset, such as the commercial property they are currently leasing, subject to meeting the criteria of an ‘arm’s length transaction’ a business owner may be able to release the equity by purchasing their property within a SMSF,” continued Harry Bozin.
“Once you have worked with a real estate professional to locate a suitable property and sought advice from a mortgage consultant regarding your borrowing capacity, your mortgage consultant can then coordinate with your financial planner and accountant to secure the appropriate funding for your SMSF,” concluded Harry Bozin.
According to James Gerard, a key consideration when buying property in super is the taxation of superannuation.
“If the SMSF property is negatively geared, the tax loss is not refunded to the fund and cannot be carried forward for use in future years.

However, member contributions to a SMSF up to the tax loss amount are exempt from the usual 15 per cent contributions tax,” said Mr Gerard.
Mr Gerard notes that holding property inside of super with a loan can be a good way for higher income earners to accelerate repayments on an investment property loan in a tax effective way.

“Contributions to super are taxed at 15 per cent, while employment income is taxed at up to 46.5 per cent.  By salary sacrificing to super, a person could potentially use 85 per cent of their pre-tax income to make repayments to a loan inside of super,” said Mr Gerard.

Other tips and traps from Mr Gerard include:
- Seek advice on whether an individual trustee or corporate trustee is appropriate for your SMSF.  Banks are generally willing to lend a higher amount if the SMSF has a corporate trustee, and corporate trustees can also have longer-term estate planning benefits. Corporate trustees are however a little more expensive on an ongoing basis with accounting and ASIC fees.
- Make sure that the SMSF pays for any incidental costs during the process of purchasing a property.  This includes costs such as building/pest inspections and solicitors’ fees.
- If borrowings are used to purchase property in super, a structure known as a ‘bare trust’ must be setup.  The bare trust holds the property until the loan is repaid, at which time the property is transferred from the bare trust to the SMSF.  The bare trust may take two to four weeks to set up so make sure your accountant has arranged this well in advance of your property purchase.
- No improvements/renovations are allowed on the property but repairs are allowed.
- Neither you nor related parties such as relatives can reside in the property (however you can rent a commercial property owned by your super fund on commercial terms).

- Neither you nor related parties such as relatives can reside in the property (however you can rent a commercial property owned by your super fund on commercial terms).
- Neither you nor related parties such as relatives can reside in the property (however you can rent a commercial property owned by your super fund on commercial terms).
Purchasing property in super is an increasingly popular strategy used by SMSF trustees however there are many things to consider. Century 21 encourages all interested parties to do their research and seek professional investment advice before proceeding.
Please feel free to email James Gerrard with any SMSF questions on: james@psk.com.au