May 2021 Finance Update
We hope you and your family are keeping well.
We've picked out four stories that round out the big news in the property and finance markets:
Rents growing strongly
Budget promotes home ownership
Property now worth $8 trillion
Taxpayers warned about dubious expense claims
Read more below.
Conditions favour buyers as rents grow strongly
Rents have surged over the past year, with houses outperforming units, according to SQM Research.
Over the year to 20 May, average weekly rents jumped by 15.7% for houses throughout Australia and 7% for units. Houses also outperformed units in every capital city.
Meanwhile, thanks to record-low interest rates, conditions favour buyers over renters.
It’s cheaper to buy than rent 59.1% of three-bedroom houses and 83.8% of two-bedroom units throughout Australia, according to REA Insights.
This analysis is based on the assumption buyers have a 20% deposit and property prices will grow by 3% per year over the next decade.
Govt promotes home ownership in latest budget
The federal government, in its recent budget, announced three measures to make it easier for Australians to enter the market.
First, the government introduced the Family Home Guarantee, which is aimed at single parents with dependants. The government will guarantee 10,000 loans over the next four years, so eligible single parents can buy a property with a deposit of just 2%. The Family Home Guarantee is open to both first home buyers and previous owner-occupiers.
Second, the government has expanded the First Home Loan Deposit Scheme (New Homes), providing an additional 10,000 places in 2021-22. Eligible first home buyers who want to build or buy a new home will be able to do so with just a 5% deposit.
Third, the government made it easier for people to save for their first home, by increasing the amount of voluntary contributions that can be released under the First Home Super Saver Scheme, from $30,000 to $50,000.
Property now worth four times the size of Australia’s GDP
The total value of Australian residential real estate has now passed the $8 trillion mark, reaching $8.1 trillion at the end of April, according to CoreLogic.
CoreLogic head of research Eliza Owen said that puts the value of residential property at:
4 times the size of Australia’s GDP
$1 trillion more than the combined value of Australia’s stock market, superannuation savings and commercial real estate stock
This valuation landmark is an important reminder that whether you want to refinance an existing loan or buy a new home, it’s vital to know the value of the property.
If your loan-to-value ratio (LVR) is less than 80%, your mortgage broker will have a better chance of getting you a lower interest rate. Also, you won’t have to pay lender’s mortgage insurance (LMI).
Existing homeowners can borrow against the equity in their home, and use it to fund the deposit on an investment property.
ATO warns taxpayers about dubious expense claims
With more Australians now working from home, taxpayers have been warned not to “copy and paste” expense claims from previous years that would no longer apply.
The Australian Taxation Office (ATO) said it would look closely at anyone who claims significant working-from-home expenses, while also maintaining or increasing their claims for things like car, travel or clothing expenses.
“You can’t simply copy and paste previous years’ claims without evidence,” assistant commissioner Tim Loh said.
“But we know some of these unusual claims may be legitimate. So, if you explain your claim with evidence, you have nothing to fear.”
Mr Loh said the ATO expects working-from-home claims to increase, as the number of home-based workers has jumped since the pandemic.
“But, if you are working at home, we would not expect to see claims for travelling between worksites, laundering uniforms or business trips.”
Mr Loh said the ATO’s data analytics team would be on the lookout for unusually high claims.
“Particularly where someone’s deductions are much higher than others with a similar job and income,” he added.
Thanks for reading. Get in touch if you need help.
Disclaimer: The advice provided in this article is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. We encourage you to consult a finance professional before acting on any advice provided in this article or on this website.
