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Catherines Chat

Wholistic Financial Solutions provides a lot of essential information and updates regarding the property investment industry. Check this page for the updates.

EOFY Tax Planning

Friday, April 19, 2013

Hello All,

Catherine is away at National’s for Dragon Boat racing and I thought I would take this opportunity to hijack her blog and write about tax. It is getting to the point in the financial year where people need to start thinking about end of year tax strategies and how the tax changes implemented for 2013 can really affect them. For example, does the tax free threshold rising to $18,200 mean that you no longer need to lodge a tax return? The ATO have some good calculators available on their website to help you make this decision. But when in doubt remember to ask a professional.

For those in business it is time to look at whether or not you have contributed enough into superannuation for yourself and does the business have enough profit in it for you to contribute more? It also time to make sure if you are a sole trader that you register with you super provider to claim super contribution’s as a deduction in your personal tax.  As we get closer to the end of the financial year (EOFY) we will give you more hints and tips. Please feel free to comment below if you have any questions you would like answered or have anything in particular you are interested in hearing about for EOFY. Remember that now can be the best time to get in and see your accountant for some tailored strategic advice.

That’s enough from me for now but you might see me again posting on Catherine’s blog as we get closer to the new tax season.

Lexie O’Toole

Investment in Real Estate is Essential for Retirement

Tuesday, April 16, 2013

What are your dreams for retirement? To live near the beach and spend your days walking, swimming, fishing?  To travel the world and see new sites?  To live near your family and be able to spoil the grandkids?  Whatever your dream – the reality is that you will need money to live on.  As a financial planner I often ask my clients ‘how much do you think you need per year to live a comfortable retirement?’ Most people will answer that they think they would need around $50,000 per annum to live comfortably in retirement. Most financial analysts will say that the average amount required at retirement to live comfortably is $500,000 per person.  And this is presuming the family home is already paid off.

And by comfortably, I simply mean being able to eat out one night a week, take a holiday once a year and live a basically comfortable existence.  Nothing extravagant.

The frightening reality is that;

Currently 76% of all retirees in Australia are retiring on less than $20,000pa.  This is only marginally over what is called ‘the poverty line’.

22% of people over 65 need to continue working and this will most likely increase as the Government keeps raising the retirement age.

The current average superannuation payout is only $130,000 for males, and $45,000 for female (2009 figures) – well short of the $500,000 estimated to be required.

People are living longer, and longer and longer.  Generations ago you were lucky if you lived till 65, now people are living well into their 90’s.

Old age pension will continue to deteriorate – there are currently 5 tax payers for every retiree, by 2040 there will be 2.5. Put simply – the Government will not have the funds to keep paying pensions in 20-30 years when a very large proportion of the current generation will be ready to retire.

The retirement age in Australia is currently 65, and if you look at a general break down of 100 average 65 year old Australians these are the statistics:

  • 24 are dead
  • 54 are on pension or welfare
  • 16 are still working
  • 5 are financially independent
  • 1 is wealthy and financially secure


These are sobering statistics but the goods new is that you are reading this book, getting yourself educated and informed and will have the opportunity to become one of the 6 per hundred of Australian’s who are financially independent, wealthy or secure.


So Why Real Estate?

The following chapters will explain to you in detail why Real Estate is superior to all other forms of investment.  That’s a big call I made right there.  But trust me, I am sure by the end of this chapter you will understand why I say that. As the following chapters will explain investing in real estate contains all of the attributes of solid wealth creation such as; capital growth, low volatility, tangibility (bricks and mortar), rising rents, low vacancy rates, high barriers to entry, tax advantages, ability to add value, and the ‘Power of Leverage’.

And the facts speak for themselves.  "Bricks and Mortar" investment is the most common money-making strategy for the Richest 200 Australians according to Business Review Weekly (BRW), which each year publishes an annual list of the nation's wealthiest individuals.

Real estate investment can be a powerful way to start or boost your retirement fund, but you need to do your due diligence and choose the property investment option that is right for you and your financial situation.

South-East Queensland Property Visit

Friday, April 12, 2013

I have returned from my trip and was extremely impressed with Mackay and it was my pick of the towns I visited (Mackay, Gladstone, Brisbane, Townsville & Toowoomba). 

 

It is just pristine.  The majority of the town is new.  New houses, new streets, new roads, new amenities, new businesses.  Every car that drove down the street was new – BMW’s, 4 wheel drives, etc.  There is significant money there. Great growth prospects.  Major export hub.  I can send you all the economic statistics about predicted growth, etc, but more importantly what I saw told the same story.

 

I spent the day in Mackay with a local builder.  He drove us to every new development and gave me a full run down on every aspect of each estate and suburb.  Funnily enough the Mackay locals are even more ‘north v south’ biased than Canberrans.  And this was clearly evident as you crossed from one side to the other.  The North is definitely the ‘better side’.  It goes even further, locals don’t want to drive any more than 10 minutes to the CBD, so anything further out than that is ‘not good’.  There are areas of Mackay that are definitely ‘investor glutted’ and you can clearly see this from driving down the streets.  There are mainly rental properties, multiple cars parked in the drive, untidy front yards, etc.  Then there are other areas that are mainly owner occupied, nice wide streets, clean front yards, BMW’s in driveways, young kids on scooters and families playing in the park.  Why is this important?

 

Resale- the locals simply won’t buy in the investor glutted areas.  So best potential re-sale is in the areas that local want to live. 

 

So what do you look for in Mackay - A mainly owner occupied area, on the northside, and only 10 minutes from town.

 

My next picks were Townsville and Brisbane.  I will report more on these areas next week.

SMSF Proposed Changes for 2014

Monday, April 08, 2013

Hi all,

As we probably all know by now the government has released it's proposed changes.  At this stage we can't say exactly how this will affect SMSF and property investing.  It is very disappointing the the government is yet again tinkering with the SMSF rules.  This will erode confidence in SMSF's to some extent.  As usual, the announcements come with no technical detail as to how they will actually work in practice.

All we know so far is 15% tax on earnings over $100,000.  Yet Capital Gains on Properties in super have always been taxed at a maximum of 10%.  My guess is that, if these rules get through, which is doubtful, the following will occur.  When a property is sold and say a gain of $500,000 is realised, then the first $100,000 will be tax free and then the balance of the gain of $400,000 may be taxed at 10% or $40,000. In other words property is still a extremely viable investment option.  You have still made a net profit of $460,000.

However, the tax is still unfair and inequitable as at this stage it appears it will only apply to SMSF's.  Retail and Industry Funds also invest in property on a large scale.  Is the same rule going to apply to the proportion of funds allocated against pension members who have more than $100,000 in income stream.  Probably not, as most people with supposedly super rich superannuation of $2,000,000 or more are smart enough to have their money in SMSF despite the tinkering of the rules.

 

I will update again when we find out more about this.

 

Australian housing market “heating up” with FHBs and investors activity to pick-up: APM

Friday, April 05, 2013

The Australian housing market revival has continued into 2013 with “solid indications of rising buyer activity and increased confidence from sellers” says Australian Property Monitors (APM) in its latest market report.

“The revival of Australia’s housing markets in 2012 has been confirmed as leading indicators such as auction clearance rates point to a market heating up.

“Historically low interest rates are the fuel to this emerging fire which is no real surprise given the typical impact of low mortgage rates on buyer activity in previous housing growth cycles," says APM.

It adds that housing markets are “off and running in 2013, building on the buyer momentum generated through 2012 but now translating to more generalised and comprehensive market outcomes”.

Fairfax-owned APM has house prices up 1.5% over the three months to January to a median of $544,000 with units up 0.3% to a median of $413,000.

The Gold Coast has shown the greatest gain over this period with house prices up 2.2% though the key Gold Coast unit market has recorded no gains.

All othe capital city markets have recorded gains of 1% or more in their median house prices over the January quarter, with the unit market more patchy.

APM is confident of a return of first-home buyers in 2013, which along with investors were "significant contributors to the housing market revival of 2012".

“First-home buyer activity was largely generated by changes to various state government incentive schemes that acted to draw forward demand from this group.

“After a subdued start to the year, first home buyer activity is set to rise sooner rather than later, driven by low interest rates, a solid economy, and rising house prices and rents.

“Investor activity is also set to intensify in 2013, driven similarly by low mortgage and deposit rates, prospects of improved capital gains, and solid yields from most local markets," says APM.

APM also notes that the sharemarket is also a solid leading indicator of housing market activity, particularly in relation to prestige properties.

“With the All Ordinaries now holding above 5,000 for the first time in three years, a rising bull market will activate prestige markets that are finally showing early signs of emerging from a sustained period in the doldrums.

APM also notes an improved global economic outlook with the US housing market finally showing signs of life.

 

By Larry Schlesinger
Thursday, 04 April 2013

Housing Affordability Surges

Tuesday, April 02, 2013

Housing affordability surged in December 2012 quarter. According to the HIA-CBA Housing Affordability Index this has been driven by earnings growth, interest rate cuts and weak price increases. The Index increased by 5.5 %  in the December 2012 quarter, representing an 18.4% advance on the same period of 2011. This is the 8th consecutive quarter of increases.

HIA senior economist, Shane Garrett commented that “For regional areas, affordability is at levels last seen during the early 2000s. Affordability is on the increase in every part of the country”. “It is worth noting that affordability would be even more favourable to householders had recent RBA rate cuts been passed on fully by lenders,” says Garrett. “Despite the relative attractiveness of house purchase implied by these figures, transactions activity on the ground is very sluggish. This underlines the need for stronger interventions from the RBA in terms of interest rates and from the government with regard to the heavy taxation of home purchase.”

What does this mean for investors?  Housing affordability can be a strong signal of impending price rises.  When houses are perceived as more affordable more first home buyers are tempted into the market, more home owners consider selling and upgrading and more investors can afford to buy another property.  As more buyers enter the market, upward pressure is placed on prices, and this eventually results in price rises.

This week we are in Canberra Weekly Magazine

Thursday, March 28, 2013

The Big Banks Big Lies

Monday, March 25, 2013

The major banks are supercharging their profits at the expense of customers. Their funding costs have fallen, not risen, as they claimed when refusing to pass on Reserve Bank interest rate cuts.

Their action has hurt not only mortgage holders but savers, small businesses and all other bank customers, according to research by Milind Sathye, a former central banker and now professor of banking and finance at the University of Canberra.

Professor Sathye has debunked claims that the banks' high cost of funding has forced them to hold back rate cuts.

And former Reserve Bank governor Bernie Fraser said the big banks had room to cut their mortgage rates, but had failed to do so because they had put profits first.

Professor Sathye said the three main sources of bank funding - deposits, long-term debt and short-term debt - had become much cheaper in recent years, even as the banks had claimed they were rising.

Since November 2011, the Reserve has lowered the cash rate by 1.75 percentage points to 3 per cent. But the banks dropped their mortgage rates by only 1.36 percentage points to the standard variable rate of 6.42 per cent. That means almost a quarter of the Reserve's cuts - billions of dollars' worth - has gone into the banks' coffers.

Professor Sathye cites the online savings account interest rate easing from 7.3 per cent in July 2008 to 3.05 per cent in January this year, a 4.25 percentage-point fall.

Term deposits fell from 7.95 to 4.25 per cent in the same period, a drop of 3.7 percentage points as the Reserve's cash rate came down further, from 7.25 to 3 per cent. But as the drop in interest paid by banks is smaller than the drop in what it charges, their profit has increased.

That shows up in the profit figures. The pre-tax combined profit of the big four banks was $22.6 billion in 2008 and $33 billion last year, a jump of 46 per cent.

All eyes will be on the banks this week if the Reserve Bank moves the cash rate on Tuesday.

Professor Sathye's analysis concludes that the greatest threat to bank profitability has come not from external funding pressures or from competition, but from a blow-out in operating costs.

His findings follow a report from UBS Investment Research last week that said the banks were in such a ''purple patch'' that they risked government intervention if they did not start making their own mortgage rate cuts outside the Reserve Bank cycle.

''Banks are now making more money from originating a mortgage than any time previously,'' UBS analyst Jonathan Mott wrote.

Last month Commonwealth Bank delivered a $3.8 billion net profit for the half-year. This put the big four - Commonwealth, Westpac, ANZ and National Australia Bank - comfortably on track to surpass their collective bottom-line profit of $25 billion last year.

It also endorsed Commonwealth's sharemarket valuation, which shot through $100 billion in the new year, further polishing the reputation of Australia's banks as among the most profitable in the world - and arguably the safest.

Professor Sathye, a former central banker in India, said this sharemarket performance ''is coming out of the pocket of somebody … and that somebody is the Australian borrower".

Even though people and business are borrowing less since the global financial crisis and despite the rise in the banks' operating costs, profits have risen because of lower funding costs and fattening credit ''spreads'' - the difference between what banks pay for money and what they charge for it when they lend.

"The majors continue to make record profits and at the same time harp on about high funding costs to justify their higher lending rates," Professor Sathye said.

Deposits are the single largest source of bank funding. They contribute just above 50 per cent of funding, according to the Reserve Bank. The Australian Bankers Association has argued that competition for deposits has pushed up the interest rates on them.

But Professor Sathye says deposit rates have fallen. In fact, they had declined more sharply than lending rates, meaning funding costs had dropped, not risen.

"So [it's] not just the mortgage holder but all bank customers who are suffering,'' he said.

Author: Michael West


Read more: http://www.smh.com.au/business/the-big-banks-big-lies-20130303-2fepi.html#ixzz2OVOReFw3

Queensland Property Growth

Friday, March 22, 2013
Hi all,
Only two weeks till I go on an extensive filed trip around QLD looking for the best property investments.  One has caught my attention as an example;
Everton Park – eight kilometers north of the Brisbane CBD - experienced the highest median price growth in 2012 for units and townhouses, according to the latest Real Estate Institute of Queensland (REIQ) data.

The median unit and townhouse price for Everton Park for the 12 months up until December is $430,000 – a 22.9% increase on the median price of $349,813 in 2011.

However suggesting some volatility in the suburb, it experienced a December quarterly fall of 16.1% to $390,000.

Sherwood – 9 kilometres south west of the CBD - comes in second place, experiencing an 18.0% annual growth from $372,500 to $439,500.

Chermside was the weakest performing suburb in the Brisbane city, falling 15.8% annually from $431,000 in December 2011 to $363,000 in December 2012.

 

Region

Median sale 12 months December 2012

Median Sale 12 months December 2011

One year change

Everton Park

$430,000

$349,813

22.9%

Sherwood

$439,500

$372,500

18.0%

Stafford

$407,500

$360,000

13.2%

St Lucia

$479,000

$425,000

12.7%

Hamilton

$477,500

$427,500

11.7%

Taringa

$434,000

$390,000

11.3%

Teneriffe

$555,938

$512,500

8.5%

West End

$523,000

$483,550

8.2%

Balmoral

$465,000

$431,500

7.8%

Bulimba

$549,500

$510,000

7.7%



Stay tuned for a more comprehensive report when I return from my trip with actual visual context and research backed up by local knowledge

Queensland Property Growth

Friday, March 22, 2013
Hi all,
Only two weeks till I go on an extensive filed trip around QLD looking for the best property investments.  One has caught my attention as an example;
Everton Park – eight kilometers north of the Brisbane CBD - experienced the highest median price growth in 2012 for units and townhouses, according to the latest Real Estate Institute of Queensland (REIQ) data.

The median unit and townhouse price for Everton Park for the 12 months up until December is $430,000 – a 22.9% increase on the median price of $349,813 in 2011.

 

However suggesting some volatility in the suburb, it experienced a December quarterly fall of 16.1% to $390,000.

Sherwood – 9 kilometres south west of the CBD - comes in second place, experiencing an 18.0% annual growth from $372,500 to $439,500.

 

Chermside was the weakest performing suburb in the Brisbane city, falling 15.8% annually from $431,000 in December 2011 to $363,000 in December 2012.

Region

Median sale 12 months December 2012

Median Sale 12 months December 2011

One year change

Everton Park

$430,000

$349,813

22.9%

Sherwood

$439,500

$372,500

18.0%

Stafford

$407,500

$360,000

13.2%

St Lucia

$479,000

$425,000

12.7%

Hamilton

$477,500

$427,500

11.7%

Taringa

$434,000

$390,000

11.3%

Teneriffe

$555,938

$512,500

8.5%

West End

$523,000

$483,550

8.2%

Balmoral

$465,000

$431,500

7.8%

Bulimba

$549,500

$510,000

7.7%



Stay tuned for a more comprehensive report when I return from my trip with actual visual context and research backed up by local knowledge


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