Hi All,
I have been doing some research in cashflow and how it will affect holding costs in the next 2-3 years (2009-2011).
My findings are as below:
1. The tax rates in Australia are heading down. Most people....now only pay 30% tax on their income instead of 45% over two years ago. This had added to people's holding costs because where you got back 40cents on the $1 you now get 30cents on the dollar back plus medicare. So if you were negatively geared to the tune of 10k your tax back is only $3000 instead of $4000.
2. The government has plans to further reduce tax of people on 80k-180k to 38% and for over 180k to 42%....this will further add to people's cashflow problems who are in this cashflow bucket.
3. The cost of Water and Council rates are now moving at a rate of over 6% per annum. This is going to encroach on expenses.
4. I cannot see over the longer term interest rates moving below the 8% mark over the next 2-3 years. This would represent a cut of amost 1.7%. I doubt the banks will hand back the extra margin they acquired as a result of the credit crunch.
Out of this I am seeing some real opportunity to get into the market. I feel that property which has solid yields (over 6%) over the next few years will be increasingly sought after by investors as they are easier to hold. My feeling is that old properties with good yileds will now be in more demand than ever. There will be less buildling till the prices of these older homes catch-up to be within a 30% premium of the new stuff....currently the premium is something like 70%-80%...this is why people are not buying new houses on the fringes....because they can get a older one in a better location for the same price closer into the city.
Your thoughts???
I have been doing some research in cashflow and how it will affect holding costs in the next 2-3 years (2009-2011).
My findings are as below:
1. The tax rates in Australia are heading down. Most people....now only pay 30% tax on their income instead of 45% over two years ago. This had added to people's holding costs because where you got back 40cents on the $1 you now get 30cents on the dollar back plus medicare. So if you were negatively geared to the tune of 10k your tax back is only $3000 instead of $4000.
2. The government has plans to further reduce tax of people on 80k-180k to 38% and for over 180k to 42%....this will further add to people's cashflow problems who are in this cashflow bucket.
3. The cost of Water and Council rates are now moving at a rate of over 6% per annum. This is going to encroach on expenses.
4. I cannot see over the longer term interest rates moving below the 8% mark over the next 2-3 years. This would represent a cut of amost 1.7%. I doubt the banks will hand back the extra margin they acquired as a result of the credit crunch.
Out of this I am seeing some real opportunity to get into the market. I feel that property which has solid yields (over 6%) over the next few years will be increasingly sought after by investors as they are easier to hold. My feeling is that old properties with good yileds will now be in more demand than ever. There will be less buildling till the prices of these older homes catch-up to be within a 30% premium of the new stuff....currently the premium is something like 70%-80%...this is why people are not buying new houses on the fringes....because they can get a older one in a better location for the same price closer into the city.
Your thoughts???
