The Federal Budget starts to take housing affordability seriously

May, 2017 by

The Federal Government through the May 2017 Budget has recognised the need to address housing affordability through several complementary measures that will address supply and demand issues, according to Angus Raine, Executive Chairman, Raine & Horne.

Super breaks for downsizers

There are two Budget initiatives aimed at freeing up housing supply, which could ultimately address housing affordability. The first initiative aims at encouraging older Australians to downsize out of big homes they no longer need. From 1 July 2018, individuals aged 65 and over will be able to make an additional non-concessional contribution of up to $300,000 to their superannuation fund from the proceeds of the sale of their home, if they’ve owned it for at least 10 years.

This initiative looks great on paper, however the immediate costs of buying a new home is prohibiting cash-poor empty nesters from selling an existing home. The trouble is downsizers will still need to pay stamp duty on the new home, moving costs, legal fees and so on, which represent immediate hits to their retirement savings. I realise that stamp duty is a state government impost, which limits what the Federal Government can achieve for older homeowners. However, this initiative means we are still only tinkering at the edges of the issue. Over 65s need stamp duty breaks now.

Vacant home tax on foreign ownership

The budget has targeted vacant dwellings owned by foreign owners. Foreign owners who do not occupy or make their properties available for rent for 6 months or more each year will be charged an annual fee of at least $5,000. This new tax has some merit but won’t probably won’t concern those foreign buyers who own higher valued properties in Sydney and Melbourne and to a lesser extent in Brisbane. This charge will seem like a drop in the ocean against the excellent growth returns they’re enjoying.

Assistance for first home buyers

To assist first home buyers entering the property market, the Federal Government announced the introduction of the First Home Super Saver Scheme on budget night, which will commence on 1 July 2017. The scheme allows first home buyers to use their superannuation fund as a vehicle to save for a house deposit.

The super-saver scheme will allow first time buyers to salary sacrifice $15,000 a year into their super account, capped at $30,000 in total. Again, this will only be a start for new home buyers, especially in Sydney, Melbourne and some parts of Brisbane. In Perth, Hobart and Adelaide, where median house prices are significantly lower than the east coast capitals, this initiative might help first timers accumulate a deposit for a property.

Budgeting can fast track Millennials into a first home

April, 2017 by

While many bemoan the uncertain future of home ownership for younger Australians, it seems many Millennials still aim to own the roof over their heads, writes Dawn Inanli, General Manager, Our Broker.

According to the recent report Beyond the Bricks from global investment bank HSBC, 83% of Millennials in Australia intend buying a home in the next five years. This is higher than the United States (80%), Canada (82%), the UK (74%) and France (69%). Yet the number of Australians aged 19-36 who currently own their own home is among the lowest.

Slash insurance costs with a bigger budget

April, 2017 by

A larger deposit will potentially assist first-time buyers to avoid or minimise the expense of Lenders’ Mortgage Insurance (LMI).

LMI is usually only charged if a borrower is unable to pay a deposit equivalent to about 20 percent of the property’s purchase price. It’s an insurance that protects the lender, not the borrower, if a loan is defaulted.

The amount of LMI payable is calculated on the purchase price of the property and the loan amount, and it can potentially cost buyers many thousands of dollars over and above the expense of buying the home.

Budget your way into a home

April, 2017 by

Interestingly, many Australian Millennials identify the challenge of saving for a deposit for a home loan as their biggest barrier to home ownership, but only 17% of Australian Millennials who intend to buy a home have a precise budget.

Establishing a budget is a vital step in the home ownership process. A budget shows you where, when and how much you’re spending and how to trim your expenditure so you can reduce your debts faster. If you’re not sure what’s involved in developing a budget, you can find an online budget tool on the Our Broker website by clicking here.

In terms of where you might be able to shave back some spending, the HSBC research says many Millennials are willing to consider making sacrifices to afford their own home. More than half (55%) of millennials who intend to buy a home would consider spending less on leisure and going out; 33% would be prepared to buy a place that’s smaller than ideal; and 21% would consider renting out one of their rooms. Eighteen percent would consider buying with a family member and 11% with friends.

Buying a house out of reach? Not if you think outside the (city) square

March, 2017 by

Buying a home has never been easy for most of us, but despite doom and gloom reports about housing affordability, the number of first home buyers grew by more than 23,000 – or 6% – during the 2016 December quarter, an increase of 0.5% on the same quarter last year.

The Adelaide Bank/REIA’s December Housing Affordability Report revealed the number of first home-buyers increased in all states and territories over the December 2016 quarter, a statistic that flies in the face of daily news reports claiming first home owners are being squeezed out of the market by investors.

“First home buyers now make up 13.8% of total owner occupied housing,” REIA President Malcolm Gunning said. “This rate has been dropping steadily over the past five years yet seems to have stabilised over the past 12 months.”

And while the size of the average loan for first home buyers increased by 1.3% over the December quarter to $323,633, there’s also no doubting house prices in capital cities, especially Sydney and Melbourne, have also sky-rocketed over the past five years. As a consequence, Raine and Horne’s Executive Chairman Angus Raine believes astute buying in regional areas  remains an affordable option for first home buyers –  if they buy in the right regions.

Angus said buyers should look out for regions with robust and diverse economies, strong employment prospects and population growth to ensure extra success. “These factors can help underpin decent long-term growth and rental yields and provide some cover against the effects of environmental influences that are often out of our hands such as flood and drought,” he said.

The impact of stamp duty – the typical stamp duty bill nationwide is now just shy of $20,000 per property transaction – on housing affordability also continues to hog the spotlight and news that from July this year, the Victorian state government will axe the tax for first homebuyers whose properties are less than $600,000 is a welcome move.

There will also be discounts for properties worth between $600,000 and $750,000, regardless of whether they are new or existing.

While this is great news for first home buyers Angus maintained that by relieving stamp duty pressures on empty nesters aged over 70 will also improve housing affordability by increasing the turnover of housing stock. “Empty-nesters are hindering the second home buyer markets in our major capital cities because the stamp duty costs for them to buy a smaller property or one in a different location are too prohibitive,” he said.

Demand set to increase in key South-East Asian real estate markets in 2017

February, 2017 by

Developers from China, Indonesia, Thailand and the Philippines are expected to reinvigorate the Malaysian property market in 2017, expatriate Filipino workers will drive real estate in the Philippines, and anti-corruption measures in Indonesia will boost that nation’s market, writes Michael Geh, Senior Partner of Raine & Horne International Zaki + Partners Sdn Bhd

Michael Geh, Senior Partner of Raine & Horne International Zaki + Partners Sdn Bhd

Michael Geh, Senior Partner of Raine & Horne International Zaki + Partners Sdn Bhd


About 47% of the population of Malaysia, or 14.3 million people, are aged between 20 and 49, and these people are seeking to buy their first homes. Therefore, the demand for starter homes will be high in 2017, yet Bank Negara Malaysia is expected to maintain its strict credit rulings because of Malaysia’s high household debts.

The government’s Perumahan Rakyat 1Malaysia (PR1MA) units and affordable housing built by private developers have only seen a 50% take-up, because many potential homebuyers were unable to obtain housing loans. We expect to see international developers coming into the Malaysian market to take advantage of PR1MA, and we will see mergers and acquisitions among local developers.


Families of the 2.4 million Filipinos working overseas are expected to drive demand for real estate in the Philippines. These overseas workers earn monthly salaries of US$1,800 to US$3,000. Each month, they send money back to their families, who then invest it in property. This strong demand for housing has forged a robust construction and housing boom in the Philippines.


The Indonesian government’s efforts to rid the country of corruption are having a major impact on the nation’s real estate markets.

In the past 10 years, Indonesia’s Corruption Eradication Commission has created more transparency at the federal and provincial government levels. In addition, a broad tax amnesty has seen huge amounts of cash being pumped back into Indonesia from the Singapore banking system and other offshore tax havens. This cash is being converted into property assets by investors searching for yields and returns. Thus, 2017 will be a boom year for the property industry in Indonesia.

New laws are expected to be introduced this year allowing foreigners to take up ‘30 years plus 30 years’ of leasehold stratified properties such as condos and apartments in certain locations. The government has also launched a campaign to invite international investors to Indonesia. It wants investors to live, work and set up businesses there.

Owning a holiday home with family – the rules of engagement

December, 2016 by

Christmas is a time for families—and a time when family members are keen to take advantage of their jointly owned holiday homes. If you have a stake in a family property, it’s important to establish the rules of engagement, writes Angus Raine, Executive Chairman Raine & Horne.

Managing peak periods

For starters, family members would do well to agree to an accommodation schedule for the holiday home. Some weeks such as Christmas and Easter are more prized than others, but by taking a common-sense approach, it’s possible to come to a solution that’s suitable to all parties.

It might be that those family members, who can be more flexible with their time, may agree to stay at the property in non-peak times. Once an agreement is reached, these dates should be included in the accommodation schedule, which is then shared with all family members, Mr Raine notes.

Sharing the cleaning

Cleaning of a shared holiday home is another issue that should be addressed early. From the outset, all parties should agree about how the property should be left after a vacation stint.

To make sure the home is spick and span for every new arrival, all owners could agree to pay for a professional cleaner whenever they exit the property.

Also don’t allow dirty linen be an issue. To manage this issue, occupants could take their own linen to the holiday home and remove it with them when they leave.

At all times, the holiday home should be left tidy. And don’t forget to leave behind a full gas bottle for the barbecue.

Repairs and maintenance

It’s important to come to an agreement about how repairs and maintenance will be funded. One method is to contribute to a sinking fund not unlike those used in strata arrangements, where all owners contribute an amount. Each owner’s contribution to the sinking fund could be calculated on how often they use the property.

Alternatively, maintenance and repairs can be paid as required, or if there are some handy types among the family, they can fix leaking taps, slap on some paint and maintain the gardens themselves.

“If either of these options do not work for the family, then an old-fashioned working bee could be a great way to keep the holiday home spick-and-span. By getting the owners together to do the maintenance work, the owners will not only save money, but it is a fantastic opportunity for a family bonding session.”

Breakages should be addressed immediately. If you crack a glass or lose some cutlery, just fess up and replace it. It’s only fair that when the next family members arrive at the shared holiday home that they can use a kitchen that is well-stocked with the basics such as plates, cups and glasses.

Take the time to put these strategies in place, and owning a share in a holiday home will prove to be one of the shrewdest decisions you’ll ever make.

Moving on up… but at what cost?

Moving Series: Mover in garage taking out boxes

November, 2016 by

Moving house is well known to be one of the more stressful events in life – and beyond the physical shift itself, there are a multitude of emotional reasons why: it could be the first time out on your own, or moving in with your partner. And then there’s the possibility of moving out after a break-up, or moving for a job change, a sea change, upsizing for family, or downsizing years later.

Whatever the reason, weighing up an interstate move is not just about the salary and the cost of renting or buying – it’s also about the associated lifestyle costs your choice of location dictates. And it is in these hidden costs where your expected lifestyle could unravel.

It seems crazy to think that a mere potato can be significantly more expensive in some cities than others, let alone a 25% increase in the same bottle of wine depending on which city you buy it in. Transport, nights out, shopping for food, shoes, clothes … parking when shopping for food, shoes and clothes. It’s the fine print that we so often don’t read and it’s the fine print that really matters when it comes to weighing up your big move.

There are no hard and fast rules and while some cities can take an enormous bite out of your budget in housing, they may be a lot kinder in public transport, nights out, and even the cost of a pair of jeans. The cost of living across population centres has so many variations that guesswork can make for a rude awakening.

This is where tools like Budget Direct’s Cost of Living Index can help. This handy tool analyses data from a variety of popular cities around the world and can compare the costs of living, including nights out, shopping, dating, transport, salary, health and fitness, and grocery shopping in three cities of your choosing. It’s a useful tool to compare cities across Australia and the world for when you’re planning your next big move, and might just give you the information you need before you start packing.Budget Direct - Cost of Living Index

Lessons from a franchising success story

October, 2016 by

While franchising isn’t necessarily the right business model for every successful business, in the real estate landscape it is quite common.

This is why, in 1976, the board of Raine & Horne Pty Limited determined to move into franchising, with a commitment to open a minimum of five franchise offices by the end of the year, in the process becoming one of the first Australian real estate companies to pursue a franchising model.

Vince Labbozzetta-Michael Busdon

Vince Labbozzetta and Michael Busdon, current principals of RH Liverpool

The decision to franchise was led by former Chairman Max Raine, who enjoyed a 60-year career with Raine & Horne, and now, in 2016, the company is celebrating 40 years of franchise success since the opening of flagship office, Raine & Horne Liverpool.

“This decision was a major turning point for Raine & Horne Pty Limited, as the focus of the business shifted from selling real estate to providing franchise opportunities,” said Angus Raine, son of Max Raine and current Executive Chairman of Raine & Horne.

“The location for the first franchise office was chosen as Liverpool, as at the time it was a rapidly-developing suburb 32 kilometres south-west of the Sydney CBD. It was prime real estate territory as the local population had swelled 13.8% in just five years.”

Within months of the Liverpool opening, additional Raine & Horne franchises had launched in Lakemba, Randwick, Campbelltown, Parramatta and Maroubra.

“My father and the board had certainly fulfilled their target, and by 1978 a total of 26 franchises were in operation,” said Angus.

“As the 1970s merged into the 1980s, the familiar yellow and black Raine & Horne signboards became a common sight across Sydney suburbs, and soon after they were also found much further afield.”

Today, there are more than 300 Raine & Horne offices nationally, with a presence in every capital city and many major population centres. The brand has also expanded its interests into Asia, the Middle East and North Africa, as well as the Pacific Rim. Raine & Horne has since expanded into commercial and rural real estate as well as financial services.

“The success of franchising as a system relies on delivering key benefits to both the franchisor and the franchisee,” said Mr Raine, who is the fourth generation of his family to lead Raine & Horne.

“On one hand it gives the franchisor such as Raine & Horne a cost-effective means to increase its footprint – while still controlling the integrity of the brand and expanding revenue.

“For those with an entrepreneurial bent, franchising offers an opportunity to run their own business backed by an established brand and the support of the franchisor, thereby eliminating many of the risks associated with starting a business from scratch.”

All of which goes to prove that while it’s been a long road, a franchise model, when it is properly structured and well run, can provide benefits and satisfaction for both parties. Here’s to the next 40 years.

Do depreciation deductions apply to you?

September, 2016 by

Owners of income-producing properties are eligible to claim tax deductions for a number of expenses involved in holding a property.

Most investors are aware of some of the deductions they are entitled to; for example, they know they can claim their Property Manager’s fees, council rates and any repairs and maintenance costs. However, all too often investors are unaware of property depreciation, and as such they frequently miss out on the valuable returns these deductions can provide them with when they complete their annual income tax returns.

To help investors maximise the deductions they can claim from an investment property in the lead up to tax time, let’s take a look at some key points to help you understand depreciation.

iStock_000065981269_MediumWhat is depreciation?

Over time, any building and the assets contained within it will experience wear and tear. Legislation allows the owners of any income-producing property to claim this wear and tear as a tax deduction called depreciation. Unlike other expenses involved in holding a property, such as repairs and maintenance for example, an investor does not need to spend any money to be eligible to claim it. For this reason, depreciation is often described as a non-cash deduction.

Types of depreciation deductions available

The Australian Taxation Office (ATO) clearly defines two types of depreciation allowances available for property investors:

  • Division 43 capital works allowance
  • Division 40 plant and equipment depreciation

The capital works allowance refers to what an investor can claim for the wear and tear that occurs to the structure of the property. This includes any structural improvements that may have been made during a renovation.

As a general rule, any residential building where construction commenced after 15 September 1987 will entitle their owner to capital works deductions at a rate of 2.5 per cent per year for up to 40 years.

Owners of older buildings constructed prior to 1987 should still find out what deductions are available, as often these buildings will have undergone some form of renovation which can result in capital works deductions for the owner.

Plant and equipment depreciation on the other hand, refers to the deductions an investor can claim for the wear and tear that occurs to the easily removable fixtures and fittings found within the property.

There are more than 6,000 different assets recognised by the ATO which an investor can claim depreciation deductions for. Some examples include the carpets, blinds, air conditioners, hot water systems, smoke alarms and ceiling fans.

Unlike structural items, no date restrictions apply when claiming depreciation on plant and equipment assets.  Each of the assets is assigned an individual effective life and depreciation rate by which depreciation should be calculated.

Who can help you calculate and maximise your deductions?

Often an investor will make the mistake of thinking their accountant will claim all of the deductions available in their investment property. When it comes to depreciation, however, it is important to consult an expert in this area.

Legislation recognises Quantity Surveyors as being one of a few select professionals with the knowledge necessary to estimate construction costs for depreciation purposes.

A specialist Quantity Surveyor will use their skills to provide a depreciation schedule which outlines the deductions an investor can claim for any specific property at the end of financial year. An accountant will then use the figures outlined within the depreciation schedule when submitting the investor’s individual income tax return at the end of financial year.

How will depreciation help an investor?

The additional funds an investor receives by claiming depreciation can have a significant impact on their available cash flow. On average, an investor can claim between $5,000 and $10,000 in depreciation deductions in the first financial year.

To see an example scenario which shows the difference depreciation can make for you, visit BMT Tax Depreciation’s property investor case study page. Alternatively, for a free assessment of the available deductions in any investment property, speak to one of BMT’s expert staff on 1300 728 726 today.

Article provided courtesy of BMT Tax Depreciation.