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Justprop Team member

Justprop Team member

Banks
Fitch Ratings has announced that it has downgraded the issuer default ratings (IDR) of Australia’s major banks and their New Zealand subsidiaries – ANZ/ANZ New Zealand, the Commonwealth Bank of Australia (CBA)/ASB Bank, NAB/Bank of New Zealand, and Westpac/Westpac New Zealand – from “AA+/F1+” to “A+/F1”. The ratings agency also joined Moody’s Investors Service in revising its outlook on the operating environment for banks in both Australia and New Zealand from “stable” to “negative”. Fitch claimed that the decision reflects expectations of a “significant economic shock” in the first half of 2020 (1H20) due to social distancing directives from government authorities designed to curb the spread of COVID-19. The agency claimed that as a result of such measures, it expects both Australia and New Zealand’s GDP to “shrink” in 1H20, with only a “modest recovery” in 2H20 and into 2021. Fitch added that unemployment is “likely to spike sharply and remain very elevated” relative to pre-coronavirus levels and has therefore forecast a deterioration in asset quality and a decline in earnings, which it said would be “alleviated” by government, regulatory and banking relief assistance provided over the past few weeks. S&P Global Ratings has also downgraded its outlook for Australia’s big four banks and Macquarie Bank from “stable” to “negative”, in line with its downgrade of the Commonwealth of Australia’s long-term issuer credit rating. The big four banks have acknowledged the downgrades but stressed that they remain well capitalised to manage the ongoing crisis. These downgrades follow the release of a new stress test analysis from S&P regarding its operational expectations for the banking sector over the coming months. According to S&P’s “Scenario and Sensitivity” analysis, credit losses across Australia’s banks are set to “more than triple” in the 2020 calendar year as a result of the ongoing crisis. S&P’s base case is for credit losses across Australia’s banks to rise from 0.14 per cent in 2019 to 0.5 per cent in 2020. The ratings agency said economic consequences form the coronavirus outbreak would be compounded by “second-order” effects from natural disasters in late 2019 and early 2020. S&P’s base case also predicts an 8-10 bps decline in the banks’ net interest margins, a 3 per cent decrease to net interest income, a 10 per cent decrease in other operating income and a 2 per cent rise in operating expenses. The ratings agency said it expects the banks to withstand cost pressures associated with the spike in credit losses but acknowledged that a “longer-lasting and more severe COVID-19 crisis” could result in “significant problems for the Australian banking system”. Read details:x Big banks downgraded by ratings agencies Expectations of a “significant economic shock” in the first half of 2020 have prompted both Fitch Ratings and S&P to downgrade Australia’s largest banks. www.smartpropertyinvestment.com.au
0 Reply 174 Views 6Mo ago
Jassie Singh

Jassie Singh

If you buy and sell an investment property, you may be required to pay capital gains tax (CGT) on that sale. It’s important to understand this tax when buying or selling a home. What is CGT? This is a tax that you are required to pay on any capital gain earned on the sale of an asset such as a property. CGT applies to any asset obtained after 19 August 1985. It is not a separate tax you have to pay. Rather a tax on ‘net capital gain‘ is included in your taxable income and taxed at your marginal tax rate. The ‘net capital gain’ will be reduced by your capital losses for the current income year and capital losses from previous years What is a capital gain? Put simply, a capital gain is made when a profit is made from the sale of an investment, so when the sale price exceeds the original purchase price. If you sell an investment property for less money than the purchase price, you will have made a capital loss. An industry expert can help you work out your net capital gain or loss. If you make a capital loss i.e. sell the property less than what you bought it for, you can’t claim it against your other income but you can use it to reduce a capital gain at a later stage. Calculating CGT It’s really quite simple. For the sale of a single investment, take the selling price of the property then subtract the amount you originally paid for it, along with any associated costs such as stamp duty and legal fees. The amount remaining will be your capital gain. If you make a loss rather than a gain, you will not be taxed. You may be eligible for a 50 per cent reduction of the CGT payable if you purchased the property after 21 September 1999 and owned it for at least one year before selling, and the property was purchased by an individual, trust or complying superannuation entity. Exemptions While any investment properties sold will be subject to CGT, you do not have to pay this tax on every property you buy and sell. Your main place of residence is exempt, as long as you have never rented it out. You also are not required to pay this tax at the highest marginal tax rate. Any capital gain obtained will be added to your taxable income and then taxed at the relative margin. If you have any more questions about CGT, talk to our experts on 1300 537 000
0 Reply 138 Views 6Mo ago
Liam

Liam

As property markets recover from the most recent downturn, Adam O’Grady of the Australian Taxation Office lays out the key changes in taxation law that could impact investors and home owners alike. According to Mr O’Grady, the acting assistant commissioner of individuals and intermediaries at the Australian Taxation Office, all tax law is determined by the Treasury Department, and the ATO administer the law as sent down by the parliament. “Largely, it’s a process within the Treasury, within the government, to look at the system and make recommendations, suggest law changes. Our role is to provide advice on how we may administer a proposed new law, but we don’t actually make or recommend those laws,” he explained further. Moving forward, one of the big changes in taxation would be reforms on the capital gains tax. For one, there would be the change in “main residence exemption for foreign residents”, which will essentially affect the exemptions that home owners may claim and the CGT that they have to pay, Mr O’Grady said. “Under the tax system, your residency status is different to your citizenship and so forth. So, what investors need to consider here is if you’re here in Australia with your home, and then you decide to move overseas for a period of time, and you sell that home, you’ll no longer be able to claim their main residence exemption going forward,” according to him. “At the moment, the main residence exemption for most homes means that you don’t have to pay CGT on your place of residence. The laws change so that when you’ve moved overseas permanently, meaning you’re no longer a resident for tax, you’ll now pay capital gains on that property,” according to him. Other key changes Apart from the changes in capital gains tax, Mr O’Grady also reminded investors of the change in depreciation, which was mandated in 2017 but still largely overlooked by home owners. Based on the new rule, those who have bought secondhand properties may not claim the depreciation on equipment included in the sale, such as water heaters or dishwashers. They will just form a part of the cost base for CGT. Mr O’Grady also highlighted the changes around travel expenses, which have also been put in place almost three years ago. “You can no longer claim travel to your rental property, whether to inspect it or collect rent. That’s no longer a deductible expense,” he explained. Moving forward, in July, a key change in taxation for vacant land is expected to be rolled out, according to Mr O’Grady. Once the change is mandated, owners of a parcel of land with intentions to build an investment property can no longer claim the expenses on the said land. Read more:x Expert advice: Key changes in taxation law for 202... As property markets recover from the most recent downturn, Adam O’Grady of the Australian Taxation Office lays out the key changes in taxation law that could impact investors and home owners alike. www.smartpropertyinvestment.com.au
0 Reply 138 Views 7Mo ago
InvestAus

InvestAus

Banks
The Australian Banking Association has followed the Reserve Bank’s lead in announcing a major relief package for Australian businesses, struggling amid the coronavirus crisis. Australian banks will defer the loan repayments of small businesses for six months, to help keep their doors open and keep people in jobs.  The package will apply to more than $100 billion of existing small business loans, and could put up to $8bn back into the pockets of small businesses. When asked about whether residential mortgage holders can expect to be thrown the same lifeline, ABA CEO Anna Bligh says today’s package is designed to impact the most critical and urgent need. “At this stage, banks report that they are not seeing any high volume of anyone in distress with mortgages.” But she notes, things could change in the coming days and weeks amid the rapidly moving set of circumstances. “As the government is having to evolve their response, if there is a need that emerges in relation to mortgages the banks will of course look at what might need to be done,” says Bligh. The focus is on small and medium businesses for now The RBA yesterday announced a suite of stimulus measures – including a crisis-cut to the cash rate – primarily focusing on businesses and jobs. The actions we have seen from the RBA and the ABA clearly show the immediate focus is on trying to keep businesses running and people in jobs, according to realestate.com.au executive manager of economics, Cameron Kusher. He adds, we know the UK, Italy and Canada have all provided targeted relief to households by pausing mortgage repayments. “It is probably an option on the table here in Australia. It would be particularly comforting for those that have already been either stood down or let go from their jobs as well as for those working on contracts or casually.” What about renters? Kusher says renters also need to be considered during the COVID-19 distress. “A better approach might be that there is a pause on mortgage repayments for a period of time, as well as the government covering the cost of rental repayments for that same period,” he says. ABA package will ultimately help keep homeowners afloat As long as homeowners can keep drawing an income, they will be able to keep making their mortgage repayments. Chief economist at realestate.com.au, Nerida Conisbee, says the ABA’s announcement is “great news” with the uncertainty around employment. “Given that it is going to be a temporary situation, we need to ensure people can pay living expenses, and this will be a great help to many people.” Some sectors have already been crippled by the coronavirus pandemic. Yesterday, two-thirds of Qantas and Jetstar’s 30,000 employees were temporarily stood down. Details inside:x Banks Yet To Rule Out Assistance For Mortgage Hold... The Australian Banking Association has today followed the Reserve Bank's lead in announcing a major relief package for Australian businesses, struggling amid the coronavirus crisis.  www.realestate.com.au
0 Reply 160 Views 7Mo ago
John

John

On Thursday, 19 March 2020, the RBA announced a 25 basis point reduction in the cash rate to a new historic low of 0.25 per cent. The last time the RBA made a call out of cycle was 1997, painting the recent decision as a necessity as a way to respond to current economic uncertainty caused largely by the COVID-19 pandemic. Commenting on the announcement, CoreLogic said: “Under normal circumstances, such an extraordinary move from the Reserve Bank might be greeted with renewed optimism towards housing market activity.” “Research from the Reserve Bank points to an inverse relationship with changes to the cash rate and property prices; when interest rates fall, housing prices typically rise. This was a significant factor in the rapid value upswing in residential property from June 2019. “However, the current situation of extreme uncertainty and economic fragility makes it difficult to expect housing market activity to lift against the historically low cost of debt.” Buying v selling CoreLogic noted that as the pandemic broadens, and the probability of an Australian recession increases, “consumer confidence is trending lower from an already weak position”. “This will likely weigh on high commitment consumer spending decisions, such as buying or selling a home,” CoreLogic said, adding that the RBA’s decision is aimed at keeping the Aussie dollar low, ensuring borrowing costs are stimulatory for businesses and households, and helping to stabilise and capitalise credit markets. Household debt During its announcement, the RBA made clear that it will keep the cash rate at this new historic low until labour markets are moving towards full employment and inflation is tracking to be within the target range of 2-3 per cent. “Considering that household debt levels are close to record highs, a material weakening in labour markets would likely see a substantial rise in mortgage arrears and distressed properties entering the market,” according to CoreLogic. “We do not expect this latest move by the RBA will increase housing demand while confidence levels are so weak and uncertainty is extreme. However, in the long term we are expecting economic conditions will rebound from the pandemic-related slowdown through the second half of 2020. “At this stage, the low interest rate setting, along with improving economic conditions, a rise in sentiment, and release of pent-up demand from buyers and sellers, should provide a more meaningful level of stimulus to the housing sector. “For buyers who have the confidence and financial wellbeing to remain active in the housing market through this period of weakness, there could potentially be some good buying opportunities to secure properties at a competitive price and at ultra-low interest rates,” CoreLogic concluded.  Source:x What the RBA’s out-of-cycle cut means for proper... With the Reserve Bank slashing the official cash rate out of cycle, what position does this put property investors in? www.smartpropertyinvestment.com.au
0 Reply 129 Views 7Mo ago

The Reserve Bank of Australia has taken the unprecedented move of slashing interest rates to 0.25% – the lowest in Australia’s history – as part of a comprehensive package to ease the economic blow of Coronavirus. Today’s emergency trigger was pulled more than two weeks ahead of the RBA’s regular meeting, on the first Tuesday of every month. The impact the cut will have on the property market is positive, but it is unlikely to have the same affect on pricing as the last four cuts, according to realestate.com.au chief economist, Nerida Conisbee. “With COVID-19, we are likely to see economic growth slow significantly and there continues to be a high degree of nervousness amongst consumers. “We don’t yet know whether we are in for house price falls, but there is no doubt the cut, as well as all the other stimulus measures being introduced, will cushion the impact,” she says. The Federal Government is expected to release a second round of stimulus measures in the coming days – a week after announcing a $17 billion package to pump up the economy amid the COVID-19 crisis. Interest rates can’t go any lower – the RBA has already said 0.25% is its lower bound. Low rates could act as stimulus upon recovery Low interest rates are generally seen as a positive for the residential property market, but in the current situation the positives could come in the long-term, according to realestate.com.au executive manager of economics, Cameron Kusher.  Mortgage holders breathe a sigh of relief As well as presenting an opportunity for home owners to get ahead on their mortgage repayments, today’s rate cut will be welcome news for mortgagees who may be struggling financially amid the uncertainty brought on by Coronavirus. Smartline chief executive, Sam Boer, says the banks have put measures in place to assist those in financial hardship. “I would advise people to get in touch with their broker or lender if they are concerned about keeping up with their loan repayments.” Read more:x RBA Cuts Cash Rate To 0.25% To Help Boost Economy The Reserve Bank of Australia has taken the unprecedented move of slashing interest rates to 0.25% - the lowest in Australia's history - in a bid to ease the economic blow of Coronavirus. www.realestate.com.au
0 Reply 128 Views 7Mo ago
Ranjit

Ranjit

Sydney
New South Wales’ bushfire-affected residents who choose to purchase a replacement home instead of rebuilding will be able to access stamp duty relief, it’s been revealed. The state government has revealed a stamp duty relief package in the aftermath of arguably Australia’s worst bushfire crisis to date. People purchasing replacement homes instead of rebuilding will only begin paying stamp duty once the amount payable is over $55,000 — applicable to homes purchased in excess of $1.25 million. The government also noted that eligible people who have already paid stamp duty will be able to apply for a refund. According to NSW Treasurer Dominic Perrottet, the stamp duty relief package will allow people more flexibility and financial freedom while making “one of their most important decisions in the recovery process”. “Losing your home is one of the worst things anybody has to face and deciding whether to rebuild or relocate is no doubt on a lot of minds,” he commented. The treasurer said the package would allow people “to weigh up their options, and if they do decide to purchase a replacement home, they can do so without the added financial burden and stress of paying stamp duty”. The government decision has been welcomed by the Housing Industry Association (HIA). The executive director of HIA NSW, David Bare, has said the association “fully supports the NSW government getting behind those who have been displaced in this bushfire emergency”. He said taxes and stamp duty “are a major impediment to people buying their own home, and by significantly reducing these fees, people will be able to get into a new house sooner and hopefully get their lives back on track with as little angst as possible”. The director acknowledged that “when you have to pick up and start again, the prospect can be made even more daunting by hidden costs and taxes”. “At a time of great hardship for those affected, it’s eliminating costs that add to suffering that counts the most,” Mr Bare said. “This move will go some ways to alleviating that suffering.” It comes after Victoria introduced measures to provide stamp duty relief for residents who wished to relocate instead of rebuild after the bushfire crisis. Read more:x Stamp duty squashed for bushfire-affected resident... New South Wales’ bushfire-affected residents who choose to purchase a replacement home instead of rebuilding will be able to access stamp duty relief, it’s been revealed. www.smartpropertyinvestment.com.au
0 Reply 211 Views 7Mo ago
Royal

Royal

Success
While there are multiple facets to successful investing — from asset selection to portfolio management — without doubt one of the most important determinants of success or failure is your relationship with debt.  The reason? Well, if you’re looking to build a better life through acquiring assets, then appropriate borrowing and responsible loan servicing are part of the equation. But awareness of how you think about and manage debt is crucial to your outcomes. There are those who know what they’re doing and are set to reap rewards. Conversely, some stay in a sour relationship with debt and eventually come undone. Understanding good v bad You see it all the time in movies — the bad guys are sexy. They’re always living on the edge, stirring up trouble and leaving broken hearts in their wake. It makes for great drama — particularly when seemingly smart people are drawn into their orbit by their charismatic charm. This is how it works with debt as well. Bad debt has a magnetic power because it offers the promise of immediate gratification. It means easy money that’s on tap to fulfil your whims, and often with an easy justification for your purchase as part of the package. Think about: Do you want a luxury car? Why not lease that thing and simply enjoy the longing looks from pedestrians as they admire your symbol of success? Feel like you need a holiday? Let the credit card carry you off to exotic lands and live like royalty. The bill won’t fall due for weeks. Yes — these scenarios are appealing and thrilling, but like all no-good characters, bad debt will, in the end, break your heart. Bad debt is where borrowed money is sunk into depreciating assets or some kind of “experience”. The types of purchases that will never yield a rising return in value. And bad debt is often a gateway problem. Miss the payments and interest starts increasing the outstanding balance. Compounding debt begins to spiral out of control until you begin to disassociate yourself from it as being actual money that you are responsible for paying back. Solutions such as getting another credit card to pay off the previously maxed-out credit card become desperately viable. It’s a vicious cycle. The other problem with a bad debt relationship is that it has long-term implications. Even if you can escape its grasp, bad debt plays out in your credit rating. Defaulting on a car loan in your 20s may well come back and haunt you when you apply for a mortgage in your 30s. A silver lining The flipside of the equation is good debt. Good debt is where borrowed funds are used to buy wealth-building assets that grow in value (and provide an income) that not only offsets, but exceeds, the costs of the loan facility over time. So, if you borrow money at an interest rate of 4.5 per cent and buy a property that sees capital growth of 5.0 per cent per year plus earns a net rental yield of 3.5 per cent, you are boosting the ledger. The upsides are even better when compounding and leveraging are taken into account. Borrowing money for growth assets with adequate rental income means you can accumulate a larger investment portfolio. Certainly, much greater than you ever hope to acquire without using borrowed funds. Best of all, if you’re a sit-and-wait investor, the value gains keep compounding upon themselves. Before you know it, the asset has gone through a property price cycle and doubles in value! Mend your debt relationship Every person who has a plan to build wealth through investing needs to use debt, but it’s so often unreasonably demonised. Sometimes it’s fallout from a bad experience your parents had during financially tough times. Or it could be a cultural perspective about the evils of debt. Certainly, debt is bandied about in media and conversation like it’s a thing to be avoided. Source:x What’s your relationship with debt? While there are multiple facets to successful investing — from asset selection to portfolio management — without doubt one of the most important determinants of success or failure is your relation... www.smartpropertyinvestment.com.au
0 Reply 225 Views 7Mo ago
Justprop Team member

Justprop Team member

A common question among home buyers is whether fixed rate or variable home loans are best. Like most decisions in investing or buying property, there is no clear cut answer. And as no one can know exactly what will happen to interest rates over the period of a loan (which has a significant impact on loan repayments), it’s important to understand and weigh up the pros and cons in order to make an informed choice. Fixed term home loans With a fixed rate home loan, the interest rate is ‘fixed’ for a pre-determined period of time. This period is usually between one and five years, with three years being a common option. After this fixed term, it usually then changes to a standard variable rate offered by that lender. The rates for fixed term loans are based on what the interest rate is expected to average over the coming years. Pros There is more certainty with this type of loan. The borrower will know exactly what their regular repayment will be for the fixed term It allows for easier budgeting The borrower won’t be affected by any interest rate rises There is peace of mind with this type of loan that payments won’t suddenly increase There is generally less mortgage stress Cons The borrower will not benefit from any rate cuts A redraw facility may not be available with this type of loan The mortgage holder generally can’t make any extra voluntary repayments, or if it is allowed, it’s capped at a very low amount Because of this, it’s generally harder to pay this type of loan off sooner Less flexibility – the borrower is locked in for that fixed term, meaning it is harder to change loans or lenders or shop around for a better deal. If the borrower wants to leave or change, fees generally apply for doing so This type of mortgage may not be appropriate if the homeowner is planning to sell any time soon, as break fees generally apply. Alternatively, this is when a shorter fixed term period (one year) may be a suitable option. Variable home loans A variable rate home loan moves with market interest rate changes. As it is based on the current interest rate, repayments will fluctuate – they will either increase or decrease, depending on the official cash rate – over the term of a loan. Pros Mortgage holders will benefit from any rate drops, meaning a reduced repayment amount at that time This type of loan generally allows for extra voluntary repayments, meaning it can be paid off sooner It is easier to switch to another loan or lender or sell the property without being penalised There are often extra perks or features including unlimited redraws and the option to set up an offset account Cons Borrowers will be affected by interest rate rises Loan holders may have trouble meeting repayments if interest rates increase dramatically. There is more uncertainty with this type of loan as there is no definite repayment amount. This can make it harder to budget and plan in advance There can be more mortgage stress with this type of loan Lenders may not pass on rate cuts in full to borrowers, meaning they won’t get the full benefit of rate drops Split loans Rather than putting all their eggs in the one home loan basket, home buyers can take advantage of a split loan if they wish. This means that part of the loan can be fixed while the other is variable. This could be a 50:50 split, a 70:30 split, or whatever balance best works for that buyer. Some advantages of opting for a split loan include: It’s a good way to hedge your bets and take advantage of the benefits of both approaches There’s an amount of protection against rate rises (only the variable portion of the mortgage will be affected), while the mortgage holder can still benefit from any rate drops (the variable portion will reduce) Some lenders will offer a discounted rate to take this approach Borrowers can choose to pay off the variable amount sooner if they wish It’s generally more flexible than a straight fixed term loan. As always, those choosing between home loans should consider the advantages and disadvantages of each approach and take into consideration their own needs and financial strategy when choosing what home loan is most appropriate. Source:x Fixed versus variable home loans: What's the best ... A common question among home buyers is whether fixed rate or variable home loans are best. Here are the pros and cons of each approach. homesales.com.au
0 Reply 200 Views 7Mo ago
Steve

Steve

What is home loan pre-approval? Sometimes called conditional approval or approval in principle, home loan pre-approval is when a lender provides an estimate of how much you can borrow for a mortgage. It isn’t compulsory, but it does help you identify how much you can borrow and be a more strategic buyer. Buyers need to know that even with pre-approval, they still need to pass the last hurdle of getting final approval from their lender. Without final approval, they won’t be able to purchase the property, so let’s look at four reasons to get pre-approval. 1. Competitive edge Depending on where and when you are buying, the property market can be extremely competitive. By gaining pre-approval, sellers and agents may prioritise you as they are confident that you’re a serious buyer who can have the loan ready for sale. 2. Auction preparation Pre-approval is an essential for buyers that are going to auction. Auctions can be daunting, very fast-paced and high-pressure environments, so knowing your pre-approval figure will help build your auction plan and know your limits. 3. Informed budget Having a figure of how much you can borrow will help your search for the perfect home and be confident when attending open homes. If there’s a mismatch between the loan and the house you want, you may need to rethink your buying strategy or increase how much of your own funds you’ll need to contribute. 4. One step ahead The buying journey is exciting. On the flipside, it includes a stack of paperwork. No one wants to be rushing around locating payslips and statements when they are under pressure to make an offer. While the pre-approval process doesn’t cover everything, it allows you to have the majority of paperwork sorted in advance. Read more:x Perfect your timing by knowing when to get pre-app... Buying a home can be a whirlwind with many different moving parts, and one thing buyers often consider is when to get pre-approval for a home loan. homesales.com.au
0 Reply 147 Views 7Mo ago
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