51182017 (Of the-pln property buys lookingless atractve | a.com Pee eee cee rus Pees ie as Commercial RealEstate Coed ay 1820179119000 | Uni May 182007 21 Save Aticlo | Pint | Ucense Article Off-the-plan property buys looking less attractive aire Rata otr9 Crees elon sale or lease Peery ll CommercialRealEstate Investors considering offthe-plan apartments are facing the loss of generous tax incentives and depreciation allowances, tougher borrowing conditions, falling rents and rising supply. yy eA x ‘opers continue offering lucrative incentives to buy -such as, free furniture and fixtures ~ despite their usefulness as long-term tax deductions being under threat from changes in the recent federal budget. Signing a contract to purchase an apartment that has yet to be built can lock in gains froma rising market and avoid exorbitant stamp duty, There are still good opportunities for investors buying quality apartments in areas of high demand close to the central business district and schools, shops, transport and, other popular amenities. Related articles ATO deputy caught up in tax fraud hitp wwf comipersona-fnancuoftnplan-proparty-buys-looking-less-atractive-20170617.gw6r37?8utm_source=socauirn_madlum=twitr&utm camp. 151182017 But rising costs, falling tax deductions and tougher markets mean investors must be aware of changing conditions, such as falling demand from foreign buyers, and factor them into their decision on what to buy and where, "Keep your eye focused on a balance of sustained capital growth and reliable rental income,” says Christopher Foster-Ramsay, principal of mortgage broker Foster Ramsay Finance, "Don't be distracted by special deals or offers that do not contribute to the long-term value of the purchase.” Avoid disappointment Lou Farinott, a senior partner with Holding Redlich Lawyers, adds many investors hhave little idea what they are purchasing when they look atthe building's plans, which means many can be disappointed with the finished product, “They need to visit more sites and get an idea of what 40 square metres, or 50 square ‘metres, looks and feels like,” Farinotti says ‘Stamp duty exemptions for investors are being cut, amended or switched to regional areas in Victoria, Queensland and Tasmania from July 1, the beginning of the new financial year. Itmeans an investor in a $2 million off-the-plan apartment in Melbourne could face an extra $110,000. Further, property transfers between spouses and de facto partners in Victoria will no longer be exempt from stamp duty and a tax will apply for some vacant residential properties In Queensland, first home buyers’ grants will revert back to $15,000 for new properties, including buildings being constructed, and in Tasmania the grant will decrease to $10,000 for the purchase of a new home, construction or off-the-plan apartment, Bi ‘ture packages ‘Some developers are offering buyers who sign before July generous furniture and fixture packages worth tens of thousands of dollars, usually in postcodes where there are many other apartments being completed. Popular negative gearing tax breaks remain but rules are being tightened around ‘what can be claimed, such as travel expenses to view an investment property and depreciation allowances. Tax specialists believe property buyers renting out the: apartments will no longer be able to depreciate new furnishings, plant and equipment, even ifit is near-new with a resale value. ‘Under the existing rules, plant and equipment items such as furniture, washing machines and ceiling fans have an effective life set by the Australian Taxation Office that can be claimed as a deduction over future years by the investor: (Of the-pln property buys lookngless atractve | a.com Advisers to become ‘digital curators’, says Stockspot ‘Tax industry shocked at Cranston’, pending arreset Brawl over meet ‘An anomaly that APRA hasn't regulated it Latest Stories BHP and Elliott hold “eonstructive’ meeting “Trump trade'turns from hope to fear ATO deputy caught upin tax fraud nego Ieee eae re] Tice property site eed all CommercialRealEstate itp wwf comipersona-fnancuoftneplan-proparty-bys-looking less-atractive-20170617.gw6r37?8utm_source=socialuirn_madlum=twitr&utm camp. 251182017 (Of the-pln property buys lookngless atractve | a.com But new rules coming into effect from July | mean the deductions willbe allowed only if the investor bought them, TThe changes apply to items purchased after the federal budget. Existing arrangements will be grandfathered. Tax specialists are seeking clarification on the depreciation status of furnishing and fixtures that are relatively new and have a resale value. There are potentially 167 plant and equipment depreciation items. Changes ahead Bradley Beer, chief executive of BMT Tax Depreciation says nearly 80 per cent of the £63,000 depreciation schedules it compiled last year will be impacted by the proposed changes. Major lenders, such as National Australia and Bank and Westpac, are tightening apartment valuations to prevent developers supporting prices by repurchasing any apartments coming on to the market in a block before all have been sold to prevent price falls. NAB says apartment valuations used to assess loan applications will have to include comparable sales outside a development and resales within the development. Recent analysis by Herron Todd and White revealed 30 per cent falls in the sale of apartments acquired off-the-plan and then resold in the market toa genuine buyer (rather than back to the developer) within 1210 18 months. Investors also need to check whether their apartment can be used as security for future residential purchases. Some lenders are excluding student accommodation, company share titles and residential properties ess than 50 square mettes (including balconies and car parking) that are being used as a serviced apartment. Potential investors should heed repeated warnings about apartment oversupply over ‘coming years everywhere except Sydney and identify postcodes where demand remains strongest. In Perth, apartment rents have fallen by more than 9 per cent during the past 12 months, The national average growth is 2 per cent, which is equivalent co the headline rate of inflation, Rental growth in Melbourne is more than 6 per cent 10 issues to consider before you buy, |. How much will buying off te plan save on price? In rising market, you can lock in today’s prices. But ina weake than necessary. \g market, the reverse happens and you may pay more 2. Are you cligible for stamp duty concessions? itp wwf comipersona-fnancuottneplan-proparty-bys-looking-ess-atractive-20170617.gw6r37?8utm_source=socialurn_madlum=twitr&utm camp. 35,1182017 (Of the-pln property buys lookngless atractve | a.com 3, Location. Is it close to amenities, ransport? Is it within IS kilometres of central business district? 4. Check all specifications. What guarantees do you have the fixtures will be equal quality to those in the display apartment? 5, Review the contract. Get an experienced lawyer to check any terms allowing the developer to change the original plan, Are there other terms and conditions that favour the developer? 6. Check the builder's record of completed projects and quality finishings. Apartment buyers are likely to be close to the end of any creditors’ list ifthe developer goes bankrupt. Does the project have development and certification approval? 7.Size does matter. Many lenders refuse, or demand bigger deposits for, apartments less than 50 square meters. They are also reluctant to take smaller apartments, or student accommodation, as security other property loans. £8, Research the likelihood of finding tenants in terms of competition from nearby planned constructions. ‘9, Make sure the developer has not registered by-laws giving exclusive use of desirable parts of the common property, such as the roof or gardens, to owners of certain apartments. 10. Inspect the management contracts to confirm your potential financial liabilities. Source: ME Bank and Shinewing. Recommended From Around the Web Airbus lost somewhere ‘The castle that costs less between Australia and than Sydney's average Austria "The moment Uber's CEO realised Tesla was... 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