from Steve McKnight
Doom, Gloom Or Boom? What's the General Economic Forecast
==========
The government is forecasting that the economic party times of quick and
easy
profits from appreciating assets are over.
Specifically, Treasury is expecting that capital gains tax income will
drop
by
$14billion over the next three years as a result of falling share prices
and
a
slowing housing market.
Furthermore, economic growth is forecast to slow, while unemployment and
inflation are expected to rise. While not mentioned in the budget, the
likely
inevitable outcome will be further interest rates rises too. I still
expect
interest rates to reach 10% by June 2009.
For property investors, the above expectations cement the reality that
those
buying will command greater purchasing and negotiating power. On the other
hand,
those selling will face an increasingly competitive marketplace and will
need to
be smart about they way they price and market their homes. It's going to
take
longer to sell a home and the price will most likely be less than
best-case
scenario.
==========
Emerging & New Op****tunities
==========
The government is bankrolling the following three specific initiatives:
** Op****tunity #1: First Home Saver Accounts
First home buyers will be able to contribute to a special savings account
that
attracts incentives and tax breaks. The specifics and rules remain
sketchy,
but
it seems the government will offer a 'bonus' of up to $850 each year (17%
of
the
first $5,000 saved) in addition to capping the tax rate paid on interest
earned
in this account to 15%.
At first glance, this op****tunity will only benefit those who save to buy
their
first home and then later swap it over to an investment property.
However, there may be some op****tunity for those selling property to lock
buyers
in and get a guaranteed sale (eg. developers selling off the plan) and
then
use
the incentives of the account to sweeten the deal.
I've written more about how this might work at
http://www.propertyinvesting.com/go/260
** Op****tunity #2: Housing Affordability Fund
The government announced $500m over five years to reduce the cost of
providing
new housing by cutting red tape and improving infrastructure.
Unfortunately, I smell a serious waste of money in unnecessary studies and
re****ts, as the underlying problem is with local council planning
regulations
rather than with State or Federal governments. Let's see what happens
though.
** Op****tunity #3: National Rental Affordability Scheme
Okay - this looks like the best op****tunity for investors of the three.
The government is offering annual incentives of up to $8,000 for each new
dwelling that investors offer for rent at 20% below market.
It is unclear what 'new' actually means, but the answer to whether or not
it
will be profitable to discount the rent and claim the incentive has to be
answered by crunching the numbers in each specific case.
Again, details remain sketchy but I'll be sure to provide further comments
when
I know more.
==========
Rule Changes
==========
There are two rule changes to be aware of.
First, that losses from investment property are now to be added back when
calculating your entitlement to welfare payments.
So, if you have a heavily negatively geared ****tfolio resulting in low
taxable
income then you may have previously been able to claim various welfare
payments.
These days are now over.
Second, that the family trust rules have been changed so that the family
unit is
more closely defined. This is technical to explain, but accountant Mark
Unwin is
preparing a summary that will be posted in the 'Legal & Accounting' forum
as
soon as possible.
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