COULD it be possible that the housing market is getting back to normal? That depends, of course, on how you define ‘normal’.
In recent years, the overseas markets were devastated, with a slump in value, markets swamped with desperate sellers and innumerable foreclosures.
Those few buyers who were around found it difficult to get finance as credit and lending dried up. The picture was not good.
Back here, despite some ups and downs, our housing market did not fare so badly. Rather than dry up altogether, buyers were fewer. This meant those homes that did sell realised little or no profit.
But we appear to have come through it.
Our big cities, where demand is high and supply constrained due to a lack of land, have had the most confident growth and sustainable prices.
Holiday markets, rural and regional areas — where demand is always more unpredictable and inconsistent — felt the pinch most.
I was in Britain recently which is now showing signs of having come through the worst of it. Interest rates are low but funding is still a challenge. Nevertheless, people are buying, selling and moving again. There are no record breaking prices — yet — but sales are being achieved at fair values.
Like here, much housing stock has not had substantial capital growth for five to seven years. It only seems terrible because growth levels in recent decades were high double digits. But let’s face it, we have to recognise that that is just not normal. The US is the housing market of extreme diversity. Houses can sell for $10,000 but you often find the tax you owe is almost half of that. And two years later, the value of the property has dropped to $7000 as high stock levels continue to push prices down.
Meanwhile, in New York demand is on the rise again and prices are pushing up. Likewise in San Francisco, where Silicon Valley salaries are again pushing up the prices of homes.
Away from the biggest cities, however, are places with high foreclosure rates and property prices in freefall. So the conclusion to draw out of all of this is that all three markets are behaving “normally”.
Regardless of whether you are in Australia, Britain or the US, there are high-demand areas and places that haven’t seen a value gain in half a decade.
Markets are driven by localised factors as well as macro-economic trends and this gives some context for why the market is behaving the way it is.
But in 2013 we do have something that was not always “normal” — the amount of information you can access to help decide on the health of any real estate market.
If you are a property nerd like me, sites such as realestate.com.au here and in Britain rightmove.co.uk are a treasure trove. In the US my favourite site is trulia.com, which provides the market for properties and the official valuation — often nowhere near the asking price.
I love pouring over these sites and seeing what’s on the market — it’s all good fun.
And that’s perfectly normal, isn’t it?
Mon Komo Redcliffe Records Strong Occupancy Rate
7 Common GST Mistakes On Property
It’s great to see the property market in South-East Queensland going in the right direction. With that comes an upswing in volume of transactions and GST consequences to consider.
GST and property has always been a touchy area and the Australian Taxation Office have remained active and vigilant in identifying problem transactions.
With the market now moving in the right direction we thought it a good time to set out the most common mistakes we see in the market by developers and professionals. So, here are 7 Common GST Mistakes on Property:
#1. CHARGING GST ON PRE-EXISTING RESIDENTIAL PREMISES.
For some reason this continues to happen almost 15 years after GST was introduced. If a developer sells pre-existing residential premises there will be no GST effect [they are input taxed supplies]. This is despite the fact that the developer is GST registered and selling to another GST registered developer. To be clear this only applies to pre-existing houses, units, apartments, etc … not land that may happen to be in a residential area.
#2. FORGETTING TO AGREE THE MARGIN SCHEME IN THE CONTRACT.
While most developers are aware that selling under the margin scheme can save GST on sale it is still often left out of the contract in error. The only way to fix this problem is to go to the purchaser after settlement to agree the margin scheme was used. You then still have an additional step in asking the ATO to waive the normal requirement to have this agreed prior to settlement. If this doesn’t occur you have lost the full 1/11th in GST on sale.
[Tip – make sure you can use the margin scheme in the first place]
#3. CLAIMING GST ON A RESIDENTIAL PROPERTY BEING BUILT WHERE YOU INTEND TO HOLD THE PROPERTY.
No GST can be claimed where you intend to rent out a property for residential rent. This is the case even if you intend to sell the property as new residential premises within 5 years of construction.
[Tip – make sure you have considered the cash-flow effect of not being able to claim back GST on construction costs]
#4. FIRST TIME OR PRIVATE DEVELOPERS REGISTERING AUTOMATICALLY FOR GST TO CLAIM CREDITS BACK.
When you undertake a development you need to consider whether or not you should register or if you are required to be registered for GST for your specific development. If you are subdividing land that you have held for a long term for a capital purpose such as rental, then you might not need to register for GST. If you choose to register for GST when you’re not required to by law you could be giving a lot of profit away by unnecessarily paying GST on the sale of the development property.
[Tip – do the maths and seek advice on your personal circumstances]
#5. IF A PROPERTY IS USED COMMERCIALLY THEN IT WILL AUTOMATICALLY ATTRACT GST ON SALE.
This is another common misconception. Traditionally with GST the type of property tends to determine the GST treatment. In other words you should look at the property and understand what its normal form and function is. Don’t just look at how the property is used. This will mean many properties used in a commercial way may not actually be subject to GST.
[Tip – you normally shouldn’t be charging GST to a commercial tenant in this circumstance or claiming back GST credits]
#6. IF YOU HAVE CHARGED OR PAID GST WHERE YOU SHOULDN’T HAVE IS IT DIFFICULT TO DO ANYTHING ABOUT IT?
We have dealt with numerous circumstances on both sides of the fence where we have been able to get a much better GST result. In some cases the ATO has been actively engaged with to ensure a good outcome.
[Tip – it’s still easier and less costly to get it right up front prior to settlement]
#7. IT’S TOO HARD TO GO TO THE ATO TO GET A PRIVATE RULING ON GST.
This is not the case. GST and property tend to be one of the more common rulings the ATO are asked for. They also tend to be quick to resolve where you know what information is required to be provided up front. This is one way to deal with contentious GST matters under contract.
We see these types of mistakes happening all the time [along with many others]. But now over to you, leave your comments below and tell us what other GST mistakes you have experienced on property.
Queensland Says No New Taxes on Foreign Property Buyers in Bjelke Petersen-like Strategy
The Queensland government has ruled out introducing new taxes on foreign buyers of residential real estate.
They are the only state that actually monitors foreign investment, so were in the box seat to implement such a tax regime.
The rejection comes after the populist Victoria Labor government’s recent budget unveiled a new tax regime that will seek to tax foreign buyers and foreign owners.
Queensland has vowed not to follow Victoria’s lead and introduce any new taxes on foreign property investors.
Treasurer Curtis Pitt said Queensland welcomed foreign property investment.
“We’re ruling out any stamp duty surcharges for foreign investors who purchase a house in Queensland,” said Pitt.
“We’re also ruling out any land tax surcharge for foreign investors in this state.”
The Victorian state budget, revealed on Tuesday, included a 3%t stamp duty surcharge for homes from July and land tax increases of 0.5% from 2016 for offshore-based investors.
News Ltd reported Queensland executive director of the Property Council, Chris Mountford saying the action will strengthen Queensland’s position on the global investment map.
“In particular it creates a compelling case to invest in Queensland over Victoria.”
Nothing new for Queensland as that was how former premier Joh Bjelke Petersen saw the state into an upswing when Queensland didn’t have death duties like other states.
It was in 1977 when the Premier of Queensland Joh Bjelke Petersen abolished death duties and a wave of Australia’s elderly headed towards the Gold Coast with the high rise following as dying in Queensland became a tax avoidance scheme and Surfers Paradise became a retirement haven.
By JONATHAN CHANCELLOR via propertyobserver.com.au
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