You may have noticed that the property prices in capital cities are showing mixed results.
These are some of the headlines that we have been reading in our news for quite some time now. From the New Daily: “Why Perth’s Housing market is stuck in the doldrums.” And from the ABC: “Perth’s housing market is still lagging behind.”
Some say the Western Australia property market is stagnant due to the slowdown in mining activities, insufficient job opportunities and low population growth. Whilst the prevailing pessimism in the WA property market cannot be ignored, I strongly believe that there are endless opportunities in the Perth property market for those who see beyond the obvious.
It’s now a Buyer’s Market. Given the combination of multiple interest rate cuts, new incentives on stamp duty rebate in WA, low vacancy rates and attractive tax offset for investors, there has never been a better time to buy.
Recent market updates indicate that Perth has reached a low 2.8% rental vacancy rate this year, dropping from a high of 7.3% in 2017. This data is especially encouraging for property investors. With vacancy rates trending down, the supply of rental properties is tightening and pushing weekly rents upwards.
A report from property expert Terry Ryder in September 2019 has also observed that the Perth housing market is already moving towards the recovery stage with various WA property agents charting steady growth in sales activities within the investment and rental markets.
In most recent ground-breaking news, investors are thrilled with the WA State Government’s announcement of a 75% stamp duty rebate of up to $50,000 in off-the-plan apartment purchases. This rebate is a two-year scheme and is eligible for both local and foreign investors who have signed a purchase contract for properties dated 23rd Oct 2019 onwards. This initiative is predicted to drive waves of investment back into the residential construction industry in WA and to support the property sector.
The Government has also announced the change of WA from a “major city” to a “regional town”. This will create more inflow of international students who are now able to obtain an additional year in their post-study work visa, which means that these students will be able to obtain better work experience, income and post-study financial stability. The continued growth of students coming into WA for higher education will drive the state’s economic development, population growth and demand on housing.
The most exciting news thus far for investors is the significant amount of NRAS allocations that are still available in WA market. NRAS had commenced in 2008 and had been on the market for over 10 years. Nevertheless, in the 2014/15 Budget, the Government announced it would not proceed with Round 5 and that the Scheme would be capped at 38,000 allocations, and conclude in 2026. I believe that, by far, this has been the most successful scheme initiated by the Australian Government to benefit thousands of our property investors and tenants.
What is NRAS?
The National Rental Affordability Scheme (NRAS) is an initiative from both Australia Federal and State and Territory Governments with an aim to stimulate the supply of affordable rental housing. This is done by offering tax-free financial incentives to property investors who have purchased a property with NRAS allocation and rent the dwellings to eligible tenants or households at 20% below market rates.
NRAS is an annual incentive and is indexed according to CPI. The incentive for 2019/2020 is $11,248 per annum and of this, 25% of the incentive comes from the State Government as direct payment, and the remaining 75% is funded by Federal Government and is paid in the form of refundable tax offset (RTO).
The main misconception for NRAS properties is that these properties are categorised under government housing, either fully or partially owned by the government. This is not true. Investors have 100% ownership of the property. They are free to sell the property or remove the NRAS allocation from the property at any time. NRAS properties are strategically located in high demand areas, with easy access to businesses, schools and services such as hospitals and public transport, making NRAS properties desirable for tenants and investors.
More information on becoming eligible as a NRAS property tenant is available on the NRAS website.
NRAS investment property typically provide greater return in comparison to holding the same property without NRAS. Below is a quick holding cost comparison between NRAS investment property and property without NRAS.
For more information on strategic property investment or information on NRAS scheme, Call IQI WA at 041 554 7878 or email us at [email protected]. We at IQI WA pride ourselves in helping our clients find a property that meet their needs, be it owning your first home or investment.