If you're considering fixing your rates, you're not alone. Fixed mortgage interest rates are growing increasingly popular among property investors.
The latest national housing finance figures reveal that fixing mortgage interest rates is gaining in popularity among property buyers.
ABS figures for December 2015 show that 13 per cent home loans in Australia were fixed – the highest proportion of loans that were fixed in Australia since January 2015.
The ABS figures show that during December 2015, fixed loans were used by property buyers to purchase some 8,009 dwellings in Australia.
This compared to just 5,238 dwellings purchased using fixed home loans during October 2015.
Fixed rates have become more popular in recent months because of recent policy changed imposed by APRA and the Reserve Bank, which has resulted in variable interest rates rise out of cycle.
These policy changes have seen a jump in variable interest rates, particularly for investors, whereas fixed rates have stayed relatively steady.
Because of this growing differential between fixed and variable interest rates, property investors can now secure three-year fixed rates for around 4.4 per cent compared to more than five per cent by choosing a variable home loan.
Another factor encouraging investors to fix to a lower interest rate is to boost their cash flow during a time when rental returns are falling in many capital cities throughout Australia.
Weekly rents have been under a downward pressure because of the large building boom that has occurred, especially in inner-city areas over the past three years.
Apart from fixing their interest rates at a lower rate, investors can also boost their cash flow through fully claiming their tax depreciation benefits, which can be equivalent to 60 per cent of the annual rental income of a typical investment property.
Many Australian property investors may not know that a tax depreciation report undertaken by a professional tax depreciation company can identify hundreds of items in an investment property for which you can claim legitimate depreciation benefits.
Owners of investment properties in Australia can significantly boost their cash flow by claiming these tax deductions on a large number of various household items through depreciation benefits.
It may surprise many property investors that even garden gnomes can be depreciated for tax purposes. Under taxation ruling TR2006/15, garden gnomes can be depreciated for tax purposes as plant over their economic life.
Many investors in Australia totally underestimate the number of items that can be depreciated for tax purposes and this comprehensive list can even include garden gnomes, cubby houses and, if they own an apartment, common areas such as car parking and recreational facilities.
To qualify for these legitimate tax deductions, an investor must have a fully compliant tax depreciation company undertake an onsite inspection of the property and then compile a depreciation report based on this inspection.
Depreciation is a complex area of taxation that requires a professional company to undertake a depreciation report because of constant changes in rules.
Property investors should check that the company undertaking their tax depreciation schedule is a member of The Australian Institute of Quantity Surveyors (AIQS).
Employing a company who is a member of AIQS, such as DEPPRO, gives protection to consumers that their tax depreciation report is completed in a professional manner.
Paul Bennion is the managing director of DEPPRO tax depreciation specialists.
DEPPRO Pty Ltd is Australia’s leading property depreciation company, specialising solely in the preparation of tax depreciation reports for residential, commercial, industrial and leisure investment properties.