There is a wise old saying that you should buy straw hats for summer in winter to get the best deal, and the same principle of supply and demand applies to buying real estate – especially apartments.
The latest ABS building figures show that the total value of apartment approvals for January 2016 was $1.28 billion or around $300 million per week.
Property investors continue to drive the construction of new apartment developments throughout Australia, especially in capital cities such as Brisbane, Sydney and Melbourne.
However, timing can be everything in real estate and picking the best time to purchase a new apartment can save you thousands of dollars as well as give you a greater number of properties to choose from.
There is a wise old saying that you should buy straw hats for summer in winter to get the best deal and the same principle of supply and demand applies to buying real estate, especially apartments.
One key point investors should remember is that there is traditionally frenzy among property buyers wanting to purchase apartments in the period leading up to and after the start of the new financial year.
This trend is underlined by the fact that more than 65 per cent of the property depreciation reports DEPPRO prepares are during the months from June to September.
However, the number of depreciation reports we undertake for investors who purchase an apartment tends to peak during July and August.
This is because many people decide to buy an apartment for investment purpose after visiting their accountant at the start of the new tax year.
Indeed, many of the depreciation reports we prepare for clients who purchase an apartment are completed to maximise their tax benefits in line with the start of a new financial year during July and August.
Completing their tax returns focuses their mind on the tax advantages, such as negative gearing and depreciation, related to owning a property.
Apartments are generally favoured by investors as an asset class because they are easier to maintain and generally have higher rental returns than a traditional family home.
With investors now representing nearly half of all property buyers in some areas of Australia, apartment sales are expected to surge even higher from the start of the new financial year.
Anyone who is considering buying an apartment for investment purposes should therefore consider making a decision now rather than waiting until activity increases later in the year.
While there are many issues concerning the depreciation entitlements on properties, in most cases, strata-style homes such as new apartments provide a higher rate of depreciation than houses – all being equal.
Buying a new apartment, for example, can provide a taxpayer with considerable depreciation benefits because of the significant tax benefits they offer through depreciation.
Some investors are achieving tax benefits obtained through depreciation that can be equivalent to 60 per cent of the total purchase price of the property. In some cases, these tax benefits can total $300,000 based on a purchase price of $500,000
A key part of ensuring the investor obtains their full tax benefits is to have a professional depreciation professional prepare a comprehensive depreciation schedule of the property.
Even an older style apartment can also qualify for substantial tax depreciation benefits if a depreciation schedule is undertaken.
Anyone considering employing a depreciation company to undertake a tax depreciation schedule should ensure that they are a member of the Australian Institute of Quantity Surveyors.
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.