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Any thoughts re article below?
Home buyers lose out in tax change
Author: Natalie Craig, Property Reporter
Date: May 17, 2008Ironically new home buyers are constituents the Rudd Government has championed since its election.
Property Council of Australia director Trevor Cooke said certain housing developers would now pay a greater proportion of their income in GST and would pass on that cost to buyers.
"In its present form, this change will add to the cost of new housing," Mr Cooke said. "It's hard to imagine developers will be able to absorb the full cost."
The Treasury estimates the changes will reap $620 million in revenue over four years. "That money will have to come from someone," Mr Cooke said.
Under the old scheme, developers would pay GST on the difference between the sale price and the price paid for occupied land that is a "going concern". Under the new scheme, they would pay GST on the difference between the sale price and the price paid to the original land owner.
For example, apartments sell for $10.5 million. A developer bought the apartment site from a factory owner for $5 million. The factory owner bought it from a farmer for $500,000. Under the old scheme, the developer would pay GST on $5.5 million. Under the new scheme, they would pay GST on $10 million.
Prosper Australia director Karl Fitzgerald said the former system was preferable, particularly when houses were demolished to make way for apartments.
"The margin scheme was fair. It was designed to stop GST being applied to the non-GST part of land and dwellings used as exempt housing but later taken over by a developer," Mr Fitzgerald said. "Without the margin scheme . . . GST is being clawed out on the way through as housing goes from a family to a unit dweller via a developer."
But assistant Treasurer Chris Bowen said the impact would be minimal and the changes would make the system fairer.
"The impact on the property sector should be negligible or non-existent," Mr Bowen said. "The very strong advice received from Treasury is that this is simply closing a loophole which is undermining the integrity of the GST system."
The Institute of Public Affairs' Sinclair Davidson said tightening the laws would affect the cost of some new houses, but was a fairer system. "The whole idea is to prevent people from artificially lowering the price of what the land is in order to reduce the GST," Mr Davidson said.
I agree with Bala in that those suburbs are poised for growth given the infrastructure and amenities. It's set to be like Parramatta of the Hills. I also agree with Bala that units are few reflecting the low demand in the area. I live in the Hills and majority of the population is families with children, and people here generally prefer houses. House prices in these suburbs are very high though.
On buying "off the plan", the price tends to take into account potential capital growth anyway and you'll be relying on the market to do all the work for you. Having said that though, the local council is planning to make the area an education hub and so attracting students, young couples, who might rent a unit. But we're talking long term here. Have you considered if this is in line with your investing strategy?
Hi D
As someone who owns 4 car parks, I thought you may be able to provide some tips on assessing the following proposal.
I have someone who is proposing to buy a commercial car park in North Sydney. It has 62 car lots and the current tenant is into his third year of a 10-year lease. One of the terms of the lease is that rent will increase by 4% annually. The expected capital appreciation is 7% per year and the IIR is about 16%.
What is the basis of 7% capital growth for a car park? Would you consider this good growth given that it's a car park?
Eve
Hi Jon
Thanks for your comment. I hear what you are saying — it is a very real issue then and worthwhile to bear in mind when investing in some of those areas. Where I live, the grass is quite green and so it's easy to overlook the impact of the drought on the real estate market in other areas such as Dalby.
Eve
Interesting thread…
I co-owned a Hyundai 1993 hatchback with my housemate for 2 years. I paid $1700 for my share of it. I moved to Sydney 3 years ago and decided to give the rest of my car ownership to my housemate. Less than a year later, the car had to be written off as he loaned it to a friend who crashed it.
Now, I rely on feet and public transport to commute around Sydney. Much better for my pocket and helps the environment.
Sometimes I do miss driving — that's when I borrow someone else's car to run errands for them or go on road trips and hire a car.
I live in Sydney Hills area and noticed a lot of houses up for sale. One 3bdroom next to TAFE has been on the market for nearly 3 months and the advertised selling price has come down by 20k. It still hasn't been sold. Houses here are generally nearly half a million and rent is only in the mid 300s range. The yield is better in Brisbane. I believe there are some good opportunities in this market but requires more work than say, in the Brisbane market.
Hi, do any of you know where we can find updated statistics on mortgage defaults in Australia?
Cheers,
EveBeck: please ignore earlier post asking for your email address. I have sent you a private message.
Beck wrote:HI EveSydney!Welcome to the site. I can help! If you like me to help with suggestions and maybe walking you through the process jut shoot me an email with you number and / or email and we can talk.
Happy days,
Beck
Hi Beck, what is your email address? Thanks.
Thanks for your input. Is it possible then to fix a price taking into account the projected capital growth? How do sellers work out the selling price?
