Interest Rates Fall and Budget Affects Super Funds

A clearance rate of 74 per cent was recorded this weekend compared to 75 per cent last weekend and 80 per cent this weekend last year. There were 807 auctions reported to the REIV, with 594 selling and 213 being passed in, 84 of those on a vendor bid. The top auction suburbs in April were Wantirna and Keilor East – with a clearance rate of more than 90 per cent each.

Another big test for the Melbourne property market over the weekend and another good result from 807 auctions. Edward Hobbs from Biggin Scott Richmond reported 2 sales from 3 auctions, the only property not selling being a 2 bedroom apartment.

Tony Tuccitto from Barry Plant said “it was mixed results. Some properties performed better than others, both at auctions and with numbers through opens. We noticed a slight increase in property inspections as a result of the inetrest rate cut but nothing substantial.”

Land sales agent for Oliver Hume, Zak Stojenovski described sales in Rockbank as “extroadinary”. “We seem to be hitting the sweet spot with our price point and new land release at the moment. There are many first time buyers who want to build their new dream home and we are struggling to keep up with demand. The infrastrucre, shopping centre and train station will be there which is a real drawcard for the estate.”  

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Interest Rates Fall and Budget Affects Super Funds

Tuesday the 3^rd of May last week became a very historic day on two fronts when at 2.30pm the Reserve Bank of Australia announced an interest rate cut of 0.25% to an all-time low cash rate of 1.75%.  Later on the same day Treasurer Scott Morrison released the much anticipated Budget which was touted as “Jobs and Growth” in an attempt to boost our ailing economy.

“Houston we have a problem”. Yes I can hear all those mortgage holders and first home buyers cheering in the background at the prospect of lower interest rates with possibly another rate cut on the cards later this year. And talk of possible zero interest rates? The RBA obviously feels the Australian economy is not in good shape. Perhaps the latest deflationary figures or the stubbornly high Australian dollar and throw in slowing housing price growth could all be weighing on the mind of Governor Glenn Stevens. Regardless of the reason, there was enough bad news on our economy to give the Reserve Bank a reason to cut rates.

The other piece of interesting news was in the Budget release. The use of superannuation as a tax minimisation vehicle is being targeted by the government. A $1.6mil cap on the amount of Superannuation that can be withdrawn tax-free in retirement is to be introduced from July 2017, assuming the budget is passed.

A reduction in the concessional annual contributions is to be capped at $25,000 with a lifetime cap of $500,000 on non-concessional contributions including all contributions made on or after 2007.

Basically what all this means is that there will be a limit as to how much the wealthy can put into their super funds to avoid tax. So after speaking to a couple of financial planners last week, the general consensus is that property will be viewed as an ideal tax minimisation strategy for many wealthy individuals who are close to or have already met the tax superannuation cap. But don’t take my word for it or advice for that matter. Like many investors have already, speak to your accountant and financial planner to determine how these new potential changes may affect you.

A Tale of Two Suburbs

We were out and about on Saturday in two different areas looking at similar homes in the $1million dollar price range. Both properties were renovated and had 3 bedrooms with relatively small backyards. The Preston property had an extra living area with the garage converted to an office for use. This feature appears to be more and more popular as people work or run their business from home.

The first property was in Ivanhoe, situated at 11 Oakdene Place, Ivanhoe. A beautiful court location walking distance to the revived East Ivanhoe shops, close to East Ivanhoe Primary School and the Eastern Freeway. Last time this property changed hands was in March 2002 when it sold for $505,000.

Auctioneer James Labiris from Nelson Alexander struggled to get proceedings started instead resorting to an opening vendor bid of $1.45million. The crowd was small, which was surprising considering the location, perhaps this was due to the restrictive nature of the building covenant in the area. A buyer in the crowd finally put their hand up at $1.46million but no other bids were forthcoming. The agents went in for a chat with the vendor, who by the way was already committed to a purchase and was keen to move on. The outcome was the vendor was close to selling but needed some more money, of course. The property was then passed in to the one and only bidder, finally selling for $1.526million, $66,000 above the passed in price. A very good result for a 12square home.

The other story of the day was at 6 Willow Street Preston. This area has seen an enormous amount of interest particularly by what I call young ‘hipsters’ moving out from inner city, Collingwood, Brunswick or Fitzroy into the Burbs. In front of a crowd of 60 onlokkers this 3 bedroom plus office/garage was up for grabs.

Initially quoted at $800-880,000 the auction started strongly with an opening bid of $900,000 by a young eager couple. Quickly rising in lots of $20,000 two couples fought head to head all the way to $1.1million, then a new bidder entered the arena, bidding in 10,000 lots to $1.17million finally breaking the bidding down to $500 lots until the final price of $1.2million was reached, all in a matter of minutes.

Last time this property was sold in August 1976 for $32,500, its land size is recorded as 495sqm.

What our Clients Are Saying?

We would like to thank you for all your hard work, your advice and your attention helping us to secure an excellent investment property.  Being first time investors, you were happy to spend time with us explaining how it all works and always happy to answer our many questions. You sorted through lots of properties according to our brief to finally secure a fantastic place in a great location and at an excellent price. You made negotiating with the vendor’s agent a breeze and your knowledge of the industry and players was a huge advantage.  All in all, we are so glad we had you as our advocate for this purchase and we hope that we can work with you again in the future. Peter and Jenny.

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