Affordability is a big issue

The struggle for housing affordability for first home buyers and the working to middle class seems to be getting worse. Australian house prices continue to rise in most capital cities and interest rates remain low; people are borrowing more to make the Australian dream of a house on a quarter acre block come true. Others are coming to terms that it may simply be unaffordable while some are investing in property for long term wealth creation.

Let’s re-evaluate!

We may need to reconsider and start small. Getting into the market may be the starting point of something big to come. Inner city apartments, suburban units/townhouses and new housing on Melbourne’s fringes may be the opportunity you need to enter the market without the unnecessary stress of an exorbitant mortgage.

Inner city apartment living is becoming trendier than ever. With some great apartment living available in Melbourne with amenities such as swimming pools, communal gardens, gyms and even ground floor supermarkets creating an environment some households would only envy.

Suburban units and townhouses are also a popular alternative, with courtyards and balconies, you can grow your herbs and eat them too.

New housing on Melbourne’s fringes from Doreen to Cranbourne is spreading quickly with exceptional value homes on a third of the size of a quarter acre. Back yards are being filled with outdoor entertainment areas and pools…..not a veggie patch in sight.

How about the property investment market?

Deciding to purchase a property to provide wealth creation also requires a great deal of consideration which is further complicated with tax implications such as capital gains tax and negative gearing.

Along with the housing affordability debate the government will also need to take into account the many hard working Australians that invest in property. We’ll have to wait and see if the Federal Government makes any changes in the May budget; but as it stands:

Capital gains tax – If an investor holds the asset for more than 12 months a CGT (Capital Gains Tax) discount of 50% applies. Note that if you acquired the asset before CGT started on 20th September 1985 CGT may not apply unless you have made major improvements since then. A CGT event only occurs when you sell or dispose of your investment. It is then you can determine if you have made a capital gain or loss.

Negative gearing – Negative gearing gives property investors who make a loss the opportunity to reduce their taxable income. For example, if someone earns a salary of $100,000 and losses $18,000 from the expenses for the property after the income is considered. That investor’s income would reduce to $82,000; saving you money by lowering your taxable income.

There are a number of factors to consider before you can answer the question, ‘Can I afford my own home?’ With some sound advice you can make the optimal decision for your circumstances; our financial advisers and mortgage brokers at DFG Wealth are ready for any questions you may have. Please call us on (03) 5976 8426.