The regional Victorian town of Warrnambool is one of only three locations to receive multiple votes in Smart Property Investment magazine’s 2012 list of 50 suburbs or towns with the most capital growth potential.

Out of the three towns that received multiple votes – the others being perennial hotspot list favourite Gladstone and nearby Rockhampton, both in north Queensland – Warrnambool is the only one not reliant on the resources boom for its high rating.

Near the western end of the Great Ocean Road, Warrnambool is one of only four Victorian locations to be included on this year’s list.

The town has been picked by hotspotting.com.au director Terry Ryder and Todd Hunter, a former Aussie mortgage broker and director of research firm Wheregroup.

It has a median price of $316,000 for houses with gross rental yields of 6 per cent and a $255,000 median price for units with gross rental yields of 5 per cent – both well above the state median (according to Rismark-RP Data) of 3.7 per cent for houses and 4.3 per cent for units.

Ryder describes Warrnambool as “the leading centre of Victoria’s south west” and says it is “growing so fast that the local council has had to rezone hundreds of hectares of farming land for new industrial and residential estates”.

According to Ryder, Warrnambool’s strengths are “tourism, construction, education and medical services”.

“Retail is rapidly expanding and there is a plethora of new power generation facilities, including gas-fired power stations and major wind farms,” he said.

The town has a resident population of just under 34,000 but attracts more than 700,000 visitors each year who come to lie on its beaches in summer and to view southern right whales in the winter months.

Suburbs were picked based on population growth, demand for housing, income levels, employment, vacancy rates, previous capital growth and current gross rental yields.

This is an edited version of an article that first appeared in www.propertyobserver.com.au, Australia’s home of property investment information. Visit www.propertyobserver.com.au to download your free copy of their expert eBook “What lies ahead in 2012”.

This innovative strategy involves typically middle-aged couples buying their next investment property based on two fundamental criteria: its potential returns and its potential as a future retirement home.

The new property is treated strictly as a negatively geared investment property for up to 20 years or so until the owners are ready to sell their existing family home and move into it. Depending upon the circumstances, the breaks from income tax and capital gains tax can be outstanding – and, perhaps, unexpected.

Tax adviser Gordon Cooper is convinced that investing in the property in your own name is likely to produce far superior after-tax benefits than pursuing an identical strategy through a self-managed super fund.

Mr Cooper, the principal of Cooper and Co in Sydney, believes the strategy of buying a future retirement home – initially as a geared investment – is extremely timely given the rapid ageing of the population.

These are the four steps involved in this strategy:

1. Borrow up to entire purchase price
Mr Cooper said borrowers following the strategy would typically take an interest-only loan to finance the property, using their existing family home as loan security. This will help maximise their tax benefits.

2. Claim negative-gearing tax breaks
The annual deductible shortfall between the rent and the costs of interest on the loan, maintenance, council and water rates, and insurance could eliminate much of the tax on your salary. As Mr Cooper emphasises, salaries are often at their highest in the last decade before retirement, making the negatively gearing tax breaks highly rewarding.

3. Minimise CGT
When you ultimately make the property your permanent home, it will gain the CGT-exempt status of your main residence. However given the property will not be your home for some years, you are likely to face a CGT bill upon its eventual sale.

Fortunately, there is a smart way to minimise that CGT liability. Say you owned the property for five years before moving in and making it your home for another 15 years. Mr Cooper said that you would be liable for CGT on a quarter of the assessable capital gain.

But now Cooper adds a twist that may surprise many property owners.

“In calculating your CGT liability [upon the property’s eventual sale], you can subtract a proportion of the non-deductible expenses,” he said.

You would have incurred these non-deductible expenses after the property ceased being used as an investment and had become your home. And such expenses would include council rates and interest on any outstanding mortgage.

Mr Cooper said that after taking into account these non-deductible expenses, you might actually end up with a capital loss.

4. Consider the SMSF alternative
Some investors arrange for their SMSF to buy their future retirement homes as geared investment properties as an alternative to gearing the property in their own names.

The apparent attractions of this SMSF strategy are two-fold. First, your super fund is likely to have enough money to pay the deposit or first instalment on the property.

Second, you could arrange for your fund to eventually transfer the property into your name as an in-specie (non-cash) pension payment.

Your SMSF would not be liable for CGT upon the transfer of the property into your name provided:

• The property was backing the payment of a superannuation pension. Fund assets supporting a pension are exempt from CGT and income tax.
• The transfer of the property into your name as a pension payment did not result in the full pension account balance being paid out. Strictly speaking, the benefit is treated as a partial commutation to a lump sum.

However, Mr Cooper is convinced that high-income earners in particular would gain higher after-tax returns from negatively gearing the property in their own names rather than gearing through a SMSF.

This is despite the fact that the property will not be subject to CGT if eventually transferred into your name as a non-cash pension payment.

“I think it is very hard to see how the maths can work to show it is an advantage to gear through your SMSF rather than in your own name,” Mr Cooper said.

This is an edited version of an article that first appeared in www.propertyobserver.com.au, Australia’s home of property investment information. Visit www.propertyobserver.com.au to download your free copy of their expert eBook “What lies ahead in 2012”.

In the June quarter this year the median Melbourne house price was $590,000, which is 103 per cent higher than the $291,000 recorded in the June quarter 2001.

A decade ago the stamp duty payable was $13,120, which is 132 per cent less than the $30,470 that was payable on the median house if purchased in the June quarter this year.

Unlike a decade ago, first home buyers can now benefit from a 20 per cent reduction on this bill for most homes.
However, the First Home Owner’s Grant was valued at $7,000 in 2001 and is still valued at $7,000.

According to the Australian Bureau of Statistics, the average home loan to a non-first home buyer was $291,200 in June this year, 99 per cent more than the $146,500 recorded in June 2001.

The median price of a house in Toorak was $2,175,000 in the June quarter this year, 105 per cent higher than the $1,062,500 in the June quarter a decade ago. In more affordable Broadmeadows, the median was $370,500 in this year’s June quarter, a substantial 219 per cent higher than the $116,000 in the June quarter 2001.

This is indicative of a trend that has seen the more affordable suburbs increase in value more rapidly.

- Enzo Raimondo, CEO REIV

However, new research from RAMS Home Loans suggests that Australians still aspire to own their homes, are prepared to make sacrifices to do so, and see property as a rewarding personal investment.

Their ‘Why we buy’ report, compiled in conjunction with leading research organisation IPSOS, explores the Australian desire for property ownership and provides insights into the social and emotional factors that make property ownership so important to Australians.

Peter Wu from RAMS Home Loans Geelong said while investing in property requires a significant financial commitment, consumers feel the sacrifice is almost always warranted.

“The prevailing sentiment is that getting a foot in the market is a priority,” Mr Wu said.

“Without this asset, people feel it becomes harder to get started and harder to start a family.”

That’s not to say consumers don’t question the degree of the sacrifice. After all, hefty mortgage repayments impinge
on aspirations for travel, job mobility and other personal endeavours.

“Young Australians, in particular, have the hope and belief that they can have a mortgage and have fun as well,” Mr Wu said.

The self-employed are also keen to own their home, but often the unreliability of their work and income is a drawback.

The new mycoastalproperty.com.au website goes live today. It is an exciting new real estate portal for the Surf Coast and Bellarine Peninsula.

It offers prospective homebuyers, investors, renters and holidaymakers direct access to properties in the region, with many major real estate agents on board.

mycoastalproperty.com.au aims to offer visitors a similar experience to the big real estate portals, but with a local focus. If you “live local – search local”.

It is designed to complement the new Surf Coast Times and Bellarine Times website, which has added an online dimension to the free weekly publications – by bringing their comprehensive real estate sections to the web.

The portal’s local focus means searches are already narrowed to areas within the Surf Coast and Bellarine, and there are also a number of tools to assist buyers, investors and renters with listings and contact details for local real estate agents, favourite properties, mortgage calculators and property alerts.

Properties can be browsed by location, price, rooms, car spaces and more – visitors can select the criteria that best fit their needs, or just check out the weekly featured listings.

mycoastalproperty.com.au is an essential real estate portal for the Surf Coast and Bellarine Peninsula for homebuyers, investors, renters and tourists wherever they are – enabling them to live local, search local or live abroad, search coastal.

It features a wide range of homes and land for sale, as well as permanent and holiday rentals from a variety of local real estate agents. Current newspaper advertisers have already endorsed the site as a welcome product for the region.

We are thrilled to provide a true multi-media presence to our clientele – this is executed through both local print and online media platforms.

For more information and enquiries contact Warick Brown 0438 778 266, or Brett Swan 0432 615 388.