1st Street Newsletter MARCH 2008

Hello,

Welcome to 1st Street's monthly newsletter. If you require any assistance in obtaining the right loan for you, or if you have any questions in regards to an existing loan, please do not hesitate to contact me personally on 1300 88 01 09 or 0411 33 9998.

Kind regards,

Jeremy Fisher

Rudd pushes for 100,000 cheap rentals

With the continuing publicity around housing affordability, the Labor government is looking for a range of solutions.

Part of their response is to encourage investors to build 100,000 affordable rental properties.

The Federal government has formally established a significantly expanded National Rental Affordability Scheme. It promised last year to set up such a scheme to encourage the building of 50,000 low-cost rental properties.

The National Rental Affordability Scheme is an innovative policy initiative to create a new “asset class” of affordable rental properties, because there is currently very little investment from institutional investors in residential property in Australia.

Industry forecasts suggest that, without this kind of intervention, the shortage of housing stock could continue for a number of years.

How it works

Under the Scheme, the Commonwealth will provide private investors with tax credits of $6,000 a year for ten years for new properties that are rented at 20% below the market rate.

States and Territories have agreed to provide $2,000 per home either through cash payments or in kind, such as via the provision of cut price land or concessions on stamp duty.

The initiative would mean, for example, that rent on a new average three bedroom unit would fall by $70 a week (from $350 to $280).

This measure is one of a range of policies the Australian Government is implementing to assist Australian families under financial pressure.

Reduce infrastructure costs

Mr Rudd also announced a $500 million Housing Affordability Fund to push down the cost of building a new home.

"It is no exaggeration to say that in early 2008 housing affordability is the worst it has been in living memory," said Kevin Rudd recently.

The Property Council of Australia estimated housing-linked infrastructure charges such as water, sewerage, transport and parklands cost more than $68,000 on a new home.

These charges are currently being passed onto the home buyer. The Housing Affordability Fund will be used to invest in infrastructure with local councils to reduce the costs for home buyers.

Development applications

The Government has also announced that it will invest up to $30 million from the Fund to streamline the approval of development applications, including moving them online allowing applicants to track progress.

This should also help to cut the cost of new homes. Delays in planning approvals create “holding costs” such as interest and land taxes, which can push up the price of new homes by tens of thousands of dollars.

The scheme is planned to complete a national roll-out to all councils by the end of 2009.

What it means

Australia continues to struggle to meet the demand for affordable housing. These measures should give confidence to existing and potential property investors that there is a strong and continuing market for rental properties.

Is DIY conveyancing a good thing?

Purchasing a property is often stressful, particularly when it comes to the legal side.

Problems can be avoided by engaging the services of a legal professional.

Finding a property that you want to purchase can be a time-consuming and stressful process. Unfortunately, this is not the end of the work, as the legal side needs to be taken care of.

Contract of sale

Once you've found the property you want to purchase, the vendor's agent, or the vendor themselves, will provide you with a contract of sale.

It's important that this document be looked at carefully to ensure that everything about the property is understood, and that there will be "no surprises" after you have purchased it.

Most people do not have the skills or expertise to review these documents, and with such a major purchase it is unwise to take risks. Therefore it makes sense to employ the services of a solicitor or conveyancer.

Costs

The most obvious consideration when determining how to choose the method of conveyancing is the cost. While most solicitors and conveyancers offer a fixed price, you need to determine exactly what is included in the price, and what isn't.

Some people simply want the appropriate forms completed and lodged, while others require a more comprehensive service, such as assisting in negotiations for a private sale.

With additional services come additional fees, and it pays to know what these are likely to be.

Peace of mind

One of the key benefits of using a professional is the peace of mind that they provide. Both should have sufficient indemnity insurance to cover them if something goes wrong with the transfer.

Another benefit of using a professional is that they provide this service on a regular basis. With this experience comes the expertise of knowing what to look for.

Draw as much advice from these people as you can. They are on your side and you are paying them. Ask about any matters you don't understand and if there are any special conditions you want to negotiate into the contract, speak up now.

Do it yourself?

The main reason for performing your own conveyancing is to save money. There are a number of do-it-yourself kits that exist for this very purpose.

There are, however, a number of important issues that should be considered first, including:

  • caveats and covenants attached to the property,
  • extensions and improvements which have not been approved by local council,
  • actual property size differing from the measurements on the title,
  • finding the property is damaged when you conduct the final inspection.

Unless you are skilled in understanding what these issues can mean and how to respond to them, then you are taking a big risk.

Conclusion

Saving a few thousand dollars can be appealing to a property purchaser. But the costs of not engaging the services of a solicitor or conveyancer can be a lot higher.
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