Australia: Overview

RENTAL YIELDS

Last Updated: Aug 11, 2008

Yields still increasing for smaller units of 50 sq.m.

Gross rental income for Sydney apartments are excellent at 8.04%, up by 1.5% from the previous year of 6.96%. Smaller units of 50 sq.m. are increasing while larger properties have remained somewhat stable with increases of less than 1%.

The average cost of apartments ranging from 55 sq.m. to 180 sq.m. is US$7,438 per sq. m. The cost of a 180 sq. m. apartment is around US$1,589,400 or US$8,830 per sq. m.

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TAXES AND COSTS

Last Updated: Dec 01, 2008

Taxes are high in Australia

Effective Tax Rate on Rental Income
Monthly Income	US$1,500
Tax Rate	11.63%
Click here to see a worked example
Source: Disclaimer

Rental income: Depending on the owner’s net taxable income, the tax rates range from 29% to 45%. An owner may also be required to pay a land tax annually, depending on which state his property is located and on what type his property is.

Capital Gains: Individuals are subject to a 50% reduction of the taxable gain if the asset is held for at least 12 months. Capital gains follow the individual income tax rates at rates from 29% to 45%.

Inheritance: There are no direct taxes on inheritance.

Residents: Residents are taxed at a progressive rate on their annual income, and are required to pay a 1.5% Medicare levy.

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BUYING GUIDE

Last Updated: Jul 24, 2007

Buying costs are moderate in Australia

Roundtrip transactions costs are 7% to 12% of the property value. Stamp duty on property transfers ranges from 1.5% – 6.75%, and is paid by the buyer. It takes about 10 – 11 days to complete the five procedures needed to register a property.

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LANDLORD AND TENANT

Last Updated: Jun 19, 2006

Tenancy laws are neutral in Australia

Australia ’s landlord and tenant laws are generally neutral. Both parties’ rights are well-protected by each states’ Residential Tenancy Act.

Rents: Rents can be freely negotiated, but increases are subject to review by a Tribunal provided the tenant makes an application. The rent cannot be increased before the end of the first year of tenancy in any state.

Tenant Eviction: A landlord can terminate a tenancy by giving notice in the approved form, or by using the tribunal. The legal system is highly efficient: it takes an average of 44 days to evict a tenant.

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ECONOMIC GROWTH

Last Updated: Dec 22, 2008

Economic slowdown

The Commonwealth of Australia is one of the world’s most thriving and progressive countries. The Australian economy has achieved uninterrupted economic growth from 1992 to 2007 with an average GDP growth rate of 3.6% per year.

However, the economy is expected to slow down as the contagion from the global economic turmoil spreads. Projected GDP growth is 2.5% in 2008 and 1.7% in 2009, according to the latest forecasts from OECD. In Q3 2008, the economy grew by a negligible 0.1%, its lowest growth in 8 years.

The resources sector, which is the largest single export sector and accounts for half of GDP, seems to be slowing with numerous projects being delayed or cancelled.

In November 2008, unemployment rose to 4.4%, and is forecast to reach 5.3% in 2009, and to 6% in 2010, as more Australians lose their jobs due to worsening economic conditions.

To boost the economy and combat the global financial crisis, the government introduced massive fiscal stimulus packages and loosened monetary policy. Australia’s central bank, the Reserve Bank of Australia (RBA), cut interest rates to a six-year low of 4.25% in December 2008. Standard variable mortgage rate dropped to 8.35% in October 2008 from 9.45 in April 2008. The 3-year fixed mortgage rate also fell to 7.75% in October 2008 from 8.95% in July 2008.

Australia is one of the world’s least densely inhabited countries, with scarcely two people per square kilometer. This vast country, big enough to be considered a continent, houses a mere 21 million people of various nationalities. However, more than 75% of the population lives in urban areas, and more than 13 million (65%) live in the eight capital cities.