Australia: Overview

RENTAL YIELDS

Last Updated: Sep 10, 2009

Dramatic drop in rental yields

Despite the good news from the Australian economy, which has largely avoided the recession, gross rental yields on Sydney apartments appear to have dropped dramatically in the past year, from 8.04% last year, to a mere 4.26% in 2009.

The average cost of apartments has meanwhile stayed stable, at around US$7,374 per square metres (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

Strong Australian economy

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

After contracting by about 0.6% in the last quarter of 2008, Australia had seen positive real GDP growth rates in the following quarters, thus avoiding technical recession.

In the second quarter of 2009, the economy grew by 0.6%, following a real GDP growth rate of 0.4% in Q1 2009.The growth was mainly driven by strong domestic demand. Household consumption, which represents about 60% of the economy, rose by 0.8% in Q2 2009. Australia is projected to grow by a modest 0.7% in 2009, before accelerating to 2% in 2010, according to forecasts from the IMF.

“Economic conditions in Australia have been stronger than expected, with consumer spending, exports and business investment notable for their resilience,'' said Reserve Bank Governor Glenn Stevens.

In October 2009, the unemployment rate rose slightly to 5.8% from 5.7% in the prior month. Australia’s unemployment rate remained relatively steady, despite forecasts that it would rise up to 8.5% in 2010.

In the year to September 2009, the inflation rate was 1.3%, down from 5% from the same period last year, based on figures from RBA. On the other hand, the underlying inflation, RBA’s current main guide to action, was around 3.5%. The underlying inflation excludes volatile price movements. The large difference between CPI and underlying inflation was due to large falls in the prices of fuel and in the prices of deposit and loan facilities used by households.

In November 2009, the RBA has raised the key rate for the second month in a row to 3.5% to curb inflationary pressures. Australia was the first developed country to reverse the cycle of interest rate cuts, raising the key rate to 3.25% in October 2009 from a 50-year low of 3%. As the economy and the housing market continue to recover, RBA hints more interest rate hikes in the coming months.

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.