April 2023
Dear Client,
MRI PROPERTY TREE – CLOUD BASED PROPERTY MANAGEMENT
As we close out the financial year DB Philpott will be moving to a cloud-based platform to assist in the management of your property. We hope this platform will streamline operations including communications across owners, tenants, and creditors.
Key features of Property Tree include:
- An all-in-one document management solution
- A central invoicing hub to ensure people get paid quicker.
- Owner & Tenant portals which will provide online access to maintenance, important documents, and financials.
- Centralised email messages accessible by the whole team.
- Improved security; with data breaches top of mind this change will provide you with enterprise-level security and industry-leading security protocols.
We hope that you will see this change as a value add to your service package. Property Tree will allow us to better stay on top of maintenance requests, routine inspections, and everything else required in the day-to-day management of rental properties.
We will slowly roll out the new suite of cloud-based solutions over the new financial year. Your existing data and documents will continue to be retained on our local server and as always accessible on request.
AUSSIE HOUSING MARKET RISK LEVEL 2ND HIGHEST GLOBALLY: IMF
Aussie housing market risk level 2nd highest globally: IMF – Real Estate Business
The level of risk in Australia’s housing market is the second-highest among developed countries, the International Monetary Fund (IMF) has warned.
In its World Economic Outlook update for April, the global financial agency cautioned that economies with higher house prices and household debt are “particularly vulnerable” to any stresses in the financial sector.
“Economies with high levels of household debt and a large share of debt issued at floating rates are more exposed to higher mortgage payments, with a greater risk of experiencing a wave of defaults,” the IMF added.
Concerningly, both of those statements described the current state of affairs in the Land Down Under.
The IMF noted that Australian households hold some of the highest levels of debt among developed countries, carrying the riskiest level of outstanding debt as a percentage of gross disposable income.
To identify the countries with the highest-risk housing markets, the IMF used five risk indicators, including the percentage of households’ outstanding debt compared to their gross disposable income; the share of debt outstanding at variable interest rates; the share of households owning a home with a mortgage; the cumulative real house price growth; and the cumulative policy rate changes.
In its final tally, Australia ranked as having the second-highest level of housing market risk among 27 developed economies, after Canada. It is followed by Luxembourg, Norway, Sweden, and the Netherlands.
Altogether, those six countries are the only ones to score a “deep red” indicator, signalling the highest possible level of housing market risk.
The IMF explained that in some economies, house prices went up quickly during the pandemic, making it harder for people to afford them. However, household debt levels were not too high until recently when interest rates started to rise.
“During the COVID-19 pandemic, real house prices rose to record levels in many countries — especially among advanced economies — reflecting a combination of ample policy support and limited numbers of available properties on the market,” the IMF said.
“In the second quarter of 2022, however, quarterly real house prices fell, with about two-thirds of economies experiencing negative growth and the remainder positive but slower growth,” the report stated.
It further predicted that in these countries, the gradual decline in property prices could make it easier for people to afford homes.
“If mortgage rates continue to rise, demand for borrowing and house prices are likely to weaken further.”
On the positive side, the agency stated that a continued decrease in housing prices would unlikely result in a financial crisis like the one experienced in the 2007–08 Global Financial Crisis (GFC) due to banks’ underwriting standards having improved in many advanced economies today compared to the standards they had back then.
“However, the average household debt-to-income ratio across countries in 2022 was on par with that in 2007, driven mainly by households in economies that managed to escape the brunt of the global financial crisis and have since run up substantial borrowing,” it noted.
Global economy entering ‘perilous’ times
The IMF also noted that house prices and household debt are not the only economic factors at elevated risk, warning that the global outlook for the world economy was getting murkier on current economic conditions.
Recent turmoil in the global financial sector, stemming from the collapse of Silicon Valley Bank and Signature Bank in the US, and the bailout of Credit Suisse by UBS, has prompted the IMF to revise its forecast for global output growth by 10 basis points to 2.8 per cent, with its medium-term global outlook for growth the lowest it has been in more than 30 years.
IMF cautioned that the global economy was “entering a perilous phase during which economic growth remains low by historical standards and financial risks have risen, yet inflation has not yet decisively turned the corner”.
“With the recent increase in financial market volatility and multiple indicators pointing in different directions, the fog around the world economic outlook has thickened,” the IMF report states.
Australia’s economy is set to slow significantly this year according to the IMF’s forecasts, which sees the local economy expanding by just 1.6 per cent and by 1.7 per cent in 2024.
Treasurer Jim Chalmers weighed in on the IMF’s predictions, acknowledging that Australia would not be spared from the global economic downturn and its impacts despite low unemployment figures and wages growth slowly increasing.
“The Treasury does expect our own economy to slow considerably later this year because of that combination of a slowing global economy and the impact of higher interest rates here at home as well.
“So we’ve got some advantages, we’re optimistic about the future, but we need to be realistic about these global conditions and what it means for us.”
While Mr Chalmers is optimistic that it is still possible for Australia to avoid a recession as it did in the 2008 GFC, he said there will be a significant deceleration in the economy in the coming months, which will be considered in next month’s budget.
“The Treasury and the Reserve Bank are not currently expecting a recession here at home, but the economy will slow.
“That’s why this budget is so important in a little under four weeks’ time, because what we need to do is provide some responsible cost-of-living relief without adding to inflation,” he stated.
$1.3BN RENTAL TAX GAP PUTS 1.7M LANDLORDS IN ATO’S SIGHTS
$1.3bn rental tax gap puts 1.7m landlords in ATO’s sights – Real Estate Business
As part of a regular review of returns related to rental property landlords, the Australian Taxation Office (ATO) will collect residential investment property loan data (RIPL) on 1.7 million individuals.
The data matching program, which sees the ATO able to obtain data from 17 banks, including ANZ, St George, NAB, and Westpac, as well as their subsidiaries as part of their data collection, reportedly covers the majority of the rental property market.
According to the ATO’s website, estimates from the 2019–20 financial year postulated a net tax gap of $9 billion for individuals not in business, with rental property risks accounting for 14 per cent of this gap.
Information provided to REB by the ATO showed the agency “has embarked on a process to collect data that can be used to help individual taxpayers get their tax return right in the first place, as well as better target those individuals who may be under-reporting their income or overclaiming deductions.”
With the rental component of the individual’s tax gap believed to be approximately $1.3 billion, the ATO noted the most common reasons for adjustments to rental items on a tax return include:
- – No or incorrect apportionment of the loan interest costs where the loan was refinanced for private purposes.
- – Claiming costs as repair rather than a capital works deduction
- – Not apportioning expenses for private use of the property
Collecting RIPL data allows the ATO to gain insights that would assist the development and implementation of voluntary compliance improving strategies, including updating guidance products or other educational engagement, undertaking compliance activities against taxpayers incorrectly claiming a deduction for interest on loans or borrowing expenses, and strengthening community confidence by helping ensure taxpayers are meeting their tax obligations.
According to the ATO’s website, “failure to address non-compliant behaviour has the potential to undermine community confidence in the integrity of the tax and superannuation systems and our capability to administer those systems.”
Following collection, the RIPL data will be matched against ATO records, including rental schedules and income tax return labels, to identify and address a number of taxation risks, such as income tax revolving around the correct reporting of rental income, expenses and associated costs; capital gains tax (CGT) to confirm investors are meeting their CGT obligations when selling properties used to generate income; and lodgement, which involves verifying owners of rental properties are lodging income tax returns.
The ATO explained that the “RIPL program is part of a broader suite of data-matching programs that includes property management and will soon include landlords’ insurance, allowing us to address several taxation risks in the investment property market.”
According to reports, 2.4 million individuals claimed $51.3 billion in rental deductions in the 2019–20 financial year, providing an approximate $18.6 billion tax bill reduction.
Thank you for your ongoing support!
Regards David, Benjamin & the Team at DB Philpott Real Estate
