Every tax reform creates opportunities for those who are prepared to look. In the case of the government’s changes to negative gearing, many shrewd property investors are focusing their attention on the City of Mandurah, and its potential to generate high yields.
Before we dive in, let’s explain a few of these terms.
What is negative gearing?
Negative gearing is when someone owns an investment property that costs more to run each year than it earns in rent. In Australia, these losses can usually be deducted from the owner’s taxable income, which reduces their tax bill.
What is rental yield?
The rental yield measures how much rental income a property generates compared to its purchase price. It’s usually shown as a percentage and helps investors compare how ‘productive’ different properties are. Under the proposed reforms, negative gearing for residential property would mainly be limited to newly built homes from July 2027, while existing investments are mostly ‘grandfathered’ (ie, kept under the old rules). The goal with the government’s tax reforms is to push more investment into building new housing and improve housing affordability, especially for first homebuyers. But in the meantime, property investors will be assessing their options.
What makes the Mandurah region attractive is that median house prices are sitting at around $650,000 (depending on the dataset), while rental yields are generally between 4.5% and 5.5%, which is high compared with most Australian metropolitan markets. Vacancy rates also remain tight, with some data placing vacancy rates at around 1.3%. This means rental demand is still significantly outweighing supply.
The new reforms are likely to create a very different environment in places like Sydney, where many investors have historically accepted weak yields because they were banking on substantial capital gains and generous tax treatment later.
In Mandurah, the property investment landscape is different. Investors are more focused on the weekly cash flow, affordability, long-term holding potential, overall tenant demand, plus ‘Fly In Fly Outers’ and lifestyle renters.
This means the Federal Government’s negative gearing changes may hurt Mandurah less than some eastern-state markets.
Another factor to consider is that Mandurah properties are already close to neutral or positively geared because rents have risen so strongly over the past few years. So if an investor is already covering most of their mortgage through rental income, negative gearing becomes less critical.
In fact, many Perth and WA investors have been shifting toward ‘cash flow first’ investing for several years because of higher interest rates and WA’s historically cyclical market.
Mandurah is also well-placed geographically. Improved transport links and the continued southward expansion from Perth mean more people now see Mandurah as both a lifestyle destination and a commuter city.
While it’s too early to tell how the tax reforms will play out across the country, Mandurah could end up being one of the stronger performers for property investors rather than one of the casualties.
There’s a truckload of reasons to choose C & R Settlements in Mandurah.
Here at C & R Settlements in Mandurah, we’re renown for our hard work, attention to detail, and going the extra mile for our clients. We’re Mandurah’s Number One independent settlement agent with over 80,000 settlements under our belt (and still going strong). As an added bonus, when you choose C & R Settlements, you can use our free courtesy truck when it’s time to make the move. All you’ll need is a standard driver’s licence (and perhaps a few strong mates to lend a hand on moving day). Just be aware that our free courtesy truck is very popular, and bookings are essential. Just another reason to make the move to C & R Settlements in Mandurah. For details, call us on 9581 2148. Or email mandurah@crsetts.com.au