"DUAL SHARE" The next disruption in Real Estate !
Damon Stroud
Just like digital companies creating major disruption to an industry for their advantage and market share. Dual Occupancy Homes are now seriously creating a major disruption to the Real Estate and Building industry in Perth.
A first Home Buyer needs to think more laterally. Just like Uber and Air B&B, now is the time for creating a new market that wasn’t there. Up until now it is easier and mathematically better for a First Home owner to buy an investment property as their first property ownership in this country, than it is to buy their first home...
A first home buyer believes they are getting a great deal with a First Home Owners Grant concession of $10,000 and possibly a stamp duty concession. But if you look at the GST alone in the average first home owners home, (approx $20,000) it is a poor concession.
· The Government actually make money from you purchasing your first home, despite the hand outs.
· About a 1000 people are involved in Building a home and all their wages and invoices are paying tax and stimulating the economy.
· Plus with a typical construction package of $200,000 there is approximately $20,000 of GST
· As all "dinky-di" West Australians know, WA only receive approximately 30% of every dollar created from GST despite WA currently having one the worst economies in Australia, the federal government continue to look after the voters in the Eastern States. Less GST means less infrastructure and less jobs.
There is a strong argument that Negative gearing is stopping First home owners from entering the market place as homes and Blocks are being bought as investments by the “well off”, which in turn takes away land selection and reduces further opportunity for the younger generation. The Labour Government promoted reducing or possibly abolishing Negative gearing for this very reason. It should be noted we are one of the very few countries in the wold that offer high tax concessions for creating an investment property. Tax concessions make it easier to buy an investment property for the wealthy to a point where they can actually pay no tax. These properties are never sold or offered back into the market place. Investors tend to accumulate, not sell. It is argued then that tax concessions are floored as most investors actually own 1 investment property, but the higher incomes earners tend to own considerably far more.
As you can see an investment property gets a Tax concession, a New home to live in does not. It is mathematically better to just build a new home and rent it out and claim the tax concessions for the rest of your life. With young adults staying at home longer, if a 20 year old buys their first home as an investment and stays at home with the parents till age 27, they have 7 years of capital growth and hopefully a larger deposit for their first family home. This all works fine if you can get near free accommodation from the parents.
If you can’t you need a better alternative….
What 99% of First Home Buyers are not aware of, is new rules have recently changed to allow additional accommodation to residential homes in Perth. There is a huge opportunity now to build effectively a Duplex home on a green titled lot. The technical Term is “Ancillary Accommodation” or “Dual Occupancy” as we like to refer too. Technically a Duplex is a development where there is some form of subdivision of House or Subdivision of Land. Dual Occupancy is two independent living areas on one Title. With the right “future” Zoning, changes by council, shire, or the West Australian Planning Commission, there is still opportunity to subdivide a Dual Occupancy Home into a two titled duplex under a “Built Strata’ title.
So how does Dual Occupancy benefit a First Home Buyer? (see the diagram below)
This example shows a First Home purchase versus a Dual Occupancy First Home Purchase where the "shaded grey" area is rented
As you can see a Dual Occupancy Home has the option to rent out a separate area creating income that can be claimed as an investment. This is the first type of home design that can be lived in and rented out at the same time with both occupants having their own space! Because the repayments are cheaper plus tax concessions, the First home buyer can afford a bigger home or a better area due to the cheaper running costs and affordability. If a first homebuyer is lacking enough income, the bank will take into consideration the additional rental income. This hence, allows better borrowing capacity...
Further to this, the number of People per home ratio in Perth is dropping. There are going to be more and more single people and couples living in a home in the future than large 4 and 5 person families under one roof. You are effectively building for the future or future proofing the home and your investment.
What if I don't want to rent an area out, could I just share the second area out with a friend. Yes its called "Dual Share"
By having a Dual Share dual occupancy home, two first homebuyers can move into a far better area with a far more affordable home loan. They can be happier as they avoid fringe areas around Perth that typically fall further in a downturn market and are closer to better amenities.
Some of my own clients have built in what they thought was a great area due to lakes, playgrounds and affordable land, only to sell up and move closer to Perth or their work 3 and 5 years later. The main reason was the amount of travel time and vehicle costs to and from the office.
Apartments are a great alternative if your over 55, but what if you have a family or would like to have a yard or garden. Apartments are not Family friendly, nor do you technically own a plot of land, so future borrowing, plus valuations become a real issue. A duplex dual occupancy home offers a large plot of land, your own yard and far better privacy than an apartment. You couldn’t have two families sharing an apartment, but with a dual occupancy you can!
What home builders in Perth won’t tell you is the best “bang for buck” investment. Due to the complexity of dual occupancy design, uneducated public perception, and additional council time frames, it’s easier to recommend the traditional first home buyer floor plan that doesn’t need planning approval, doesn’t have additional time frames and doesn’t scare a first home buyer away due to being an advanced form of property investment. This really is shameful advice when you look at the statistics that the ABC brought out 2 week ago about affordability for first home buyers. (refer above diagram).
The above graph clearly shows it is now harder than ever to get your first home loan approved because of the amount of deposit required. The average deposit in Perth for a first home buyer is now over $105,000. Sharing a home together with completely independent spaces can halve this amount.
Dual Share offers greater choice in land location due to combined incomes of two parties