IT’S been documented by a number of global studies that Australia is at the top of the list with cities such as London, New York and Hong Kong when it comes to unaffordable housing.
A shortage of properties and an increasing population housing has put upward pressure on rents, making it difficult for many to be able to lease a property, let alone buy one.
According to the National Housing Supply Council’s State of Supply Report 2010, there is an estimated current housing supply deficit of 178,400 homes across Australia.
As a result of this situation, the National Rental Affordability Scheme or NRAS was launched by the Federal Government in 2008 to provide assistance and funding to increase the supply of affordable rental dwellings, reduce rental costs to low to mid income earners and to encourage investment on a large scale to provide more affordable housing.
The scheme – which has bipartisan support – is based on a similar US program implemented in the 1980s, resulting in over 1.5 million homes being built and US$5 billion in tax credits being paid annually.
Independent property investor *Brett McCallum said the scheme was a fantastic opportunity for Australians looking to benefit from property investment.
“I am huge fan of NRAS (National Rental Assistance Scheme) property at the moment as this gives you the best of both worlds.
“A negative geared property with positive cash flow that is subsidised by the Government.”
Mr McCallum said the NRAS Incentive, compared with a conventional residential investment property can provide a better cash return to investors than the receipt of full market rent.
He added the scheme offered investors an opportunity to have a positively geared investment, which he believes is far superior to negative gearing.
“I have never understood the concept of spending money to save on tax,” he said. “I like the fact what with a positive cash flow property you do not need to put your hand in your pocket each week for the mortgage.
“You can save that money and look at buying the next property.”
Mr McCallum said he has found companies such as www.saltairrealty.com.au and www.nrascentral.com.au beneficial when looking for positively geared properties to add to his portfolio.
The NRAS Scheme is expected to deliver up to 50,000 affordable rental homes by 2014.
According to the scheme’s website, if the investor reduces the rent by 20 per cent (may vary according to incentive provider) of the market rent, the government will provide an incentive of $9,140 per annum ($6,855 from Federal and $2,285 from the State governments). This payment increases in line with CPI and in 2010 it is $9,140.
Eligible tenants are determined on an income basis with the service industries such as police, teachers and nurses targeted as potential tenants.
For more information regarding the scheme go to: http://www.fahcsia.gov.au/sa/housing/progserv/affordability/nras/Pages/default.asp
Key facts about NRAS
- NRAS dwellings are private property. No Government holds caveats or claims over NRAS properties.
- NRAS homes can be bundled with non-NRAS properties: they may be only a minority of a new multi-storey development, with other properties sold off-the-plan to homebuyers and individual investors.
- NRAS dwellings can be sold without penalty during the 10 year holding period:
- a dwelling can be sold to another investor who undertakes to comply with NRAS obligations; or
- an equivalent dwelling can be offered as a substitute dwelling for the remaining part of the 10-year period.
- At the end of the NRAS 10 year period, properties revert to full control of the investor, who has no ongoing obligations to the Australian Government.
- Where dwellings are approved under NRAS, investors should be aware that this does not mean that the Australian Government endorses, guarantees or secures the investment in any way.
- The Australian Government has made a 10 year commitment to NRAS. The Scheme is managed and regulated under the legislative framework provided through the National Rental Affordability Scheme Act 2008.
* Contact Brett at firstname.lastname@example.org