The 2012 Federal Budget delivered good news for investors in Australian property. Last night’s announcement confirmed that despite cut backs in some areas to achieve a surplus, the Gillard government will continue to support the National Rental Affordability Scheme (NRAS).
NRAS is a government program which aims to stimulate private investment in the affordable housing market by rewarding investors who rent approved properties to eligible tenants at 20-25% below market rent. NRAS provides a tax-free financial incentive, estimated to be worth $119,833 tax free over ten years to investors in approved properties. The continuance of the Scheme will make it possible for many new investors to enter the property market for the first time, while more experienced investors will be glad of the opportunity to add to their NRAS property portfolio.
Minister for Housing, Mr Brendan O’Connor, indicated that funding for the $4.5 billion Scheme will be maintained, with NRAS set to deliver 50,000 new affordable rental dwellings by 2016. He also pointed out the success of NRAS so far. To date, 35,000 dwellings have been approved for participation in the Scheme, with 8,000 of these already constructed and tenanted. The remaining 27,000 are in various stages of development and allocation.
While NRAS is a federal government program to increase the supply of rental housing in Australia the program is delivering significant side benefits to participating investors. In many cases, the incentives make it possible for investors to enter the property market for the first time.
Paul Thewlis, Managing Director at Onyx, a property services company specialising in NRAS investment, summed up the government’s announcement as "the 2012 Budget essentially has NRAS on a 'steady-as-she-goes' course. The Gillard government has clearly recognised the benefits the Scheme is delivering to both Australians facing rental stress and to property investors. It’s great to see their continued long term commitment to the program after some adjustments to the timing of the roll-out in last year’s budget."
Reflecting on the Scheme to date, Mr Thewlis said "NRAS is really a win-win program. Essential key workers in our community are eligible for reduced rental rates, easing housing stress in Australian households. At the same time, the generous incentives offered to property investors under NRAS are allowing many people to enter the property market for the first time.
One really significant impact of the Scheme is that many property investments become cash flow positive – this means they start making money for the owner in the first year, rather than some years down the track."
Residential property investment has been the cornerstone of wealth creation for many Australian families for a long time. The fact that many new investors are entering the market is not only a plus for the investors themselves, but also for the Australian property market. Increasing the numbers of experienced and willing property investors will help to alleviate Australia’s chronic housing shortage.
Investors interested in the National Rental Affordability Scheme can find further information about the Scheme from the FaHCSIA website or from property investment services companies such as Onyx, which work with government agencies, not-for-profits organisations and individual investors to ensure a successful roll-out of the Scheme.
Onyx is a property investment services company specialising in the National Rental Affordability Scheme. Onyx offers investment property for sale and a host of related services, including legal advice, mortgage finance and financial planning. Working as an integrated team, Onyx's expert staff make building a property portfolio a smooth and rewarding experience for new and experienced investors.