Is your portfolio ready for the new financial year?

I don’t think I’m overstating the fact that the 2021 financial year is likely to be one of the most interesting any of us will experience in our lifetimes. 

This time last year, millions of businesses were being kept afloat by the impressive JobKeeper initiative as our national economy was battered by the extended lockdowns that coronavirus forced upon our population.  

We were also in the midst of billions of dollars of emergency financial measures to ensure that any economic recession was temporary, which indeed it ended up being.

This time last year, there was also plenty of doom and gloom about property markets as well, even though interest rates were sitting at history-making lows.

Most “commentators” were predicting big property price falls at the time with only a handful, such as PIPA Chairman Peter Koulizos, suggesting that property was much more resilient than most people realised, and history had shown strong price growth after previous economic downturns.

Well, he was right, with the latest CoreLogic data showing that national home values had annual growth of 13.5 per cent for the financial year.

The growth in Australian dwelling values was led by houses, which rose 15.6 per cent over the year, compared to a 6.8 per cent increase in unit values, with higher results still in some locations.

In Sydney, for example, the median house value increased 19.3 per cent over the financial year, with the median unit value also growing by 5.1 per cent over the same period.

Make time to review

These spectacular results over the past year means that many homebuyers and investors have seen their equity positions increase dramatically.

Indeed, some property owners may have hundreds of thousands of dollars in additional equity compared to this time last year.

But, even with these impressive yearly results, it’s always vital that property owners take the time to review their portfolios annually, with the start of a new financial year the perfect time to do so.

This review can not only update the estimated values of your property, or your portfolio, but can also assess other factors which are vital to successful property investment over the long-term.

For example, the start of each financial year is the ideal time to run a financial health check on your home loans to assess whether they are still competitive with the current rates on offer.

This assessment can also include checking whether better interest rates can be achieved with the same lender, or whether it might be worthwhile exploring refinancing to a new one.

Relatively new investors should also ensure that they have requested a depreciation report for their property before they lodge their next tax return. 

Tax depreciation on a residential or commercial investment property is a deduction against assessable income that allows the owner to reduce the amount of taxation payable, with the deduction based on the depreciating value of the property asset.

Depreciation can make a big difference to cash flow, especially in the first years of property investment ownership.

Strategic property investment doesn’t need to be overly complex, and it certainly should never be unnecessarily stressful.

However, one of the reasons why some people create portfolios with multiple properties, when others do not, is that they regularly review how their investments are performing – and proactively purchase property when they are financially capable of doing so.