Housing scheme wins over investors
The National Rental Affordability Scheme is not only providing housing but also proving attractive for mum and dad investors, writes Property editor Michelle Hele
IT MAY have had a shaky start and a blacklist discouraging banks from lending money for its properties caused some angst late last year, but the National Rental Affordability Scheme ( NRAS) appears to have weathered the storms and found traction for residential investment.
According to the latest figures, Caboolture has the highest number of NRAS incentives allocated so far, with 105 properties.
In terms of reserved allocations (when developers have applied for allocations in the scheme but they have not yet been built) Chermside tops the list with 380 allocations reserved as at January.
Under the NRAS program, investors get tax incentives for renting out properties at 20 per cent below market value.
Eligibility to rent the properties is based on income.
Analyst Diana Howes of Resolution Research says while she was sure some NRAS properties had been onsold, there had not been enough transactions to date to determine whether the scheme added capital value to the properties.
But she believes anecdotally, it would be an in-demand asset as NRAS has been shown to provide superior guaranteed returns.
She says it is not a simple financial model, but there has been strong evidence of uptake over the past six to seven months.
‘‘It is basically cash flow positive from day one and year one. It is probably as bullet proof as it gets,’’ she says.
Howes says the Government has an agenda of providing affordable housing for people and this was a way to make it happen.
She says it is not social housing, but a commercial earning vehicle.
‘‘In Queensland, we have estimated that there are 94,400 key workers who qualify for NRAS, 76,000 students and then, within greater Brisbane, 170,500 people have an immediate need for affordable housing options,’’ she says.
‘‘It is a more cautious investor who is looking for a long-term rental yield (who are attracted to NRAS).
She says she would like to see an extension of the scheme.
Andrew Scriven of Colliers International says demand has been strong for NRAS properties which they have been involved with.
Colliers International recently received five allocations on a project and sold them within a week.
Scriven says while originally it was thought the properties would appeal to superannuation funds and big investors, it had proven to be more enticing for ‘‘ mum and dad’’ individual investors.
He says the buy-in price was generally in the affordable price range because for NRAS properties to work in terms of tax breaks, they needed to cost purchasers between $300,000 and $450,000.
He reckons once it gets to about $500,000 it is not as enticing.
‘‘It is a fixed amount you get as a tax credit. A higher purchase price really doesn’t work,’’ he says.
Reports so far from some investors is that they are seeing returns of potentially up to 7 per cent.
According to Colliers International, rental yields in Brisbane are high for apartments. Brisbane yields are currently about 5.6 per cent – the highest of capital city markets.
It also found affordability was at its highest levels since the December 2009 quarter, with Brisbane becoming more affordable than Adelaide.