Full-service agents have the edge as speculation about negative gearing grows

Demand for investment-grade property in Melbourne is set to escalate as speculation grows about possible changes to Australia’s negative gearing policies for residential investment.

The ongoing conjecture about changes to the tax treatment of investment properties is shining a spotlight on the market advantages of full-service real estate agents.  “One-stop” agencies, such as Nelson Alexander, offer services in property management and lettings, as well as expertise in sales and other specialised niches of residential real estate.

Federal Labor leader Bill Shorten has proposed sweeping changes to Australia’s existing negative gearing taxation policies.

The Turnbull Government is also reported to be looking at modifying negative gearing tax concessions, which allow taxpayers to claim deductions on the losses incurred on a rental property against their income.

The key changes, as proposed by the ALP, are that negative gearing would only be available for new dwellings, that existing negative gearing policies would remain for all existing residential investors and the new policy would be implemented from July 2017.

The most critical consequence of any amendments, if implemented, would likely be a surge in the purchase of established properties as investors flooded the market before the cut-off date.

“Any changes to negative gearing are unlikely to be retrospective, so there is likely to be a lot of enthusiasm from new investors to get in and buy some existing real estate,” says Nelson Alexander Sales Director Arch Staver.

If there is an upsurge in buying investment property, accessing a well-connected local agent with substantial listings of properties with good capital growth prospects and tenant appeal, as well as a track record in managing rentals, will be crucial.

Mr Staver believes that using a full-service real estate agent is becoming more critical in the current changing environment.

Nelson Alexander has 15 offices including, Ascot Vale, Brunswick, Carlton North, Coburg, Docklands, Essendon, Fitzroy, Flemington, Ivanhoe, Keilor East, Kew, Northcote, Pascoe Vale and Preston. The company provides services in property management, managing more than 12,000 properties, as well as in sales. In addition to these core benefits, it recently established an Owners’ Corporation division that delivers management services and administrative support for body corporates.

Nelson Alexander’s head of property management for the inner-city, Grant Gifford, says the Owners Corporation division was launched following many enquiries from landlord clients.

Mr Gifford says continuing conjecture about changes to negative gearing and suggestions that existing investors will be grandfathered could generate “a bit of a rush to buy something in case the rules change.”

In this environment, he adds, a full-service agent adds value because of its large database of prospective tenants, capacity to quickly let properties and maintain low vacancy rates and knowledge of market rents.

“When tenants are vacating, our landlords will often ask for an update on the rental market,” Mr Gifford says. “We quickly provide this need-to-know information, and we can also provide a sales appraisal on a property.”

Nelson Alexander is on-trend with market rents as the company continually reviews rents and tenancies on properties under management. As a wholly-owned real estate business it is also able to refer tenants to rental properties being offered through any of its extensive network. This typically doesn’t happen with franchised real estate offices.

Nelson Alexander generally reviews rents once a year. A property manager will look at the state of the current market and compare this to the rent that tenants are paying.

Mr Gifford says some landlords shy away from regularly reviewing rent or feel awkward about asking for more money.

But he stresses that good quality, educated tenants will pay market rent – “they won’t pay above market rent, but you don’t need to discount to get a good tenant.”

Mr Staver says a full-service agency takes a far more proactive approach to property management than companies that only provide rental services.

“We try to get on the front-foot and encourage tenants to explore broader parameters, which is not the traditional way of running property management,” he says.

“The traditional way is to put an advertisement up, hold an open for inspection and wait for someone to say, “I’d like to lease the property.’

“We take a more sales-oriented approach to property management. Our staff are trained so that they will advocate for your property.

“And, when you have more than 12,000 properties under management, you are clearly going to be speaking to more prospective tenants.”