If clients are considering investing in a property as an alternative to shares or superannuation, then what would be a short, considered response to the benefits of the NRAS program regarding head leases and:-
“Although the management fee is higher than normal, it also covers Landlords insurance and includes extra benefits negotiated by NRASthat assist Landlords. The rental is 25.01% below the market (but still kept in line with CPI), therefore the properties will always be in demand”.
There was no answer on this question when posed to a media marketing “property” “expert” whose name I will not provide.
Answer from Govt. (relevent authority):-
“In Queensland for example, the state government maintains a list of NRAS-approved tenants, who must meet strict eligibility requirements.
When a vacancy occurs, eligible rental applicants are referred to approved tenancy managers who manage NRAS properties on behalf of owners.” & attached was a mispelled National generic brochure written in typical government/insurance language.
The Australian has continued its justified attack on rorts in the $4.5 billion National Rental Affordability Scheme (NRAS), which has seen large sums of taxpayer money used to subsidise rental accommodation for international students.
The Australian newspaper has uncovered that half of all university accommodation built under NRAS nationally, and 70% in Victoria, has been let to foreigners, raising legitimate concerns over the efficacy of the Scheme:
The figures supplied by the Department of Social Services reveal that of the 622 taxpayer-assisted units built on or near university campuses in Victoria, 422 of them – 70 per cent – are filled by international students…
The Department of Social Services said $147 million of federal funds had been spent on the NRAS so far, used to build some 20,000 units. As the incentives on each NRAS unit run for a decade, the ongoing subsidy will cost the government about $200m a year in coming years, rising as more housing is built…
While the intended beneficiaries of the policy were low-paid workers, the fact that the incentive remains the same regardless of how many bedrooms are in the property has made it attractive to universities and student housing providers. Students – including foreign students often backed by wealthy families – usually don’t breach the $47,000-a-year earnings cut-off.
Using taxpayer funds to subsidise foreigners is ridiculous, and the funds should instead be targeted at low income locals. The incentive structure of NRAS should also be changed to encourage the construction of larger apartments and houses suitable for local families, rather than shoebox-sized apartments for students.
That said, I would hate to see NRAS abandoned altogether because of these rorts. Given many lower income Australians are unlikely to ever be able to afford their own home, as well as the busted state of Australia’s rental market (whereby insecure one-year rental terms are commonplace), there is scope for the Government to assist in the provision of longer-term affordable leases that provide renters with greater security of tenure.
NRAS is not bad in principle, rather it has been implemented poorly with bad incentives built-in. Fix these incentives, and ban provision to foreigners, and you have the makings of a good Scheme.
Obviously, freeing-up the supply-side of the housing market would also help to ameliorate some of the pressures emanating from high rental costs, and should also be pursued with vigour by the various levels of government.
Creditors are set to lose millions of dollars following the collapse of a group that allegedly guaranteed tenants for rental properties.
Four related entities of the Charterhill Group owed $19.1 million dollars when they entered insolvency in January-February 2014, according to documents recently filed with ASIC.
In total, only $89,000 of that has been recovered or less than 0.5 cents in the dollar.
The Adelaide-based group offered a range of services including property management, real estate marketing, mortgage broking, contract negotiation and SMSF advice.
Charterhill director George Nowak filed a petition for bankruptcy in July 2014.
Fairfax Media reported last September that Mr Nowak allegedly claimed that he could help property investors benefit through the National Rental Affordability Scheme.
“Investors in Charterhill, some of whom have lost their life savings, say Nowak told them tenants for their investment properties, which they had leveraged through their DIY super funds, were guaranteed under the National Rental Affordability Scheme [NRAS],” Fairfax reported.
“Nick Piantadosi, 55, a sales representative, claims he invested $250,000 after Nowak came to his Adelaide home and told him he could guarantee 10 years of NRAS accommodation for a flat in Melbourne.”
The Department of Social Security, which runs NRAS to help house the disadvantaged, told Fairfax that it had had no involvement with Nowak or Charterhill.
Documents recently filed with ASIC give a more detailed picture of the debt positions of the four companies in the Charterhill group.
One of the companies, Nova Real Estate, owed $7.6 million, according to a report filed by the liquidator, Andrew Heard of Heard Phillips.
Mr Heard’s presentation of accounts and statements, which covers the period between 25 February 2014 and 24 February 2015, shows he recouped only $49,500 during that time.
Mr Heard is also acting as liquidator for one of the other related entities, broking firm Lending Solutions International. It has $10.2 million in debts, of which $31 has been recovered.
Michael Basedow of Pitcher Partners is acting as receiver and manager of the final two entities: EJ Property Developments and Financial Wellness.
Those two companies owe a combined $1.3 million but have only collected $39,000 in payments, according to Mr Basedow’s presentation of accounts and statements.
[Related: Court orders Nowak to surrender passport]
|As many of you will have heard, the Government has announced in the Budget on 13 May 2014 that it is not proceeding with Round 5 of NRAS. This has brought forth several questions regarding remaining NRAS allocations as well as properties already under the scheme.To assist with any concerns, below is an extract from the Government Website which may provide some clarity on any questions you may have.|
|Extracts from the Department of Social Services Website:What was the outcome of Round 5 applications?
The Government announced in the Budget on 13 May 2014 that it is not proceeding with Round 5 of NRAS. This means that no incentives will be allocated for Round 5.Will there be any future rounds?
There are no funds for future rounds at this time. Any decision regarding future funding rounds is a decision for Government.
Why couldn’t the scheme be fixed and incentives offered?
What does this mean for me as a current investor in the scheme?
With the axing of the National Rental Affordability Scheme (NRAS), many negatively impacted rental areas may return to normal, according to a leading economist.
Speaking with Residential Property Manager, senior economist at Australian Property Monitors (APM) Dr Andrew Wilson said some areas had seen damaged rental markets since the introduction of NRAS.
“NRAS was an initiative by the Rudd government to improve accessibility to affordable housing. It provided a bonus to builders who provided less than market-based properties for rental.
“We’ve seen some markets where this has had an effect on overall market activity,” said Dr Wilson.
“With smaller markets, tenants usually gravitate toward more affordable subsidised NRAS properties, which has affected the private rental market.”
Dr Wilson said government interference in the property market is never welcomed, and that schemes such as NRAS typically cause more damage than they fix.
“I’m never a big believer of government interference in the property market – they general follow the rule of unintended consequences and they can tend to have a flow-on effect,” he said.
“I’m not quite sure NRAS provided the outcomes it was supposed to. I don’t think its [removal is] a negative for rental markets, but more so for the developers who are taking advantage of those government subsidies.”
In the May 2014 Budget, the government decided to not go ahead with the fifth round of NRAS funding.
Incentives already allocated through the scheme will continue to be paid for up to ten years as long as eligibility requirements are met and homes in the construction pipeline are built according to agreed timeframes and in agreed locations.
Investors in dwellings that are currently rented as part of the scheme will not be impacted. For dwellings not yet delivered, investors should discuss the progress of the project with the developer.
Current NRAS tenants and existing tenancy agreements will not be impacted by the decision not to offer any incentives under Round 5. Homes currently rented through the scheme will continue to be paid NRAS incentives, subject to the requirements of the scheme continuing to be met.
How NRAS was supposed to work (script 2009 by http://www.ljgrealestate.com.au/index.php?lan=ch)
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