National Rental Affordability Scheme opportunities for NSW and Queensland investors

Investors in NSW and Queensland will have the opportunity to acquire more than 10,000 properties that qualify for the government’s national rental affordability scheme (NRAS) following the launch of the latest round of the program.

The two states have received more than half of the 17,000 incentives including for properties to be built in areas impacted by floods.

According to the latest government records, 54 applications have been approved to build a total of 4,800 dwellings in NSW, taking its total since the inception of the scheme to 6,800.

The most successful NSW applicant is property developer Frasers, which has been granted a licence to build 828 dwellings.

In Queensland, 62 applicants have been approved to build a total of 5,700 dwellings with the not-for-profit Queensland Affordable Housing Consortium granted a licence to build over 1,300 dwellings.

The state has been the biggest beneficiary of the scheme to date with 11,200 properties qualifying for government incentives.

Applications to build 2,300 dwelling have been approved in Western Australia (taking the total to 5,000) and over 1,000 in Tasmania (a total of 1,600). Around 900 qualifying homes will be built in Victoria taking the total to 6,900.

Ruby Janssen from Onyx, one of the largest sellers of NRAS-qualifying properties, says the schemes appeals to investors who want to invest in a positive cash flow property but still receive the negative gearing benefits.

“An NRAS property is really good for a first time investor as it does not put strain on their cash flow.

The scheme offers annual incentives for 10 years with the two key elements being a commonwealth government incentive currently of $7,143 per dwelling per year as a refundable tax offset or payment and a state or territory government incentive currently of $2,381 per dwelling per year in direct or in kind financial support.

According to Janssen, owners of NRAS properties receive around $60 less per week in week, but are compensated by receiving $183 dollars a week in tax-free rental income.

Realestate.com.au is advertising off-the-plan NRAS properties starting from just over $220,000 for a studio apartment in the Newstead on the Brisbane River.

An apartment block featuring eight two-bedroom apartments in Deception Bay, Queensland is asking $2.12 million.

The government has committed to support 50,000 NRAS properties, with up to 35,000 dwellings available to rent across the country by June 30 2014, and the remaining 15,000 available by June 30 2016.

To date 4,178 privately owned dwellings are tenanted or available for rent across the country under the scheme.

A couple with three children earning up to $104,913 per annum are eligible to rent an NRAS dwelling, while the lower limit starting at around $60,000 for a two-adult household.

The privately owned developments range from studio apartments to large family homes, and are located in areas identified by state and territory government partners where affordable rental accommodation is most needed, particularly in areas with employment, transport, schools and other services available nearby.

The scheme applies to newly built properties which are then tenanted to low and middle income earners.

Properties must be leased at 20% below the market rate.

According to real estate groups specialising in NRAS properties, the major banks are starting to get on board with financing the purchase of qualifying properties.

Westpac and NAB already providing financing for the scheme while ANZ told Property Observer in September it was looking at ways to support government initiatives to house low-income earners.