Housing affordability is a significant problem for many Australians. In response to this national issue, the Australian government collaborated with the state and territory governments in 2008 to implement the National Rental Affordability Scheme, which aims to address the lack of affordable rentals by providing financial incentives. These allow qualified tenants to rent properties at 80% or less of the market rent, for up to 10 years.
This scheme has been advantageous to tenants, but what exactly does it offer investors?
Buyers can purchase NRAS properties through an approved participant, and they are then paid an annual subsidy by the government via the NRAS participant, if the dwellings are leased out to eligible NRAS tenants.
This subsidy is calculated based on the rents component of the Housing Group CPI, which in turn refers to the weighted average of all eight capital cities. Investors are also able to apply a refundable tax offset on the rent they earn from their NRAS properties – and as a result, they have a chance to earn considerable profit.
The Port Macquarie region is a holidaymaker’s destination that has been drawing visitors and retirees for a long time. With properties that are relatively affordable, especially when compared to Sydney, it has become an ideal spot to establish the NRAS development Poet's Ridge.
“There is a wide demand for affordable housing, in particular affordable rentals, in the region, and Poet's Ridge is the only NRAS development in the area that rents affordable housing,” says Paul Adams of AMG!.
“It has a range of 2-3 bedroom freestanding houses and duplexes, and attracts lower income renters who qualify under the scheme. Right now, the attraction for renters is that rent is subsidised and they pay 80% or less than that of the market rent – for example, if the market rent for a 2-bedroom attached house is $375, then a renter will pay $300.”
The development is located in the suburb of Kendall, located around 20 minutes away from the Port Macquarie CBD. This makes it very convenient for working professionals, which helps to spur strong demand. This, coupled with high rental yields, is putting Poet's Ridge on the radar for investors.
“Poet's Ridge is really at the top of the table in terms of NRAS returns – investors can expect consistently high returns of over 6%,” Adams says.
“What makes Poet's Ridge good for the investor is the government subsidies, as they more than makes up for the difference [in rent]. You combine that with projected capital growth, and the story is quite a strong one!”
