Rising mortgage rates

July, 2017 by

There was a time when the Reserve Bank of Australia (RBA) moved the official cash rate up or down that most lenders would typically follow suit, shifting their mortgage interest rates in the same direction too.

Moreover, when the cash rate was increased, you could always rely on the lenders to pounce, passing the hike onto their customers immediately. This remains the case. On the flipside, when the cash rate is cut by the RBA, lenders often take at least a month to pass on the savings. We haven’t seen a cut since September 2016, but I can almost guarantee that if another cash rate cut eventuates, that the lenders will be slow to pass it on.

Out of cycle cuts

Yet despite the 10-month rate respite, the major banks have increased their rates over the past couple of months. Not only are they penalising investors, who provide public housing, but now owner-occupiers are taking a hit too. Even small business variable loans have increased.

But there is not point getting mad. Rather it’s time to get even with the lenders by shopping around for more competitive rates. Yet, a recent industry study reported that 90% of home owners don’t know their current interest rate[i].

In my book, an even bigger concern is that fact that the average Aussie pays up to 1.75% more interest on their home loan than the lowest rate available. That’s just over $5,000 annually for an average home loan in NSW of about $435,000. It will be less in Tasmania, Northern Territory and South Australia, but you get my drift.

Time to act

You would also be aware that if you have dealt with Our Broker before, that the lowest interest rate is not always the best interest rate. However, when we see research results indicating 90% of Australians don’t know their current interest rate, then it begs the question… when was your last finance review?

If it hasn’t been in the last 18 months, then it is easy to suggest that there may be additional savings we could find for you. While the cash rate has been stable since last spring, it has dropped 100 basis points (1%) in the last 2 years. Moreover, can you be certain your lender has passed these savings on to you, while there could be a more suitable mortgage with your name on it.

Sometimes we don’t even have to change your lender to secure you a better rate. Just ask us and we will negotiate this for you. We also know that your current lender won’t call you and tell you they are offering better deals to new clients. Loyalty to longer-term banking customers seems to have gone the way of the Dodo Bird and into extinction.

The Our Broker difference

Also, your lender will not tell you if there is a better deal with a competitor, be it a Big 4 bank, a credit union, building society or a regional bank. This is the job of a mortgage professional such as Our Broker.

There are many other lenders in the market place and it is our job is to put you in touch with the right lender who can provide you with the right mortgage for your circumstances. As part of our service, we can also guide you through your financial journey, as life and the world around us changes.

To find out how Our Broker can help you improve your financial position, call us today on 1800 913 677.

[i] www.thehippocket.com.au/australians-dont-know-mortgage-rate

Economic engine

July, 2017 by

There are hundreds of thousands of Australian workers who argue otherwise. These include architects, solicitors, builders, accountants, bookkeepers, painters, landscapers, mortgage brokers, bankers, public servants, quantity surveyors, valuers, carpenters, bricklayers, plumbers, as well as research analysts, real estate agents and property managers. Also don’t forget the mega hardware and supermarket chains and other retailers who are directly or indirectly indebted to the housing sector for their revenues. Real estate is big business and a vital cog in the Australian economy.

Moreover, we all need a roof over our heads, whether we’re renters or owner-occupiers. Yet listed companies come and go – anyone recall One.Tel or HIH, which took large wads of investor’s cash with them into liquidation?

Property investors have more control

July, 2017 by

By buying a quality, well-located property or by means of a shrewd ‘fix and flip’ renovation strategy, you can accelerate the rate of capital growth of your investment. On the other hand, the value of your equity investments are totally outside your control — it depends on how well the executives and directors who lead the company you own shares in, perform.

Unlike most businesses listed on the ASX, real estate is a vital commodity. Equally, I can’t agree with those who advocate that investing in property doesn’t help spin the wheels of our economy.

Defending real estate

July, 2017 by

It’s an age-old question: which is a better investment — property or shares. Angus Raine gives some reasons why property is a better investment than shares. Last month the value of ASX-listed stocks, as measured by the All Ordinaries Index, fell 3.1% in May 2017. If the Australian real estate market copped a monthly loss of this magnitude, there’d be hell to pay in the media.

For what it’s worth, the average for our combined city markets dropped by 1.1% in May, although it’s up more than 8% year-on-year, according to real estate data provider, CoreLogic.

It strikes me that with plenty of experts tipping rocky times ahead for shares that it’s an opportune time to remind investors why bricks and mortar makes for an excellent investment.

For starters, owner-occupiers dominate the real estate market, which means that if investors leave it in large numbers, it won’t necessarily collapse. This unique situation helps manage down the volatility in the property market. On the flipside, a mass exodus of skittish investors from the ASX would be disastrous for that market.

For what it’s worth, the value of the national housing market reached a massive $6.7 trillion at the end of 2016. There are 9.7 million residential properties in Australia. By comparison Australia’s superannuation pool is worth $2.1 trillion and listed equities $1.7 trillion.

The Federal Budget starts to take housing affordability seriously

May, 2017 by

The Federal Government through the May 2017 Budget has recognised the need to address housing affordability through several complementary measures that will address supply and demand issues, according to Angus Raine, Executive Chairman, Raine & Horne.

Super breaks for downsizers

There are two Budget initiatives aimed at freeing up housing supply, which could ultimately address housing affordability. The first initiative aims at encouraging older Australians to downsize out of big homes they no longer need. From 1 July 2018, individuals aged 65 and over will be able to make an additional non-concessional contribution of up to $300,000 to their superannuation fund from the proceeds of the sale of their home, if they’ve owned it for at least 10 years.

This initiative looks great on paper, however the immediate costs of buying a new home is prohibiting cash-poor empty nesters from selling an existing home. The trouble is downsizers will still need to pay stamp duty on the new home, moving costs, legal fees and so on, which represent immediate hits to their retirement savings. I realise that stamp duty is a state government impost, which limits what the Federal Government can achieve for older homeowners. However, this initiative means we are still only tinkering at the edges of the issue. Over 65s need stamp duty breaks now.

Vacant home tax on foreign ownership

The budget has targeted vacant dwellings owned by foreign owners. Foreign owners who do not occupy or make their properties available for rent for 6 months or more each year will be charged an annual fee of at least $5,000. This new tax has some merit but won’t probably won’t concern those foreign buyers who own higher valued properties in Sydney and Melbourne and to a lesser extent in Brisbane. This charge will seem like a drop in the ocean against the excellent growth returns they’re enjoying.

Assistance for first home buyers

To assist first home buyers entering the property market, the Federal Government announced the introduction of the First Home Super Saver Scheme on budget night, which will commence on 1 July 2017. The scheme allows first home buyers to use their superannuation fund as a vehicle to save for a house deposit.

The super-saver scheme will allow first time buyers to salary sacrifice $15,000 a year into their super account, capped at $30,000 in total. Again, this will only be a start for new home buyers, especially in Sydney, Melbourne and some parts of Brisbane. In Perth, Hobart and Adelaide, where median house prices are significantly lower than the east coast capitals, this initiative might help first timers accumulate a deposit for a property.

Budgeting can fast track Millennials into a first home

April, 2017 by

While many bemoan the uncertain future of home ownership for younger Australians, it seems many Millennials still aim to own the roof over their heads, writes Dawn Inanli, General Manager, Our Broker.

According to the recent report Beyond the Bricks from global investment bank HSBC, 83% of Millennials in Australia intend buying a home in the next five years. This is higher than the United States (80%), Canada (82%), the UK (74%) and France (69%). Yet the number of Australians aged 19-36 who currently own their own home is among the lowest.

Slash insurance costs with a bigger budget

April, 2017 by

A larger deposit will potentially assist first-time buyers to avoid or minimise the expense of Lenders’ Mortgage Insurance (LMI).

LMI is usually only charged if a borrower is unable to pay a deposit equivalent to about 20 percent of the property’s purchase price. It’s an insurance that protects the lender, not the borrower, if a loan is defaulted.

The amount of LMI payable is calculated on the purchase price of the property and the loan amount, and it can potentially cost buyers many thousands of dollars over and above the expense of buying the home.

Budget your way into a home

April, 2017 by

Interestingly, many Australian Millennials identify the challenge of saving for a deposit for a home loan as their biggest barrier to home ownership, but only 17% of Australian Millennials who intend to buy a home have a precise budget.

Establishing a budget is a vital step in the home ownership process. A budget shows you where, when and how much you’re spending and how to trim your expenditure so you can reduce your debts faster. If you’re not sure what’s involved in developing a budget, you can find an online budget tool on the Our Broker website by clicking here.

In terms of where you might be able to shave back some spending, the HSBC research says many Millennials are willing to consider making sacrifices to afford their own home. More than half (55%) of millennials who intend to buy a home would consider spending less on leisure and going out; 33% would be prepared to buy a place that’s smaller than ideal; and 21% would consider renting out one of their rooms. Eighteen percent would consider buying with a family member and 11% with friends.

Buying a house out of reach? Not if you think outside the (city) square

March, 2017 by

Buying a home has never been easy for most of us, but despite doom and gloom reports about housing affordability, the number of first home buyers grew by more than 23,000 – or 6% – during the 2016 December quarter, an increase of 0.5% on the same quarter last year.

The Adelaide Bank/REIA’s December Housing Affordability Report revealed the number of first home-buyers increased in all states and territories over the December 2016 quarter, a statistic that flies in the face of daily news reports claiming first home owners are being squeezed out of the market by investors.

“First home buyers now make up 13.8% of total owner occupied housing,” REIA President Malcolm Gunning said. “This rate has been dropping steadily over the past five years yet seems to have stabilised over the past 12 months.”

And while the size of the average loan for first home buyers increased by 1.3% over the December quarter to $323,633, there’s also no doubting house prices in capital cities, especially Sydney and Melbourne, have also sky-rocketed over the past five years. As a consequence, Raine and Horne’s Executive Chairman Angus Raine believes astute buying in regional areas  remains an affordable option for first home buyers –  if they buy in the right regions.

Angus said buyers should look out for regions with robust and diverse economies, strong employment prospects and population growth to ensure extra success. “These factors can help underpin decent long-term growth and rental yields and provide some cover against the effects of environmental influences that are often out of our hands such as flood and drought,” he said.

The impact of stamp duty – the typical stamp duty bill nationwide is now just shy of $20,000 per property transaction – on housing affordability also continues to hog the spotlight and news that from July this year, the Victorian state government will axe the tax for first homebuyers whose properties are less than $600,000 is a welcome move.

There will also be discounts for properties worth between $600,000 and $750,000, regardless of whether they are new or existing.

While this is great news for first home buyers Angus maintained that by relieving stamp duty pressures on empty nesters aged over 70 will also improve housing affordability by increasing the turnover of housing stock. “Empty-nesters are hindering the second home buyer markets in our major capital cities because the stamp duty costs for them to buy a smaller property or one in a different location are too prohibitive,” he said.

Demand set to increase in key South-East Asian real estate markets in 2017

February, 2017 by

Developers from China, Indonesia, Thailand and the Philippines are expected to reinvigorate the Malaysian property market in 2017, expatriate Filipino workers will drive real estate in the Philippines, and anti-corruption measures in Indonesia will boost that nation’s market, writes Michael Geh, Senior Partner of Raine & Horne International Zaki + Partners Sdn Bhd

Michael Geh, Senior Partner of Raine & Horne International Zaki + Partners Sdn Bhd

Michael Geh, Senior Partner of Raine & Horne International Zaki + Partners Sdn Bhd

Malaysia

About 47% of the population of Malaysia, or 14.3 million people, are aged between 20 and 49, and these people are seeking to buy their first homes. Therefore, the demand for starter homes will be high in 2017, yet Bank Negara Malaysia is expected to maintain its strict credit rulings because of Malaysia’s high household debts.

The government’s Perumahan Rakyat 1Malaysia (PR1MA) units and affordable housing built by private developers have only seen a 50% take-up, because many potential homebuyers were unable to obtain housing loans. We expect to see international developers coming into the Malaysian market to take advantage of PR1MA, and we will see mergers and acquisitions among local developers.

Philippines

Families of the 2.4 million Filipinos working overseas are expected to drive demand for real estate in the Philippines. These overseas workers earn monthly salaries of US$1,800 to US$3,000. Each month, they send money back to their families, who then invest it in property. This strong demand for housing has forged a robust construction and housing boom in the Philippines.

Indonesia

The Indonesian government’s efforts to rid the country of corruption are having a major impact on the nation’s real estate markets.

In the past 10 years, Indonesia’s Corruption Eradication Commission has created more transparency at the federal and provincial government levels. In addition, a broad tax amnesty has seen huge amounts of cash being pumped back into Indonesia from the Singapore banking system and other offshore tax havens. This cash is being converted into property assets by investors searching for yields and returns. Thus, 2017 will be a boom year for the property industry in Indonesia.

New laws are expected to be introduced this year allowing foreigners to take up ‘30 years plus 30 years’ of leasehold stratified properties such as condos and apartments in certain locations. The government has also launched a campaign to invite international investors to Indonesia. It wants investors to live, work and set up businesses there.

Top