Posts

market

Why there is never a market equilibrium

The market is currently in a sweet spot between market feast and famine.

market

When it comes to property markets, there is usually never a perfect equilibrium. 

What I mean is there is usually an oversupply or undersupply stock situation, such as too many new units being built. 

In the finance sector, the same goes, with lending either constricted or overflowing. 

Both of these factors have an impact on buyer and investor sentiment, but also the sentiment of vendors and selling agents, too. 

Plus, there are seasonal factors to consider such as winter, which is usually a period of slower market conditions. 

Of course, this is purely psychological because the time of year should have no impact on market activity. 

Also, there is the tax season when investors in particular are waiting on insights from their accountants to better understand their numbers, and whether they can afford to buy another property for their portfolio.

Changing times

So, it stands to reason, that July is usually a lower listings month because it’s the dead of winter, and not many people want to buy or sell. 

However, new SQM Research has highlighted that the number of listings, while still seasonally low, have reduced significantly from the same period last year in some locations. 

In fact, according to the research, year-on-year Sydney’s listings declined by 10.5 per cent, Darwin declined by 4.8 per cent and Perth by 2.6 per cent.

One of the reasons why this could be happening is that some vendors still have their heads in the property clouds, and aren’t prepared to list their properties until prices mystically go back to the levels that they were a few years ago.

Also, because of lower interest rates, more people are able to hold on to their properties, rather than selling because of cash flow problems. 

Going back to my original statement, though, currently there is an imbalance of buyers in my opinion.

That’s because many were stuck on the sidelines as they couldn’t secure finance until the serviceability calculations were reduced recently. 

Some of them now have the “fever” and are just buying any old thing, while the smart ones are being strategic with their property purchases.

The first state of play is where bidding wars take place, which is starting to happen more and more at auctions. 

Another sign of the market changing can be evidenced through my regular attendance at housing commission auctions in a suburb of Sydney. 

Over the past four months, attendance has gone from being half-full to standing room only. 

Plus, the sale prices of those properties have skyrocketed from about $388,000 to $476,000 in the space of a few short months. 

Another sign of market change is that the volume of listings with no price guides or advertised as “offers over” are also on the rise, because sellers and agents recognise the equilibrium is starting to swing back in their favour.

However, it’s not there yet. 

In fact, I believe we are now in a unique position that will see, by years’ end, the pendulum swing significantly back towards sellers.    

Many fundamentals are pointing towards stronger market conditions next year due to higher government spending on infrastructure, lower interest rates as well as incentives such as the first home buyer deposit scheme, which are all aimed at stimulating our economy.

That’s why the equilibrium is still on the side of buyers, even though listings aren’t exactly flush. 

Within six months, though, the number of buyers will have supercharged, and they will be competing against each other to purchase property – regardless of its quality. 

The smartest investors won’t delay before making their move. 

Source: The Real Estate Conversation 21st August 2019 https://www.therealestateconversation.com.au/blog/victor-kumar/why-there-never-market-equilibrium/victor-kumar-blog/victor-kumar-why-there-never

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

deposit

7 Tips For Saving Your Deposit

Investing in property is an enterprise that can take a lot of research, advice and sometimes even trial and error to get off the ground. And, most importantly, it takes money. There are many costs involved when it comes to buying a property, one of which is the initial deposit you’ll need to put down. Generally, most buyers aim to save or access a deposit of 10% of the purchase price, although a deposit of 20% is ideal if you want to avoid lenders mortgage insurance (LMI).

deposit

Prime Minister Scott Morrison recently outlined a First Home Loan Deposit Scheme that could help some buyers get their property goals off the ground with a deposit as low as just 5%. While the plan is intended to help first home buyers enter the property market, not investors, this could be a step towards rentvesting for those who are keen to leverage the scheme. For many, the prospect of saving a property deposit is daunting and is something they focus on once they are closer to wanting to buy. But to give yourself the best chance of growing the biggest possible deposit, you should ideally start planning and saving at least two years before you hope to buy.

This would mean you could save a greater amount and wouldn’t need to borrow as much from a bank or lender, which would serve you well in the current climate in which many investors are hampered by strict lending conditions.

 It would also increase your borrowing power and expand your loan options by allowing you to demonstrate a positive savings habit to potential lenders. In addition, if you could avoid having to pay the fee associated with LMI – which is a insurance policy that protects the lender in case of default – you could stand to save thousands of dollars.

For many investors-to-be, saving a property deposit can be a difficult prospect, especially if you find that you run out of money before you run out of month as it is. But with our tips for saving, you could be well on your way to landing your first investment property sooner rather than later.

1. Get budgeting

Budgeting sounds like the obvious tip – and it is. However, clear, strategic budgeting is about much more than simply saying you will put ‘X’ amount into your deposit savings every pay period. Instead, see if you can work out a budget that includes paying yourself a regular amount – enough to cover your essential bills, plus a discretionary spending allowance. You might find that it leaves you with more to set aside than your initial ‘X’ savings amount. To boost this value, look for opportunities to skim costs, such as by cooking more and eating out less. Go on a spending freeze for a month, when you don’t spend a cent on anything unless it’s absolutely necessary. Opt for Netflix and homemade comfort food rather than going out for dinner and a movie. In other words, make a few small sacrifices now to reap the rewards later.

2. Reduce your rent

This can be one of the most effective ways to save for a property deposit, as paying rent can take up a huge chunk of your earnings each month. While it’s not feasible in every situation, there are various ways to reduce rent, such as by housesharing, moving back in with your parents, or moving to a cheaper location. It might be slightly painful in the short term, but keep your eye on the prize: property ownership awaits.

3. Consolidate debts and credit cards

Consolidating debts and credit cards can reduce your repayments and interest, which frees up cash that can be redeployed into your savings account. Not only that, but the less debts you have, the more favourably your bank will look upon your home loan application. Banks offer debt consolidation or personal loans that allow you to combine these payments into one; or you can just make a plan to carve through your debts and smash it as swiftly as possible.

4. Simplify your life

Simplifying sounds… simplistic, but foregoing some of the little things will also help you save money. For instance, if you spend $100 over the course of the week on buying beverages – a coffee on the way to work or a beer at the pub after you’ve knocked off – then that’s $5,000 you’ve frittered away in a year alone. For every meal out that you would have bought, put that money into your savings. Work out what other things you can cut back on, and put the money not spent into your savings.

 

Do you use your gym membership, for instance? Could you use the exercise equipment in a park instead, or do you have equipment at 

home? Remember, cutting back to save a deposit doesn’t mean you have to live a completely spartan lifestyle, but it will be worth it when you reach your end goal.

5. Be a mindful consumer

Really think about your usage of fans, heaters and air conditioning throughout your home – energy bills can chew through thousands of dollars per year, and being smart about your consumption could see you make some significant savings. Could you hang your clothes out to dry instead of using a dryer, and wait to do your laundry when the load is full instead of in smaller batches?

6. Access the First Home Owner Grant

If this is your first home, you may be eligible for the First Home Owner Grant – however, there are conditions to be met, depending on the state or territory in which you intend to purchase the home, and the price of the property. Requirements vary, but generally you need to be a permanent resident or a citizen of Australia, and intend to buy the property as an individual and not as a corporation or trust. The applicant must live in the property as their principal place of residence within 12 months of the purchase, and remain there for at least 12 months.

7. Seek support

Some of the ways that family could help you get a leg up on the property ladder include lending or gifting money towards a deposit, or agreeing to go guarantor on the loan (using a proportion of the equity in their own home or investment property towards your property loan). As guarantor, they also become responsible for making loan repayments in case you are unable to do so; thus, you become a less risky prospect for a lender. The best way for this situation to work is when there is a win-win for both parties – for instance, if your parents provide a 20% deposit, then they retain 20% of the property’s value. Look for ways to exchange value, remembering that it might not always be monetary.

Applying these tips and learning how to save will not only help you get started in property investment but could also result in some important lifestyle changes that could benefit you in the long run. Not only will you be able to work towards saving a deposit but you’ll also be ready for a rainy financial day.

Source: Your Investment Property 25th July 2019 https://www.yourinvestmentpropertymag.com.au/property-tips/7-tips-for-saving-your-deposit-264440.aspx?utm_source=GA&utm_medium=20190728&utm_campaign=YIP-Newsletter-Opener&utm_content=&tu=

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

 

rentinvesting

This is what first home owners need to do to get into their dream homes

Under current market conditions, purchasing a home in idealistic locations can prove quite tricky, especially for first home buyers.

rentinvesting

It is a great strategy for first home buyers looking to get into the market when they just don’t have the budget to buy their dream home.

So, they invest in more affordable markets and rent where they like to live while their investment is working for them to build up their deposit power.

For example, one young couple I’ve worked with, Tara and Martin, lived in Sydney’s expensive Inner West but could not afford to buy their $1.5 million dream terrace where their repayments would have been more than $6000 per month.

So, they adopted rentvesting and continued to rent in the Inner West for $550 a week.

They then strategically invested in Dapto and Adelaide where both property purchases were under $400,000.

In three years, they made just under $300,000 in equity which will go to their deposit power back in Sydney when the time is right.

If purchasing your dream home lead to mortgage repayments $5,000 a month, but renting in the same area had rental repayments of $2,500 a month, you would be left with $2,500 per month to invest.

To get started as a rentvester, firstly, you must get access to a deposit (as you would if you were purchasing their dream home).

The deposit can be obtained by savings or using your parent’s equity through parent pledge type structures.

You’ll need 20 per cent of the purchase price, plus stamp duty. It’s best to speak with a broker about the options and exact figures for how much is needed.

Next, it’s crucial to set a budget for buying and development an investment strategy, either yourself or with the help of a buyer’s agent.

When selecting a buyer’s agent, avoid the spruikers and cowboys of the industry by only working with firms who do not take kickbacks or buy off the plan.

Finally, you’ll need to pick your market. The best thing to look out for here is a market positioned for good growth in the first 3-5 years so you can build deposit power.

Look for areas driven by infrastructure, rental demand, employment and population growth.

My team like to look at areas down around South Adelaide such as Woodcroft and Morphettvale where there are markets you can buy in for under $400,000.

The Suburbanite team also look towards Flynn, in the ACT, which is gentrifying and starting to go through the urban renewal process.

What happens after selecting your market and purchasing a property for rentvesting?

It’s important to be patient while the value of the property increases with the market and remember to pay down as much extra off the loan as you can so you can build your equity even faster.

Once you have a good amount of equity, you can sell it to cash out of leverage it to buy your own home.

Some rentvesters will even do this 2-3 times before cashing out and buying their own home to really double down on their deposit power.

Successful rentvesting doesn’t come easy. Here are my top tips to successfully rent-vesting:

  • It HAS to be a growth market driven by employment, infrastructure and population growth
  • Avoid new or off the plan as they have lending risks, are slower to grow in value and can be at risk of over supply
  • Don’t be tempted to sell the property too soon, 12 months is not long enough to build equity in the property market and you typically need to work on a 3-5 year strategy. So be patient…

 

Source: Your Investment Property 12th June 2019 https://www.therealestateconversation.com.au/blog/anna-porter/this-what-first-home-owners-need-do-get-their-dream-homes/rentvester-tips/investor

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

first home buyer

Housing Minister Says Now Is Right Time To Buy

Housing Minister Michael Sukkar urged first-home buyers to try and grab a property now before the introduction of the First Home Loan Deposit Scheme in 2020.

“If you’ve got an opportunity to get a foot in the market before then, you should take it, given I think the market is starting to improve. People who buy now, I don’t think, will regret it at all,” Sukkar told The Australian.

The Minister spoke as the government polishes the loan scheme, which will enable first-time buyers to purchase a house with as little as a 5% deposit.

The market conditions were possibly the “best ever” for first-home buyers, according to independent property economist Andrew Wilson.

“It’s a very good scenario for first-home buyers. They’ve still got those stamp duty concessions in NSW and Victoria, where they don’t have to pay stamp duty on a house worth $600,000 in Victoria, and $650,000 in NSW,” Wilson said.

Markets, especially in Sydney and Melbourne, were “feeling the bottom” but would soon rise up, according to Wilson.

The Morrison government also put more “confidence” in the market, according to Sukkar.

“We’re seeing green shoots in Melbourne and Sydney in the last quarter and I think with low-interest rates, with APRA reducing serviceability buffers, all those factors combined to confirm that optimism,” Sukkar said.

Ninety-one percent of first-home buyers believed owning a property is now within reach, compared to only 80% the same time last year, according to The Commonwealth Bank (CommBank).

Source: Your Investment Property 22nd July 2019 https://www.yourinvestmentpropertymag.com.au/news/housing-minister-says-now-is-right-time-to-buy-264647.aspx?utm_source=GA&utm_medium=20190721&utm_campaign=YIP-Newsletter-Opener&utm_content=FB30EBA4-A343-4537-A961-B966FABA4B8F&tu=FB30EBA4-A343-4537-A961-B966FABA4B8F

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

home ownership

Young people prioritising home ownership over travel, career, says research

A new survey from comparethemarket.com.au has found Australians under 30 consider buying a property to be the third most important ‘life factor’ behind health and family.
young people

Australians under 30 consider home ownership to be more important than other life factors such as their career and travel, according to new research.

A survey commissioned by comparethemarket.com.au has revealed that younger demographics rate buying a property as the third highest life factor behind health and family.

Nearly 1300 Australians were asked to consider how important certain ‘life factors’ were on a scale of one to five, with 1 being not important and 5 being very important.


At a glance:

  • A survey commissioned by comparethemarket.com.au has found Australians under 30 are prioritising home ownership over other life factors such as career and travel.
  • Of the 11 ‘life factors’, home ownership came in third behind health and family.
  • Other demographics also rated owning a home highly in the survey.

These were broken up into 11 categories – health, education, home ownership, career, the environment, wealth, travel, car ownership, their partner, friends and family.

The results revealed that under-30s rated owning a house at 4.0, the third highest life factor.

Following this was accumulating wealth (3.9), career (3.9), education (3.8), car ownership (3.6) and travel (3.6).

Owning a house was also ranked highly across all respondent pools, with most groups valuing this life factor at the same level as under-30s.

According to the results, 30 to 50-year-olds ranked home ownership at 4.0, while 50 to 70-year-olds also ranked it 4.0 and over-70s ranked it 3.7.

Rod Attrill from comparethemarket.com.au said the data showed that many young Australians were willing to compromise on travel and even car ownership to be able to afford their own home.

“Owning your own home has always been part of the Australian dream,” he said.

“When undertaking such a huge financial investment, it is vital to shop around to find a home loan that fits with your lifestyle and budget.”

More enquiries for lower-cost new builds

Lower-cost new builds are the best way to help people get into their first home, according to Thrive Homes general manager Patrick Eather.

Thrive Homes, which specialises in reduced cost project home builds, has seen an uptick in enquiries and has been given a further boost from the First Home Buyers Loan Scheme announced as part of the election campaign and speculation around falling interest rates.

“We saw on average, a 50 per cent increase in our usual display visitation numbers in the weekend following the election and in the last two days alone we have taken a handful of deposits,” he said.

“First home buyers are excited by the proposed changes to APRA guidelines announced last week which will put more money in their pockets, but it’s even more important to make sure that they have access to high-spec homes at affordable prices and that’s where we come in.”

Source: The Real Estate Conversation 31st May 2019 https://www.therealestateconversation.com.au/2019/05/31/young-people-prioritising-home-ownership-over-travel-career-says-research/1559260971

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.

Big “Hidden” Costs Of Buying A Property

We often tend to focus on the total property value when shopping for an investment property – or the deposit needed to secure it. But what are some of the other fees that get lost in calculation?
 
Source: Your Property Investment 23rd May 2019 https://www.yourinvestmentpropertymag.com.au/news/big-hidden-costs-of-buying-a-property-262589.aspx?utm_source=GA&utm_medium=20190528&utm_campaign=YIP-Newsletter-Opener&utm_content=&tu=

This article provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such as it does not take into account your personal circumstances or needs. Professional advice should be sought prior to any action being taken in reliance on any of the information.