Yo, Shorty

Tried to buy a car lately?

 

No chance, there is a 6-18 month wait.

 

Over the last 50 years, when you went to a dealership, cars were just sitting there waiting for you to walk in.

 

When you went to buy toilet paper or dog food, they were happily waiting for you on the shelf… oh the good ole days!!!

 

Today, every single economy across the world is plagued by shortages and dysfunction.

 

Everything in the world right now is SHORT.

 

If you own property, the question you need to know is ‘how did we get here?’, and more importantly… what now?

 

I will give you a clue.

 

First word Pan, second word, rhymes with Jeff Fenech.

 

During the two years of the pandemic, governments around the world imposed restraints on supply chains. Many countries across the globe were in and out of some form of lockdown. With industries shutting down for weeks to months.

 

As the world started to emerge from its economic hibernation at the beginning of 2022, it was game on!

 

We wanted everything and we wanted it all at once. We were booking flights, making reservations and partying like we thought we would in 1999.

 

Inflation is usually caused by immense pent-up demand and a shortage of supply, which in turn drives prices up. Late 2021 was the perfect melting pot for inflation – on a very global scale.

 

Inflation is also usually characterised by excessive wage growth, however, we have had weak real wage growth for over a decade now. Our high prices are the result of fiscal stimulus and shortages of materials and workers. These are supply constraints caused by the pandemic and the war in Ukraine.

 

So, as we take a bigger picture view of how we got here, you can see that many of these price increases are one-off or short-term reactions, and import prices will fall soon enough as pandemic disruptions and the war in Ukraine eases.

 

The Reserve Bank and its Chairman know this, and they know that the 5.1% inflation reading is a high number and one that long term must be brought down. The Reserve has a target for inflation of 2-3% a year, and just as the economy was below that target for six years, if we are above that number for a year or two, that’s ok as well.

 

In the meantime, if you would like to speak with one of our Lending Specialists about a loan to buy some lettuce, please reach out.

 

Kiril Ruvinsky

Should You Refinance?

With millions of Australian homeowners likely to be slugged with higher mortgage repayments due to the cash rate hikes, there’s one question on everyone’s lips. Is now a good time to refinance?

While it depends largely on your individual situation and goals, there are mounting reasons why refinancing should be on your radar. At the very least, now is a good time to review your home loan to make sure it still measures up. Here are a few things to consider.

Interest rates are likely to rise further

Reserve Bank governor Philip Lowe has made it pretty clear that more rate rises are inevitable. In fact, he’s indicated it’s not unreasonable for the cash rate to climb to 2.5 per cent. Those on a variable home loan are likely to feel the pain of each cash rate hike, as lenders pass on the increases and repayments go up.

When is refinancing worth it?

You’ve been with the same lender for a long time

For some, the thought of refinancing can seem all too hard, but if you’ve had the same home loan for several years, chances are you could be getting a better offer elsewhere.

You’ve never heard of a redraw facility or offset account

Nowadays, there are all sorts of loan features and tools to help you save interest and get ahead. Two popular choices are a redraw facility and an offset account. With a redraw facility, you can make extra repayments on your mortgage and save on interest, but still, access funds should you need them. An offset account allows you to deposit money into a transaction account that’s linked to your mortgage. Deposited funds are offset against your loan balance, reducing your interest.

Your situation has changed

If you’re earning more money, your financial situation has changed or have different goals than when you took out your home loan, these are all good reasons to consider refinancing.

Your debt is out of control

A popular reason to refinance is to consolidate debt. This involves refinancing your mortgage and using your equity to pay off your debt. There are pros and cons to debt consolidation, so it’s important to speak to us about whether it’s right for you.

You want to access your equity

You may want to use your equity for a big-ticket purchase, such as buying an investment property or renovating your home. Refinancing can help you achieve these kinds of goals.

Like to know more?

With so many changes to interest rates at the moment, now could be the time to consider your financial position and whether it’s worthwhile refinancing. We can help you work through how any additional interest rate rises would affect you and make sure you have the right home loan for your needs.

Contact Us Today.

Your Suburb Research Checklist

The golden rule in real estate is “location, location, location”, but how do you know a suburb is right for you when you find it?

Whether you are buying an investment property or a home, finding an area that meets your needs is paramount. Here are some things to consider when deciding on a suburb.

1. Access to amenities

In terms of lifestyle appeal and future potential capital growth, one of the key things to look out for is access to amenities. You’ll want to know there are things like schools, hospitals, shopping centres, parks, bike trails and walking tracks in the neighbourhood. If you’re buying a home, having amenities nearby will make life easier and more enjoyable. As an investor, these kinds of features will also be a drawcard for prospective tenants.

2. School zoning

It’s a good idea to pay particular attention to the local school catchment area. This can affect not only the capital growth potential of your property but also its reliability. Which public schools in the area are zoned for and what’s their reputation like? Are there private schools nearby that are highly sought after? Even if you don’t plan on having kids, you may want to rent out your home to a family one day and being close to reputable schools could make your property more appealing to them.

3. Transport links

Anyone who has ever commuted to work on public transport understands the importance of having efficient public transport close to home. Check the local bus routes and train lines when doing your suburb research. If there are limited public transport options nearby, at the very least make sure the property is well connected to major roads and freeways.

4. Future planning and zoning

Proposed infrastructure changes and large-scale residential developments could have a significant impact on the value of your property and its rentability – think suburbs that become saturated with townhouses and multi-storey apartment blocks. Research whether there are any zoning changes looming or major government projects in the pipeline that could affect the suburb’s desirability. Infrastructure investment in a suburb can help drive up property prices. However, as an investor, it’s also important to stick to suburbs with a strong record of population growth, not just mass development on the horizon.

5. Rental market returns

As an investor, look into the rental yield, which is a measure of how much cash an income-generating asset produces each year as a percentage of the property’s value (note: there are gross and net yield calculations to consider). It’s also a good idea to look into vacancy rates and the demographics of the suburb. What proportion of inhabitants are renters? This may help give you an indication of the level of rental demand within the suburb.

6. Future price growth

If capital growth is on your radar, look for indications property values may increase. What do the historical capital growth trends tell you? Is there likely to be population growth in the area in the coming years? Are there employment opportunities nearby? Are neighbouring suburbs highly sought after or is the suburb being improved or “gentrified” by new residents? Are vacancy rates low? How many days are properties on the market and are vendors discounting? This kind of research will help give you a clearer understanding of the local market and how the suburb is faring.

Tips for doing your suburb research

A good way to better understand a suburb is to spend time there before purchasing. Drive through the neighbourhood at different times of day and speak to the locals about what it’s like to live there. However, the absolute easiest way to access all the information you need is to ask us for a free suburb report. It includes the latest details about everything from demographics and the volume of properties in a suburb to current listings, recent sales, median property values and more.

Get in touch today for your complimentary suburb report.

Labor’s Policies Helping First Home Buyers

In May, Labor was voted in at the Federal Election. If you’re an aspiring homeowner, the change of Government could mean new opportunities to help get you into your own home sooner rather than later.

In this article, we cover some of Labor’s key policies that may help those looking to get into the property market.

Help to Buy scheme

Labor pledged to help more people get into the housing market sooner by introducing the Help to Buy scheme. Under the scheme, eligible home buyers can purchase homes with just 2 per cent deposit. The government will throw in up to 40 per cent of the purchase price of a new home and up to 30 per cent of the purchase price of an existing home.

The shared equity scheme allows eligible homebuyers to: 

  • Get into the market with a smaller deposit and have a lower mortgage and interest repayments (as you’re taking on a smaller bank loan).
  • Avoid having to pay Lenders’ Mortgage Insurance (which is usually applicable if you have a smaller deposit).
  • Buy an additional stake in the property (a minimum 5 per cent stake) during the loan period if/when finances permit.

Help to Buy will be available to 10,000 Australians each financial year.

To be eligible, you must: 

  • Be an Australian citizen of at least 18 years of age.
  • Earn $90,000 a year or less for individuals, or $120,000 or less a year for couples (note: if your income goes up during the loan period and exceeds the Help to Buy threshold for two consecutive years, you must repay the Government’s financial contribution in part or whole based on your circumstances).
  • Live in the property as your principal place of residence.
  • Not own any other land or property – either in Australia or overseas.
  • Have saved the required minimum 2 per cent deposit and get approved for a home loan with a participating lender.
  • Pay for any associated purchase costs like stamp duty, legal and bank fees, as well as ongoing property costs like rates, strata and any other bills.
  • Be buying a property that falls under the price cap for your region (more info here).

Labor plans to double foreign investment screening fees and financial penalties from July 2022 and raise about $445 million over the forward estimates to pay for the scheme. It will take a share of the profits when the property is sold.

Regional First Home Buyers Support Scheme

This scheme will be available for 10,000 first home buyers a year in regional areas. Eligible first home buyers can enter the market with a deposit of just 5 per cent, while the Government will guarantee up to 15 per cent of the purchase price. The home doesn’t need to be new – existing houses, townhouses and units are included. House and land packages, off-the-plan apartments, and land with a contract to build are all covered.

To be eligible, you must: 

  • Live outside a capital city.
  • Be a first home buyer, an Australian citizen and over 18.
  • Live in the property purchased.
  • Have a taxable income of up to $125,000 per year for singles and $200,000 a year for couples.
  • Have been living in the region for at least 12 months.
  • Meet the property price cap for the region under the existing First Home Loan Deposit Scheme.

Labor also vowed to improve the current scheme by updating property price caps every six months and improving the process of reallocating unused guarantees.

Other Labor Housing Proposals

National Housing Supply and Affordability Council

The new government plans to set up a council to address the housing supply problem in Australia. Experts from various fields will provide input and the council will report on issues such as land use, housing supply and demand, and rental affordability.

Housing Australia Future Fund

Labor plans to create a $10 billion fund to build 30,000 new social and affordable housing properties in 5 years. This will support 21,500 full-time jobs annually.

Looking to get into the market?

If you’re looking to get a foot up on the property ladder, talk to us about how to get started.