Posts Tagged home loans

Can Sydney’s housing affordability be fixed in five steps?

Australia has ranked as one of the least affordable countries in the world for housing again – but solutions are on the way. Demographia’s 2017 report ranked Australia third behind Hong Kong and New Zealand for unaffordable housing, largely driven by price hikes in Sydney and Melbourne.

Of course, that’s nothing new. Anyone who’s tried to secure a home loan in the last five years would understand the issues with many east coast housing markets. But what about solutions?

The Property Council of Australia (PCA) has come to the rescue – in a sense. It has released a five-point plan it believes can address affordability in New South Wales, if the government will adopt it.

Can you really fix the Sydney market in five steps?

Can we really fix the Sydney market in five steps?

Five points to fix it all

Jane Fitzgerald, NSW Director for the PCA, says the five-point plan has already been delivered to the Reserve Bank and the New South Wales government. She believes the following steps will go a long way to helping struggling buyers:

  1. Reform the planning system to increase land and housing supply
  2. Cut red tape, property taxes and fees
  3. Increase cooperation between Federal, State and Local Government departments
  4. Provide more support to first home buyers
  5. Increase innovation in the rental market

Now, that’s a lot of buzzwords without many tangible measures. But, as Fitzgerald notes, the PCA does have a full report outlining what the NSW Government can specifically do to make sure it achieves these goals.

Items like less stamp duty, a higher level of housing supply and more FHB support will certainly be music to the ears of buyers who are yet to get onto the ladder. CoreLogic RP Data’s monthly indices show the median house value for Sydney is still above the $1.2 million mark – something has to be done to make buying easier.

Give yourself every advantage you can

Of course, this is a proposal put to the government – it’s far from concrete. For now, anyone struggling to make a property purchase has to wait and see. That is, unless they start taking matters into their own hands.

One way to start working on affordability issues is to make sure you have access to the full spectrum of home loans. Too often, people restrict themselves to just one or two types of mortgage, thinking that’s all they have to work with.

By using a mortgage broker, you can tap into dozens of home loan products, each tailored to a different financial situation. It won’t necessarily fix the housing market – but for some people, it can help out a lot.

You can contact me Kim Wight Mortgage Broker Sydney on 0412 167 551  for mortgage advice.

Posted in: Blog, First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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Buying At Auction – What You Need To Know

Mortgage Broker SydneyBuying property at auction can be a daunting task, and with more and more properties being sold by auction these days it is important that you understand the process and have your finance in place before you bid.

When you are buying property at auction there is no cooling off period, which means once the hammer is down you have bought the property and have to proceed to pay for it. Unlike a property that is sold by private treaty you do not get 5 days to arrange finance and do property searches all this must be done before the auction.

The most often asked questions people have when buying property at auction are:

1. Can I have the loan approved before I bid?

I advise all my clients to have their loan application assessed before starting negotiation on any property purchase but if you are buying property at auction you need to know in advance that you will be able to get a loan for the amount of money you need.

We can arrange to have your loan pre approved which means that the lender will look at your credit report, income, savings, assets and any other debts you may have and then pre approve you for a loan based on this information.  As you cannot be sure how much you will have pay when buying property at auction, the loan cannot be formally approved.

When buying property at auction, I suggest to all my clients that we get the loan approved for the maximum amount your income can service and that you feel comfortable with and then lower the loan amount once you have successfully purchased the property and we know exactly how much loan money is required.

The loan preapproval with be subject to a valuation on the property and if you are borrowing more than 80% of the property value acceptance by the mortgage insurance company.

There is always an element of risk buying property at auction with no cooling off period but with the right pre work the risk is greatly diminished.

2. Can I have the lender value the property before the auction?

This question is always a tricky one.

When buying property at auction and there is a contract of sale with an amount on it a valuer will base their valuation on the sale amount plus comparative sales in the area. Because someone was prepared to pay the amount on the contract as long as the amount is not unrealistic based on other sales in the majority of cases the valuation will come in at the sale price.

When there is no contract of sale the valuer will base their valuation on comparative sales and the property may value at less than you are prepared to pay. If the Bank has done the valuation before the auction they will accept the valuation amount not the purchase price when accessing the LVR (loan to valuation ratio) which may result in a reduced loan amount or an increase in the cost of mortgage insurance.

Again, when buying property at auction there is an element of risk that the property may not value at the purchase price but if you have done your research  and keep your cool at the auction and do not exceed the maximum amount you believe the property to be worth the risk is extremely low.

In my 25 years of lending I have not had a property purchased at auction come in lower than the amount paid. This gives you confidence to use my service when buying property at auction.

3. How do I know how much to pay?

You need to research property prices in the areas you are looking at prior to buying property at auction. You can do this by attending open houses and gauging the value of the property by the asking price and what the property has to offer in way of size, location, quality of fittings, décor.

You can look on the various real estate sites at the sold properties which often list the sale price.

The easiest way is to ask me to provide a free RP Data property report on any property you are considering buying property at auction, or indeed any property at all.  This will give an estimate of the current value and list comparative sales in the area. This report is one of the tools the valuers use when assessing the value of properties and I can give you free access to it.

4. How can I buy before I sell my current place?

This is the problem existing home owners find themselves in and causes the most stress when buying property at auction or otherwise.

If you sell before you buy what if you cannot find a property you like, but if you buy before you sell how can you afford to pay for the new property?

I always advise my clients who are in this situation to ask for an extended settlement time. Most contracts of sale have a completion date of 42 days (6 weeks) after the signing of the contract.  If you can extend this time to 10 or more weeks to allow you to sell your property you do not have to consider bridging finance.

With a bridging loan, the lender will loan you the money to cover the gap between settlement and buying a property at auction or otherwise. Effectively, the lender agrees to take on both mortgages. Bridging finance typically covers a period from a few days to a few months.

This form of finance is expensive because in most cases your existing loan and the full amount of the new purchase are combined and interest accrues on the new total loan balance. The lender will access your ability to repay the loan based on the amount you will owe after the sale of your existing property. There are additional fees due to the lender having to value two properties plus other associated costs.

There are strict criteria for bridging finance before approval is given which will include the unconditional sale of a borrower’s existing property and restrictions on proposed settlement terms. Other conditions may be imposed on a case-by-case basis. The finance is usually only available for 6 months after which penalties may apply.

My advice is to allow me to fully access your personal situation and together work on the best strategy for you when buying property at auction.  I have always bought before I sold so I understand the stress involved in purchasing this way but with careful planning the stress can be reduced.

5. I haven’t sold my place yet so how can I get the money to pay the 10% deposit.

Once you find the perfect house and you have the thrill of buying property at auction, you sign the contract of sale and will be required to pay the 5% or 10% deposit which ever amount has been agreed upon. If you do not have the money and cannot borrow it short term from family we will need to arrange a deposit bond for you.

A deposit bond is basically an insurance policy. The deposit bond is the policy document that tells the vendor that the insurance company will pay the 10% deposit to the vendor if you for some reason do not proceed with the purchase. The insurance company will then endeavour by all legal means at their disposal to get the bond money back from you.

There is a once only premium paid for the bond. When purchasing at auction the premium is calculated on the maximum amount you are prepared to pay. If you are unsuccessful at auction the bond can be returned and a portion of the premium refunded.

In the normal course of events settlement takes place, the purchase price is paid in full and the deposit bond simply lapses

6. Other than the loan what else should I organise?

Buying property at auction can be an expensive exercise as you have to do all your due diligence even though you may not be the successful bidder but it could be even more expensive if you do not.

  • Have a solicitor review the contract of sale. They can address any conditions of the contract that may not be in your best interest and can also ask for an extended settlement if required. They will also arrange any searches that they feel would be in your best interest to undertake such as strata reports or building surveys.
  •  Get a pest & building inspection done. It is important to find out if there are any building or pest problems before you buy.
  • If you are buying before you sell have the contract for sale for your existing property ready. If you are the successful bidder and you need to sell your existing property time will be of the essence and you need to move quickly to list your property for sale. By law a real estate agent cannot show a property unless they hold a contract of sale. By having your solicitor prepare the contract you will lose no time it getting your place to the market.
  • Have a Real Estate Agent lined up ready to put your property in the market. Again as time is of the essence to sell your current property by having already decided upon the real estate agent you want to sell your property you will save time. A good agent will be able to arrange photos and have your property listed in a day or two. They may already have people to show through which will give you confidence for a sale.
  • Have your house prepared for sale. I cannot stress enough the importance of being prepared to list your current property as soon as you have purchase. Now is not the time to think about decluttering, fixing the gutter, cleaning the carpet etc. you want your house to be ready to show to potential buyers immediately. Have all the jobs that needed to be completed done so you can attract that potential buyer.

As you can see they are many things to consider when buying property at auction. I hope you have found this information useful and if you have any questions that I may not have covered please contact me Kim Wight, Mortgage Broker Sydney at this web page or at kwight@smartline.com.au.

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RBA Cash Rate Decision

The RBA’s cash rate decision is always handed down at 2.30pm on the first Tuesday of each month.

This means the November cash rate decision always occurs half an hour before the big race.

Every year for the last six years I have made  a form guide for the RBA’s November decision. Enjoy.

The ASX Futures Market

Mortgage broker sydney

As you can see, the ASX futures market is very much on the fence with 51% predicting no change as at COB last Friday.

Mortgage broker sydneyWestpac, CBA and NAB

The Commonwealth Bank and Westpac are forecasting no change in the cash rate for the next 12 months. The NAB is forecasting no change in the cash rate until December where they predict a 0.50% rise to 2.50% p.a..

As you know, predicting the future is a difficult business, however, it is pretty clear that most “experts” are suggesting a stable variable interest rate environment for most of 2016.

If you are a betting person, I hope you have a lucky Melbourne Cup. If you are not having a punt, my tip is always going to be “put your money on your mortgage”.

As always if you want to discuss your current home loan or are looking at getting into the market please contact me Kim Wight Mortgage Broker Sydney at kwight@smartline.com.au. 

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Are property vendors experiencing PAIN?

“Core Logic – RP Data” publish a terrific quarterly report (Pain and Gain) that almost every property owner should take heart from.

This report shows the percentage of people that made a profit (or loss) from their actual property sales.

As you can see below, 32.3% of vendors doubled their money but 8.6% of people lost money.

Mortgage Broker Sydney

The above graphic represents the entire nation but the full report digs down to more localised data.

The table below demonstrates the performance of “capital cities” vs “the rest of a state or territory”. In every State the risk of loss was greater in regional areas compared to their respective capital cities.

Mortgage Broker Sydney

Are property vendors experiencing Pain

Sydney is in a purple patch with only 2.4% of people experiencing vendor pain and almost 60% of people making more than 50% on their initial purchase price.

The full report digs down even further by looking at council areas and major regional groupings. Well worth a read.

If you would like a free copy of this report please contact me Kim Wight Mortgage  Broker Sydney.

 

Posted in: First Home Buyers, Latest Mortgage News, Mortgage Broker Sydney

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Australian Housing Market

We have long speculated that the cost of Australian housing market has been increasing due to a lack of supply. The damaging impact of this supply shortfall is further boosted by strong population growth. Demand for housing is growing at a far greater rate than supply. A range of Government regulatory demands, especially in capital cities, have steadily driven up the price of our most fundamental need, shelter.

Alan Moran from the Australian Financial Review recently wrote about this very subject and speculated as to why our housing supply is not keeping up with demand. We have included some of his key points from that article below.

“Out of 86 cities across the world with over a million people house prices relative to incomes in Sydney and Melbourne were the third and sixth most expensive.  That’s the findings of the latest annual survey of house prices released this week by Demographia.

Australia’s regulatory induced scarcity of land increases the cost of a fully serviced housing block complete with telecom, water, energy and road infrastructure from less than $100,000 to $300,000 or $400,000.  And on top of this there are special taxes on development – at least $36,000 per block in the case of Sydney.

Back in 1983, according to data from the Housing Industry Association, the land component cost of a new house on a standard sized block comprised 40 per cent of the total house/land package in Sydney and 30 per cent in Melbourne.  This year the land component cost in the two cities was 72 per cent and 70 per cent respectively.  The same pattern is seen throughout Australia since planning authorities have adopted similar restraints on land availability.

Unlike elsewhere, Australian house price rises barely paused in the recession. This chart by Demographia sums up the affordability situation around Australia.

Mortgage Broker Sydney

 

The Financial System Inquiry Chaired by David Murray suggested that negative gearing and the capital gains tax regime were a cause of Australia’s price increases. But negative gearing opportunities for investors in housing have always been with us and many other countries have similar tax laws. In any event, a ready antidote to demand-induced housing price increases is to permit more land to be used for this activity.

The people disadvantaged by unaffordability of housing are those who have not bought a house. In Australia, young people are the most vulnerable to the high prices, and are showing a much increased interest in owning their own place.

Mission Australia conducts an annual survey of youth which offers insights into young people’s aspirations and concerns.  The past four years have seen marked changes in attitudes. In the 2014 survey 72 per cent of young people think it important to own their own home and a similar number expected to be able to do so.  However, home ownership by younger people is declining.  Amongst 25 to 34 year-olds those owning their home has fallen from 56 per cent in 1991 to 47 per cent in 2011.

Here comes the bottom line….

“It is regulatory scarcity that has driven Australian house prices to stratospheric levels of unaffordability.  And smashing the constraints is the only means to bringing house prices within range of younger people’s incomes.”

Existing and prospective property owners need to ask and answer the following question. Are any of our governments likely to reduce their supply stalling regulations? We suspect not.

As always if you have any questions regarding the above or are looking to arrange finance for property purchases please contact me Kim Wight, Mortgage Broker Sydney. 

 

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Why waste money on an overpriced mortgage?

Why waste money on an overpriced mortgage?

Some good news to kick off 2015.

At the end of last year we heard a few economists suggesting that we could see further interest rate cuts by the RBA in 2015. It appears that the ASX futures market now agrees with this assessment.

As you can see from the chart below, the implied yield curve is showing a predicted 0.25% p.a. drop in March or April. A further 0.25% drop is estimated to occur toward the end of 2015.

The main basis for this prediction is the current environment where inflation remains low and stable, unemployment is slightly growing and economic growth remains subdued. These are all ingredients that lean towards a rate cut in normal circumstances.

Mortgage Broker SydneyWhilst a 0.25% cut does not seem like much, the following chart shows just how much this can save a borrower.

Mortgage Broker Sydney

As you know, my offer to conduct a “health check” on your loan is always on the table. Just shoot me, Kim Wight Mortgage Broker Sydney an email if you would like to check that your loan is still competitive. There are terrific deals to be had.

 

 

 

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STAMP DUTY

After reading the following newspaper headline on the 18th of December, “Property market gives NSW string of surpluses into future”, we did some research to find out exactly how much Stamp Duty the average property purchase is now forking out…..

$30,998.  We would all agree that this amount is both surprising and disappointing.

The reason for this tax bonanza has little to do with a more active market. As you can see from the comparison below, the number of properties sold in November is actually less than 2007.

However, as property prices have risen over that seven year period, NSW property buyers are being pushed into duty brackets that charge much higher rates of stamp duty.

Property prices

The state government needs to raise revenue from somewhere but we all believe this level of taxation is simply unfair, and well beyond the affordability levels of the average Australian home buyer. We need a transfer stamp duty threshold review.

With an election just around the corner we would all like to see this become a core issue. Please pass this email on if you know someone that could assist.

As always if you want to discuss this or any home loan matter please contact me Kim Wight , Mortgage Broker Sydney. 

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Latest RBA Rates Decision

The last RBA meeting for 2014 has been held and another “no change” verdict has been announced.

This continues a very long period of minimal change in almost every home loan interest rate category (since July).

Most of the experts are also predicting a fairly lengthy period of minimal interest rate change ahead.

One could be forgiven for thinking that we have nothing to report but as you can see from our chart below, our current position is extraordinary.

Mortgage broker Sydney

Latest RBA Rates Decision

Whilst the average basic variable rate for the major banks is currently a record low of 5.00%p.a., it is important to note that this is only the advertised rate. We have seen variable rates reach down as low as 4.65% p.a..

Now 0.35%p.a. may not sound like much but it is an annual interest saving of just over $1,000 on a $300,000 loan.

Please contact me Kim Wight Mortgage Broker Sydney at kwight@smartline.com.au if you would like to have your loan reviewed.

 

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Property Trends – The Housing Bubble

Residex and RP Data are both highly reputable information businesses that specialise in measuring property trends.

I  have attached links to two of their recent blog posts.

Both of these articles make very strong arguments against the housing bubble argument.

Residex

John Edwards is first and foremost a statistician. His approach to property analysis has always been about finding patterns in the data. His article in the link below is very informative. We particularly liked this paragraph.

“It is this high level of un-affordability that probably leads many to suggest that we are in a “housing bubble”. However, something has changed: The buyers in our markets. Our measure is likely no longer as valid as it once was, because the current buyers are no longer median income families. Median income families living in the median value areas of Sydney are largely renting.”

http://blog.residex.com.au/2014/09/24/september-property-market-update-2/?Cid=ResiNewsSept142RedBlog

RP Data

This particular blog by RP Data’s Senior Research Analyst, Cameron Kusher is incredibly important to the “housing bubble argument” as it looks at “REAL” property prices. Real property prices must take into account the diminishing value of money, inflation.

http://blog.rpdata.com/2014/07/inflation-adjusted-home-values-still-lower-previous-peak-across-cities/

The following table will surprise many people.

This information shows capital city house price performance since their last price peaks. Take Sydney as an example. Since Sydney’s last peak in property prices 10 years ago, prices initially dropped by 21.2% and are currently sitting only 4.3% higher after inflation is taken into account. That is less than half of one percent of average annual growth over 10 years. This makes it hard to argue a bubble exists in Sydney. The rest of the capitals have experienced real value reductions since their more recent peaks.

Housing Bubble

 

 

 

 

Whilst arguments about asset values will never be conclusive, I feel these two arguments are at least highly compelling.

Please give me a call, Kim Wight Mortgage Broker Sydney if you are looking at buying property in the near future and want help with home loan finance.  

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Want to know what is happening in the real estate market?

Want to know what is happening  in the real estate market?

Smartline has long held a strong and trusted alliance with the biggest property information company in Australia, RP Data.

This company has extraordinarily detailed property information that starts from a national perspective, moves through the states, councils, suburbs and streets and ends at your specific address.

RP Data provides the software that almost all Real Estate Agents use to appraise your home.

RP Data has also become the dominant provider of property valuations for most of our major banks.

Smartline has access to almost all of this information. And if Smartline has access, you have access.

The following video clips have been prepared for Smartline by RP Data’s Head of Research, Tim Lawless.

These videos are 4 to 6 minutes in length and cover off on the major factors that will influence property prices over the short to medium term. They are well worth a quick time out.

National – http://youtu.be/oF56-I5b248

NSW – http://youtu.be/CaE-629BeFI

QLD – http://youtu.be/QMWTBPRbgio

SA – http://youtu.be/t9K_MWi3aEE

VIC – http://youtu.be/wMOjl-NzWHU

WA – http://youtu.be/6C4T6JnQea4

If you would like your own detailed RP Data report (on your home, street or suburb), please send me  Kim WIght Mortgage Broker Sydney an email  to kwight@smartline.com.au with your address. I will PDF the report and email it back to you.

 

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