Graeme Salt Archives

Graeme’s investment experience #3

April 15, 2025

This week my new tenant moves into my new granny flat.

Building a granny flat has been a key part of my wealth creation strategy as it allows me to create further equity in my assets.

The background to this is that I bought an investment property in Brisbane about 18 months ago that was large enough for me to build a granny flat, almost as a battle-axe development.

It cost me just shy of $235,000 to build the granny flat and the tenant will pay me $400 a week, which works out almost as a nine per cent gross rental yield.

I am particularly happy with the tenant. She is a paramedic who has been employed by QLD Health for over 10 years and has an excellent tenancy history.

For me, income is an important consideration. But I still need to factor in capital growth; I am of that age where there’s much I want to do and still have a healthy risk appetite.

With more luck than good judgement, I have already done well out of the initial purchase as the Brisbane property market has had a heck of a growth spurt over the past few years. Hopefully, with the Olympic Games coming, there will still be a stimulus to the region for the next few years.

But I also think I can create more equity in the property. When I bought, I consciously did not buy the best house in the street as I saw the property’s potential. Working with the existing tenant and agent, I have been able to give the property a bit of Tender Loving Care which hopefully has increased its value.

Once this has all bedded down, my plan is to tap into the equity I have created and use it as a deposit for another property.

Message me in a year to see if I made the right choices.

None of this is financial advice – your financials circumstances may be very different to mine, but feel free to message me about how to finance an investment purchase.

Graeme Salt is an award-winning mortgage broker. For a no-obligations consultation on your lending needs, please contact him on 02 9922 5055.

What first home buyers can do to get on the property ladder

April 7, 2025

By Graeme Salt

Property in Australia is expensive. Property in our capital cities is really expensive. Property in Sydney is really, really expensive. So, what can you do to get on the property ladder?

For many, the issue is less about income and more about savings; they may have the income to justify a loan, but the cost-of-living means they are struggling to build up the savings for a meaningful deposit.

Many banks understand how tough it is for first-time buyers and have initiatives to help first-time buyers. Here are some examples.

Get a Gift

According to one survey, more than 60 per cent of first-time buyers receive some form of financial assistance from their parents to buy their first home.

The ‘Bank of Mum and Dad’ is estimated to be worth about $35 billion. With Victorian kids receiving the largest gift from their parents – over $50,000.

While banks like to see that someone has saved up their deposit, they know it can be tough. Most will accept a Statutory Declaration from parents – others even have a dedicated form for parents and borrowers.

Get a Parental Guarantee

If buyers have less than a 20 per cent deposit for their home, they often have to fork out for Lenders Mortgage Insurance. In itself, it can be costly – plus, it attracts higher interest rates.

One way around this is to secure the loan also against a parent’s property. This way, the family equity contribution is way more than 20 per cent and as a result, interest rates are lower.

Not every bank accepts a parental guarantee; talk to your broker as to which bank will do it.

Buy with a mate

ING & CBA have special loan products where people can buy a home with a mate – but retain their own financial independence. This can help friends pool resources together – so they have enough deposit.

Get help from the Government

Both state and federal governments have special schemes designed to help first-home buyers get on the property ladder

35,000 places have been made available under the federal government’s First Home Guarantee Scheme to help those bridge the gap when they only have a five per cent deposit
Many state governments will waive the need for first home buyers to pay stamp duty (in itself about 4 per cent of the property’s purchase price)

Try Rentvesting

Sometimes we just can’t afford to buy where we want to live, but want to get into property. One option is to buy an investment property in a cheaper location, rent it out then live where you want to live.

I am currently financing a Townsville purchase for a Sydney woman. The plan is that, in time, it will help her build up enough equity for a Sydney purchase in future.

It’s tough for would-be first-home buyers. Thankfully lenders recognise this and will help where they can. If you want to learn more about options for would be first-time buyers, please feel to get in touch.

Graeme Salt is an award-winning mortgage broker. For a no obligations consultation on your home loan needs, please feel free to contact him on 02 9922 5055

The property market returns to normal

March 29, 2025

By Graeme Salt

Covid was a huge distortion on our property markets. But now new data shows that, five years on, markets are starting to look more normal – with our big cities coming back to the fore.

Recent data from the Australian Bureau of Statistics (ABS) shows that after growing by an all-time high 520,900 in 2023, our capital city population grew by 427,800 in 2024. That’s pretty-much 1m in two years!

During Covid there was a rush to the burbs and even the country. But now it seems the capital cities are attracting the bulk of population growth again.

As more employers are encouraging working from the office, plus greater investment in our cities, more of us are choosing to live in more urban environments.

The biggest growth was seen in Melbourne (142,600) and Sydney (107,500), while Brisbane and Perth both recorded extremely fast population growth of 2.7 per cent and 3.1 per cent respectively.

Source: ABS

Since mid-February, dwelling prices in Sydney and Melbourne have appreciated by 0.7 per cent and 0.9 per cent, respectively, with a clear turning point identifiable in the CoreLogic hedonic index data.

And new figures show a 9 per cent rise in the number of people passing through the Martin Place station’s gates in February compared to what was predicted before the M1’s city section opened last August.

These growth figures are likely to be repeated in Melbourne. A round of client meetings for me this week in Victoria opened my eyes to the $12.58bn metro rail underground project which will create five new underground stations – and likely attract more people to the city.

The Melbourne skyline is alive and well.

Financial markets are currently pricing about two to three more rate cuts by the end of 2025, long-term population fundamentals and short-term financial changes are likely to drive our capital markets even more.

Graeme Salt is an award-winning mortgage broker. For a no obligations consultation on your lending needs, please contact him on 02 9922 5055.

Graeme’s Investment Experience #2

March 26, 2025

I am naturally a counter-cyclical investor; I tend not to invest in things that everyone else is buying. And that is one of the reasons why I have just bought an investment property in Melbourne.

Melbourne is arguably Australia’s second city (in truth it is our largest city and some say it’s our best city). Melbourne is a serious player….a heavy hitter. Yet, Melbourne home values have only risen by 8.4 per cent since March 2020 — the lowest growth rate of any capital city (whereas Brisbane saw home values rise by about 68.7 per cent, and had the largest dollar value increase to its median property value at about $364,305)

But long-term you would be a fool to bet against Melbourne; many of our largest companies are headquartered there and there’s heaps of investment taking place. That’s why I decided to invest in Melbourne.

Of course, while I know and like Melbourne, I don’t really know the property market there – that’s why I employed an expert to find me a property. The buyer’s agent I used recommended a few Bayside suburbs and ultimately I bought a property in Frankston.

It ticks lots of boxes

Good transport (train and freeway take you to the city in less than an hour)
Good infrastructure – there’s a spanking-new hospital down the road
Development potential – many of the houses in the area are being converted into duplexes.
Disposable income – it’s by no means Melbourne’s wealthiest suburb, but it has a lovely shopping centre with a cute Italian deli by the station, a great cinema plus an amazing beach.

There’s already some anecdotal evidence that the Melbourne market is showing some signs of life so, so far, I am happy with my investment. But I am long-term investor – ask me in 10 years if I made the right decision!

Graeme Salt is an award-winning mortgage broker – and he is pretty good at it. He is also an investor in various things – though none of the above is advice. If you want to chat with Graeme about your mortgage needs or his life experiences – please contact him on 02 9922 5055

Graeme’s Investment Experience #1

March 26, 2025

This week sees the completion of the construction of a granny flat I am building on my investment property in Brisbane. It’s been quite a journey with a few ups and downs.

I bought the investment property with the express intention of building a granny flat. Here is what I learnt from the process.

Check the contract
The real estate agent told me that it was renting for $500 a week, the contract said it was renting for $500 a week, the valuer assessed it saying it was renting for $500 a week – so you can imagine my shock when the tenant told me he was paying $350 a week.

Once discovered I went straight back to the agent who pretty-much said ‘yep, my bad. I didn’t verify what the tenant was actually paying.’ The agent compensated me and we moved on.

Choose a good builder
As soon as I exchanged on the investment property, I went out for quotes to build a granny flat. Some builders didn’t respond, some were slow and vague; one was sharp and on-the-ball straight away. This is the builder that got the job. He stuck to the contract, kept me informed of progress and has delivered in time.

Manage existing tenants
I am a fair-minded but business-like investor. I kept the existing tenant informed of progress, even dropped his rent a bit during construction. But this is a business transaction and the tenant knows that, while I will treat him with respect, I will be charging market rents – and the Brisbane market has been going gangbusters lately.

Watch out for cyclones!
Managing the project from Sydney has been fairly painless. However a few weeks ago I had a panic when Cyclone Arthur was due to pass over my half-finished construction site! Thankfully a call to my insurer confirmed that my Landlord’s Insurance covered additional buildings on site.

Even better, Cyclone Arthur did no damage so I didn’t have to call on the insurance!

Timing
I am no Warren Buffett but, so far I have done pretty-well from this investment. I bought the property just as the Brisbane market was taking off and now have an additional source of income from the property!

In the next instalment I will tell you how I am going with my new tenant!

Graeme Salt is an award-winning mortgage broker – and he is pretty good at it. He is also an investor in various things – though none of the above is advice. If you want to chat Graeme about your mortgage needs or his life experiences – please contact him on 02 9922 5055

Schrodinger’s Cat and the Property Market

March 19, 2025

By Graeme Salt

I am a simple guy, not much up to philosophy. But today I saw two apparently contradictory headlines which made me reflect on the state of the property market. They were:

Is this the beginning of the property supercycle?
Suburbs where property owners are selling at a loss

Believe it or not, both can be true simultaneously – and for the same reasons; its all about supply and demand. Don’t build enough properties and property prices will go up, build too many then there’s an oversupply which drives prices down.

This week these week three pieces of research were produced proving that, since time immemorial, price is driven by supply and demand.

The Urban Development Institute of Australia (UDIA) 2025 State of the Land report shows an alarming 400,000 dwelling supply shortfall.

New dwelling growth has consistently undershot population growth over the last 30 years, creating a serious shortage of national housing supply.

The same day, the Australian Bureau of Statistics (ABS) said a record 200,000 overseas students entered Australia in February – 15 per cent higher than the last monthly record in February 2019, before the pandemic.

There’s now an all-time high of 700,000 overseas students in Australia (many also carrying out valuable jobs) demanding a roof over a head. Couple this with record levels of permanent immigration and demand for housing still outstrips supply – driving up prices. So, unless we build more accommodation, we probably are close to another supercycle.

And yet, Corelogic’s Pain and Gain report showed that hundreds of property owners are selling their units at a loss in a handful of high-density neighbourhoods. Of the property owners who sold in the December quarter, 94.8 per cent made a nominal profit (on average $306, 000).

However, there were others who made a loss and they tended to be concentrated in the newer, high-density locations. In many of these instances we have seen a rush of new properties, more than is wanted right now and which can often be of questionable quality.

Source: Corelogic and Sydney Morning Herald

So, both headlines are probably right – and the lesson is, when it comes to property investments, choose wisely. Across the country, most properties will probably rise over the next decade. But, there will always be underperforming pockets.

If you want to chat about my insights into the property market, feel free to get in touch.

Graeme Salt is an award-winning mortgage broker. For a no-obligations consultation on your home loan needs, please contact him on 02 9922 5055.

Why Sometimes We Have to Use a Big Bank in Australia

March 5, 2025

Bank-bashing is one of those national past-times along with talking about property prices, the Melbourne Cup winner or the price of road tolls.

Very few of us feel that much affinity with our bank these days. Yet, in the diverse and dynamic financial landscape of Australia, choosing the right bank can be a crucial decision. While there are numerous smaller banks and credit unions offering personalised services, there are compelling reasons why sometimes we have to rely on the Big Four. Here are some key factors that highlight the importance of big banks in Australia:

Comprehensive Services and Products

Big banks in Australia, such as Commonwealth Bank, Westpac, ANZ, and NAB, offer a wide range of financial products and services. From everyday banking and savings accounts to complex investment options and international transactions, these banks provide a one-stop-shop for all financial needs. This comprehensive suite of services can be particularly beneficial for individuals and businesses looking for convenience and efficiency.

Big Banks can cope with non-vanilla

It may seem illogical – those apparently stodgy big banks can often look at financing properties smaller banks can’t.

I recently financed a mortgage with CBA in Parramatta because the client’s (initially) preferred lenders could not look at higher density locations. Sometimes the small lenders are not in the borrower’s interest.

Advanced Technology and Innovation

Large banks have the resources to invest heavily in technology and innovation. This means they can offer cutting-edge digital banking solutions, such as mobile banking apps, online banking platforms, and advanced security features. These technological advancements make banking more accessible, secure, and user-friendly, catering to the needs of tech-savvy customers who prefer managing their finances on the go.

Some friends of mine have recently expressed frustration at having used a credit union for their loan and particularly offset.

Financial Stability and Trust

Big banks are often perceived as more stable and trustworthy due to their size, reputation, and regulatory oversight. During economic uncertainties or financial crises, customers may feel more secure knowing their money is with a well-established institution. This trust factor can be crucial for those seeking peace of mind and reliability in their banking relationships.

Of course, deposits up to $250,000 are underwritten by the Australian government. But, either way, some Aussies tend not to see tiny lenders as robust.

Global Reach and International Services

For individuals and businesses involved in international trade or travel, big banks offer a significant advantage with their global reach. They provide services such as foreign currency accounts, international money transfers, and global investment opportunities. This global connectivity ensures that customers can manage their finances seamlessly across borders.

Conclusion

While smaller banks and credit unions have their unique advantages, there are situations where the services and stability of big banks in Australia become indispensable. Their comprehensive product offerings, advanced technology, extensive networks, financial stability, global reach, and expert advice make them a reliable choice for many customers. Ultimately, the decision to use a big bank should be based on individual needs, preferences, and the specific financial goals one aims to achieve.

Will banks pass on rate cuts?

February 18, 2025

By Graeme Salt

It’s been 15 months since the Reserve Bank changed interest rates, but now, finally, we are getting some changes.

Today’s interest rate cut shows that the economy is moving into a new phase and it will have a big impact on home borrowers.

Today’s interest rate cut could be (though it’s far from guaranteed) one of a few that Reserve Bank announces this year.

So, the question is how quickly will the banks pass the cuts onto homeowners (if at all)?

A review by financial comparison firm Canstar of the past decade looked at how many of the 10 rate cuts during that period the major banks had passed on either in full or partially.

It found Commonwealth Bank, ANZ and National Australia Bank had delivered borrowers just four of those 10 cuts in full, while Westpac fared even worse by passing on just two rate reductions in their entirety.

In February 2015, Westpac did deliver borrowers a rate cut of 28 basis points, which slightly exceeded the official decline by the RBA of 25 basis points.

Canstar also found banks typically passed on rate changes between 10 and 14 days after an RBA move.

It’s common place for the banks not to pass rate cuts on fully (there’s more than just the Reserve Bank cash rate that influences the rates we pay for our home loans).

However, generally, the Big Four banks tend to be less hungry for business and so are often not as good as passing on rate cuts as the mid-tier lenders; lenders such as Suncorp, Macquarie or ING.

If things follow the usual pattern, the medium sized lenders will be more aggressive than the big banks in passing on rate cuts.

So, what that means for you is that now is the time to monitor what your bank does with your home loan rate.

If your bank is not passing on rate cuts in full, the first thing you should do is call them and try to negotiate.

If your bank refuses to drop rates, then you need to talk to your broker who can advise where to take your loan. We are already seeing some very sharp under-the-table rates come through from smaller lenders -it’s the best way of keeping the Big Four honest.

Graeme Salt is an award-winning mortgage broker. For a no-obligations consultation on your home loan needs, please contact him on 02 9922 5055

Why Lenders Mortgage Insurance is Beneficial for First-Time Home Buyers

February 6, 2025

Buying your first home is an exciting milestone, but it can also be a daunting financial challenge. One tool that can help first-time buyers achieve their dream of homeownership is Lenders Mortgage Insurance (LMI). While some may view LMI as an additional cost, it actually offers several significant benefits.

Lower Deposit Requirement

One of the primary advantages of LMI is that it allows buyers to secure a home loan with a smaller deposit. Traditionally, lenders require a 20 per cent deposit to mitigate their risk. However, with LMI, lenders are willing to accept a lower deposit, sometimes as low as 5 per cent.

This means that first-time buyers can enter the property market sooner, without having to spend years saving for a large deposit. This is a major issue in some of our capital cities, where would-be first-time buyers can’t save their 20 per cent quickly enough when prices are in runaway mode.

Access to the Property Market Sooner

The property market can be highly competitive, and prices often rise faster than the rate at which potential buyers can save. By enabling buyers to purchase with a smaller deposit, LMI helps them get a foot in the door before prices escalate further. This can be particularly advantageous in rapidly growing markets where waiting could mean being priced out.

Increased Borrowing Power

LMI can also increase a buyer’s borrowing power. With the backing of LMI, lenders are more confident in offering larger loans. This can be crucial for first-time buyers who may need extra funds to purchase a home that meets their needs and preferences. It opens up more options in terms of location, size, and quality of the property.

Potential for Investment Growth

Entering the property market earlier can also provide first-time buyers with the opportunity to benefit from property value appreciation. Real estate has historically been a sound investment and owning a home sooner rather than later can lead to significant financial gains over time. The equity built in the property can also be leveraged for future investments or renovations.

Building Credit History

For first-time buyers, taking out a mortgage and consistently making payments can help build a strong credit history. This can be beneficial for future financial endeavours, such as applying for personal loans, credit cards, or even refinancing the mortgage at a better rate. LMI facilitates this process by making it easier to obtain a mortgage in the first place.

Conclusion

While Lenders Mortgage Insurance does come with an additional cost, its benefits for first-time home buyers are substantial. By lowering the deposit requirement, providing access to the market sooner, increasing borrowing power, and offering potential for investment growth, LMI can be a valuable tool in achieving homeownership.

For many first-time buyers, LMI is not just an added expense, but a stepping stone to realising their dream of owning a home.

Rate Cuts are Here! What happens next?

February 4, 2025

By Graeme Salt

So, this is the moment.

The moment when rate cuts are amongst us.

After more than a year of speculation, most economists think interest rate cuts are imminent. What will be their impact?

Prices in many cities are currently either plateauing or trending downwards; only Perth and Adelaide are now showing robust growth.

While welcome news for borrowers, these rate cuts are unlikely to have an imminent impact on property prices.

Borrowing capacity has been slashed by 25 per cent since rates started rising in May 2022; cutting the amount people can afford to pay for homes, and even a further two or rate cuts this year would not be enough to ignite another strong increase in house prices.

Traders imply a 96 per cent chance of a February rate reduction to 4.1 per cent. What the cuts are likely to do is arrest any falls to make them short and shallow.

CoreLogic figures show the median value of a Sydney house fell 0.4 per cent in January to $1.47 million. This took the decline over the past three months to 1.6 per cent.

Melbourne’s median house value fell 0.5 per cent to $917,132 in January. Over the past three months, Melbourne prices dropped 2 per cent to be 3.5 per cent lower over the year.

Despite edging down, values remain well above pre-COVID levels. Total dwelling values across Sydney are 27.3 per cent above their pre-COVID mark, Melbourne is up by 7.8 per cent, Brisbane values are 68.2 per cent higher and Perth’s have soared 76.7 per cent.

Graeme Salt is an award-winning mortgage broker. For a no-obligations consultation on your home loan needs, please contact him on 02 9922 5055

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