Archive for category: Graeme Salt

By Graeme Salt

This is NOT advice – but I am buying an investment property in Melbourne.

Median house prices in Melbourne are approximately 41 per cent cheaper than in Sydney. This gap represents a more than $600,000 difference in median house prices in August 2024.

This is the cheapest that houses in Melbourne have been relative to Sydney at any point in the past 20 years.

And it’s hard to imagine Melbourne being so cheap forever.

One of our greatest cities, Melbourne is often competing against global icons like Vienna and Copenhagen as the World’s most liveable city.

But Melbourne underperformed through the pandemic and has underperformed in the period since, making Melbourne the weakest performing capital city since March 2020.

During the pandemic, the price increases in Melbourne were less significant compared to other cities as Melbourne recorded large net losses of people. Subsequently following the decline in prices in 2022, the recovery has also been much slower in Melbourne and values remain 4.7 per cent below their 2022 peak.

Part of this could be an overhang from the underperformance experienced through the pandemic.

Plus land tax increases for investment properties in Victoria have further discouraged investment and made owning an investment property less attractive. As a result, more investors have been selling properties in Melbourne

Melbourne has been the second most expensive market for over a decade but this recent underperformance in Melbourne has led to the city dropping back to fourth place in the rankings of Australia’s most expensive capital cities, with both Brisbane and Canberra now ahead.

But, looking at historic swings in price performance and comparative affordability, a time will likely arrive when Melbourne is viewed as undervalued given house prices are at their cheapest relative to Sydney in a decade.

Once-upon-a-time, Melbournians moved to Brisbane due to Queensland’s cheaper prices.  Its now more likely that the trend will be reversed – thus boosting demand for Victorian properties.

But buying a Victorian investment property may not be for you.  I really encourage you to do your own due diligence and consult your trusted advisor.

Graeme Salt is an award-winning mortgage broker.  For a no-obligations consultation on your home loan needs, please contact him on 02 99922 5055.

By Graeme Salt

Prospective homebuyers are becoming increasingly confident about purchasing a property.

And we might be getting closer to another period of property growth.

New research shows that the majority of prospective buyers feel positive about getting into the market.

Buyer confidence has increased markedly over the past three months, with a report from Mortgage Choice showing 83 per cent of prospective buyers now feel positive about buying a home (compared to 70 per cent last quarter).

Some of this may well be because, nationally, prices appear to have peaked – increasing by 0.08 per cent last month – the smallest monthly increase recorded since prices stopped falling in late 2022.

This slowdown in price growth is not unexpected, it coincides with continued strong listings activity – so much so the balance appears to have been tilted in buyers’ favour.

Even the cities that have shown most growth (Adelaide, Brisbane and Perth) are starting to show some level-headedness.

In the past three months, 15 suburbs in Brisbane and three in Adelaide posted a decline in house prices.

However, if you’re holding-off buying in the hope of major price falls, you are in for a major disappointment.  Economists expect the Reserve Bank of Australia to deliver its first interest rate cut in February 2025 – this may well spur the market into another growth phase.

And Australia’s (traditionally) second market – Melbourne has been showing value for some time.

If you are thinking about buying, now may be a window of opportunity for you and you would be well-advised to arrange your loan pre-approval.

Economists are predicting three rate cuts in 2025 – expect prices to take off once they have occurred.

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.

By Graeme Salt

You run your own business and you have trouble getting a mortgage – that’s what used to happen; especially as many self-employed try to reduce their income to avoid paying too much tax.

But banks are now more creative in lending to the self-employed.

There really used to be just two options:

1 Show two-years’ tax returns.  This was always hard for the self-employed because it felt like they had to wait ages before they could buy a place (especially compared to their mates who had regular jobs)

2 Get a lo-doc loan.  Here the banks could be more creative, people could buy a home much quicker – but they often ended up paying a higher interest rate.

But now, with changes in work practices, banks are more creative with the self-employed.

Some banks will now just accept one year’s tax returns.  This is great if your business is relatively new but is doing really well.

Others are now even more creative, if they can see you are paying yourself a regular wage from your company, they can treat this as regular income (their logic is if you are organised enough to budget and pay a regular salary, you are organised enough for a home loan).  This is now really easy with software like Xero and MYOB.

And, lo-doc loans still exist.  Often lenders can use a variety of documents for you to prove your income.  These could include:

• BAS statements
• Business bank accounts
• Letters from your accountant

What many self-employed do here is, buy a home using a lo-doc loan (at a slightly higher rate).  Then, when their finances are stronger, refinance their loan as a full-doc loan – at a regular rate.

Getting a self-employed loan is easier than it used to be.   For the self-employed, their circumstances vary greatly.  If you want to talk about your own personal circumstances, please contact me.

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

By Graeme Salt

With property purchase increasingly out-of-reach, many Aussies are turning to innovative ways they can get on the property ladder.

Much has been written about the ‘Bank of Mum and Dad’ where parents contribute equity towards a purchase.

But there are also innovative ways to which homebuyers are turning to make their dollars stretch out.

One way, mates will agree to buy a place together – typically they will be first home-owners.  Often first home-owners struggle to get enough of a deposit on a property and their individual incomes don’t stretch far enough.  But, combined, their purchasing power is much stronger.

But the downside of this approach is that there is no real separation of each other’s finances; all parties can see what repayments are being made and how much is in other’s offset account.  Critically, if one defaults on the loan, all borrowers are affected.

Macquarie have a more sophisticated offering whereby each borrower has their own offset with separate login – which gives everyone a bit more privacy.

While CBA and ING have taken this one step further by developing specific property share loans where loans and offsets are in each borrower’s names.

But, there is no way of getting around the fact that each borrower will have to be guarantor for the other’s loan.

Long term, borrowers will need to think about what happens if one wants to sell and the other doesn’t.  Or maybe, one wants to rent out their part of the property – what happens then?

I am currently, arranging such a loan for two sisters.  In this instance we are using Suncorp.  One thing that the sisters are doing is documenting who owns what percentage of the loan, their respective property share and an agreement with the family as to their own individual property plans.

Buying a property with a friend or family member can be a powerful means of increasing purchasing power.  But it’s important that borrowers know what they are letting themselves in for.

If you want to discuss this loan further, please contact me.

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

By Graeme Salt

The same day that the Reserve Bank said interest rates were likely to cool the economy, new inflation figures came out way higher than economists predicted.

Many now believe that we are looking at rate rises in August.

Today, Reserve Bank (RBA) Assistant Governor, Christopher Kent, gave a speech entitled Restrictive Financial Conditions in Australia; broadly speaking, it argued that rates were sufficiently high to keep a lid on inflation.

Only hours later, the Australian Bureau of Statistics produced inflation data showing prices have edged up to 4 per cent.  Most economists were only predicting inflation of 3.8 per cent.

If inflation proves to be persistently high, the RBA will have no choice but to raise interest rates.

Yet, in today’s speech, Dr Kent noted that the effects of tighter monetary policy are felt most directly by the roughly 40 per cent of households with a mortgage and that highly-leveraged borrowers are selling out of property as rising mortgage rates stretch budgets.

Loan discharges are now outstripping new loans at a rate of 2:1, implying that Australians are choosing to get out of debt where they can.

Dr Kent said the RBA’s 4.25 per cent rate rises meant monetary policy was “restrictive” and households were feeling a “painful squeeze”.

After 13 interest rate rises, the average outstanding mortgage rate is now a little over 6 per cent, and total scheduled mortgage repayments are now consuming a record 10 per cent of household disposable income.

The 4.35 per cent cash rate is above the central bank’s estimate of the neutral interest rate (the rate which is neither too high, nor too low for the economy).  Some economists believe the cash rate is one percentage point above the neutral rate.

Certainly rates are likely to stay higher for longer than previously anticipated – and there is the risk we are facing another rate rise in August.

The good news is that, for the right borrower, some lenders are offering sharp loans.  If you want to discuss which lenders are offering what at the moment, please contact me.

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