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The cities tipped to lead property price growth as Sydney slows

June 27, 2018

David Chau| The New Daily| 25 June 2017

https://thenewdaily.com.au/money/property/2018/06/25/property-price-growth-cities-bis-report/

In the next three years, house prices in Brisbane, Perth and Canberra are expected to surge most — while the Sydney market slows to a crawl.

Though in the short term, property price growth will remain weak, or even decline in some markets, according to industry analyst BIS Oxford Economics in its latest report.

It argues this is due to tighter lending criteria, particularly a crackdown on interest-only loans, and record levels of dwelling construction being completed (above 200,000 per year), which may lead to an oversupply in some states.

Property buyers should not get too excited, BIS warned, as the chances of a major correction will be mitigated by record-low interest rates, and a “relatively stable, albeit subdued, economic environment”.

But there should be some “upside” from 2021, as “high net overseas migration inflows [are] likely to be sustained in the coming years” — and “economic conditions begin to strengthen and supply falls back below underlying demand”.

Sydney and Darwin lag behind

Sydney prices are expected to rise just 3 per cent by 2021, the slowest out of every Australian capital city.

Australia’s largest city has seen its prices soar by 85 per cent since 2013, with investors — which account for over half the values of mortgages in that period — bidding up prices to record highs.

In 2013 a Sydney house typically cost about $650,000 while today the average house in Sydney will set buyers back about $1.2 million.

Its median house price hit a peak of $1.2 million in June 2017 and has since declined (to $1.1 million) due to the banks’ tighter lending policies, mandated by the Australian Prudential Regulation Authority (APRA).

BIS predicts Sydney’s median will fall by 2 per cent in the next financial year (2018-19), but an undersupply of dwellings will prevent larger price falls.

“By 2019-20, a combination of the correction in prices, the undersupplied market and some improvement in the economic outlook is forecast to see prices stabilise, and potentially show modest rises into 2020-21.”

In contrast, Darwin peaked much earlier, with houses reaching their highest median price, $620,800, in June 2014. Since then, it has fallen 19 per cent to $505,000.

Its resources boom led to a surge in dwelling construction. But after that boom unwound, so did Darwin’s population growth, which contributed to its housing oversupply.

Subsequently, there was a sharp fall in the number of new houses being built in Darwin.

“The collapse in new dwelling construction is expected to see excess stock steadily absorbed in this period,” BIS predicted.

It sees flat price growth for Darwin in the next financial year, before rising 5 per cent to 2021.

house price growth — Australian house price predictions, 2018-2021. *Source: BIS Oxford Economics*

Strong-performing Brisbane, Canberra and Perth

BIS’s forecast is that Brisbane will see the strongest growth over the next three years, jumping 13 per cent to a median of $620,000.

If its prediction is correct, this would be a phenomenal improvement. Queensland’s capital city is currently seeing house prices grow by a tepid 1 per cent annually.

Its apartment oversupply may be a drag on the market, but the sunshine state is starting to see a boost in interstate migrants — particularly from Sydney — with prospective buyers lured by Brisbane’s comparative affordability.

Canberra and Perth are tipped to have the second-fastest price growth by 2021, each rising 10 per cent to $770,000 and $570,000 respectively.

“With the highest household income of Australia’s capital cities, [Canberra’s] affordability remains attractive,” BIS noted.

Perth is expected to see “minimal growth” for the next couple of years, before it sees “stronger growth” in 2021.

“House prices in the Perth market appear to be bottoming out,” said BIS senior manager Angie Zigomanis.

“The rate of price decline has slowed, net overseas migration inflows have returned to growth, while the interstate migration outflow has peaked and is now improving.”

Melbourne, Adelaide and Hobart

Melbourne, on the other hand, is expected to fare better than Sydney — 6 per cent price growth in three years’ time.

Investors loans drove its prices higher, but nowhere near the extent as Sydney.

House prices in the Victorian capital surged 65 per cent in the past five years, reaching a peak of $892,000 in December last year.

“Soaring population growth in Victoria is expected to be a key to house prices in Melbourne as investor demand continues to weaken, by supporting owner-occupier demand,” Mr Zigomanis said.

“While new dwelling completions are forecast to continue to rise through 2018… supply will be largely met by population growth” — from strong overseas and interstate migration.

Strong price growth is also expected in Adelaide (+9pc) and Hobart (+8pc) in the next three years.

With South Australia’s automotive manufacturing industry shutting down, its economy and property market are currently subdued.

BIS predicts its shipbuilding industry will drive future employment and slowly boost interstate migration into Adelaide, lifting its median house price to $555,000 by 2021.

Hobart is currently the strongest property market, given its house prices have jumped 35 per cent in the past three years.

The biggest drawcard could be its median price of $485,000, which is the lowest of all capital cities.

“The current migration inflows largely comprise younger adults and families with children, suggesting people [are] moving for Hobart’s affordability or expats coming back to raise a family,” Mr Zigomanis said.

What’s next for Australian property prices? Three economic heavyweights make their case

April 30, 2018

Chris Kohler| Domain| 9 April 2019

https://www.domain.com.au/money-markets/whats-next-for-australian-property-prices-3-economic-heavyweights-make-their-case-20180409-h0yijb/

Economic experts are at loggerheads over the Australian property market’s health and outlook, with UBS arguing a 35 per cent slump in the mortgage borrowing power of Australians, and steep house price falls, is possible.

Meanwhile, AMP chief economist Shane Oliver expects another 5 per cent fall this year alone, but no house-price crash, and ANZ economists argue the worst is behind the property market and prices will rise this year and next.

Australian capital city house prices fell 0.2 per cent in March – the fifth-consecutive monthly price drop – bringing the annual growth rate to 0.8 per cent, compared with 11.4 per cent in May last year.

With few economists predicting the Reserve Bank will lift interest rates this year, focus has turned to the regulatory reaction to the bank royal commission, and key economic data. The Hayne inquiry has uncovered alarming lending practices, while households remain heavily indebted and house prices sit well above long-term trends, according to some gravely concerned economic voices. Others argue mortgage holders are ahead on their repayments and building up a buffer to approaching higher interest rates.

‘Credit crunch’ is very possible: UBS

House price call: Between flat and -3 per cent in 2018/19, with larger falls possible

The royal commission is “more material” than UBS economists expected, with regulators likely to respond with a tightening of responsible lending laws – a move that could cause mortgage finance to become harder to secure.

Mortgage borrowing limits could fall by 35 per cent in this scenario, as higher living expenses become fully factored into mortgage calculations, UBS economists George Tharenou and Carlos Cacho wrote to clients this week.

“The banks have already moved to undertake more due diligence on borrowers’ living expenses, however the Royal commission suggests this will need to go substantially further,” according to Mr Tharenou and Mr Cacho, who say resurgent first-home buyers will be heavily affected.

“While some may not be impacted by changes (eg, low [loan-to-income] borrowers), many are likely to see a sharp reduction in borrowing capacity, particularly first-home buyers, who are ~12 per cent of total loans, and low income borrowers.”

UBS predicts house prices to sit between flat and -3 per cent year-on-year in 2018 and 2019, but expect a credit tightening scenario would see larger price falls.

More downside ahead, but a crash isn’t likely: AMP

House price call: Around ~5 per cent further to fall this year, with more drops likely next year

While AMP chief economist and head of investment strategy Shane Oliver noted concerns that a house price crash – a 20 per cent fall in national average price – was on the way, he said it was unlikely, for three main reasons.

Supply of dwellings has not kept pace with population-driven demand. “Average capital city vacancy rates are at or below their long-term averages, notably in Sydney”, Dr Oliver noted.

Debt serviceability remains relatively strong, with APRA’s rule tightening leading to a drop in interest-only lending, and mortgage stress appears to be low, for now.

“It is dangerous to generalise” – Property prices have surged in Sydney and Melbourne but have fallen in Perth and Darwin and have seen only moderate growth in other capitals.

“To see a property crash we probably need much higher interest rates or unemployment (neither of which are expected) or a continuation of recent high construction for several years (which is unlikely as approvals have cooled from their 2016 highs),” Dr Oliver wrote.

While no crash is seen to be looming, AMP predicts Sydney and Melbourne property prices “will fall another 5 per cent or so” this year, with further falls likely next year.

‘The worst is behind us’: ANZ

House price call: 1.8 per cent growth this year picking up to 3.6 per cent next year

The slowdown in Australian capital city house price growth won’t deepen from here, according to ANZ senior economists Daniel Gradwell and Joanne Masters, who stand apart from UBS and AMP by predicting prices will rise this year and next.

February saw both ANZ and NAB abandon their call for two RBA rate hikes to take place in 2018, a positive development for the property market, according to the ANZ economists.

“We think most of the slowdown has already occurred,” the economists wrote this week. “We retain our view that prices will not materially decline.”

(Source: ANZ Research)

Should you refinance for a better deal??

January 16, 2018

Refinancing a loan can take advantage of lower interest rates to bring down the overall cost of servicing a loan. But it’s not always the best, or the only, option.

There are many different factors borrowers need to consider when thinking about refinancing a loan.

The first step is to speak to a credit adviser/ mortgage broker about your needs and whether you can afford to service a different loan structure.

At this point, an MFAA Approved Credit Adviser will also need to find out about your existing loan, repayments and the structure of the facility.

The current value of the property is also taken into consideration, so the credit adviser will have access to current data that will indicate what the asset is worth.

Then credit advisers will have a look at the various loan options and figure out whether it’s worth it for the borrower to refinance. It’s not usually worth it if it’s only going to save a couple of hundred dollars a year, taking into consideration exit and application fees. But if it’s going to save upward of $1000 a year, refinancing might be a sensible approach.

Another key consideration is lenders’ mortgage insurance (LMI). If switching loans means you will need to pay LMI again, sometimes it’s not worth refinancing.

If you want to refinance just to lower lending costs, ask your credit adviser to negotiate with the bank for a lower rate.

If you do decide to go down the refinancing path, working with a credit adviser rather than going straight to a bank has advantages because the adviser has access to loan options from scores of different lenders.

Credit adviserscan compare lots of different lenders and, if there is a better opportunity, they’re able to access it. Credit advisers are always working to give you great advice that’s in your best interests.

If you’re thinking of refinancing your existing home loan OR trying to lower the costs of your loan, please contact me 1300 30 6767 for an obligation free discussion regarding the same.

What to look for at an Open House Inspection?

November 21, 2017

There’s an old saying that you should never judge a book by its cover, and this is true for houses – after all, who would buy one having never seen more than the front door? Open inspections are opportunities to really flick through the pages, and here’s how to take full advantage.

Really use your senses

Sniff, peer, listen and feel as much as you can. Your nose might pick up a mouldy or musty smell that may mean damp. You might spy small or hidden cracks that could mean structural issues. That clattering sound when water is running? That can be a sign of serious plumbing problems.

Don’t be distracted by the beautiful bling

Anyone can invest money in pretty cushions and lamps to set off the house. Or bake some cookies just as the open inspection starts so the house smells cosy and homey. But when buying property, you’re buying the sausage not the sizzle, so look past the perfectly presented and lit lounge room to the size, shape and placement in the floorplan of the actual room, and imagine how you will use it.

Look up

That means checking the roof on the way in and looking at the ceilings in the rooms. Damp and leakage issues are costly and notoriously hard to fix. And once the rot sets in, it’s there to stay.

That kitchen and bathroom advice

It’s true what they say. If these two rooms aren’t how you would like them to be, are you prepared to live with it or spend the money required to transform them? On an average, kitchen renovations in Australia have an average cost of $10,608 to $31,722, provided that the room is in good condition and doesn’t need any significant structural renovation. Bathroom renovations will be upwards of $10,000, and probably a lot more.

Look at your surroundings

Who and what are your neighbours? Check out the location at different times of the week and day. It may sound excessive, but maybe the house is under a window-rattlingly low flight path only when the weather is bad, there’s a bar across the road that blasts out loud music in the early hours but is closed during the day when inspections are on, or there’s a factory down the road that when the wind blows a certain way sends nasty smells wafting. If you have kids, what are the local school like? What is the local crime rate?

Do not hesitate to ask lots of questions

What are the utilities like gas, electricity and water costing the current residents? A home with large windows seems bright and sunny, but it can also make for more drafts in winter and warmer rooms in the summer – both problems that make for higher utility costs. It’s also important to ask about previous repairs and renovations; if something goes wrong down the track it can be good to have a history.

Have a pre-purchase building and pest inspection

This may seem obvious, but many houses are bought and sold without one. Home inspectors are trained to find flaws in a home that your untrained eye may never see as a problem, but may cost a lot to correct down the line. If it’s your dream home, you may choose to buy it even with structural or pest problems, but you’ll no doubt be able to negotiate on price.

Call to action

Before you start looking at homes, talk to a Finance/ mortgage broker about how much money you can borrow and which type of loan suits you.

Call me at 1300 30 6767for an obligation free discussion regarding the first steps towards buying your first home.

Why does my broker ask for so much documentation?

November 15, 2017

This is one question which lot of clients think of while dealing with their broker. Hopefully after reading the following you will understand exactly what’s the need of all that paperwork.

No one likes paperwork; however, providing your broker with the right documentation will save you time and money.

What information will your broker ask you to provide?

When you ask to enlist the services of a broker, they will probably ask you for the following documentation.

Identification, including photo ID such as driver licence or passports
Income verification documentation such as recent payslips
Rate notices (if refinancing) or Copy of Contract (if purchasing)
All the loan statements, including credit card, home loans etc.

Depending on the lender or bank you would like your broker to apply to for your loan, you may also be asked to provide:

A recent PAYG summary
A notice of assessment from the Australian Taxation Office
Tax returns
Proof of your contribution toward the transaction, such as savings or deposit statements

Why is this information important?

While it may seem that you are climbing the Mount Everest of paperwork, a broker will ask for all of this to ensure they are protecting you and that they get the best possible deal.

Gathering various forms of documentation allows brokers to do a fact find, which is an important part of the loan process.

This is the process by which brokers ensure that they match a client with a loan that helps them achieve their property goals, whether that is buying a home to live in, one to renovate and sell, or a long-term investment, and one that matches their financial positions. Brokers do not want to put prospective loan clients into a situation where they cannot afford to repay their new loan commitments or go through hardship to pay the loan.

Will a bank ask for the same documentation?

If you apply for a loan with a bank that you do not currently have an account with, they will require much of the same information as a broker would.

Although borrowers may be able to avoid the paperwork by applying for a loan with their current bank (which will already have a lot of information on file), this means being constrained by the products that bank offers and risking missing out on a great deal.

The benefit a broker has compared to an individual bank, is the broker has access to most banks and lenders across Australia. Lending policies and pricing vary greatly across the lending market and some clients do not realize this, so why waste time going direct to a bank.

It is also likely to mean missing out on having a broker match a loan to longer-term goals, rather than just a purchase price and interest rate.

Saving you time and money

Brokers can usually tell a client after 30 minutes of the first meeting only whether they have a chance of obtaining loan approval.

Brokers have access to bank loan affordability and serviceability calculators, which show clients’ potential borrowing capacity. Depending on the size of the funding required, and the loan to valuation ratio, these days the banks are extremely competitive, and we can quite often get a better price deal than advertised.

If a client is not yet in a position to obtain a loan or has a credit issue on their file, such as a default, having a broker on-side can be invaluable. A broker can guide the client with a view of getting default removed, or waiting until the default drops off the client’s credit file.

In a nutshell, a broker will shop around to get the best possible deal for you, their client. Finance Brokers at Origin finance are the experts in finding you a loan that matches not just your finances, but your future.

Call me at 1300 30 6767 for an obligation free discussion regarding getting a new home loan OR for refinancing the existing one to obtain a better interest rate and/or features.

The Rate Rise Drums are Getting Louder (But Are Still Distant)

September 18, 2017

One reason why we have had a property boom is because, for the last few years, we have had ultra-low interest rate – rates that will not be available for ever.

When rate rises do eventually come, they will take more heat out of a frenzied property market.

For almost 10 years, Central Banks around the World have been pumping money into the global economy to keep things moving. Now, across the planet, economic conditions look healthier – meaning that Central Banks can start taking the foot of the accelerator and we can all expect rate rises.

The Bank of Canada has now increased interest rates twice and, this week, the Bank of England indicated it was minded to increase rates soon. Australian economists increasingly expect the Reserve Bank (RBA) to follow suit.

The National Australia Bank (NAB) is now forecasting Australian interest rates will increase rates four times before the end of 2019.

The Australian economy is looking healthier by the minute; jobs are increasingly plentiful; there is a tsunami of infrastructure hitting us; and the resources decline is coming to an end.

While mortgage repayments are likely to come tougher, the property market is still likely to hold up.

This is particularly true as, even with four rate rises, the RBA’s cash rate will still only be at 2.5 per cent by end of 2019. This is still well below what it estimates to be a neutral position, suggesting monetary policy settings will still be at a level where the banks want to keep stoking the fires rather than cooling them.

So, what does that mean for you?

If you already have a mortgage, you can:

Expect the property market to hold up
Factor in some gradual and modest rate rises (you may want to make hay while the sun shines with your mortgage repayments)
Look at fixing part of your interest rates

If you are looking to buy a property, you can

expect there to be less competition as slightly higher interest rates stop people getting ahead of themselves.

The Ultimate Property Investor Event – Sydney 16th September

September 11, 2017

With the boom market now behind us learn how to get the inside edge for your next property investment.

There has been so much talk and noise about the property market recently that most of us are wondering where to go from here for our clients (and ourselves). To try and make sense we have partnered with “Property Buyer “ and several other prominent industry specialists putting together “The Ultimate Property Investor Event!” On Sat 16th September at the Mercure Hotel next to Central Station Sydney.

This is a full day event to help advise and plan for property investment over the next few years and will be invaluable to you if you own property or are looking to invest in the future.

To secure your place click HERE

Why you should come.

Getting this many experts in one room on the same day is a coup for your investment education. These experts are masters of their craft and have an extensive track record. They say that success leaves clues. Following in the footsteps of proven property investment systems means you can take safe steps forward to improving your own financial position. Learn from the best and you can directly apply the strategies and techniques these experts use.

We will take a deep dive into the current property market to see where new opportunities will arise. We will look at how to get finance approval easily despite recent tightening in lending standards. We’ll uncover smart strategies for finding positive cashflow properties, high growth properties, renovating and small development opportunities. Our speakers will show you how to use the right structures for minimising tax, protect your wealth and create a complete financial plan. We’ll update you with the latest depreciation allowances, show you how to get a property manager that really cares and teach you the key principles for renovating and styling for maximum profit. Plus we’ll have fun along the way.

Date: Sat 16^th September

Time: 9.00am to 5.00pm

Venue: Mercure Hotel Sydney

Investment: $197 per person

REGISTER NOW: Register Now!

How to choose between auction and private treaty when selling your home

June 26, 2017

Auction or Private treaty

Nicola Powell| Domain| 23 June 2017

https://www.allhomes.com.au/news/how-to-choose-between-auction-and-private-treaty-when-selling-your-home-20170623-gwtwq5/

Choosing the method of sale is a key decision vendors initially face. Auctions tend to be a fast path to sale compared with private treaty but the speed and success largely depends on market conditions and location.

Auction numbers in Sydney jumped during autumn as vendors sought to take advantage of the housing market strength and fraught competition between prospective buyers.

Just over 10,250 homes were listed for auction during autumn 2017, up 28.6 per cent compared to autumn 2016. That’s an additional 2282 properties under the hammer.

Auctions tend to be a fast path to sale compared to private treaty. Photo: Jessica Shapiro

Vendors across all regions of Sydney are making the most of market conditions before the anticipated easing of activity over winter sets in. The upper north shore played host to the highest number of auctions during autumn 2017, with 1734 homes scheduled to go under the hammer — an additional 453 compared to autumn 2016.

The south west experienced one of the largest percentage gains, soaring a staggering 64.4 per cent to 761 homes listed for auction during autumn 2017, an additional 298 compared autumn the year before. The west experienced a similar jump at 60.6 per cent to 745 auctions throughout autumn 2017 compared with 464 auctions during autumn 2016. Other significant gains included a 38.9 per cent increase in the northern beaches with 861 auctions listed, and a 35.2 per cent increase to auction activity in Sydney’s south, with 1349 listings.

Some vendors prefer setting a price without a deadline, taking away certain elements of pressure from the selling process.

Statistics surrounding auctions tend to reflect buyer sentiment and are a good indicator of market conditions. Autumn appears to still be filled with competition as demand puts pressure on the housing sector.

Data compares the clearance rates in Autumn 2016 and Autumn 2017 in Sydney. Photo: Data sourced by Dr Nicola Powell using Australian Property Monitors 1 800 817 616. Copyright APM Pty Limited.

Clearance rates did ease over the month, from 73.3 per cent in April to 69.7 per cent in May, perhaps a reflection of the surge in auction listings. Figures are still above the clearance rate of 69.4 per cent recorded in May 2016.

Clearance rates in some regions echoed the intense competition between buyers. Sydney’s lower north had the highest clearance rate during autumn 2017 at 81.4 per cent, closely followed by the northern beaches at 78.4 per cent and the inner west at 77.9 per cent.

The only region to record a declining clearance rate was the city and east, from 77.1 per cent in 2016 to 75.5 per cent for autumn 2017.

Clearance rates in the upper north shore (75.4 per cent), south (71.7 per cent), Canterbury-Bankstown (71.4 per cent), Blue Mountains (61.5 per cent) and the south west (59.7 per cent) registered some of the biggest annual improvements.

More vendors are certainly wagering on strong clearance rates. The robust auction market conditions exemplify the strength in demand. The varied auction results highlight the need for understanding market climate in each locality; it is a key consideration when choosing a method of sale.

There are many benefits to selling by auction but some vendors prefer setting a price without a deadline, taking away certain elements of pressure from the selling process.

Knowing the current market climate is vital when deciding to sell by auction or private treaty.

First home buyers to have edge over investors under NSW housing affordability package

June 2, 2017

Sarah Gerathy| ABC

http://www.abc.net.au/news/2017-06-01/nsw-first-home-buyers-to-have-edge-over-foreign-investors/8580042?section=business

First home buyers could save up to $34,000 under the NSW Government’s new suite of housing affordability measures, according to Premier Gladys Berejiklian.

The Premier said the measures were designed to give first home buyers a competitive edge when bidding against investors.

The measures, which come into effect on July 1, include:

Abolishing stamp duty for first home buyers on existing and new homes up to $650,000 and introducing stamp duty discounts for properties worth up to $800,000
Scrapping stamp duty charged on lenders mortgage insurance when it is required for first home buyers with limited deposits
Doubling the foreign investor surcharge from 4 to 8 per cent on stamp duty — overseas buyers will also pay a 2 per cent surcharge on land tax.
Local investors purchasing off-the-plan properties will no longer be able to access stamp duty concessions.

“We’re doing everything we can to level the playing field for first home buyers,” Ms Berejiklian said.

She said the measures were estimated to cost the State Government about $1.2 billion, but the increased surcharge on foreign investors would help pay for it.

The Premier has previously said she was reluctant to radically overhaul stamp duty or first home buyers grants in case it generated fresh heat in the market or had other unintended consequences.

But she said she the former Reserve Bank governor Glenn Stevens had given the plan his tick of approval.

“He noted to me that he felt the package we were putting forward was well balanced,” Ms Berejiklian said.

She argued the number of home buyers entering the market had been declining in recent years, which had changed things.

“We feel given the way wage growth has been, and what’s happening out there in terms of first home buyers that we needed to take some measures on the demand side as well.”

The lowdown on Lenders Mortgage Insurance

December 18, 2016

First of all, what is Lenders Mortgage Insurance (LMI)?

LMI is insurance the bank will generally require you to purchase if you need to borrow more than 80% of the value of the property you provide as security.

So now that I have LMI, that means the bank can only take the property I provided as security, right?

Wrong! If you can’t make your repayments, the bank can take possession of the property or force you to sell. If that still doesn’t cover what you owe, the LMI will pay the bank the balance still owing.

But it doesn’t stop there… Unlike in some States in the USA, you can’t just hand back the keys and walk away from the loan. The LMI provider can and generally will come after you for any shortfall, and numerous bankruptcy proceedings have been launched by LMI insurance companies against borrowers over the past decade.

So what?

There can certainly be legitimate reasons to borrow a high proportion of the value of the property you give the bank as security, however it does come with additional risks. If rates go up or if your circumstances change, it may be difficult to make your repayments, and it’s possible you could owe (and will need to repay) more than the value of the property.

Make sure you’re clear about what you’re agreeing to, and if in doubt, ask the questions!

Noah Cohen is Mortgage Broker with Origin Finance, and is a Credit Representative (CRN 490277) of BLSSA Pty Ltd (Australian Credit Licence 391237)

Sydney and Darwin lag behind

Strong-performing Brisbane, Canberra and Perth

Melbourne, Adelaide and Hobart

At Origin Finance, We Put You First