Hi,

I hope you and your family had a great Christmas break. Even though it’s early in the year, there’s already some big news around:

– Refinancing hits new record

– Property listings rise 4.6%

– 3 key fixed-rate loan tips

Read more below.

But first….. 3 things!

#1 Our survey results are in!

Conveyancer Vs Property Lawyer?

Our question was: As a property purchaser, would you use:

– A conveyancer

– A property lawyer

– Someone who does both

Some observations:

Personally, I like to use a conveyancer who works closely with a property lawyer or alternatively, a property lawyer. The reason being that if something goes awry, I want my conveyancer to be onto it like a dog with a bone. I don’t want to have to suggest and then engage a property lawyer at the last minute (I had a client who was once in that position and it was painful for all concerned 😥)

Property lawyers can cost a little bit more than a conveyancer (but not always a lot more) and for run-of-the-mill property transactions, you might think “Is this overkill?‘ But for me, I come from the perspective ‘I am not the expert and I don’t know what I don’t know‘ so I rely on the legal and property experts to assist me. I would call those extra few hundred dollars I might need to spend as my insurance policy!

And if there is complexity but I don’t understand the complexity, I don’t want my conveyancer to assume I have already obtained appropriate legal advice (noting that conveyancers cannot give legal advice).

#2  Updates to our Property Market Reports.

These Reports are a great resource for those looking to buy in a new region or just to get a feel for what is happening in that region. Each Report also includes a suggested recommendation to Buy / Hold / Sell.

Updated Regional Property Reports

Here are the last 3 months’ updates of these detailed regional reports (including the property clock: Buy / Hold / Sell).

There are 30+ regions analysed and they are updated regularly.

Get your Free Property & Regional Reports

#3  Phil Anderson – Guru or ….?

If you don’t know or have not heard of Phil Anderson, you are not alone. He runs a business called Property Share Market Economics and pre-COVID, he presented at a CBRE property seminar.

Phil has a contrary view on all things economic to what you might read in the media. As he says, the economy runs off the back of the price of land and the economic rent of land. And most economists don’t factor this relationship (and the cyclical nature of this relationship) into their economic forecasts.

Phil’s food for thought: Phil believes the property market runs in a predictable cycle (18.6 years is pretty precise!) and that the next peak is in 2026/27.

Further, he is predicting banks, with their higher margins from the interest rate increases will be increasing access to credit which will fuel the next series of price rises. On this I am in agreement – and, watch out for bank profits to go up even higher as a result.

Now, whether you think Phil is blowing steam from you know where or whether you agree with him, the interesting thing is that he is bullish on the property market for the next few years. And, he says he has data on his side. Of the last 10 cycles of interest rate increases, the price of property has increased 9 times (and in the 10th it went sideways).

So there you have it!

 

Mortgagees refinanced a record $19.5 billion of home loans in November, the Australian Bureau of Statistics (ABS) has reported.

That included $13.4 billion of owner-occupied loans (also a record) and $6.1 billion of investment loans (the second-highest on record).

The ABS had a simple explanation for the astonishing amount of refinancing that occurred in November: “More borrowers switched lenders for lower interest rates as the RBA’s cash rate target continued to rise.”

There are two reasons why so many people are able to find lower-rate home loans at other lenders.

First, rising interest rates are causing people to shop around, because not all lenders are increasing rates at the same pace.

Second, with so many lenders in the market, competition for business is fierce, so institutions often charge new customers lower rates than their existing customers.

If you like the sound of switching to a home loan with a lower interest rate, get in touch. I’ll compare the market on your behalf and give you multiple options to choose from.

Want to compare interest rates? Let’s talk!

 

In a strange twist, the number of properties listed for sale has increased, even as the number of homes coming onto the market has decreased, according to SQM Research.

At first glance, it appears as though there must be fewer for-sale properties. That’s because, across Australia, the number of new listings (those that had been on the market for less than 30 days) in December was 22.4% less than the year before.

However, while fewer new homes are being listed for sale, those already on the market are taking longer to sell. In December, the number of listings that had been on the market for more than 180 days was 14.3% higher than the year before.

However, while fewer new homes are being listed for sale, those already on the market are taking longer to sell. In December, the number of listings that had been on the market for more than 180 days was 14.3% higher than the year before.

As a result, the total number of homes listed for sale in December was 4.6% higher than the year before.

SQM Research managing director Louis Christopher said the rise in older listings appears to be uniform across cities and towns, and is typical of what happens in a housing downturn.

“As there remains more sellers than buyers, dwellings on the market that are not priced to market, don’t sell,” he said.

Get in touch if you need a home loan!

 

If you fixed your home loan in early 2022 or before, and your fixed period is going to expire this year, it’s important to prepare yourself for higher interest rates.

That’s because, once your fixed period ends, you’ll revert to a variable loan, whose interest rate will almost certainly be higher.

Since May 2022, the Reserve Bank has raised the cash rate by 3 percentage points, and most banks have increased their variable rates by a similar amount.

Here are three tips to prepare yourself for a rate rise:

– Pretend your interest rate has already increased by 3 percentage points and pay the extra amount into a special savings account each month

– Look for ways to reduce your discretionary costs, such as by holidaying domestically rather than internationally or buying a used car rather than a new vehicle

– Speak to a broker ahead of time about refinancing to a lower-rate home loan once your fixed period ends

Many lenders offer special inducements to refinancers, including lower interest rates and cashback deals, which is why refinancing can be such an effective tactic.

Get in touch if you want to refinance!

 

The Australian Banking Association, which represents the country’s biggest banks, will make changes to the Banking Code of Practice to better protect customers.

In response to the 2021 Independent Banking Code of Practice Review, the ABA has said it would:

– Accept clear statements about customers’ rights and how to enforce them.

– Ensure banking services are inclusive of people of diverse sexual orientations and gender identities.

– Update the definition of a ‘small business’, to protect an additional 10,000 small business customers.

– Update the definition of a ‘vulnerable customer’, to better recognise that anyone can be vulnerable at any time.

The changes around vulnerable customers will also clarify the type of support available to all customers, including financial difficulty options for small businesses or those needing access to external support services such as interpreters and financial counseling.

The ABA has started work on drafting its amendments.

The ABA’s membership includes 20 of Australia’s largest banks, including the big four banks, Macquarie Bank, Bendigo & Adelaide Bank, Bank of Queensland and ING.

Hi,

Christmas is just around the corner, so if you haven’t done your shopping it might be wise to start now. In the meantime, here are four stories I think you’ll like:

– Borrowers pass their ‘rate buffer’

– Govt tackles housing affordability

– Australian property earns praise

– ABS releases good economic news

Read more below.

 

And for the business owners amongst you,

we have snuck in the results of our most recent survey (towards the end 😉)

This month’s survey question: 

If you were borrowing money for your business, would you…..

• use your transaction bank

• a specialist lender

• a broker

(Scroll to the end to see the results – and our commentary!)

Plus…..

Updated Regional Property Reports

Here are the last 3 months’ updates of these detailed regional reports (including the property clock: Buy / Hold / Sell). 

There are 30+ regions analysed and they are updated regularly.

Request FREE Report

 

 

The mortgage market has entered interesting territory, thanks to the Reserve Bank’s decision to hike the cash rate by another 0.25 percentage points in November.

That increased the rate rises that have occurred since May from a cumulative 2.50 percentage points to 2.75 percentage points.

The reason that’s significant is because when lenders assess home loan applications, they have to make sure the borrower could repay the loan if interest rates were to rise.

Until October 2021, lenders had to add a buffer of at least 2.50 percentage points – so the November rate rise pushed many borrowers beyond their buffer.

Since October 2021, that buffer has increased to at least 3.00 percentage points

But despite the series of rate rises, CoreLogic isn’t seeing any signs of panicked selling or forced sales in its listings data.

“In fact, the flow of new listings remains substantially below what they would usually be for this time of the year,” executive research director Tim Lawless said.

Reach out if you’d like to discuss refinancing. I can explain the pros and cons, and potentially help you refinance to a comparable loan with a lower interest rate.

 

One of the highest-profile elements of the Albanese government’s first budget was a target to “build one million new well-located homes over five years from 2024”.

Only 2% of these one million new builds will be funded by the federal, state and territory governments; the other 98% will come from the market, with governments “playing a key role in enabling and kick-starting investment”.

CoreLogic’s head of residential research, Eliza Owen, noted that some have said the target lacks ambition, given that 974,732 homes were constructed in the five years to June 2022, and an average of 1,010,723 have been completed on a five-year basis since 2017.

One of the highest-profile elements of the Albanese government’s first budget was a target to “build one million new well-located homes over five years from 2024”.

Only 2% of these one million new builds will be funded by the federal, state and territory governments; the other 98% will come from the market, with governments “playing a key role in enabling and kick-starting investment”.

CoreLogic’s head of residential research, Eliza Owen, noted that some have said the target lacks ambition, given that 974,732 homes were constructed in the five years to June 2022, and an average of 1,010,723 have been completed on a five-year basis since 2017.

“However, the past five years have been conducive to high levels of construction (notwithstanding immense bottlenecks for the construction industry in the past two years) and there’s no guarantee activity levels will remain at the same level for the next five years,” she said.

“As interest rates rise, home prices fall and supply-side constraints persist, the delivery of a million homes is not guaranteed and may be more ambitious than what was achieved in the past five years.”

 

Australia’s population is set to grow strongly over the next decade, which is likely to lead to higher demand for rental accommodation.

Global real estate giant CBRE said population growth is one of the main reasons why “Australian real estate represents a compelling investment”.

CBRE said Australia’s population was expected to grow by 14% between 2021-2030, which would be the highest rate among developed economies.

That strong population growth is partly due to migration, with the federal government recently increasing its annual permanent migration intake from 160,000 people to a record 195,000.

More competition for rental accommodation would put upward pressure on rents, in an environment that’s already strongly favouring landlords. As CBRE noted, there is “less than 1% vacancy in select markets”, which is leading to “robust rent growth”.

CBRE forecasts that from 2022-26, rents will increase by an average of at least 5% per annum in Sydney, Melbourne, Brisbane, Perth and Adelaide.

 

Australia’s economy has posted its best growth numbers in a decade, according to the most recent data from the Australian Bureau of Statistics.

The economy grew 3.6% in the 2021-22 financial year – the best result since it grew 3.9% in 2011-12.

That strong economic growth has helped drive down the unemployment rate to below 4%, which is very low. As a result, the vast majority of workers have jobs, which is the key to being financially secure.

The ABS also reported that households saved 13% of their income in the 2021-22 financial year, which is high by historical standards.

That means many people put money aside for a rainy day – a smart move given the subsequent increase in prices and interest rates.

The Reserve Bank said earlier this month that it “expects to increase interest rates further over the period ahead”, so if you have a home loan, it would be wise to budget accordingly.

Two possible ways to save money are to ask your bank for a rate cut (you’d be surprised how often they agree to this) or to refinance to a comparable loan with a lower interest rate.

 

This month’s survey results are in!

If you were borrowing money for your business, would you…..

The interesting thing here is that whilst 70% of borrowers consider using a broker for their residential property loan, business owners still prefer to use their bank.

 

This is interesting for a few reasons:

– Transaction banks are not always the best solution for business finance.  That is why there has been a proliferation in the growth of non-bank lender finance for businesses.

– Using property security for business purposes may work when there is an asset being acquired and the asset is the property which is being used as security.

– However, for other business purposes e.g. working capital finance, cashflow finance, ‘urgent cash’ finance and debt consolidation finance, other types of security might work better – particularly in terms of turnaround time and flexibility of the amount able to be borrowed.

– There are now non-bank lenders offering not just invoice finance (commonly referred to as debtor finance or factoring) but also trade finance where the supplier’s invoices are financed so the supplier remains happy as they are being paid on time. This can be particularly relevant for purchases from overseas suppliers who don’t like to ship their stock if they haven’t guaranteed payment is going to be received.

– Sometimes (e.g. for a property acquisition), the business owner is using the business entity to hold the asset.  However, the assets can be held in other entities which might be more appropriate eg a super fund, or a trust. Typically, we see good tax accountants assist business owners make this assessment.

We can help you work out the best way to fund the cash your business needs in order to grow.  And, as a broker, we can introduce you to the lender which will best suit the needs of your business.