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Where to now for the property market? The RBA came out strongly in their February meeting, announcing a 0.25% rate rise and that further rate rise’s can be expected. According to their view, inflation is not contained and they’re ‘hell-bent’ on reducing consumer spending. Interestingly, at the start of the year, economists were predicting the cash rate to peak at 3.60%. Now it’s more likely to be between 4.00% – 4.50%… So where to now for the property market? ·         It’s a buyers’ market in many locations around the country. Vendors understand that the value of their properties have decreased and that credit conditions have changed significantly since 2021. ·         It’s our view that the second half of 2023 will be a time when we see increased ‘investor’ action. Those with strong borrowing and servicing power will pounce on undervalued properties. ·         On average, prices will decrease (with Adelaide & Perth bucking that trend) as interest rates continue to rise. ·         When the rises stop, however, and the tide turns, it’s our belief we’ll be set for another period of sustained growth. This is estimated to be in 2024 and beyond. Many economists are predicting we’ll see an increase in property prices similar to upswing of 2021 and 2022.  Should you wait to purchase and time the market?  In short, no. If you’re ready to buy and can afford to, take action today and you’ll reap the rewards in 2024 and beyond. 

Is now a good time to build? Is now a good time to build? It’s a question we get asked quite regularly from prospective clients looking to embark on their home building journey. So, with that front of mind, we decided to ask ourselves the question. Is now a good time to start? Yes, and conditions will only get better! “Is now a good time to start? Yes! It’s our belief that we’re starting to see a ‘levelling out’ of supply chain issues throughout the building industry and around the world. Unfortunately for some consumers, the most expensive time to enter into a build contract was approximately 6 months ago when building costs peaked. However, speaking to local builders and large construction companies, the general consensus is that prices are stabilising as supply chain issues decrease. It was also reported in the ‘Weekend Australian’ that car manufacturers in the US are for the first time in months, outpacing demand and sales for their products. Hence, the tide is starting to slowly turn back around. From a finance perspective, there is still the appetite from lenders to compete for construction lending. For example, Bankwest will lend up to 95% LVR (loan to value) and are not limited to 90% LVR like many of the top tier banks. It’s a great initiative that provides flexibility for customers in a rising rate market. Whilst borrowing capacities have reduced with numerous interest rate rises, utilising a 95% LVR may provide the finance option you require.  As we all know, there is also serious housing shortage in Australia with many parts of the country in a so called ‘rental crisis’. Therefore, affordable housing is in high demand. If you’re thinking of building your own home in a decent location than future growth opportunities look promising as demand will continue to rise.  If you’re a first-time buyer, it would be wise to assess the ‘House and Land’ packages as an entry point into the market. 

Mortgage Myths (Part 2) When it comes to buying a home, there are many misconceptions that can lead potential borrowers to abandon their home buying process. One such misconception is that if you’re classified as being on ‘probation’ in a new role or career, you can’t apply for a home loan. However, as it stands today, lenders will approve loan applications based off 1 payslip only, with many accepting two payslips – regardless of whether you’re on probation. In this article, we will address some common misconceptions about the home-buying process and provide information on how to navigate them. “…there are many misconceptions” You can’t apply for home loan if you’re on probation A common misconception that leads potential borrowers to abandon their home buying process is if they’re classified as being on ‘probation’ in a new role or career. As it stands today, lenders will approve loan applications based off 1 payslip only, with many accepting two payslips – regardless of whether you’re on probation. Often a letter of employment assists (in conjunction with a payslip) to satisfy policy across a range of lenders   Lenders don’t like casual employees Not necessarily true. Lenders add certain caveats to casual employee lending to mitigate risk, however they do lend to casual employees. For example, most lenders will require casual employees to be employed for a minimum of 6 months to provide a level of certainty that employment is not a ‘flash in the pan’. Additionally, they may ask for 6 months of payslips and annualise this figure to determine an ‘expected annual salary’. An educated broker will know different lender policies and recommend a suitable product In a rising rate market, you should always fix a home loan In our opinion, fixing your home loan is a strategy we generally don’t advise. Often, you’re leaving money on the table that could be in your pocket. However, this question is client specific and depends on each individual scenario. As an example, current fixed rates are over 5/6%, which is a full 1 percent higher than the current variable rate. Yes, rates are rising, but the top range of the rises is unknown. Additionally, rates are predicted to drop from July onwards in 2023. Therefore, you may have locked yourself into a high rate unnecessarily. It’s easier to apply for a home loan with your current bank As brokers, we see this type of behaviour regularly. It’s understandable, you’re familiar with your bank and you’re comfortable with the app and online experience – so why change? When seeking a home loan, it’s our view that it’s always worth getting a second opinion. For example, you may be able to borrow $100k more with another bank if their policy differs or they have a greater risk appetite for certain types of income. This could be the difference between purchasing your dream home or missing out on it all together.

Do you purchase in a rising rate market? The Reserve Bank of Australia has raised the official cash rate from a record low of 0.15 in April to 2.35 in September. It’s the fastest cash rate rise in history, and it’s taken most of Australia by surprise – especially considering the RBA predicted in 2021 that there wouldn’t be a rate rise until 2024. What should I do? This leaves numerous questions on the lips of home buyers across the country. Do you pause your dream home search and wait for rates to drop in a couple of years? If you purchase now, are you buying a property that will decrease in value? Can I afford another 1% rate rise? Will this hurt out lifestyle too much? The list is endless. In our opinion, it all comes down to two things: what is your strategy & what can you afford? The word ‘strategy’ can be bounded around as a buzz word at times, however at Ynance we like to think of a property strategy as the ‘purpose’ behind your purchase. A sound strategy will clearly define your preferred type of property, the timing of the purchase and usually has an agreed end goal in mind.

Mortgage Myths (Part 1) 1. You need to have a 20% deposit to purchase a property: · Lenders can lend up to 95% of the property value (and in some cases 97%) for owner occupiers and investors. · In today’s market, it is rare to see first home buyers saving a 20% deposit due to the increase in house prices across the country. E.g. for a $1 million dollar property, you would need $200,000 in savings (plus costs) to meet the 20% deposit threshold. · It is common for buyers to purchase properties with a 5% or 10% deposit. This enables them to enter the property market earlier and take advantage of property growth. “Lenders can lend up to 95% of the property value” 2. You can’t borrow if you’ve been self-employed for under a year: · Non-banks such as Liberty Financial & Redzed have policies to assist self-employed borrowers with as little as a 1-day old ABN! · If you can show strong growth via BAS statements or preliminary financial statements, lenders have loan products that suit these scenarios 3. Your loan costs more if you use a Mortgage Broker: · To bust the myth right open, this statement is entirely false. Mortgage Brokers are a free service for borrowers to use when submitting a loan application. · If you source a home loan through a broker, there is no extra cost to the customer. Brokers are remunerated by the bank as a ‘thank you’ for providing them with business. · A broker’s commission is not added onto your loan amount, nor do you have extra fees that you have to pay for using broking services. 4. Lenders Mortgage Insurance protects you against the banks: · Borrowers are required to pay Lenders Mortgage Insurance if you are seeking a ‘Loan to Value Ratio’ (LVR) higher than 80%. · Lenders charge this fee to protect themselves and not you – the customer. · Lenders assess loans with an LVR’s of above 80% as higher risk, and therefore charge an extra fee to protect themselves against borrowers defaulting or terminating the loan.

Refinancing could save you $3,360 For the first time in 10 years, borrowers are starting to look more closely at their home loan interest rates. For many home buyers, the May rate rise announcement was the first rise they had experienced in their home buying journey. Cost of livings pressure are immense, house prices in major capital cities are softening and there is instability internationally as Russia and China flex their muscle. These concerns are not just feelings, they’re facts. “Cost of living pressure is immense” The latest Australian Bureau of Statistics data shows refinancing surged to almost $18.2bn in June – a monthly record. That eclipsed its earlier peak of $17.2bn in August last year (in the middle of the Melbourne and Sydney covid lockdowns). Loyalty to your current bank is a dying trait. Australians are becoming ‘savvier’ and improving their financial literacy by assessing their options in market. Here are the reasons why you should join the refinancing boom: Loyalty can cost you $3360 a year · The most common benefit of refinancing to a lower rate is the savings it places directly back into your pocket. Reducing your rate by 1.0% on a $500,000 loan will enable a saving of $3360 for the first year, regardless of having additional funds in an offset account · Even a 0.5% saving of a $500,000 loan will save $1680 a year. New customers receive lower rates than existing customers · Banks are money making machines and it’s no surprise that they entice new customers by offering considerably lower rates than existing customers. · For example, Westpac are industry leaders when it comes to a ‘rate gap’ between new and existing borrowers. They are currently offering a two-year honeymoon home loan rate to new customers that is 1.09% percentage points below what existing borrowers are paying. · CBA are a close second with a rate gap of 0.93 percentage points between existing and new borrowers · Hence, you get a better rate by switching lenders Your loan structure may not be the best fit · The statistics show that Australians have record household savings in their bank accounts due to the covid period being so restricting on travel and lifestyle activities. · A current client had over $100k in savings yet this was not attributed to an offset account. We were able to refinance our client to an institution that offered this product feature – reducing the interest payable on their home loan. · This client will now pay off their home loan debt five years sooner than expected. Release equity for future investments · With a property boom, comes an equity boom. Australians are sitting on useable equity, and many don’t even realise. · We understand that investing in property is not for everyone however we love to educate clients on the opportunities available to utilise their equity. · It is quite common for clients to refinance to lower rate and withdraw equity for an investment property purchase. · You save on your home loan, and you invest for your family’s future – now that’s a winner!

What Is The First Home Loan Deposit Scheme? Over the last couple of years, the Australian Government have made it a priority to help everyday Australians purchase a home to live in. It’s no secret that saving up for a house deposit is a challenging task. Let’s look at Melbourne (as an example). With a median house price of $930,000, you would be required to save $186,000 if you were to pay a 20% deposit. Even a 10% deposit is just under $100,000. This is excluding any purchase costs such as stamp duty, transfer fees etc. For those in their 20’s or early 30’s, this can seem like a daunting figure to strive for. Help is here! Therefore, the Australian Government introduced the First Home Loan Deposit Scheme (FHLDS) to help first home buyers enter the property market with as a little as a 5% deposit (without the need to take out Lenders Mortgage Insurance): · The Commonwealth Government guarantees the difference between what the eligible first home buyer has saved, and the 20% deposit threshold lenders usually require before they’ll provide a home loan without Lenders Mortgage Insurance · For instance, if you have $45,000 to put towards a $500,000 home, the government will step in and guarantee the first $55,000 of your loan so that it brings your security up to $100,000 (Note, your loan would still be $455,000. The benefit comes from not having to pay LMI). · You can use the FHLDS in conjunction with other government grants, schemes, concessions, and waivers. E.g. stamp duty concessions that you qualify for in your state or territory · Borrowers are required to show evidence of ‘genuine saving’s to prove your ability to save and therefore repay your home loan · Both newly built and established properties qualify for the scheme What is ‘genuine savings’ and why is it important? · Lenders want to see you’ve planned for and saved for a deposit yourself, as this shows that you’re likely to be a good borrower · Lenders typically ask for a minimum of 5% of the purchase price, therefore the rest of your deposit can come from alternate sources. · For example, if you were buying a $500,000 home, you’d need $25,000 in genuine savings as a deposit.  Can you use your ‘rental ledger’ as genuine savings? · If you can prove a strong rental history, some lenders will make an exception to their normal genuine savings policy and may consider other deposit sources such as a gift from your parents · For example, National Australia Bank are happy to classify your rental history repayments as genuine savings. If you have paid $500 a week in rent for the last year (equating to $26,000), they will classify this as ‘genuine savings’ · Therefore, the actual deposit for your home loan can come from other sources i.e. a gift, sales of an asset, tax refunds, employment bonuses, inheritance etc

What is stamp duty and how is it calculated? Common queries we receive from borrowers is ‘what is stamp duty’, ‘how is it calculated?’ and ‘why do we have to pay it?’ Essentially, stamp duty refers to the tax charged by each of the state and territory governments on certain transactions and documents. You are required to pay stamp duty when you purchase a house to cover the cost of transferring the legal title in your name. The amount of stamp duty you pay depends on the property’s value and the state or territory in which you are buying. Stamp Duty rates may also vary for different types of properties such as vacant land, independent units or a property bought off the plan. Stamp Duty varies based on location​ Generally speaking, stamp duty charges amount to 4-5% of a property’s value. It means you could be paying as much as $37,500 in stamp duty when purchasing a house worth $750,000. As an example, this is how much stamp duty you would pay in each state based on a $700,000 purchase (established home, primary residence and not a first home buyer): Estimated Stamp Duty: VIC: $38,911 SA: $38,626 NT: $34,954 WA: $27,757 TAS: $27,105 NSW: $27,002 QLD: $19,668 ACT: $19,751 In terms of calculating stamp duty, the best resource (in our opinion) to use is www.stampdtycalc.com.au. It allows you to calculate the duty depending on purchase and state. However, when it comes to purchasing property, here are a few tips to minimise the ‘impact’ of the tax: Stamp Duty Concession: Depending on the state in which you are buying, you may be eligible for a stamp duty concession or exemption as a first home buyer, pensioner, or someone in a specified financial situation. Get in touch with the relevant state bodies to assess your options. You could save thousands! Budget for Stamp Duty: Enlisting a smart mortgage broker will enable you to budget for additional fees when purchasing property. Note: it is not just the one-off purchase price that you pay when buying a house. Short-term Property purchase: If you are looking to flip properties over a short period, be mindful that stamp duty charges can eat into your profits. Take this into account when budgeting and selecting properties. If in doubt, do your research and understand the costs involved in purchasing property – it’s not as scary as you think

Where to buy in a ‘softening’ property market? Despite Australia’s property market softening over the first half of 2022, smaller capitals and undersupplied regional cities will continue to strengthen – albeit at a slower rate. It’s important to note that the ‘property market’ is made up of many smaller markets, which all move at different rates. Many locations do not necessarily follow that of Melbourne or Sydney – and are often at completely different stages. There are always opportunities​ For example, let’s look at Perth. This is a city that has laid dormant from a growth perspective for the last 10 years, with a minimal uplift in growth (on average) compared to the east coast. However in 2022, these factors listed below are pushing house prices upwards in the west: · 40-year low vacancy rate in the rental market caused by a housing shortage · Strong job market with the average wage higher than most other capital cities – driven by the large % of FIFO workers · Economy remains strong and unaffected through COVID as WA managed the response to the crisis better (arguably) than it’s eastern state counterparts Additionally, here are a few other regional areas that we expect to continue to grow over the next 12-18 months (in our opinion). This is based on key factors such as an undersupply in properties for sale and rent, booming local job markets, a strong outlook of infrastructure development, accessible lifestyle and affordability. Victor Harbor, SA Only an hour away from the centre of Adelaide, the seaside town on the Fleurieu Peninsula is a favourite for property buyers. With more living space and affordability than any other capital city could provide for the same distance, there is no doubt its value is increasing since the pandemic began. Additionally, with major infrastructure and road upgrades expected in the future, the accessibility from Adelaide to the southern region will become even smoother. Vacancy rate is 0.13% with only 4 properties currently available to rent. Additionally, the growth in the last quarter alone was 3.33% for houses with 12.45% increase in median house price in the last year. It’s on track for another year of double digit growth in 2022.    Bundaberg, QLD Bundaberg offers an attractive lifestyle of coastal living at affordable prices, with family homes averaging from $580,000-$750,000. An added attraction is its commutability to the Sunshine Coast. With Noosa and it’s surrounding areas almost ‘maxed’ out on growth, it’s no wonder the next regional hub north of the Sunshine Coast is experiencing higher demand. This market hasn’t seen movement for a little while, so as vacancy rates start to drop and buyers get pushed out of the Sunshine Coast market, expect Bundaberg to appeal to families and FIFO workers chasing a more affordable existence Townsville, QLD Much similar to Perth & Bundaberg, this regional area has remained rather flat for the last 10 years. It will be an interesting case study to see whether demand returns for the tropical location, however these key indicators suggest it’s in line for an upswing: · Diverse economy – not reliant on mining or one industry · Rental yields are high, with the region being home to one of Australia’s military bases, enticing investor action · Low entry point for houses. For example, buyers can enter the market for under $400k for a three- or four-bedroom home, 10 minutes from the CBD · Key spending on infrastructure including a new sporting stadium, improvements James Cook University and road upgrades all bode well for growth Of course, there are risks with all regions and Townsville has had serious floods and cyclones in the past however we predict there is more upside in the capital of North Queensland that outweighs the climate risks. Disclaimer: these views are opinions only and we recommend all prospective buyers undertake their own research and due diligence

MID YEAR REVIEW: The Key Talking Points In Property Here we are, at the halfway mark of 2022, and what a time of change it has been! The key talking points so far are: A new Federal Government An ever-changing property market Three large interest rate hikes Health of Australia’s economy So let’s deep dive into the detail and how they relate to the property market: A number of changes on the horizon 1. Labour Government introducing new initiatives: Shared equity scheme that should make it easier for buyers to get into the market 30,000 new ‘spots’ for the First Home Loan Deposit Scheme open from the 1st July 2022 – helping everyday Australians purchase their first property In NSW, the State Government has just announced options for first home buyers to pay an annual property tax instead of upfront stamp duty. Interesting tactic that reduces the upfront cost to purchase property 2. Ever-changing property market: Major cities such as Sydney and Melbourne have turned into ‘buyers’ markets’ with drop off in prices at the top end of town. So-called ‘2nd tier’ capital cities such as Perth and Adelaide have shown impressive growth in the first two quarters – with low vacancy rates a key driver Migration to SEQ is still strong with agents still experiencing strong demand from interstate buyers This thing called inflation 3. The rise of interest rates and this thing called ‘inflation’: The Reserve Bank has flagged the possibility of more rate rises in 2022 as inflation is expected to hit 7% by the end of 2022. CBA – Australia’s biggest lender predicts the cash rate to peak at 2.1% in mid 2023 – we’re currently at 0.8% More pessimistic suitors are predicting the cash rate to peak at 4.0% by mid 2023 – ouch! 4. Australia’s economy remains strong: Our economy grew by 3.3% over the year to March as household spending bounced back from the Omicron wave Our unemployment rate hit decade-long lows, currently sitting at 3.8%. This means more Australians are experiencing a form of paid work Skills shortages remain an issue, as many industries struggle to find staff amidst a lack of immigration and travellers from overseas Where to next? There will be more rate rises, and they will be large. However, they will peak in mid-2023 as inflation is reined in. CBA are bullish and expecting a rate decrease in the second half of 2023. Certain sectors of the Australian property market will continue to prosper. For investors, research diligently and remember to focus on your key investment pillars e.g. property type, location etc. The new government schemes will enable more Australians to purchase homes and stop renting. This is a great thing and will help reduce the shortage of rental homes. Next step? To know how you could be impacted by rising interest rates and a changing property market, call Mitch today: 0411 235 798