Housing affordability the best it’s been since 1999: HIA

July 11th, 2019 by

Great news for home buyers – housing affordability is the best it’s been since 1999, according to new data released by the nation’s peak housing and building body.

That’s right – housing affordability is comparable to the days when the Y2K bug had us fearing for our lives, Nokia Snake was the pinnacle of mobile gaming, and median house prices in Australia ranged between $112,000 (Hobart) to $272,000 (Sydney).

These days, however, median prices range from $420,000 (Hobart) to $840,000 (Sydney).

But here’s where it gets a little interesting.

For a home buyer with an average income purchasing a median-priced dwelling (assuming a 10% deposit), mortgage repayments will consume the smallest proportion of their earnings since 1999, according to the Housing Industry Association (HIA) Affordability Index.

Hang on, how is this possible?

The main reason housing affordability is comparable with levels seen in 1999, despite house prices rising significantly faster than incomes over the last 20 years, is that interest rates are (in the vicinity of) 4.6% today compared with 6.7% in 1999, says HIA senior economist Geordan Murray.

Average earnings have also increased by 113% over the past 20 years.

While the median home price has increased by 228%, the lower interest rates have kept the cost of servicing a loan the same, points out Murray.

“The combination of lower home prices, improvements in wage growth and lower interest rates have contributed to the ongoing improvement in the HIA Affordability Index for the June 2019 quarter,” adds Murray.

What does the HIA Affordability Index measure?

HIA’s Affordability Index is calculated for each of the eight capital cities and regional areas on a quarterly basis and takes into account the latest dwelling prices, mortgage interest rates and wage developments.

All eight capital cities saw an improvement in the affordability index over the quarter to June 2019, with Darwin seeing the greatest improvement with its index up by 4.8%.

This was followed by Melbourne (+3.0%), Perth (+2.6%), Brisbane (+2.6%), Sydney (+2.4%), Canberra (+2.4%), Hobart (+ 2.2%) and Adelaide (+1.0%).

It gets even better

There are a number of recent initiatives that are not reflected in HIA’s Affordability Index but are nonetheless providing further benefit to purchasers, HIA points out.

There’s the reduction in income tax, the easing of APRA restrictions on mortgage lending, and the Australian government’s First Home Loan Deposit Scheme.

“The passing of the federal government’s income tax package means that millions of Australians will have extra income to put towards a deposit for a new home,” says HIA managing director Graham Wolfe.

Get in touch

If you’d like to take advantage of the current housing affordability conditions, then get in touch.

We can help arrange a home loan that’ll put a smile on your face and get you partying like it’s 1999.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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What the cash rate cuts mean for other areas of your finance

July 4th, 2019 by

Whenever the Reserve Bank of Australia (RBA) changes the official cash rate we all hear about how it will impact home loans. But it affects many other areas of finance and the economy, which we’ll look into today.

The RBA has cut the official cash rate to a new record low of 1%, just one month after lowering it to 1.25% – which was the first rate cut in almost three years (since August 2016).

Now, whenever this happens we all hear about what it will mean for mortgage-holders.

But it also has a flow-on effect for many other areas of finance, which we’ll look into below.

If you’re saving for a first home deposit

If you’ve got a large chunk of your money in a savings account and you’re trying to save for a first home deposit, the latest two RBA rate cuts probably aren’t the best news for you.

That’s because you want your savings account to have the highest interest rate possible and a cut in the official cash rate will likely mean a reduction in interest you earn on your savings.

If you are worried interest rates are going to be cut further, and you want to lock in a rate for a particular length in time, you can look into a term deposit account.

Alternatively, if you think now is a good time to jump into the property market, feel free to give us a call and we can run you through your financing options.

Car finance

If the RBA cuts the official cash rate, the interest rates on car loans generally go down too.

The bad news is that if you have already taken out a car loan it usually has a fixed interest rate for the period of your loan term.

The good news is with interest rates at an all-time low, if you’re thinking about buying a new car or refinancing an existing car loan, now might be the time to lock a rate in.

The many other types of loans

Changes to the cash rate affect interest rates on all kinds of loans, including commercial and business loans, asset and equipment finance, investment loans.

If you’re thinking about taking out any type of loan, or weighing up the pros and cons of refinancing, give us a call and we can give you the lowdown on the new landscape.

Credit cards

Yep, the official cash rate generally has an effect on the interest rate on credit cards too.

That’s because lowering the interest rate is meant to encourage people to spend more – including on plastic – which in turn can give the economy a boost.

If you’re someone who has been guilty of spending a little too much on your credit card, however, get in touch – we can help you look into consolidating it with other debts that are ripe for refinancing now.

Get in touch

Basically, it comes down to this: if you have an existing or prospective debt and you want to see how it all stacks up on the back of the two consecutive RBA rate cuts, then get in touch.

We’re following the market closely and can tell which lenders are passing on the rate cuts to their customers, which lenders aren’t, and present you with refinancing options.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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Granny flat could boost your property value by 30%

June 27th, 2019 by

Backyard cricket pitch not getting much of a workout these days? Sick of your weekends being taken up with mowing and gardening? Installing a granny flat could be a lucrative solution – boosting the value of your home by 30% and adding around 27% to rental income.

That’s according to a combined analysis by CoreLogic and Archistar, which shows more than half a million east coast homeowners have enough free yard space to build a granny flat at least 60sqm in size.

Constructing a two bedroom granny flat would require an initial investment of up to $200,000, while the outlay for a one bedroom dwelling would be approximately $120,000. The full report is here.

The benefits of a granny flat

The report found that for a house worth $500,000, building a granny flat could add around $150,000 to the value of the property.

It also found that building a two bedroom self-contained granny flat apartment could add an additional 27% in rent each week.

CoreLogic head of research Tim Lawless says building a granny flat is becoming an increasingly compelling proposition for homeowners in a relatively lacklustre market.

“Many properties identified as suitable for a granny flat are in densely populated and traditionally expensive areas,” says Lawless.

Archistar co-founder Robert Coorey says many home-owners “are sitting on a pot of gold” in the form of excess land.

“The family benefits of a secondary residency can’t be overlooked, whether that’s giving adult children more privacy while they save for a mortgage, keeping loved ones close as they become more reliant on care or having additional accommodation for overseas visitors,” Coorey says.

How to assess your property’s granny flat potential

Got a big backyard and want to see what you can do with it?

Granny flats can’t be built just anywhere. The property must have appropriate town planning rules, the land area needs to be large enough, and the existing property must be located in a position that allows for the development.

As it happens, Archistar has developed a platform that can help you view in 3D the potential to add a granny flat on your property.

“Archistar’s platform helps home-owners by instantly assessing thousands of zoning and planning laws and producing a report, so it’s worth taking this step and consulting a local planning expert before you proceed,” says Coorey.

Last but not least – finance!

If you’re interested in ripping up the backyard cricket pitch and adding a granny flat to your property, feel free to get in touch.

As discussed, granny flats require an initial investment of $120,000 to $200,000. So if you’d like to run through your financing options, you know where to find us!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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How to find a bank with strong corporate social responsibility

June 20th, 2019 by

Yes, we’re well aware that this may sound like an oxymoron to some! But cheeky jokes aside, this is a question we’ve been increasingly receiving. So today we thought we’d look into what good corporate social responsibility means, and how you can find it in a bank.

What do you look for when pairing with a bank?

An attractive rate? Convenience? Low fees? High transparency?

What about good corporate social responsibility?

In the wake of the Banking Royal Commission, it’s a question we’re seeing pop up more and more.

In fact, even before the royal commission a report found that 4 in 5 Australians would consider moving their investments to another provider if their current provider engaged in activities not consistent with their values.

So, as property is likely one of your biggest investments, today we thought we’d take a look at what exactly corporate social responsibility means and how you can find out if your bank embraces it.

What is corporate social responsibility?

Corporate Social Responsibility (CSR) is generally understood to mean that corporations have a degree of responsibility not only for the economic consequences of their activities, but also for the social and environmental implications, according to the Australian Human Right’s Commission.

Some lenders sponsor rescue helicopters, many provide community grants, while others throw their support behind social causes.

If you’d like to know what type of CSR work your bank does, simply google your bank’s name + CSR. The more recent the result the better, especially in the wake of the banking royal commission.

That said, as Dr Stephanie Schleimer from the Griffith Business School points out to the ABC, “CSR reports are not meant to be glossy brochures that look like advertising.”

In other words: it’s one thing for banks to make a snazzy list of their CSR activities, it’s entirely another for them to make a meaningful impact.

So how do I find a bank with strong CSR principles?

Well, you see, if you google “banks ranked corporate social responsibility” you’ll find…

Huh, not much. Basically banks tooting their own horn in their own reports.

Not to worry.

Maybe, if you try googling “best bank CSR” you’ll find… Nevermind…

You see, this is where it gets a bit tricky.

What you consider ethical, or to be a bank displaying strong CSR principles, will be completely different from the next person.

It’s a bit of a case of horses for courses, if you will.

Hmmm. So are there any other ways to identify strong CSR lenders?

Absolutely! Come and have a chat with us.

Everyone’s ethical compass points a slightly different way, so we can give you a pretty good idea of lenders on our panel that are making efforts in the areas of CSR that you may identify with.

It’s definitely a topic we’re seeing come up more frequently, so rest assured we’re watching this space closely.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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Is the housing market finally about to reach rock bottom?

June 13th, 2019 by

‘Are we there yet?’ That seems to be the million dollar question on everyone’s lips. Today we’ll take a look at whether or not the property market is finally starting to stabilise, as well as when we might start seeing some positive changes in the market.

Shhh. Can you hear it?

It’s the sound of optimism breathing its way through the Australian property landscape once more.

Let’s run through what some of the property market’s leading experts and reports have said recently.

CoreLogic

CoreLogic says the housing downturn is losing steam as the pace of declining values continued to reduce in May.

With Australia’s average housing affordability the best it has been since 2016, CoreLogic’s Head of Research for Australia, Cameron Kusher predicts “that price falls will settle later this year, followed by modest price growth starting from 2020”.

Westpac

Consumers think now’s a pretty good time to buy a house, according to the Westpac sentiment survey’s ‘time to buy a dwelling’ index.

“Housing-related sentiment showed a clear response to the lowering in interest rates, although again some of the gains were more muted than seen in past rate cuts,” Westpac senior economist Matthew Hassan said.

AMP Capital

Since peaking in October 2017, house prices in capital cities have fallen about 10%. Forecasts had suggested they’d fall as far as 15%, but AMP Capital believes they’ll now only bottom out at 12% later this year.

“The combination of the removal of the threat to property tax concessions, earlier interest rate cuts, financial help for first home buyers and APRA relaxing its 7% interest rate test points to house prices bottoming earlier and higher than we have been expecting,” said Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist, AMP Capital.

ANZ

ANZ’s Home Owners Lead, Kate Gibson, says they’re seeing suburbs and towns in every state where it is more affordable to buy than rent. Here’s the list if you’re interested.

“This shift, combined with record low interest rates, is driving more first home buyers to look at entering the market,” Ms Gibson said.

The Australian Bureau of Statistics (ABS)

According to the latest ABS data, the value of lending commitments to households rose 0.6% in April 2019.

“The steep decline in owner-occupier lending commitments seen since late 2017 appears to be slowing,” said ABS Chief Economist, Bruce Hockman.

Want to know more?

Sure, the nationwide property market might still be trending down. But optimism seems to be on the way up.

If you’d like to know how this shifting landscape might affect your lending situation, then please get in touch – we’d love to run through it with you.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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