Why house prices are going down?

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Stephanie Brennan | www.stephaniebrennan.com.au | 19.10.2016

There has been a lot of hype in recent times on the property market and the ‘inflated’ house prices with talks of the housing ‘bubble’ bursting, but what does this all mean?

Let’s take a look at the Australian housing market as a whole you through the September 2016 report released by Core Logic:

  • Combined capital city home values increased by 1.0% in September with values rising in all capital cities except for Perth and Darwin
  • Home values were 2.9% higher over the three months to September 2016 with home values in Brisbane, Perth and Darwin falling over the quarter
  • Over the first nine months of 2016, capital city home values have increased by 8.6% and Perth and Darwin are the only cities in which values have fallen
  • Over the past 12 months, combined capital city home values have increased by 7.1% which is up from a recent low of 6.1% at the end of July
  • Across the individual capital cities, the annual change in home values have been recorded at +10.2% in Sydney, +9.0% in Melbourne, +3.0% in Brisbane, +6.5% in Adelaide, -7.0% in Perth, +8.7% in Hobart, -6.0% in Darwin and +9.0% in Canberra
  • Capital city house values have increased by 7.3% over the past year compared to a 6.1% increase in unit values

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Source : dailymail.co.uk


So why are house prices going down? If you look at the above figures these are the average across all major cities, meaning that some areas within those cities have experienced higher and lower growth with the average having increased in value over the past 12 months.

So what causes house prices to drop in value? The main factor is supply verse demand. Let’s take a closer look at Brisbane for example. House prices at the moment are increasing, however unit prices are falling due to an oversupply of property with a lack of population growth to outweigh the number of new properties coming onto the market. This not only means the new unit market is devalued but the existing unit market.

So why are house prices in Brisbane increasing if unit prices are falling? The value of land within 5-10kms of the CBD has been increasing over the last 12 months to due developers looking to built units or townhouse on that land and paying a premium for it. This was of course before the banks started to reign in their lending with developers due to an increased risk on their ability to recoup their funds. The other factor driving housing growth in that for an additional $100,000+ more you can buy a 3-4-bedroom house rather than a 1-bedroom unit so purchasers are seeing more value for money in houses over units.

Let’s take a look at why the Perth & Darwin housing market dropped. The short answer is a lack of demand due to limited growth factors such as population growth. There were a number of investors that bought into the Perth market at the time of the mining boom however when you’re looking to invest you need to ensure the area you’re investing in has multiple growth indicators not just one as we’ve seen in Perth. If you rely on one growth indicator, as soon as that reason for growth becomes removed there is no longer anything driving growth and so your investment becomes devalued.

Related : WHEN IS THE RIGHT TIME TO PURCHASE PROPERTY?

This is the same with investors that purchase in rural areas across Australia. The majority of people want to live within 10-20kms of a major city. Melbourne but more so Sydney have the population growth to sustain consistent capital growth, which is what we are seeing now.

Let’s touch on another reason why house prices may be going down even if the average house price is going up. This occurs when properties are bought substantially over market value, which usually result from an owner-occupier buying at an auction. Investors will always have a limit at an auction because their focus is gaining a Return on Investment (ROI) meaning the numbers need to stack up. Whereas the Owner Occupier are making an emotional investment and are willing to pay top dollar for their dream home but that’s not to say the open market will also want to pay top dollar which is why we see some house prices dropping in areas or cities where house prices are increasing.

Tip: If you’re a first homebuyer and you’re looking to get into the property market, look at properties that are being sold by private treaty and aren’t going to auction. Set your limit particularly if you’re buying to invest rather than to live.

Tip: For the investor that has a property in a housing market that’s decreasing, if you have the rental income to support the current debt on the unit then look to hold. Alternatively, if your rental doesn’t cover the mortgage/expenses or you’re looking for greater growth, you can look to buy and sell at the same time by transferring the current debt on your property directly onto the next property in a better area. Speak to your bank or broker about porting the security and the best way to implement this.

 

It does annoy me a little that the media latch on to stories that the “property bubble” is about to burs!!!!

ggg
Comments From : Geoff Schippers

Geoff Schippers of Scout Finance has been a mortgage broker since 1998 and has settled more than 3,000 loans worth in excess of $750,000,000. He has previously been Mortgage Choice Australia’s No. 1 mortgage broker and now runs his own boutique brokerage offering the same exceptional service and unparalleled expertise for mortgages (residential and commercial), strata finance and asset finance. For enquiries, call Scout Finance today on 02 9526 7899 or visit www.scoutfinance.com.au.


It does annoy me a little that the media latch on to stories that the “property bubble” is about to burst and sighting the situation in the USA after the GFC as some kind of precedent for what’s going to happen in Australia. It’s absolute garbage.

Firstly, the rise in housing prices in the USA pre-GFC was predicated on unsavoury lending practices that blind Freddie (Mac) should have been able to see coming; loans to borrowers who couldn’t afford them (or worst still didn’t even have jobs) coupled with adjustable rate mortgages that jump up 4% after the introductory period, a legal framework that permits non-recourse mortgages (i.e. walk away from an upside down property with no consequences) and a derivatives market which amplified the effect of rising mortgage default rates and you get an almighty bubble that can do nothing else BUT burst.

Whilst the increasing availability of credit to Australian borrowers has long been the argument for proponents of the Australian property bubble, the fact is that’s it’s never been to the same extend that it was in the USA pre-GFC – ever. Yes, average household debt has risen markedly since the 1950’s, but so too has society changed. Households are no longer single income families, and so with the increasing incidence of double income households, household borrowing capacities have increased accordingly. It becomes a self-fulfilling prophecy that because we earn more we borrow more and therefore we have to earn more but it’s a trend that is unlikely to reverse any time soon.

Furthermore, APRA has actually already been taking pro-active steps to REDUCE the availability of credit to borrowers by demanding more stringent lending criteria of the mortgage providers it regulates. Therefore, even if credit was considered to be too readily available previously (which is contentious to begin with) it’s already tending back the oth er way.

Secondly, property values are a function of supply and demand. It’s been regularly reported recently that Sydney house prices have increased significantly over the last 2-3 years. However, it’s no coincidence that it’s the same city with the greatest shortage of available property! I’ve heard experts quote that net migration into Sydney accounts for an increase in demand for approximately 10,000 dwellings per annum. And what have the state government done to facilitate that development? Antiquated urban planning processes which restrict the supply of new property developments? How about a road and rail network incapable of supporting the increasing size and distribution of the population? Is it any wonder, when we’re always 20 years behind the current population’s needs, why we end up with a shortage of property which in turn drives prices up? Perhaps if the powers that be had the vision, will and finances (or better still, stopped wasting money on things like, for example, a desalination plant!) to bring Sydney into the current decade, we wouldn’t be talking about a “property bubble”.

And thirdly, reports on isolated pockets throughout Australia where the property prices have dropped significantly as being the precursor to a wider housing bubble are nonsense. Any town throughout Australia that has been particularly influenced by the rising and falling fortunes of a single industry (e.g. mining) is in no way indicative of the Australian market on the whole. Generally, mining towns with limited supply of property suffer from sharp rises in rental prices as the industry prospers (again, supply and demand). When out-of-town investors then think they’ve stumbled on the “rental return of a lifetime” and flood the market, property values rise until the perceived rental return becomes normal again. Then, as recent times have shown, when that industry wanes and rental returns decline (back to normal), p roperty prices also decline (back to normal). Yes, I would consider that to be a bubble, but it’s an isolated bubble – not an “Australian housing bubble”.

But again, Sydney needs another 10,000 dwellings per annum just to meet the organic growth in demand for property. Post-GFC, property development all but ceased in Sydney for years and the cumulative effect of that rising demand has put us in the situation we’re in today. Until that demand abates, or supply catches up, how can we expect anything but a continuing rise in property prices?

5 reasons why the Australian housing bubble is far from bursting

Steve headshotComments from Steve Jovcevski. He is a property expert at financial comparison site Mozo.com.au,

You can read more about Steve on the Mozo blog here: https://mozo.com.au/blog/author/steve-jovcevski/





 

High credit quality

Strict lending criteria and serviceability requirements ensure Aussie home borrowers who are approved for a loan are quality candidates and can generally afford to repay it. For instance, borrowers can no longer borrow 100% of the property but are required to have at least five per cent deposit and pay Lender’s Mortgage Insurance on low deposit loans.

 

Fewer foreclosures

In addition to tighter regulations, lenders can also seek financial retribution if a borrower defaults on their home loans. For this reason, borrowers are less likely to default their home loan, resulting in fewer foreclosures.

For a massive property collapse to occur, we’ll need to see wide scale job losses and foreclosures which is in fact, the opposite of what is happening in Australia with unemployment at a steady six per cent.

 

Regulatory bodies are doing their job

Financial bodies such as the Australian Prudential Regulation Authority are keeping a closing eye on the housing market. Last year when APRA found there were too many investors driving up the market, it stepped in to enforce a 10 per cent cap on investor lending growth.




We’re not the US

Earlier this year, investment expert Jonathan Tepper on 60 Minutes tipped that the mortgage bubble in Australia as well as the United States and Ireland would burst with property values plummeting up to 50%. While these predictions gained a fair share of concern, Tepper’s predictions did not compare apples with apples.

Instead, we need to compare large cities with other large cities such as Sydney and New York that tend to behave quite similarly.

 

We’ve seen this before

It may be difficult to remember the peak of the last property boom all the way back in 2003, but I can guarantee you we were hearing similar doomsday predictions about the property bubble bursting. In terms of the way borrowers are leveraged today versus 13 years ago –it’s pretty comparable.

Because we didn’t have a property bust back then, it’s highly unlikely we’re on the brink of having one now.

 

Steve is Mozo’s property investment and lending expert. With an extensive knowledge of home loan products and property trends, Steve is full of practical tips to help first homebuyers, refinancers or investors build and get the most out of their property portfolio.

Low Doc Loans for Self Employed Australians.

Australia has more than two million independent contractors or self-employed. Low Doc Home Loans (Low documentation loans) are designed for these self-employed people who do not have up to date financial statements and tax returns which are required for a prime home loan. Generally the same features and facilities are available on prime loan are also available on a Low Doc Loan as the name indicates the difference is in the documentation. If you are self-employed or have a small business and can’t provide lodged returns then it is the way to apply for a home loan.

Although financial statements and tax returns are not required for these loans, lenders will require some form of proof that you can service these loans. For these low doc loans, you may need to provide the lender with a statement confirming your income generally certified by your accountant or Business Bank Statements or BAS Statements or a combination of above

Can I switch from a Low Doc Loan to a Prime Loan?

Yes, most lenders will require full income verification such as 1 or 2 years tax returns and have a history of good repayment conduct.

Talk to an Expert:

We specialise in Low Doc Loans for both Residential and Commercial Properties in clean credit or credit impaired and deal with many lenders that most mortgage brokers do not have on their books. Please complete our Enquiry Form or Phone Direct where you can discuss your situation with an expert as it is important to deal with a broker that has several options and is experienced in this category of lending.

If you wish to proceed, then we will help you to complete all the necessary paperwork and liaise with the lender on your behalf. This will include the completion and submission of your home loan application and the on-going communication between all parties until your home purchase is settled. So if you are self-employed and hunting for a home loan or commercial loan then visit us at www.lowdocmortgages.com.au

How to find the best mortgage for you ?

Mortgages are one of the biggest financial commitment that people will take on in their life. Ensuing you have the most suitable mortgage for your financial situation is very important. When sourcing a mortgage you should consider the type of interest rate as well as the most competitive, fees and charges that you will be required to pay and the overall features and flexibility of the loan. Having the right home loan can help you to save thousands of dollars and knock off years of your loan.

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In Australia there are more than 30 home loan lenders so it is important to understand each lender and their product offerings to determine if it is the right product for you. Before you begin your search for the home loan it is important to determine the features of the loan you require to help narrow down the products that best suit your situation out of the hundreds that are on offer.

Somebody who has the ability to save a lot may want a loan with an offset account to  help reduce the interest they pay, an investor may want an interest only loan and a family on a strict budget may want a fixed rate loan to keep their repayments the same each month and not fluctuate with rate changes. Once you have determined what you want out of a loan you can begin your search.

The internet can be a great tool when searching for a new home loan. Information provided by the lenders is updated daily to reflect changes in the market and can give an overview of what each lender provides and their products without having to go in to a bank branch to find out the information. The information sourced can then be compared with other lenders that are offering products that suit your needs.

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When comparing home loan products you should consider-

  • The interest rate – is it variable, fixed or an introductory rate that will revert to a higher rate after a set period of time
  • Annual and monthly fees – What are the ongoing fees and can these be avoided
  • Package Fees – Is the home loan product part of a package that includes a credit card and transaction account and do you really need these
  • Application and other upfront costs – What other fees and charges will you have to pay up front to take out the loan
  • Discharging Fees – The cost to refinance or payout the loan
  • Maximum LVR – What is the most I can borrow against my property and is it enough

It is important that when comparing home loan products you take into consideration all the fees and charges that are involved and not just the cheapest interest rates. Sometimes loans will offer a cheap interest rate but will have ongoing fees and charges that in the long run you will end up paying more. You should also read the fine print of each loan product and if you have any questions about anything about the loan you should ring the lender directly to get clarity.

You can help to narrow your choices by talking to family or friends about their experiences with certain banks. You can also take into consideration the other services the lender offers that could benefit yourself.

Once you have decided on which home loan product you would like to apply for that bests suits your needs it is important to speak to the lender to ensure you meet their lending criteria. Applying to too many lenders can negatively affect your credit scores and lenders may not want to lend to you. You can also apply to VEDA to get a free copy of your credit report to ensure it is all clear before you apply for a new loan.

Doing as much research as you can whilst comparing mortgages is very important. Spending a few hours doing this can result in thousands of dollars saved in interest. Also determining what features you require in a loan so you are not paying extra fees and a higher rate for features you do not use or need. Once you have sourced your loan, applied and settled it is also important to stay up to date on what is happening in the market and ensure that every couple of years to ensure your home loan is still best on the market. You may find that in a couple of years time that there are new products on the market and if you may be able to refinance to a better rate and save even more on interest.

Are we in a Housing Bubble? Perth Metro Area Focused

jho

by J.Ho Dept. Economics & Property, Curtin University

Do you believe this is a bubble or not? If so, how or why?


Perth-City-pricesOverall, I do not believe that there is a bubble across the majority of the Perth Metropolitan housing market; however, I do believe that there are sub-markets within the Perth Metropolitan area which are experiencing bubbles. Some bubbles encompass an entire suburb and some in specific property types in a suburb, such as 1 or 2 bedroom units or apartments. Firstly, I would like to qualify that the bubbles we are referring to are probably caused by a significant drop from the previously strong demand for housing in those areas. The 12 to 36 months lag from planning changes to development construction and finally to completion of new supply makes predicting the market equilibrium a miraculous feat; therefore the high risk, and what used to be high return but more commonly now low return,  in real estate development. Supply created to meet the projected demand now became an over-supply and now blamed on the developers as optimistic exuberance. This however is nothing abnormal in real estate markets as the real estate market cycles do over-correct due to the lags.

APRA and major banks have also made finance more costly and harder to obtain with higher interest rates for owner occupiers, even higher with real estate investment loans and preferring a lower LVR; driving down demand further. In addition, increases in Land Tax in WA over the years may also deter some investors real estate acquisitions as a higher return needs to be achieved to attain a profit.  Some of these changes were brought into the market in the recent months or years and it would be cruel to say that developers should have known that the demand would diminish as this would have been hard to predict for most seasoned developers. Although there were indicators signifying a larger than expected downturn. The discussion on the long term benefits or detriment of these changes that affect housing is probably best left for another article.

One could probably identify potentially bubbly markets with the use of web based real estate marketing sites and searching for suburbs where there are unusually high number of properties for sale and for lease that is persistent over a considerable amount of time. The real problem for developers and property investors arise when the stock of properties that they have built or own cannot be rented out to offset holding costs; which could cause a significant drop in price in a sell off. If the sell off is trickled into the market, there may not be a significant drop in real prices at all.

The typical misconception is that a drop in median house price equates to a drop in real house prices for all housing within the precinct. A drop in median house price does not always equate to a drop in real house prices for all properties in the area as the median is a measure of midpoint between the highest and lowest prices within a range. A drop in median house price in a suburb could be the result of a high number of transaction within the suburb on houses below the previous median price; in this case higher density and more affordable housing. Again something which is quite normal in a subdued market.

Is this the best time to buying your first home? What considerations should one take into account?

Buying your first home comes down to need or want. If it is a necessity, the opportunity arrives for the right price and the buyer can afford the home; I could suggest that anytime could be a good time to buy a home. If you are aiming to venture into home ownership with the main aim of building some asset wealth, then the best time to buy your first home would be, much like a Captain Obvious joke – Buy just before a long and significant real price growth for the real estate you are purchasing. Based on current market conditions and in-line with mainstream research; significant real house price growth is a major determinant to a financial cost benefit analysis decision. The “Buy vs Rent Or Stay at home with Mom and Dad” decision is a subjective matter with no perfect answer and is based on a combination of personal preferences, financial circumstances, social status and expectations of growth in house prices. An understanding of Economics, Finance and Real Estate would prove advantageous.

Based on previous research I have completed with my colleagues (Assoc. Prof. Steven Rowley and Assoc. Prof. Greg Costello at Curtin University) and my opinions on current localised economic conditions in the Perth metro area, first home buyers in Perth taking into account the buy or rent decision should consider:

  1. Purchasing properties in centralised locations with strong fundamentals for long term sustainable demand of the property, for example near retail centres, public transportation and employment opportunity locations, within a reasonable distance from the CBD or activity centres.
  2. Purchasing properties types that will always be in demand and attractive across multiple buyer types for example 3 bedroom 2 bathroom properties where a small family, young couple or shared accommodations for housemates could be potential buyers or tenants.
  • Purchasing properties that are cheaper to wisely maximise government Duty exemption and grants, for example buying a home below the $430,000 where no stamp duty is payable at the moment and a FHOG of $3000 for an existing home or $10,000 for a ‘new’ home, that would require a lower rate of property price growth to achieve a financial benefit as compared to home purchased at $700,000.
  1. Objective of the first home across the mid or long term with considerations of the real estate to be
    • used as is,
    • converted into a rental property and possibly refinanced to purchase the next investment or home,
    • selling the first home to purchase an upgrade home,
    • develop first home for investment or owner occupier (or both); or any other possibilities
  2. Other basic considerations that one should consider could be
    • local council’s plans, budgets and developments for precinct,
    • safety and crime rate of the precinct,
    • statistical information such as Census information of the precinct,
    • composition of housing types and tenures,
    • future supply of new housing in the precinct such as building approvals in the precinct,
    • certainty of personal/household income,
    • career mobility requirements,
    • personal life goals or family unit dynamics,
    • future financial constraints,
    • possible refurbishment, extension, redevelopment of your property to meet your needs; and
    • always keep yourself informed, gain as much knowledge about real estate as possible, ask for and read all documents to know what you are signing, and seek reliable professional advice where required.

Housing Bubble 2015 – Expert Comments

christine

Comments By : Christine Williams

Email : christine.williams@smarterpropertyinvesting.com.au

Web : www.smarterpropertyinvesting.com.au

Phone : 1300 736 754

Do you believe this is a bubble or not ?

No I don’t. The reason why I don’t believe this is a bubble, is because it’s no different to any normal residential property cycle over the past 100yrs. There will always be boom and bust.

A “bubble” refers to the potential of property never going up in price again, but it will.

Housing BubbleIt relates back to Paul Keating’s “recession we have to have” and predictions that property had hit its peak.

We’ve been through the GFC and 9/11, each time with a prediction of a bubble due to the economic impacts, but it hasn’t happened.

And the reason why we won’t have subprime like the US or bust like Ireland is because of our mainstream 4 top banks, which are governed by APRA (top 4 are going through capital raising to meet new APRA regulations, which will strengthen them even further).

I believe the banks won’t go under and property owners won’t go under.

There is only a problem for prop owners if they overexpose themselves in the first place ie over buying on their cars, rushing out and filling their homes with new furniture on credit from Harvey Norman, having numerous flat screens etc  – when they’ve overextended, their cashflow hurts.

They may find themselves in crisis and need to sell their homes because of the situation they’ve put themselves in.

Credit policy in general is pulling the reins in.

Is there a boom?

Sydney and Melbourne are definitely going through a boom. It’s definitely a sellers’ market, but there are opportunities if you know where to look for them.

It’s all about knowing your numbers in the first place and covering them. I also expect interest rates will go up over the next couple of years, so that will need to be factored into people’s cashflows.

Buyers also need calculate in life changes (ie starting family, losing a job) and if they borrow with those factors in mind, everyone should be fine and stable.

 

Is this the best time to be buying your first home?

First Home Buyer
First Home Buyer

It really depends on what that first home is. If it’s your first investment, yes I would buy and then hold.

If it’s your first home, it’s a good time as interest rates at all time low.

If you can justify your figures by paying what a property is worth in a boom market, you need to understand the market will come down again. If you don’t have to sell within next two or three years, you’ll be fine.

I would advise people to buy with a view to holding for 10 years and they’ll get their money back and more. If they have the money for a deposit and the bank is willing to lend to them, they’ll be fine.

Understand they’ll have to hold a lot longer because they’re holding in the boom. Otherwise, an alternative is to become a ‘rentvestor’ – someone who buys in an area where they don’t want to live in, then rent in their ideal locality. The equity they build up through their investment will help them buy their own home in the future.

All good bubbles are made with soap, let’s cut the grease on Australia’s Housing market.

let's cut the grease on Australia's Housing

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Stephanie Brennan | www.stephaniebrennan.com.au/ | 19.10.2016

Throughout history property (bought in the right areas) has always increased over time and in excess of inflation. The market does level off as it follows normal economic life cycles, however Australia has a two-speed economy whereby our property market often works on a separate life cycle to our GDP as we are currently seeing.





Whilst the property market is booming our GDP isn’t looking so good, namely because of how much we have borrowed over the last few years. The majority of the public have only recently become aware of this as our mining investments were temporarily inflating our GDP, however these have since matured last year, which has significantly reduced out GDP. In order to help correct this, the government has been borrowing more money to invest in infrastructure that will increase in value and enable us to pay back the debt we owe.

In terms of the property market, it doesn’t rapidly decline, only during the great depression was there a restriction on raising rents and were properties along with all investments significantly devalued.

When buying property, lenders don’t hand out loans to everyone that come through their doors, there is a formal assessment process and the banks assess applicants at a higher interest rate to allow for market fluctuations. Most lenders also assess any rental income at 80% to allow for vacant periods.

Recently the Australian Prudential Regulatory Authority (APRA) have enforced banks to look at their lending policies to which each bank has placed further restrictions and limitations around borrowing.

With any investment there are ways to de-risk your investment and with property the best way to do this is through positive cash flow properties this gives a further buffer for investors in case interest rates rise.

The comments you see in articles stating that rents are low in comparison to the purchase price are relative, there are a lot of factors that contribute to this that have very little to do with the market itself.  The only correlation is that when property prices increase rents are always going to appear lower as they don’t increase exponentially like property purchase prices do.

When property managers lease a property or when they suggest a rent review they base their market estimate off comparable properties, usually through a site that gives them information on properties leased in the past 6 months. These figures aren’t always a true and current reflection of rental values, the reason being that there are many owners that don’t increase rents, as they prefer keeping their tenants, and legally under the residential tenancies act you aren’t able to issue a rental increase that is deemed excessive even if the market has increased significantly.
The comments you read in articles stating that Sydney and Melbourne are not suitable investments and are too pricey without a strong rent return is inaccurate. Personally, I am looking at a property in Melbourne (one bedroom, CBD apartment, fully furnished) with a purchase price $360,000 and a rent return of $500 per week. Previously I have looked in Newport, Sydney for a 1 bedroom with a purchase price of $395,000 and a rent return of $450 per week and Dee Why, Sydney for $450,000 with a $490 per week rent return. It’s all about what you buy and when you buy and taking the time to find the right property.

The other issue is the media; you hear all this doom and gloom over property because the idea is to create a sense of fear so that people keep reading the newspaper for regular updates on their impending doom or they keep reading for a sense of false hope when a controversial article bucking the trend comes out.

What people don’t know and what the media declines to tell you is that according to the Australian Bankers’ Association, whilst households do continue to borrow and whilst we are currently seeing the highest number of investor loans throughout history, households also continue to invest and to save.

In Australia, property is the single largest component of household wealth at $5.1 trillion, with superannuation at $1.9 trillion. The value of individual household assets is much greater than the value of household debt, with every $1 of household debt matched by almost $6 of assets.

Despite mortgage holders taking on record debt levels, on average, mortgage holders are some 28 months, yes, over 2 years ahead on their mortgage payments because of the record low interest rates. Meaning they aren’t just getting ahead of their mortgage but are also paying down and paying off their debt at a faster pace.




Now if you have a higher number of people with more assets and less debt and more passive income and therefore less need to work, how do you think this affects the government? I’ll tell you! If you look at the below chart, you’ll see that the majority of revenue the government raises so it can continue spending is through individuals income tax which raises $194.3 billion per year.

Simplistically, if you have someone earning $70,000 with 1 property they live in, the government can still take their tax and you have nothing to offset or reduce your taxable income with. Now if you buy an investment property that earns you $20,000 a year then your taxable income is now $90,000. However, your property had $15,000 worth of expenses you could claim so you only earned $5000 from your property so your taxable income is not $90,000 its $75,000, and you happened to buy a new property so you can depreciate the fixtures and fittings which comes to a total of $30,000, so your taxable income isn’t $75,000, it’s closer to $45,000. Meaning you’ve just dropped a tax bracket so you’re now paying less tax and yet you’ve earned $5,000 more this year. So you building wealth is not in the governments best interests.

Where the revenue coming from
Where the revenue coming from

I firmly believe that the larger issue at hand is the lack of accurate knowledge and information available around property investing and I blame the education system that allows this nation to let it’s students finish year 12 without everyday life skills such as how to buy your first property and how to invest your money for your future, how to network and up skill yourself to make more money and I wonder why that is? That’s right, the government governs school and what does the government not want, for you to make money, because wealthy people are much harder to control that people collect their pension and centrelink benefits.

That is the greater issue here and we are masking it by trivial commentary on a housing bubble that the educated realise is simple inflation at its best.

Remember, it’s not a housing bubble; it’s called a good investment.

Article Author

Stephanie Brennan
Founder & Managing Director
Level 1, 50 Yeo Street,
Neutral Bay NSW 2089

0424 482 170
02 9453 0682

stephanie.brennan@steploans.com.au
www.steploans.com.au

 

Why Australian House Prices Will Fall

According to BIS Shrapnel, the threat of rising interest rates could be an indicator for the falling of Australian house prices in the following year. This is because the rise of interest rates will affect the affordability of the market in a negative way.

However, BIS Shrapnel also stated that this house prices crash prediction is still a little premature. In fact, according to their flagship report, the price falls will be quite minor if it really happens, which is only less than 10% of what the market experienced in the period of 2011-2012.

Meanwhile, the Australian house prices will likely still be moving up this year. In fact, it might even move in a higher pace in some areas like the south-east Queensland as well as in some regional cities like Cairns, Newcastle or Wollongong. This is due to undersupply condition that still exists in the market, also because the banks are still providing relatively easy loans for property buyers, which finally increases the demand. Rising demand in an undersupply market is automatically increasing house prices.

However, the 3 year prediction for Melbourne and Sydney doesn’t look so good. By mid 2018, many observers believe that the median house price in Sydney area will only be 2% higher than today’s price. While in Melbourne the rise will be a little higher, which is 4%, but still that’s a very small number. In Perth and Canberra on the other hand, prices will fall marginally. The prediction is even worse for apartment markets, only in Brisbane that the price seems to be a bit higher than today.

According to the senior manager of BIS Shrapnel, Angie Zigomanis, the level of apartment construction in major cities in Australia has created a disconnection between the balance of supply in the unit and house market and a discrepancy in price prospect.

In most major cities, apartment constructions are being done at record rates, encouraged by investors demand. When those apartment buildings are completed, high tenant demand is required to support rents and maintain values. The slowing down of the net overseas migration could definitely weaken the investor/rental sector, especially in resource based markets.

The key is to maintain high demand while maintaining just the right amount of supply of the housing units in the market. But of course this is not an easy thing to do, there are a lot of complexities involve, and looks like time is the only thing that holds the right answer to the future of this matter.

Is Australian in a Housing Bubble?

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How To Get The Best Home Loan





The real estate market is thriving in Australia and today it actually has become one of the top real estate investment destinations in the world. That’s why it’s not very surprising that getting a home loan in this country is actually not very difficult. Australia has a high rate of home ownership, even though the housing prices in this country is considered to be among the highest in the world, it doesn’t stop the Australians from buying their dream homes. Basically, getting the best home loan in Australia is pretty much a matter of choice. However, there is always a better option among many good options we have.

When trying to get a home loan, probably the very first thing you do is to search on the Internet. However, you cannot only rely on the information you get from the Internet. Usually banks and other financial institutions that usually offer home loans are only providing limited information about their products. So usually if you rely on their websites alone, you might be misled. This will make it difficult for you to really understand what they can offer you and which product is best for you.

Home loan is a pretty complex loan category, every lender usually has some specific preferences and requirements that you should comply with, and these requirements may not be the same for all of their products. So it’s likely that you won’t be able to find complete details about these home loan products on their websites. The best thing to do is to contact several lenders that you’re interested with so you can get more information about their products and make comparisons so you can find the best deal. You can either contact them over the phone or go to their offices and get your information directly.

The best home loan products are those that can be customized and flexible. Do your research thoroughly so you can avoid any home loan product that has any hidden agenda. Believe it or not, you can find such loan products everywhere and if you’re not careful enough, you can get trapped into a harmful deal. It’s best if you can determine you own realistic requirements for the best home loan and then you can try to find a home loan product that best fits those requirements. The key is to shop around and don’t rush to a decision, always compare your options so you can find the best home loan for you.

Is Australia in a housing bubble?

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