How to Take Care of Your Home

In Australia, break-ins and attempted break-ins have increased across the country in recent years. Not surprisingly, money is the top target for burglars, followed by jewelry and technology. This shouldn’t worry you too much because it is quite possible to rise to the challenge protect your home. Moreover, home security does not have to cost an arm and a leg. Knowledge and understanding are the bedrock of safety and besides, there are many inexpensive ways to keep burglars and other wrongdoers at bay.

Doors and windows

Doors and windows are often the weakest links when it comes to home security. First-story windows are particularly tempting for burglars. Latches on most windows, for instance, are rather flimsy and inferior to locks and key-operated levers.

Furthermore, one-third of the burglars enter the home through the front door. Thus, they should have strong frames and protected hinges. A deadbolt should be installed in order to beef up safety. And if you really want to make it near-impossible for burglars to break in, consider a smart lock.

Security system

A security system is the much-needed cornerstone of home safety. Around 60% of convicted burglars state that the presence of smart system is enough to prompt them to target another home. Depending on the budget, you can opt for a smart monitoring system or a basic camera installation.

The mere sight of a camera is enough to turn most trespassers away, and if not, at least it will be much easier to catch them. Also, ponder on the alarm system – which is one of the best deterrents according to the police – as well as motion detectors for doors and windows. Bear in mind that it’s always preferable to have multiple layers of defense than a single one.

Parameter defense

Darkness and shadows are criminals’ greatest natural allies. Deny them this cover by placing outdoor lights around the front and back yard. Fittings that come equipped with infrared motion sensors are the best tools you can employ.

Other tactical advantages that burglars seek are hiding places around the house. So, put your green fingers to good use and deal with shrubs and bushes. Trim down trees and plants and do not leave the ladder outside. This will make it hard for anyone to approach unnoticed and conduct a quick break in.

On the right track

Motor vehicle theft is on the rise in Australia, so make an effort to protect your portable assets. Place keys and garage doors remotes somewhere safe, out of sight. In addition, use a GPS tracking device. It’s  an onboard computer solution with no technical installation required.

You can use it instantly, out of the box. Therefore, don’t miss a chance to harness the power of the most advanced mapping technology to monitor and protect your assets. The only thing you need in order to keep your precious four-wheeled friend safe is an internet connection and a web browser.

A multilayered fortress

There is no shortage of low and no-cost security measures you can take advantage of. First off, you should post security company signs and stickers near entryways, regardless of whether you have security measures or not. “Beware of Dog” sign in visible spots can also do the trick, especially if you possess a real animal guardian, which is ranked as the most effective deterrent in the country.

Feel free to ask your neighbors to keep a watchful eye while you are away. At last, create an illusion that someone is always at home by using timers on TV and lights. Fake TV is another way to make your home appear occupied, which is something that always puts burglars off.

On the safe side

Household burglary is one of the most widespread types of crime in Australia, so follow the best practices and invest in security tools. Take a good hard look around your home. Check your doors and windows, light up the landscape, and eliminate the hiding spots. Make security a habit and ensure that all family members are on the same page. With some vigilance and planned effort, you will be able to deter would-be thieves from even targeting your property.

When is the right time to purchase property?

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Bessie Hassan | Money Expert at finder.com.au

Whether you’re a homebuyer or an investor, you will wonder whether or not it’s the right time to enter the market. While you can research the demographics, historical price growth trends or the supply and demand of property in different areas, the best way to decide whether it’s a good time to buy a property is to review your personal situation.

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While many buyers may be lured by historic low interest rates – currently we are seeing variable home loan rates as low as 3.63%, it’s essential that you reflect on your personal and financial situation to work out if you should take the plunge.

Lifestyle factors such as your job security and number of dependents as well as your financial situation can be telling when it comes to understanding your readiness to buy real estate.

Here are some factors to consider.

 

Lifestyle

  • Job security. When you apply for finance, most lenders prefer that you’ve been in your current job for at least 12 months. Think about where you are in terms of your career path, how stable your job is, and whether your income is sufficient to service mortgage repayments and other costs of purchasing and owning property. If your employment is secure, then you may be ready to buy. On the other hand, if you’re a low-income earner or you only work on a part-time basis, it may not be a good time for you to buy.
  • If you have kids or you’re planning to settle down and have kids, think about how this will influence your ability to buy property. The number of dependents you have can influence your borrowing capacity. Generally, each dependent can lower the amount you can borrow by around $50,000. Most lenders will ask you to factor in the cost of childcare and school fees when listing your day-to-day expenses. Be honest with yourself and your lender when discussing your future lifestyle plans.
  • Travel plans. Review any future trips that you have and consider how this will impact your finances. Frequent overseas trips can put you into further debt which may hinder you capacity to repay a mortgage. If you have several overseas trips planned and you’re not sure whether you’ll be able to afford your repayments, then you may not be ready to purchase property.

 

Finance

  • One of the biggest factors to consider when buying property is knowing how much you can afford to borrow. Use a repayment calculator to get an estimate and remember you should come up with at least a 20% deposit to avoid paying lender’s mortgage insurance (LMI).
  • Financial clean up. To help you decide if you’re ready to buy property, you should reflect on your financial situation and conduct a financial health check. If you have a large amount of personal debt, such as personal loans or credit cards, you may want to take steps to reduce this. For instance, to minimise debt you can leverage interest-free periods by using a 0% balance transfer credit card. Or if you’re struggling to make repayments on your mobile phone plan, for example, contact your provider to see if they can revise your payment plan.
  • A crucial part of knowing if it’s a good time for you to buy is to budget the costs of buying and holding a property. There are several upfront fees you’ll need to budget for such as stamp duty, mortgage application fee and building inspections, however you’ll also need enough savings to cover ongoing costs such as repairs and maintenance and council fees.

No matter what your objective is for buying property, remember that you shouldn’t try to time the market. Instead, you should carefully review your personal and financial situation to decide whether or not you’re ready to buy.

Bessie Hassan is the Money Expert at finder.com.au, one of Australia’s largest financial comparison websites.

 

Strata or Bricks and Mortar ? – the things to weigh up when buying a first home ?

About the Author:

Name: Aris Dendrinos

Agency: Richardson and Wrench – Marrickville

When venturing out of the cave for the very first time into the big bad world of home ownership there are so many choices confronting the would be buyer.

How many bedrooms ? Parking ? On top of the station or nice quiet street ?

aprtment-sydney

But probably the biggest one of all is the “type” of home you would want to live in.

And the two main types are Strata which takes the form of apartments & townhouses or solid Torrens title houses.

So let’s look at the pros and cons of both.

It’s never wise to assume but for the purposes of this article I’m going to assume that the budget would be identical for both items and an equivalent desirable location can be found for either, ie. a luxury two bedroom apartment in Bondi with views compared to a nice two bedroom family home in Marrickville.

So let’s start with apartments/townhouses. Probably the biggest advantage or positive that has rapidly evolved over the past five years is the convenience factor. Apartments, especially many of the new ones are generally situated in central locations that are within easy walking distance to all desirable facilities which include shops, schools, parks and public transport. In many instances if these new apartment developments are large enough the infrastructure is “built-in” with a new supermarket, or open parkland area coming with the package.

With everything speeding up so much in this blink and you’ll miss it technological age, the way of life of your average Sydneysider (or any modern westernized city dweller for that matter) has changed dramatically turning the traditional must haves on a buyers wish list on its head.

For example, the ownership and use of a vehicle is evolving rapidly for many inner city apartment residents. With the advent of Uber along with GoGet car spaces on public streets and in many parking lots of new developments as well as public transport, many people are abandoning ownership of a car altogether and choosing to live a more central, localized lifestyle. The increase in traffic and difficulty to navigate your way around greater Sydney is also a big factor in many  buyers considering an apartment in a key well located suburb of the city to be much better than a nice house in a similar price range which leaves you stuck in gridlock hell during peak hour every weekday.

Other conveniences that an apartment offers include such things as pools, gyms and a higher level of security with intercoms, swipe cards and gates.

In addition to these creature comforts apartments are much lower maintenance than the good old Torrens Title home. You pay your strata levy each quarter and you don’t have to fix the leaking roof, paint the outside or update the building insurance. You also don’t have to clean the common areas or water the back yard to make sure the grass keeps growing. It’s very much a lock and leave kind of life which many young first time buyers find attractive as the growing demands of work and family suck more and more of our time away.

 

So what could be possibly be bad with this Utopic apartment existence I hear you ask ?

Well for starters if you were to ask me the one character trait a strata title resident needs to have if they want to be happy it would be this – the ability to share and compromise.

No man is an island and this never is more true than in Apartmentland. From noise issues to privacy issues and sharing of common facilities if you aren’t open to a collective way of life then put the big red pen through Strata.

The restrictive nature of this type of property also heightens when you add pets and kids into the mix. Both of these joyful little treasures require more space and time to play which is always in strictly limited supply in apartment buildings.

And forget about changing something quickly in an apartment complex. Big decisions are made generally at a snail’s pace as it takes much longer to get the Body Corporate family together to discuss and agree on a course of action. For example, the younger owners may be all for installing synthetic turf into a common area of the property for kids and pets to play but the long term elderly owner occupiers have neither the money or interest to agree.

 

So that’s apartments, but what about a house ?

The major benefits of bricks and mortar are fairly simple. First of all you are literally master of your own domain. Whatever you wish to do to your property (subject to council approval of course) is on the table on whatever time frame you want. New roof ? No problem. Rear extension with parking ? Done. Basically you have a far greater ability to change the item thus allowing you to live in it for a longer period and create far more potential for significant capital growth.

And following on from this the land your home sits upon can also change very quickly not only in value but also use thus leading to potentially an exponentially higher sale price and wealth creation levels previously unthinkable. With an apartment this cannot happen.

Houses also tend to sit in clusters of other houses which can make for a greater community experience and outdoor lifestyle with such examples as cul de sacs, street parties, etc. There is obviously more room to move for the future family with outdoor areas that the kids or Fido can play in.

And the downsides ? Well it’s all on you for a start. At least with improvements you know you are potentially getting a return on investment down the line but when it comes to repairs this is pretty unlikely, and the repairs bill for a house can escalate fast. From replacing the entire roof, to new fences, rewiring, and new flooring there is a much larger exposure to unwanted and unexpected costs at the most inconvenient time when money is tight.

The location of a house in an identical price bracket to an apartment will also mean generally a location that is less central to the more popular and necessary facilities in Sydney. This would mean more time is spent each day commuting both to and from work which lessens the amount of enjoyment one can derive from a more attractive property. There isn’t much use owning a lovely home if you hardly ever use it once you tally off sleeping, working and getting to and from work.

In the end it comes down to the apple or the orange. Both taste pretty good so ultimately it’s a personal choice.

 

 

People ask me if I think that Australian housing is in a bubble!!!

Kathy Comments From : Kathy Ran -Financially Wise
Financially Wise Page – www.facebook.com/financiallywise 
www.financiallywise.com.au

There has been a lot said, many megabytes devoted to and much news ink used in commentary
about a bubble in Australian housing.
People ask me if I think that Australian housing is in a bubble. I usually answer in the affirmative and
furthermore tell them that Australia’s and many of the world’s housing has existed in a bubble for
the past 45 or so years.

I will get back to this in a moment, but first I’d like to say that just because Australian housing is in a
bubble, does not mean that it cannot continue for a while longer, although I personally believe we
are closer to the end point than the start point. As John Maynard Keynes supposedly noted, the
market can remain irrational longer than we can remain solvent.
Now, a very quick history lesson on events that happened 45 or so years ago and why this has
created numerous property bubbles in Australia and the world. In 1968 then US President Lyndon
Johnson eliminated US dollar gold cover. That is, the US no longer had to have a percentage of gold
in their reserves to cover each US dollar that was in existence. This was taken a step further in 1971
by the then US president Richard Nixon who suspended the US dollar’s convertibility into gold, which
meant that a US dollar could no longer be exchanged for gold.
Prior to this, under the Bretton Woods agreement in 1944, the US dollar was backed by gold and by
proxy, so were the world’s currencies as they were valued against the US dollar on the exchange
rates.
When the gold link was severed, the world changed from a gold backed to a credit backed and
driven economy. This meant the economy would only grow if credit was increasing, so people were
greatly encouraged to accumulate more debt by governments and central bankers. Many people
were happy to oblige.

Anybody who bought property in the past 45 or so years has been the beneficiary of this huge
loosening of credit brought about by the actions of both Presidents Johnson and Nixon.
When looking at Australian house prices from about 1880 until late 1960’s/early 1970’s, prices were
relatively flat, when adjusted for inflation. Once credit was loosened however, from the late 1960’s
onward house prices went parabolic over and above the inflation rate. The gains seen over the past
45 or so years are a product of this huge credit expansion.
Pretty much anybody who purchased property in that time, benefitted from increasing values. With
few exceptions, property prices generally went up far in excess of the inflation rate.
The people who benefitted from this windfall weren’t geniuses, they were just in the right place at
the right time. But many thought they were, because they made money each time they sold
property and because they didn’t understand the underlying parameters that allowed this to occur.
So the myth of property prices doubling every seven to 10 years was born. The fact that this had only
happened over the past 45 or so years wasn’t recognised. “45 years” somehow became “always”.
There were even pretty graphs with a starting year point and an ending year point to support this
property doubling “fact”, but once again, the data was extrapolated and prices averaged out over
the time frame, rather than show actual annual prices for the period in question. And more often
than not, these were not adjusted for inflation. As previously mentioned, inflation adjusted property
prices stayed fairly flat until the late 1960’s. They certainly didn’t double, for example, from 1910 to
1920 or 1930 to 1940, but the graphs made it appear as though it did.
However, in the current environment of low inflation and low interest rates, property prices are now
starting to pull back and I believe they are reverting back to the more normal mean of only
increasing in line with inflation.

Changing demographics as baby boomers retire and change from spenders into savers, will impact
on property prices as well, particularly when they start to sell their assets to fund their retirement.
Not just prices for property, but shares and businesses as well.
Overbuilding of flats around Australia’s capital cities will also have a dampening effect on housing
prices, particularly in attached dwellings. Real sustained property price corrections could happen as
soon as the 2017-2018 financial year, if not sooner.
The way global economies are at the moment, there are no guarantees that prices will remain
stable, let alone increase any time soon. And with the oversupply of flats coming into the market,
most likely just as the global markets enter a serious downturn, falling real estate prices are a very
real possibility, particularly from investors exiting the market. When they are not seeing any real
capital gain (after inflation), have very low or no yields and longer vacancy periods, but still have to
put their hand in their pocket every month for expenses, there could be a rush for the exits.
Real estate, after all, is a non-productive consumption item.
Prices may rise but people seem oblivious to the fact they can also fall. What goes up can also come
down. So capital gain only really exists if it is realised. Unless capital gain is locked in (ie. sold at the
highest valuation price), it’s not real capital gain.
You cannot rely on the greater fool theory forever. This is the theory that a greater fool will come
along and pay you more for your “asset” than you paid for it initially.
The banks have been complicit in this, allowing borrowing against any increase in equity so the debt
load is constantly increasing. This strategy is also pushed by property spruikers as a means of
increasing your property portfolio.
Yes, a property investor might have a two million dollar property portfolio. But if it’s secured against
a debt of $2.5 million thanks to falling property prices, that’s hardly a sound financial position to be
in. If and when that happens, the friendly bank won’t be quite so friendly any more.
The problem is that, as previously mentioned, housing is a non-productive consumption item whose
purpose is to provide shelter, but is being sold as an investment item reliant on capital gain rather
than yield.
So, as well as property not doubling every seven to 10 years over a long period of time, Australian
property prices can also actually fall. And this is even more likely at this particular juncture.
We are entering a deflationary period, a period of asset price falls. The reason the massive money
printing or quantitative easing programs we have seen over the past few years by many countries
have not succeeded in increasing asset prices consistently, kick starting the economy or causing
massive inflation or even hyperinflation, is that this money printing has just stopped the deflationary
forces from having their full effect. It’s why the global economy is sluggish at best. With the amount
of money printing carried out by various governments, global economies should be booming. They
are not.
Just as record low, and in some cases negative, interest rates have similarly been unsuccessful in
getting the global economy moving.
There is a train of thought, particularly amongst politicians and central bankers that inflation is good
and deflation is bad. But I disagree. Before the turn of the last century, (and incidentally before the
proliferation of central banks), deflation was as much a part of an economy as inflation. Before the
1900’s, periods of inflation were generally always matched with periods of deflation.
It was only when central banks decided that deflation was a bad thing that we have had persistent
inflation. Inflation has only been a feature of modern economies from about the early 1900’s
onwards (incidentally, the US Federal Reserve Bank came into being in 1913).
Why is deflation the enemy? Deflationary periods are useful to dampen and remove malinvestments
from the markets and bring the economy back into equilibrium. This is now being
prevented from happening.
Japan is well into its third decade of deflation. Asset prices (property, stocks and businesses) are
about half the value they were during the 1980’s and have never recovered those highs. The
various governments of the day have tried desperately to stimulate inflation and asset price growth
through massive quantitative easing (far greater than the US) and zero and negative interest rate
policies. It hasn’t worked. Inflation is still negligible and asset prices are still languishing. And yet
Japan is still ticking along nicely and they’re in no immediate economic trouble. Why? Because
inflation isn’t needed!
And why are our politicians and central banks so desperate to see inflation? Because it increases
asset prices, which brings about the so called “wealth effect”. When asset prices are rising, people
feel wealthier and more secure and this supposedly encourages people to spend more. And why is
this a good thing? Because under a fiat (debt backed, not gold backed) monetary system (pretty
much all developed nations and most developing nations) in order for the economy to grow, we
need to borrow more and get further and further into debt. In other words consume today with
tomorrow’s income.
The record amount of debt we currently have in Australia does not bode well either. Australia is
currently one of the most indebted nations in the world. We have record amounts of private and
corporate debt, and public debt is increasing faster than any other developed nation.
Rising public debt endangers our AAA credit rating, which in turn will increase borrowing costs for
the major banks causing interest rate rises above the RBA “official” rate. Many of the private debt
holders won’t be able to afford any interest rate rises. A massive amount of this private debt is
secured against this non-productive consumption item, property, which will either be defaulted
upon or sold at a loss.
What does this mean for the housing bubble? Who knows! It could continue for another 10 years,
start to deflate next month or pop in a year.
The markets can only be gamed for so long before they revert back to the mean. We are probably
now entering an extended deflationary period and sluggish global economic growth, after more than
100 years of constant inflation. Get used to it. This is most likely the new normal.

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.

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

Article by :

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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?

haveyoursay

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