september
Spring is here and it’s also the start of the busiest time of year for our property markets! Auction activity is already heating up in our largest capital cities – are you ready for the rush?

At its September meeting last week, the Reserve Bank of Australia (RBA) decided to keep the official cash rate on hold at 1.50 per cent. The decision came as no surprise to analysts as the RBA cut the cash rate by 25 basis points just last month, bringing it to all-time lows.

Positive economic growth figures for the June quarter of 3% combined with improved jobs and salary growth data, indicate the RBA’s easing measures are starting to have the desired effect. Whilst the RBA would prefer the Australian dollar to be weaker against other global currencies in order to stimulate growth in our export markets, the US Federal Reserve is tipped to be considering an interest rate rise at their September 20 meeting this month. This could potentially create a downward trend in our dollar, eliminating the need for further rate cuts from the RBA this year.

Following last month’s RBA rate cut, lenders have been reducing interest rates on a wide variety of owner occupier home loan and property investment loan products. However, some have only passed on part of the rate cut, which prompts us to motivate you to check your interest rate with us to see if you still have the most competitive loan product for your needs!

Activity in our largest property markets is already picking up after the Winter slowdown. Victoria held 826 auctions during the week ending September 4 and achieved a clearance rate of 79%. NSW also had a big week with 715 auctions and an 84% clearance rate. Other markets were slower to respond to the arrival of Spring, with QLD holding 135 auctions with a clearance rate of 58%, SA 73 auctions with a clearance rate of 81%, and ACT had 76 auctions with a clearance rate of 78%.

The Perth and WA property market has been quite weak for some time and the trend is expected to continue during 2016. For the first week of Spring only 26 auctions were held and they only achieved a clearance rate of 17%. NT and Tasmania have also been slow to get started, with NT holding just 6 auctions with a clearance rate of 40% and Tasmania holding 7 auctions which achieved no sale.

Home value movements were very conservative this month, with Sydney achieving an increase of 1.44%, Melbourne 1.49%, Brisbane/Gold Coast 0.47%, and Perth 0.20%. Larger gains were seen in Darwin at 4.07% and Canberra 2.77%. Adelaide saw a slight decline in home values of 0.96% and Hobart’s home values fell by 0.88%.

Many of you in the market to purchase a property this Spring have already talked to us about arranging pre-approval on your home loans. If you haven’t called us yet, pick up the phone and get onto it so you don’t risk missing out on the home of your dreams during the Spring rush! Rates are great following last month’s RBA cut so it’s also a good time to discuss your refinancing plans, fix your interest rate or get a home loan health check on your existing loan. Give us a call today!

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Saving up the cash for a deposit on a second property can be just as difficult as saving for your first home. So how do property investors manage to get their hands on enough money to build a decent portfolio?

The answer is equity. It’s a hidden source of wealth that grows inside your property purchases over time. Equity is one of the biggest financial benefits of home ownership, a benefit that could allow you to turn your first home into a money tree that helps you finance property investment activities and build wealth for your future.

What is equity exactly?
Your equity is the difference between what your home is worth and what you owe on it. For example, if your property is worth $500,000 and you owe $400,000 then your equity is $100,000.
In order to calculate your equity position properly, you will need to establish the current market value of your home. You can do an estimate yourself by comparing your home to the price of similar homes that have sold in the surrounding area recently. If you would like a more accurate assessment of your home equity, you will need to obtain the services of a professional valuation expert.

How do you access your equity?
Once the equity in your home has increased, it may be possible to access it. Accessing your equity requires making an arrangement with a lender. There are several different ways you can go about accessing your equity. The options that are available to you will depend on your personal financial circumstances and goals, so you should talk with a professional mortgage broker about which method is right for you.

The two most popular options to access equity are to refinance your existing mortgage to extract a lump sum, or to establish a line of credit against the equity in your home. However, it should be noted that a lender will seldom allow you to borrow against all of the equity in your home, particularly if you still have a mortgage. They usually prefer to keep back at least 20% of the equity in your first home as security.

How can you grow your equity faster?
A popular strategy to grow equity quickly is to add value to your property. This can be achieved by renovating or expanding your home. You can often create quite large equity gains with a relatively small capital outlay and the equity increase occurs as soon as you have completed the project. Improving your property also tends to help it to continue to go up in value more readily over time – out dated properties, particularly run down properties, tend to experience less value growth because prospective buyers view them as fix-me-uppers and only want to pay a bargain price.

If your property is on a large block of land, you may even like to consider subdivision as a means of accessing the equity in your home. The subdivided block will acquire a value of its own, which you can borrow against to build. Or you can simply sell the block and access the funds.

What is the equity investment strategy?
When investing in property, time is your friend. Over time, the equity grows in your first property, which you can then use as a deposit to purchase a second property. This will mean that you now have two properties growing in value over time, which has the effect of growing your total equity position twice as fast. After a little more time passes, you can access more equity from the first two properties to invest in a third property, and so on.

Whilst you continue paying the mortgage on your first property yourself, your tenants pay the mortgages on your second property and any further properties you may purchase after that. Both the tenant’s financial contributions and home value growth in the marketplace continue to increase your total equity position. The more properties you own, the more quickly your total equity grows.

Are there any risks?
There are always risks associated with any kind of investment strategy. The danger is that you will borrow too much money and when interest rates go up, your tenant’s rental contributions will not cover your mortgage repayments and you may not be able to cover the difference from your own pocket. If a decline in property prices was to occur at the same time as an interest rate rise, you may find yourself in the position of having to sell off your properties at a considerable loss.

The way to mitigate these risks is to invest conservatively and always get the advice of a professional mortgage broker to help you determine how much you should borrow. They will help you take into consideration what could happen in the worst case scenario and help to make sure you don’t get caught out.

For more information about using the equity in your home to invest, please call us today. We’ll be happy to help you formulate an appropriate strategy that’s right for your personal financial situation and goals and help you to get started by helping you access your equity and by getting you pre-approval on an investment loan.

offplam
When you’re looking to buy a property, a genuine bargain is the ultimate Holy Grail. We all want to buy at less than market value – and this is exactly the reason why it hardly ever happens. Buying off the plan has the possibility of being the one exception, particularly in a rising property market. It offers buyers an opportunity to put down a deposit at today’s prices on a property that is not yet built, in anticipation that it will have significantly increased in value by the time it is completed and settlement is due.

It sounds simple, right? In fact, buying a property off the plan can be a lot more complicated than it may first appear. In this article we give you five tips on how to get it right.

What is buying off the plan?
Buying off the plan means signing a contract with a developer to purchase a property that has not yet been built. Instead of inspecting a completed home, you choose the property by inspecting the developer’s designs and plans, or by visiting a demonstration home or show room. Apartments are the most common type of off-the-plan property purchase, however you can often buy units, duplexes and townhouses that are a part of a larger development.

Tip #1. Do your research.
Putting down your deposit on a property that proves to be worth less than the original agreed purchase price could be a disaster, as you may not be able to get the finance you need to complete the sale. That’s why it is vitally important to do your research very carefully to ensure you’re buying a property that will have the value you expect when the purchase is completed.

To be sure you get it right, you should research the suburb’s capital growth rates and rental yields. You should also find out how many other, similar developments are planned to find out how this will affect sale prices, clearance rates and vacancy rates in the area.

Tip #2. Reference check the developer.
Choosing the right developer is just as important as choosing the right property. Everyone has heard stories about dodgy property developers and the way to avoid being caught out is to reference check them carefully.

Do a background check on the developer for bankruptcy, criminal record, complaints with your local building authority and ask to speak with previous clients. Ask the developer how long they have been in the industry, how many projects they have completed and visit their previous work to inspect the quality. Find out what professional industry associations they have.

Most importantly, ask the developer to provide proof of their financial status. You don’t want to run the risk of the developer going into liquidation before the property is finished.

Tip #3. Be sure of what you’re buying.
When buying off the plan, it pays to be very thorough and detail minded. You need to determine exactly what you are going to be getting for your money, so ask a lot of questions about what is covered by the purchase price and what isn’t. You should be careful to ensure that everything your developer agrees to provide is written down in the contract. Be as detailed as you possibly can in every respect.

Tip #4. Get a solicitor to check the contract.
Because they are so very detailed and comprehensive, contracts for off the plan purchases can be complex and lengthy. To make sure everything is correct, take the contract to a solicitor you can trust to check it carefully. Read it yourself and ask your solicitor to explain anything you don’t understand before you sign on the dotted line.

Tip #5. Pre-inspect prior to settlement.
Another thing that you must remember to include in your contract is a pre-settlement inspection. This will give you the opportunity to go in and check that everything the developer has agreed to deliver is there in the property. You can also take along a building inspector to help you check for defects or finishes that are not up to standard. If everything is not in order, you can delay settlement until the developer rectifies the problem. Including a pre-settlement inspection in your contract is essential to protecting yourself from having to take possession of an uncompleted property. You don’t want to hand over your money until you are completely satisfied you’re getting everything you’re paying for.

If you’re considering buying off the plan, it’s also a good idea to get pre-approval on a loan before you sign the contract. You can then keep this up to date whilst the property is being constructed to be sure you can get finance when needed. We’re here to help you crunch the numbers and make sure it’s the right purchase for you, so please call us today.

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Whilst our property markets have cooled somewhat over winter, last week’s rate cut from the RBA looks all set to motivate buyers and reignite property market activity in time for spring

At its August meeting, the Reserve Bank of Australia (RBA) decided to cut the official cash rate by 25 basis points to just 1.50 per cent. This follows a rate cut in May this year, bringing the official cash rate to its lowest point ever on record!  The RBA has indicated that it’s now waiting for more information regarding global currency market activity before it will decide if further cuts to the cash rate will be necessary in 2016.

This month’s move was prompted by low inflation figures for the June quarter, which indicated a weakening trend, well under the RBA’s target range of 2 per cent.  The Australian dollar also remains stubbornly high compared to other currencies, which tends to have a dampening effect on the economy.

Property market activity has cooled during winter, which is traditionally the case for this time of year. For the week ending July 31, Victoria’s auction market was the strongest, with 754 scheduled auctions and a clearance rate of 75 per cent. NSW held 509 auctions with a clearance rate of 78 per cent. Queensland only scheduled 156 auctions and the clearance rate was quite low at just 49 per cent. South Australia had 107 auctions and a clearance rate of 69 per cent. Western Australia scheduled 34 auctions and achieved a clearance rate of only 37 per cent. Northern Territory had only 8 auctions and a clearance rate of just 25 per cent. ACT held 43 auctions, with a clearance rate of 74 per cent and whilst Tasmania held 7 auctions, none of the properties registered as sold.

With the overall weakening of property sales during winter, home value increases have also slowed. The biggest increase for the month was in Adelaide, where home values rose 1.42 per cent. Home values in Sydney increased by 1.25 per cent, in Hobart by 1.12 per cent and in Melbourne, 1.11 per cent. All other markets showed very marginal decreases in home values, except for Darwin where there was a significant drop of 6.18 per cent.

This month’s cash rate cut, combined with the decline in market activity for winter, has stimulated  lenders to offer some extremely competitive interest rates and great special offers. Smaller lenders have passed on the full rate cut, so if you’ve been waiting for the right time to refinance your home loan or fix your interest rate, then this could be it! We can also access great rates for first home buyers, next home buyers and property investors, so give us a call now to check out what we can do for you and find out how much money you could save.

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Did you know that termites damage more than 180,000 homes and buildings around Australia every year?

That the high prevalence of rats and mice in Australian homes is a major factor in the distribution of food poisoning organisms like salmonella? Clearly, if you’re thinking about buying a property, the value of an independent building and pest inspection report can’t be understated!

Reduce your financial risks.

Buying a property can be a very emotional decision and it’s easy to forget about looking for defects when you finally find a property you love. But the reality is that all property buyers should obtain an independent building and pest inspection report in order to remain sensible and objective about the property they’re purchasing and reduce the risk of incurring expensive repair bills down the track.

A building and pest inspection report will provide you with a professional’s evaluation of the condition of the property you are purchasing. They will provide you with a visual review of all elements of the property including structural inspections of the exterior roof, interior roof spaces and eaves, foundations, subfloor, wiring, interior plumbing, sheds and pergolas, fireplaces, electrical and air conditioning systems. Your report can also cover things like windows, doors, flooring, ceilings and other temporary fittings and so on. If you have any particular concerns about a property you are looking to buy, you can mention them to your inspector and they will take special care to put your concerns to rest.

There are three good financial reasons why you should get a building and pest inspection report:

  1. To check for structural and pest issues, so you are able to budget for rectifying them.
  2. To use the information to negotiate a lower price, or for repairs to be completed before you purchase the property.
  3. To find out if the problems are so severe that they may adversely affect the property’s future resale value, or be so expensive to repair that you may be put off purchasing the property entirely.

Ideally, a building inspection should be performed before you sign a Contract of Sale, or prior to auction if that is going to be the method of sale. When you’re not buying at auction, it is standard practice to insert a clause into the Contract of Sale stating that the purchase is subject to building and pest inspection reports.

Even new build homes can have problems.

Whilst it’s true that structural defects, termite damage and pest infestations tend to be more common in older homes, unfortunately even new-build properties can come with issues. If the property is new, paying for a fully comprehensive building inspection report is still a good idea because it will ensure that the building has been finished correctly according to the building plans and help you identify any problems the builder has overlooked or any issues that may not be covered under the building warranty.

When it comes to pest problems, these tend to be endemic to areas and their prevalence will have as much to do with where the property is located, as the property’s age. In many areas, homes under construction are extremely vulnerable to termite attack and other pest issues such as rats and mice.

A few hundred dollars could save you thousands.

Depending on the location and size of your home, a building and pest inspection report can cost anywhere from $300 for your average suburban home to $600 or more for larger properties or ones located in a rural location. However taking the precaution of getting a building and pest inspection report before you buy could save you a great deal of money and hassle.

When a professional building and pest inspector comes across a problem that may be significant, they will recommend you seek further advice from an appropriate professional before proceeding with the purchase. Depending on the nature of the defect and the extent of the damage, you can get quotes to make repairs or simply walk away from the deal if it is too hard.

For more information about locating a reputable company or qualified building industry professional to perform your building and pest inspections, please give us a call. We maintain relationships with many professional companies relating to the purchase of your home, so please don’t hesitate to get in touch for a referral if you require any assistance.


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Copyright 2016