As North Queensland continues to grapple with floods, it raises the question of how natural disasters impact property markets.

Ray White Group Chief Economist Nerida Conisbee said the relationship between natural disasters and property values was shaped by factors ranging from demographics to wealth disparities.

Citing research from Siddhant Saha, Ms Conisbee noted that after the 2019-20 Black Summer bushfires in Sydney, properties in bushfire-prone areas in the Hawkesbury experienced price drops of 6% to 24%, while those in the Blue Mountains saw declines of only 0.2% to 0.5%. However, those price drops were only temporary, with most markets recovering within 12-24 months.

“This pattern of short-term impact followed by recovery appears consistent across different types of natural disasters and locations,” she said.

“For example, following the 2011 Brisbane floods, affected suburbs initially saw value declines but by 2017 were achieving median prices well above their pre-flood levels. Similarly, Mallacoota, one of the worst-hit areas in the 2020 bushfires, saw house prices surge 70% in just three years, driven significantly by covid-19-driven population movements to regional areas.”

Ms Conisbee said the speed and extent of recovery often depended on:

“Short-term price impacts from disasters typically recover, but the timeline can vary significantly by location and circumstances,” Ms Conisbee said.

“Demographic and wealth factors play crucial roles in market resilience, creating uneven recovery patterns across different communities.”

In positive news for many, the Reserve Bank of Australia (RBA) has today cut the cash rate. The cash rate is now at 4.10%, down from 4.35%, in the first cut since November 2020. The decision to reduce the cash rate follows data that shows inflation in Australia has cooled to be within the RBA’s target range of 2-3% (though underlying inflation remains slightly higher).

But how does this impact you?

The cash rate is closely tied to the interest rate lenders charge in their loans, or offer on savings products. If the cash rate is lower, lenders can borrow money for less, which they could pass on in lower interest rates. While they are not necessarily obligated to pass on the full cut to their customers, there will be many eyes watching to make sure savings are passed on. It will most directly be noticed in variable rates, but long-term predicted reductions should also see reduced fixed rates.

For those who are considering buying, lower interest rates mean lower repayments and increased ability to service the loan. This can mean increased borrowing capacity.

 

Crunching the numbers

Let’s have a look at how much of a difference rate cuts can make.

Borrowing power

For this example, we’ll consider a single person – we’ll call her Lucille. Say Lucille earns the average full-time annual income of $90k, has no dependents and with the average Australian annual expenses. A 30-year owner-occupier loan that dropped from 6.3% p.a. to 6.05% p.a. (because the lender passed on the full .25 percentage points cut) would potentially see her borrowing power increase from $477k to $489k. If the cash rate drops again later this year by another .25 percentage points, and the lender passes it on in full, Lucille’s borrowing power could increase to $501k.

You can get an estimate of your borrowing power using this calculator. Though remember, this is a guide. Reach out if you would like a more tailored calculation.

Repayments

Now we’ll look at a hypothetical couple that already has a home loan – Craig and Patrice. Craig and Patrice have the average Australian mortgage of $642,121 and make monthly repayments with a variable interest rate of 6.3% p.a. with a 30-year loan term. Their current repayments are $3,974. Should their lender pass on the .25 percentage point decrease to their interest, it would drop to 6.05% and their repayments would be $3,870. This would save them around $1,248 over a year. If there is another .25 percentage point cut later this year and their lender again passes on the full amount, Craig and Patrice’s monthly repayments would decrease to $3,768. This would save them around $2,472 over a year.

You can find out how much your repayments could be using this calculator.

Your next steps

Over the next few days, lenders should begin decreasing interest rates. If you have a loan with a variable rate, check in to see if it has dropped. It could be a good opportunity to compare your loan including interest rate with others in the market. We can do that for you.

If you are interested in purchasing, it is often a good idea to get pre-approval. This shows you how much a lender may be willing to lend to you and helps you to refine your search to your price range. 

Reach out to get started.

Many Australians have used funds that are ‘stuck’ in superannuation to purchase investment properties as a way to grow their retirement wealth. In this article we look at the process of purchasing property through a self-managed superannuation fund (SMSF).

  1. The first step in the process is to establish an SMSF. This must be done with the help of a licensed professional to ensure the SMSF is compliant. There are a number of steps here including registering the fund, appointing trustees and opening a dedicated bank account. As part of the process, an investment strategy will need to be created – include property investing in this strategy.
  2. The second step in the process is for the investor to speak to a mortgage broker about securing finance. Borrowing through an SMSF is more challenging than taking out a regular home loan outside super; because there are fewer lenders in the SMSF space, they have tighter lending conditions and they charge higher interest rates.
  3. Third, the investor will need to establish a bare trust, which is a type of trust that can hold only one asset at a time. That’s because, for technical reasons, an SMSF can’t borrow money to buy an asset; instead, the bare trust needs to do it on the fund’s behalf.

 

Limited-recourse borrowing arrangement explained

Most home loans have full-recourse borrowing arrangements, which means if the borrower defaults on the loan and the lender is unable to reclaim all its money by selling the property, the lender has recourse to pursue other assets belonging to the borrower. 

However, SMSF property loans have limited-recourse borrowing arrangements, which means if the borrower defaults and the lender is still owed money after the property is sold, the lender can’t attempt to seize any assets outside the bare trust; and because the bare trust, by definition, will have only one asset, the lender must accept the loss.

 

Sole purpose test explained

Investors can use SMSFs to buy both residential and commercial property. Either way, the investment must comply with the sole purpose test, which means the sole purpose of the investment must be to provide retirement benefits to members of the SMSF.

That’s why a residential property cannot be rented out to a member, or one of the member’s relatives or associates. Instead, it must be rented to another party on market terms.

The rules for commercial property are slightly different. Members are allowed to lease the property to their business; however, the business must pay a rent that matches the market rate.

 

Final note

SMSF property investing can be quite technical, which is why it’s vital for borrowers to work with a good accountant, financial planner and broker.

When you are buying a new car, there are a number of factors to consider when selecting the right finance.

One key decision is whether to use a secured or an unsecured loan. A secured loan (which involves using the vehicle as collateral) can require more paperwork from the borrower and a longer assessment period. On the flip side, the borrower usually gets a lower interest rate and may gain access to additional loan features as well.

With an unsecured loan, the borrower will not need to provide collateral, so they will probably be asked for less paperwork and can expect a faster assessment period. However, they will usually need to accept a higher interest rate and, potentially, a less feature-rich loan.

 

Balloon payments

The borrower will also need to decide if they want their car loan to include a balloon payment, which is a lump-sum payment they would need to make at the end of the loan.

The upside of including a balloon option is the monthly repayments are reduced throughout the life of the loan; the downside is that once the balloon payment is added at the end, the life-of-loan costs become higher. Avoiding the balloon option means higher monthly repayments but lower life-of-loan costs.

As a result, borrowers may wish to:

 

Novated leases

Another option for borrowers to consider is a novated lease, which would be a three-way agreement between the borrower, their employer and the lender. Under a novated lease:

The reason novated leases exist is because all three parties can benefit:

That said, borrowers need to remember that if they can’t afford the balloon payment at the end of the lease period, they may be forced to sell the vehicle to raise the funds. Also, if they leave their job during the lease period, they would need to keep making the monthly repayments – but from their private, post-tax savings.

 

The benefits of using a broker

I can compare loans from a diverse range of lenders on your behalf. If you go direct-to-lender or use dealer finance, you will be more limited in your options.

 

Many borrowers who have heard of lenders mortgage insurance (LMI) regard it as a bad thing. But that’s not necessarily the case.

LMI is an insurance policy designed to protect the lender (not the borrower) in the event the borrower defaults on the loan and the lender isn’t able to recoup all its money by selling the borrower’s property.

Lenders typically make borrowers pay LMI when they buy a property with less than 20% deposit, although exceptions apply. Some lenders expect borrowers to pay the premium up front, although many allow borrowers to add it to their loan.

LMI premiums can be significant – for example, if an owner-occupier first home buyer wanted to purchase an $800,000 home with a 10% deposit (i.e $80,000), their LMI bill could be upwards of $20,000, depending on the lender and state or territory.

Paying out all that money is, clearly, an unappealing prospect, which is why many people try to avoid LMI at all costs. However, when someone considers the bigger picture, they might find there are some circumstances in which the pros of paying LMI outweigh the cons.

 

The case for LMI

The biggest benefit of taking out a mortgage with a high loan-to-value ratio (LVR) and paying LMI is that it allows borrowers to enter the market  potentially years ahead of schedule.

To continue the hypothetical scenario mentioned above, if the first-home buyer wanted to avoid LMI, they would need to increase their deposit from $80,000 to $160,000 – and saving all that extra money might take years. Our first-home buyer might not want to wait so long to achieve the security and satisfaction that comes from owning your own home.

Delaying home ownership doesn’t just have an emotional cost; it can also have a financial cost. For example, by the time our first-home buyer was able to save a 20% deposit, they might find that property prices had increased by more than the LMI bill they would’ve had to pay had they entered the market years earlier. Also, if property prices had increased, our first-home buyer would now need to save an even larger amount – the hypothetical $160,000 figure mentioned earlier would no longer cover a 20% deposit for the same property.

As a result, there are circumstances in which paying LMI can be a smart move, although it depends on a borrower’s financial position and risk profile.

 

I can help if you are unsure about LMI

If you want to buy a property and have a relatively small deposit, please come to have a chat.

First, I’ll explain exactly how LMI works. Second, I’ll crunch the numbers for you, so you can make an informed decision about whether it would be in your interests to apply for a high-LVR loan and pay LMI.

The federal government has finally succeeded in passing its housing support measure, Help to Buy, through parliament. Once it takes effect, Help to Buy will support 40,000 low- and middle-income earners to purchase a property years ahead of schedule, in two ways.

First, buyers will be able to purchase their property in tandem with the government, which will take an equity stake of up to 30% in an existing home and up to 40% in a new home. That will reduce the funds that a buyer will need to commit. For example, if a buyer purchased a $700,000 property, their share could be $490,000 (i.e. 70%) for an existing home and $420,000 (i.e. 60%) for a new home.

Second, buyers will need to contribute a deposit of only 2% and will not be charged lenders mortgage insurance. For a $700,000 home, the deposit requirement would be just $14,000.

Help to Buy will be available to first-home buyers as well as people who previously bought real estate but no longer own it.

Income restrictions will apply – to participate, your annual income must be less than $90,000 if you’re an individual buyer or $120,000 if you’re a joint buyer. There will also be property price restrictions, which will differ from state to state (and will be higher in metro than regional areas).

Help to Buy will become available in each state/territory once it passes legislation for the scheme to operate in its jurisdiction. 

 

Industry association backs government policy

Property Council of Australia Chief Executive Mike Zorbas welcomed the passage of Help to Buy, which he said would provide valuable support to those who were struggling to get on the property ladder.

“We need to ensure that home loans are not just for the wealthy, and that we are giving first home buyers a realistic chance at accessing credit for housing. Removing blockers to home ownership is important and one of the biggest challenges, alongside access to finance, is saving up for a home deposit. Schemes like this must be targeted directly to those who need them most, and this initiative will hopefully help 40,000 low- and middle-income Australians into home ownership,” he said.

“The next step, the most important step in making housing more affordable, is boosting the supply of new homes across Australia. Unlocking state planning systems and setting taxation levels to create more at-market, more affordable housing, more rentals, more retirement villages and more student accommodation must be a national effort.”

 

The great thing about a new year is it gives us a chance to take stock of our lives and identify areas for improvement. That applies particularly to money.

If you’re thinking about buying a property in 2025, already have a home loan, or you’re running a business – or all of the above – there are steps you can take to improve your situation.

 

Purchasing a property 

To increase your chances of qualifying for a home loan and to maximise your borrowing capacity, you should aim to make yourself as creditworthy as possible in the eyes of lenders. That can be done by:

 

Keep a close eye on your mortgage

Do you already have a home loan? In that case, it is a good idea to remain aware of your interest rate and features, and compare that to other loans on the market. This is particularly important when there are cash rate cuts as lenders will likely cut interest rates and you may find some offering more competitive rates for new customers. 

Contact me to see if your loan is still suitable and your interest rate is still competitive. I’ll let you know if you could improve your situation by refinancing to a new loan – and, if you decide to proceed, manage the application for you. 

If you find yourself with additional debts to manage – such as a maxed-out credit card, a car loan or a personal loan – depending on your scenario, you might be able to reduce your interest bill (and simplify your finances) by consolidating several debts into your home loan. I’ll be happy to crunch the numbers for you, so you know whether debt consolidation would be a good move.

 

Improve your business in 2025

For business owners, there are two contrasting situations to be aware of. On the one hand, business failures are continuing to rise and are now at their highest rate since October 2020, during the pandemic, according to CreditorWatch. On the other hand, the Reserve Bank of Australia has forecast that economic growth will increase in 2025 (albeit off a low base).

If you’re thinking defensively, we could help you with cash flow finance. If you’re thinking about growth – and potentially taking advantage of the instant asset write-off – we could help you secure a business loan. Either way, get in touch to discuss your scenario, so we can work out a plan to move your business forward.

As we come to the end of another eventful year for property, it’s clear that we’re experiencing a two-speed market, and that prices are slowing in both, according to Ray White Chief Economist Nerida Conisbee.

Ms Conisbee said the weakest markets were Sydney, Canberra, Melbourne and Hobart, with their median prices having increased by an average of 2.9% over the year to October. “This is much less than the peak 6.7% experienced in the 12 months to February 2024,” she said.

Ms Conisbee said the strongest markets were Brisbane, Perth and Adelaide, where prices rose by an average of 13.2% over the year to October. “While this is much less than the 18.9% experienced in the 12 months to May 2024, the increase is still extremely strong.”

 

Weakest markets

Sydney, which has the country’s highest property prices, is really feeling the impact of higher interest rates, according to Ms Conisbee. “While more affordable properties are still seeing decent growth, the luxury market has notably softened. Any significant market revival will likely need to wait for interest rate cuts, expected in early 2025,” she said.

Canberra, which also has very high prices, is also affected by interest rates, but, unlike Sydney and other cities, is not facing a housing shortage, making conditions more buyer-friendly. “The ACT Government’s efforts to make Canberra an affordable city through high levels of housing supply appear to be working,” Ms Conisbee said.

Melbourne faces multiple challenges, according to Ms Conisbee. “Beyond interest rate sensitivity, the Victorian economy shows signs of recession, and property owners are dealing with the country’s highest property taxes.”

Hobart’s main problem is demography. “With population growth at low levels and forecasts suggesting this trend will continue, particularly as a result of plunging interstate migration, the market faces ongoing pressure,” Ms Conisbee said. “While interest rate cuts would help, the fundamental population challenge remains significant.”

 

Strongest markets

Brisbane, along with the Gold Coast and Sunshine Coast, is continuing its impressive run, in part because south-east Queensland is soaking up interstate and international migrants. “With housing supply falling short of demand and strong market confidence, prices continue to rise across all segments,” Ms Conisbee said.

Perth also has a strong market, with both prices and rents rising, according to Ms Conisbee. “While some of this represents catch-up growth, the combination of population increases and rising construction costs continues to limit supply.”

Adelaide is benefitting from a range of strengths. “Strong state government leadership has boosted confidence, driving investment and tourism growth,” Ms Conisbee said. “Perhaps most significantly, Adelaide’s median house price – at half of Sydney’s – makes it increasingly attractive for interstate migrants seeking value, as well as investors.”

 

Looking forward to 2025

Ms Conisbee forecast that the two-speed market would continue into 2025. 

“Local economic conditions, population trends and housing supply are playing crucial roles in determining each city’s path,” she said.

“As we head into a lower interest rate environment, it’s becoming increasingly clear that understanding these regional differences is key.”

 

Please get in touch if you’re planning to buy in 2025, whether you’re an owner-occupier or an investor. We’ll assess your borrowing capacity, compare a wide range of home loans for you and then help you get a pre-approval.

Bushfire and storm season has arrived in much of the country. So what can you do to protect your home?

Fires

One idea is to remove dry vegetation and flammable items from around the property, to create a buffer zone.

Another idea is to add ember guards to your roof, eaves and windows, to prevent embers from setting your home alight.

You can also install bushfire-rated shutters, which are designed to protect windows from heat and flames.

For future bushfire seasons, you can retrofit your home with non-combustible materials, such as metal, brick and concrete, and switch to fire-resistant plants in your garden.

 

Floods

There are a range of measures you can take to guard against the floods that often occur at this time of the year.

For example, you can install a sump pump, so you’re able to remove any water that may enter your basement.

You can also prepare to place sandbags (as an interim solution) and flood boards (as a long-term solution) at places where water could enter your home, such as doors and windows.

In future, you can elevate electrical outlets, wiring and appliances, so they remain above any potential flood. Furthermore, you can add water-resistant materials, such as tile and sealed concrete, to your home.

 

Storms

Storm events are another regular summer occurrence that you might want to protect yourself against.

One measure you can take right now is to secure outdoor structures that might become dangerous projectiles in strong winds.

Also, you can add shutters to your windows, to protect them from flying debris.

As a future project, you can install impact-resistant doors and windows, as well as replace your current roof with a cyclone-rated version.

 

How to finance these improvements

While some of these ideas are free or low-cost, others require a significant investment.

If you don’t have the cash at hand, I can help you finance the work, in one of two ways:

 

Please get in touch to discuss your options.

 

The hardest part of buying your first home isn’t necessarily paying the mortgage – although that can be challenging. Rather, it’s often saving a large enough deposit to qualify for a loan.

What makes the deposit hurdle tricky is that it’s been getting higher. Between March 2020 (when the pandemic started) and August 2024, the national median property price increased 37.8%, according to CoreLogic. For some first-home buyers, prices have been rising faster than their capacity to save.

However, there are steps you can take to not just enter the market, but potentially do so faster than you thought possible.

To begin with, look for opportunities to increase your savings rate. This could be done by increasing your income (which, admittedly, is easier said than done), reducing your expenses or both.

If you’re able to build your savings through tax refunds, parental gifts or inheritances, that would be helpful. Please note, though, that when lenders review your mortgage application, they’ll look not just at how much money you’ve saved but also how much of this money is ‘genuine savings’ (i.e. the result of recurring rather than one-off factors). Lenders want to see a history of genuine savings, because that reassures them you’d have the ability to make mortgage repayments month after month after month.

 

LMI explained

One way to buy your first home sooner is to do so with less than a 20% deposit.

Generally, if your deposit is below this threshold, you will need to pay lenders mortgage insurance (LMI) – an insurance product designed to protect the lender in the event you default on your loan – although exceptions apply. Some professionals, such as doctors, lawyers, engineers and accountants, may be able to put down less than a 20% deposit without paying LMI, because they tend to have larger and more secure incomes, and therefore pose a lower risk for lenders.

No one likes paying LMI. However, in a rising market, paying LMI could potentially save you money in the long run by allowing you to buy a property sooner (i.e. when prices are lower).

 

How to avoid LMI

There are a couple of other ways you could put down less than a 20% deposit and avoid LMI.

One way is to ask eligible family members to guarantee your loan, assuming they own their own home. In that case, you might be able to contribute a deposit of as little as 5% or even 0%; the rest of the 20% deposit would be secured against the equity in your guarantor’s home. After a few years, once you’d built up 20% equity in your property, through a combination of paying down the loan and having the home rise in value, you could refinance and remove your guarantor from the loan. In the meantime, though, your guarantor would be legally liable for your mortgage, so if you failed to make your repayments, the lender could potentially seize their home. That’s why it’s important for all parties to get professional advice before proceeding with a guarantor home loan.

Another way is to take advantage of the federal government’s First Home Guarantee or Regional First Home Buyer Guarantee schemes, which allow you to buy a property with a deposit of as little as 5% without having to pay LMI. However, eligibility criteria apply, including income caps – your income must be under $125,000 if you’re buying on your own or a combined $200,000 if buying as part of a couple. Property price caps also apply – these range from $400,000 in the Christmas Island and Cocos (Keeling) Islands to $900,000 in Sydney.

 

How pre-approvals work

Regardless of how you plan to buy your first home, it’s a good idea to first get a mortgage pre-approval, which is an in-principle (but not legally binding) indication from the lender that they’d be willing to lend you a certain amount of money.

A pre-approval provides peace of mind that you can qualify for a loan. It also lets the vendor know you are a serious bidder.

I can help you secure a pre-approval. I can also provide you expert advice on the entire buying and mortgage process. Contact me to discuss your options.