Australia’s vacancy rate fell to 0.9% in July, compared to 1.0% the month before and 0.9% the year before, according to Domain.

In national terms, supply and demand strongly favours property investors, although conditions differ from market to market

Sydney’s vacancy rate was 1.2% in July, the same as the year before. “Annually, vacant rental listings remain down by 2.4% but this is an improvement compared to the deeper declines that were being experienced,” Domain said.

Melbourne’s vacancy rate fell from 1.5% in July 2022 to 1.0% in July 2023. That was partly due to a 33.2% annual decline in rental listings.

In Brisbane, the vacancy rate increased over the year, from 0.6% to 0.8%. “The rental market is still moving away from the highly competitive conditions and record low vacancy rate last seen in February,” Domain said.

Perth’s vacancy rate fell slightly over the year, from 0.5% to 0.4%, with rental vacancies falling 12.2% during that time.

In Adelaide, the vacancy rate rose from 0.2% last July to 0.4% this year, in tandem with a 53.2% increase in rental supply.

Hobart’s vacancy rate recorded a sizeable increase over the year, from 0.5% to 1.2%. “There was a monthly fall in rental listings but it is almost triple the number of listings of July 2022, indicating a continued improvement in conditions for tenants,” according to Domain.

Canberra’s vacancy rate decreased in July but increased over the year, from 0.9% to 1.8%. “The number of vacant rentals fell over the month but is seeing almost double the number of listings compared to last year. This indicates an easing of conditions for tenants,” Domain said.

Finally, Darwin’s vacancy rate was unchanged at 0.7%, despite a 13.0% increase in listings over the year.

Why the current market favours investors

Vacancy rates are at historically low levels in many parts of Australia, which is challenging for tenants but favourable for property investors.

In this kind of landlords’ market, most investors are finding it easy to attract tenants and are able to command higher rents.

Furthermore, median property prices rose in every capital city during the three months to July, according to CoreLogic, so many investors are also enjoying capital growth.

Want to buy an investment property? I’ll be happy to research your borrowing capacity and let you know whether you can tap into any equity you might have in other property.

 

Today, the Reserve Bank of Australia (RBA) chose to hold the cash rate at 4.1%. This is the second month in a row the Bank chose to hold the cash rate following positive signs in inflationary data.

With the uncertainty around the future of interest rates – whether they will keep increasing or have reached their peak – we are regularly asked about limitations around pre-approvals and whether they are worth getting.

In short, pre-approvals are a good idea if you are serious about buying property. Here is why.

Pre-approvals:

  1. give you confidence a lender is satisfied with your current situation to lend you the money you need.
  2. provide an understanding of how much you may be able to borrow.
  3. show real estate agents and vendors you are a serious buyer and ready to purchase.
  4. can speed up the process of getting your loan approval as the lender already has your information to make the final assessment.
  5. remove some of the stress when your offer has been accepted as you have already completed a lot of the paperwork and submitted key documentation.

In saying this, there are some limitations to pre-approvals to be aware of. A pre-approval is a good indication of your borrowing power and that the lender is happy to lend to you at that time. However, it is conditional, based on your circumstances and the interest-rate environment at the time of the application. This means if anything changes between the time you received your pre-approval – either within your circumstances or if there have been significant changes with interest rates – your final application can be impacted. Small changes to interest rate is unlikely to impact your pre-approval. That said, we will work with you to do everything in our power to get your finances across the line.

How long does a pre-approval last?

The timeframe a pre-approval is valid for depends on the lender. In general, it is around three months, but can be up to six. However, if your circumstances change or there is a change in the cash rate, it is a good idea to reach out to your broker for a chat to determine if your borrowing power could have been impacted.

If your pre-approval is approaching its expiration, speak to your broker to discuss your options including applying for an extension or a new pre-approved product.

Making an offer

If you find property you would like to make an offer on, reach out to your broker to discuss whether there could have been any changes to your borrowing power and the range you may want to offer within. Your broker can also determine whether the property you are interested in falls within the lender’s criteria and provide a free property report that shows recent similar transactions nearby. 

It is a good idea to include a finance clause in your offer – usually around 10 days. If your offer is accepted, speak to your conveyancer or solicitor to ensure you are happy with the contract and any conditions, such as building and pest inspections, that are included.

Keep in mind if you are bidding at an auction, your offer is unconditional and binding with no opportunity for a finance clause.

If you have any questions – reach out for a chat. And if you’re thinking about buying property, make an appointment to get your free property-buying plan in place.

Australia’s consumer watchdog has put businesses on notice about false environmental and sustainability claims, after finding a large number were engaging in ‘greenwashing’.

The Australian Competition & Consumer Commission (the ACCC) has published draft guidance to help businesses stay on the right side of the Australian Consumer Law. This comes in response to ACCC research in late 2022 that found 57% of businesses reviewed were making potentially misleading environmental claims.

The ACCC’s draft guidance has recommended that businesses apply eight principles when making environmental claims:

  1. Make accurate and truthful claims.
  2. Have evidence to back up your claims.
  3. Don’t leave out or hide important information.
  4. Explain any conditions or qualifications on your claims.
  5. Avoid broad and unqualified claims.
  6. Use clear and easy-to-understand language.
  7. Make sure visual elements don’t give the wrong impression.
  8. Be direct and open about your sustainability transition.

 

If you’re unsure, don’t say it: ACCC

ACCC chair Gina Cass-Gottlieb said businesses needed to be honest and transparent when making environmental or sustainability claims so consumers didn’t get misled.

“False or misleading claims can undermine consumer trust in all green claims, particularly when consumers are often paying higher prices based on these claims,” she said.

“Similarly, businesses that are taking genuine steps to adopt sustainable practices are put at a competitive disadvantage by businesses that engage in ‘greenwashing’ without incurring the same costs.”

Ms Cass-Gottlieb said businesses must provide clear, accurate information to consumers about green claims – and that “if you are unsure or can’t substantiate these claims, then don’t make the claim.”

The ACCC is seeking feedback from businesses, consumers and other stakeholders on its draft guidance. Consultation closes on 15 September 2023.

Business confidence has fallen to its lowest level in almost three years, according to Roy Morgan’s latest monthly survey.

The Roy Morgan Business Confidence Index slipped to 88.8 points in June, compared to 90.3 points the month before and 97.3 points the year before. 

That is the lowest reading since September 2020 and well below the long-term average of 112.0 points. A score of 100 is neutral; anything lower is negative and anything higher is positive.

Looking at a state-by-state breakdown, all but one state recorded negative confidence in June:

 

Businesses backing themselves, but down on the economy

Ironically, the businesses surveyed in June were still broadly positive about their own prospects: 41.1% expected to be better off financially in a year’s time and 25.7% worse off.

However, businesses were broadly negative about the outlook for the economy, with 62.2% expecting bad times over the next 12 months and only 35.6% expecting good times.

At the same time, 45.0% believed the next 12 months would be a good time to invest in growing their business, while 48.3% believed it would be a bad time.

 

Improve your bottom line

Every business is unique. While this may not be a good time to invest for some businesses, it may be for yours. If you feel that buying new machinery or equipment would make your business more profitable, get in touch and I’ll be happy to finance it for you.

Alternatively, if you want to consolidate your financial position, contact me about refinancing. I could potentially help you reduce your interest rate or switch to more favourable loan terms.

A new report from the Productivity Commission (PC) has solved the mystery of why Australia’s labour productivity is falling.

Labour productivity fell 4.6% in the 12 months to March 2023, according to the most recent data from the Australian Bureau of Statistics. The PC report said this was “most likely due to the unwinding of COVID-19 restrictions and the historically low unemployment rate”.

Focusing on the first cause, the report found that productivity rose during the pandemic.

“Less-productive firms were more likely to pause production, and contact-intensive service sectors were severely affected by COVID-19 restrictions. As a result, labour productivity increased through a productivity-enhancing reallocation of labour. More labour flowed towards high-productivity goods sectors, and within the same sector, labour also shifted to high-productivity firms,” the report found.

“As the pandemic subsided and restrictions were lifted, the service sector recovered and firms with low average productivity levels – such as hospitality – returned to production. This partly reversed the reallocation effect, lowering measured labour productivity.”

 

The downside of falling unemployment

As for the second cause, similar forces were at play.

“The COVID-19 pandemic at first caused an increase in under- and unemployment. This disproportionately affected low-productivity workers because the pandemic forced firms in lower-productivity customer-facing industries to cut costs, reduce production and lay off some of their workers. Consequently, this led to a temporary increase in labour productivity,” according to the report.

“As the labour market recovered from the COVID-19 pandemic and the unemployment rate fell to historic lows, lower-productivity workers reentered the workforce, thereby reducing labour productivity.”

 

Better times may lie ahead

PC Chair Michael Brennan said that while productivity had fallen recently, the increased digital capacity Australia developed during the pandemic could lead to a lasting productivity dividend.

“Government and business should continue to embrace innovation and invest in upskilling the workforce to maintain that momentum,” he said.

A leading property data analyst believes that while property investors continue to hold the balance of power in the rental market, the rental crisis among tenants is now starting to ease.

SQM Research Managing Director Louis Christopher said new data showed vacancy rates (which measure the share of untenanted rental properties) had increased in several capital cities and, as a result, the pace of rent increases had significantly slowed.

Mr Christopher was quick to note that “the rental crisis is not yet over and, given our ongoing strong population growth rates, it is very unlikely we will get to an oversupply of rental properties anytime soon”. However, he added that a mere easing in conditions “can at least translate to a steadying of market rents after what has been an extended period of very rapid market rent growth”.

Here is the latest SQM data for the eight capital cities:

Sydney

Melbourne

Brisbane

Perth

Adelaide

Hobart

Canberra

Darwin

While vacancy rates and rental growth are easing, they’re still strongly favouring property investors.

If you’d like to buy an investment property as a way of building wealth, I can help you get a competitive loan.

You could fund the deposit in the standard way – through your savings – or potentially by using the equity in your home, which means you might not need any cash.

Contact me today to discuss your options.

The Reserve Bank of Australia (RBA) has unveiled a series of reforms to how it manages and communicates the country’s monetary policy.

Following an independent review of the RBA, which was commissioned by the federal government, the RBA board has agreed to update how it conducts monetary policy (i.e. the setting of the cash rate) and shares its thinking with the public.

As a result, Governor Philip Lowe said the RBA would make a series of changes, starting in 2024. They include:

“The less frequent and longer meetings will provide more time for the board to examine issues in detail and to have deeper discussions on monetary policy strategy, alternative policy options and risks, as well as on communication. Likewise, the staff will have more time for analysis, with less time spent preparing summaries of recent developments,” Governor Lowe said.

“The board will also be able to hear directly from more staff and have greater opportunity to request work on particular topics. And the post-meeting media conferences will provide a timely opportunity to explain the board’s decisions and to answer questions. This will complement our existing communications, including through speeches with Q&A. Together, this is a significant package of reform that will contribute to better decision-making and communication.”

 

RBA gets new leader

Meanwhile, the federal government has decided against awarding Governor Lowe a second seven-year term.

As a result, he will be replaced by the current deputy governor, Michele Bullock, on 18 September.

“I am deeply honoured to have been appointed to this important position. It is a challenging time to be coming into this role, but I will be supported by a strong executive team and boards. I am committed to ensuring that the Reserve Bank delivers on its policy and operational objectives for the benefit of the Australian people,” Ms Bullock said.

New data from Roy Morgan has found 12.5% of Australians who expect to buy a new vehicle in the next four years plan to go electric.

Over the past four years, the number of people who plan to buy an electric vehicle (EV) has jumped 1,236.6%, from 41,000 to 548,000 people, according to Roy Morgan.

Tesla has been largely responsible for this growing interest in EVs.

Since 2018, there’s been a 897.3% increase in the number of people who plan to buy a Tesla in the next four years. And of the 548,000 people who intend to buy an EV in the next four years, 369,000 intend to choose a Tesla.

That said, Australians are showing growing interest in other EV brands. While 67.3% of future EV buyers plan to choose a Tesla, that’s fallen from 90.9% in 2020.

There’s also been a change in the gender breakdown of EV enthusiasts. In 2020, 76% of people who planned to buy an EV were men and 24% women; now, it’s 61% and 39%.

 

Tesla has moved from fringe player to market force

Roy Morgan CEO Michele Levine said Tesla had surged from being the 16th-highest-selling brand in Australia in 2022 to the sixth-highest in 2023 so far.

“Tesla is clearly the dominant force in the electric vehicle market but as the intention to purchase data shows – there is an increasing gap opening up between those who want to buy an electric vehicle and those who intend to purchase a Tesla,” she said.

“This gap, which didn’t exist three years ago, shows that as other manufacturers such as BMW, Mercedes, Volvo, BYD and MG launch competing electric vehicle brands, there is an increasing market for these vehicles to tap into.”

 

Some lenders offer rate discounts for EVs

In recent times, some lenders have started charging lower interest rates for EV loans compared to standard car loans. This is part of a larger shift among lenders to showcase their green credentials.

If you want to buy an EV, I can help you finance the purchase by comparing loans from a range of lenders.

My strong recommendation is to organise your finance before you start searching for a vehicle so you know how much you can spend and can budget for the repayments.

 

In its meeting today, the RBA board decided to hold the cash rate at 4.1%, giving reprieve to homeowners.

As interest rates have increased in line with the cash rate hikes over the last year, it has become harder for some mortgage holders to refinance their home loan. However, to overcome this, some lenders are reducing what is called a ‘serviceability buffer’, making it easier for some borrowers to meet the criteria to refinance.

What is a serviceability buffer?

Lenders are required to use a serviceability buffer when determining how much a person can borrow to make sure they can continue to meet repayments even if interest rates increase or their circumstances change. The Australian Prudential Regulation Authority (APRA) recommends a buffer of 3%, meaning lenders calculate whether a borrower could comfortably meet repayments if the interest rate on the loan was 3 percentage points higher at the time the loan is granted.

How has the serviceability buffer been impacting refinancers?

As interest rates have increased, some people have found themselves in what is called “mortgage prison” where their income has not kept pace with higher repayments. If someone took out a home loan when the cash rate was at 0.1%, they now would have exceeded the stress test that was applied at the time as the cash rate has increased more than the 3% serviceability buffer. 

In some cases, lenders applying a 3% serviceability buffer on top of the current increased interest rate could disqualify a number of borrowers from refinancing their loan, essentially trapping them with their existing loan and interest rate.

What has changed?

Major lenders Commonwealth Bank and Westpac have announced they will reduce their serviceability buffer to 1% for eligible borrowers who haven’t missed any repayments in the last 12 months and hold equity in their property. This means some homeowners who previously were ineligible may now be able to refinance to a lower interest rate.

Can I refinance my home loan?

There is a good chance we will be able to find a lender that will refinance your loan, or work with you toward a solution. Whether you need to free up cash for a project, want to consolidate debt or see if you could be on a better rate, we can search the market to find the right solution for you. Lenders are making refinancing more accessible for people who otherwise would be facing a mortgage prison and there are still competitive deals in the market. Simply reach out and let us do the legwork for you.

Employers will have to pay higher wages to workers on award wages and the National Minimum Wage (NMW), following a review by the Fair Work Commission.

As of 1 July 2023, award wages will increase by 5.75%, while the NMW – which applies to employees who aren’t covered by an award or registered agreement – will increase by 8.6%, from $21.38 to $23.23 per hour.

Treasurer Jim Chalmers called this “a huge win” for Australia’s lowest-paid workers.

“People on low and modest wages have the least capacity to deal with rising cost of living. That’s why the government argued for a decent pay rise for these workers, and the government welcomes the decision from the independent Fair Work Commission,” he said.

“W believe the best way to ensure workers can deal with cost‑of‑living pressures is to ensure they earn enough to provide for their loved ones and get ahead.”

 

Will the wage rise be inflationary?

The Treasurer’s reference to high inflation was, ironically, one of the arguments against giving such a large raise to Australians on the award and minimum wages.

Inflation was 7.0% in the March quarter, according to the most recent quarterly data from the Australian Bureau of Statistics, and some people argue that it will be hard to crush inflation unless wages are restrained.

 

Employer association criticises decision

CEO of employer association Australian Industry Group, Innes Willox, called the wage decision “disappointing”.

Mr Willox recognised the “competing tensions” between addressing cost-of-living pressures on the one hand and forcing businesses to deal with a large wage increase in a weakening economy on the other.

“Nevertheless, at a time when the economy and the labour market are clearly under growing pressures and when productivity growth has flatlined, it is a decision that adds to the risks of an inflation blowout; is likely to see interest rates rise further than they would have otherwise; and raises the likelihood that households will face further cost-of-living pressures,” he said.