In its first meeting of 2023, the Reserve Bank of Australia (RBA) today raised the cash rate for the ninth consecutive time. It increased from 3.1% to 3.35% as the bank continues to attempt to ease rising inflation.

While this can impact borrowing power of prospective home buyers, the positive news for anyone looking to purchase is that home prices have continued to decline throughout the country. CoreLogic’s national Home Value Index fell 1% in January, following a 1.1% drop in December.

A decline was seen in all capital cities:

For the first time since March 2021 Sydney’s median dwelling value is beneath $1 million. 

Demand has also dropped. Sales in the capital cities are estimated to be 29.4% lower than the same period in 2022 and 11.5% below the five-year average. This means less competition and the potential to negotiate on price.

The good news for investors

With house prices coming down throughout the country, it could be a good time to purchase. On top of this, rents have jumped by 17.6% for units and 14.6% for houses over the last year, according to Domain. At the same time, the number of rental properties that are vacant is at an all-time low. This presents an opportunity for investors who may be able to find more positive yields.

What does it mean for refinancing?

If the value of your home has decreased, it will impact your equity. However, if you have continued to pay down your principal, this impact will be mitigated. On top of that, while housing values have declined over the last year, they have not yet surpassed the boom in values during the pandemic, which peaked in March last year. According to Proptrack data, prices nationally are still 28.5% above their pre-pandemic levels. This means the amount your equity will have been impacted will depend on when you purchased the property. If it was pre-pandemic, your home is likely to still be worth more today than when you bought it.

Regardless, if your interest rate has increased and you haven’t refinanced in the last year, reach out. We will evaluate your situation and let you know if you could be on a more competitive or more suitable loan.

The job market has improved from an employer’s perspective, but it’s still challenging to find good staff, based on the latest data from the Australian Bureau of Statistics.

In December, the unemployment rate was just 3.5%, the same as the previous month, although the number of unemployed workers edged up slightly, from 492,600 to 494,200.

Meanwhile, the number of job vacancies fell from 466,900 in the August quarter to 444,200 in the November quarter.

This means there are now more workers chasing fewer jobs, making recruitment easier. However, there’s still only 1.1 unemployed people for every 1 vacant job, which is a very low ratio.

NT & WA businesses crying out for staff

In the November quarter, 27.7% of businesses reported vacancies, although conditions varied from state to state:

 

Job vacancies have soared in the past three years

If it feels like the job market has tightened significantly since just before the pandemic – you’re right.

Back in the February 2020 quarter, only 11.0% of businesses reported vacancies. Amazingly, between then and November 2022, job vacancies increased in every single industry monitored by the Australian Bureau of Statistics:

 

 

Looking for a business loan to invest in new machinery, buy extra stock or fund an acquisition? Reach out and I’ll be glad to talk you through your options.

The Australian Taxation Office has responded to feedback from trustees and their advisors by issuing guidance on trust reimbursement agreements.

The guidance, which relates to reimbursement agreements where section 100A of the Income Tax Assessment Act 1936 may apply, will not affect “the vast majority of small businesses operating through a trust”, according to the ATO.

ATO Deputy Commissioner Louise Clarke said given that section 100A is an anti-avoidance rule, the ATO’s guidance is firstly about ensuring that those structuring their affairs to avoid their tax obligations are held to account.

“But it also provides confidence and guidance to those who legitimately use trusts in their financial affairs, but are concerned that they might inadvertently trigger Section 100A,” she said.

“Specifically, it addresses ‘reimbursement agreements’ where, for a purpose of avoiding tax, an entity is provided a trust distribution but someone else actually benefits from that distribution.”

A distribution to an adult child who has a low marginal tax rate will not attract section 100A where they simply receive or otherwise enjoy the benefit of their distribution, Ms Clarke added.

 

ATO reassures community

 

The ATO’s guidance was finalised following an extended consultation period and:

The ATO will not retrospectively change its views on how the law operates, and will stand by its previous guidance for arrangements entered into between 1 July 2014 and 30 June 2022.

In most cases, the ATO will only apply section 100A within four years of a trustee lodging their tax return. It will not review arrangements before 1 July 2014, other than in exceptional circumstances (which are outlined in the guidance).

The ATO has suggested that trustees who think the ATO’s guidance may apply to their affairs should consult their registered tax professional for advice or apply to the ATO for a private ruling.

The federal government has extended funding for two support programs for small business owners.

 

The first program is NewAccess for Small Business Owners. This program is:

 

The second program is the Small Business Debt Helpline. This program is:

 

Both support programs are free and confidential.

Minister for Small Business Julie Collins said the government wanted to help small business owners get the support they need.

“I understand that many small businesses are doing it tough, and I want them to know that support is available,” she said.

“I would urge small businesses to access these free government-funded programs that provide confidential support from coaches and counsellors who understand how small businesses work.”

Remember, if your financial situation has changed or you would like to find out what your options are, please get in touch. We’ll be happy to help.

For property investors, 2022 was one for the history books.

To begin with, capital city rents increased by 14.6% for houses and 17.6% for units, according to Domain – both of which were records.

Furthermore, the year ended with an unprecedented seventh consecutive quarter of house rent rises and sixth of unit rent hikes.

“Just over 10 years ago, in 2010, rents were flatlining. But we’re now facing a period of exceptional rental growth, and across all capital cities. It’s historic. And the crux of it all is that we have a severe housing shortage, high demand and a lack of investor activity,” according to Domain chief of research and economics Nicola Powell.

Domain noted that the number of vacant rental properties is sitting at an all-time low across the nation.

Low supply generally means high demand, which puts upwards pressure on rents.

“It’s a situation that’s been building for a while with a lack of housing supply, high demand and a lack of investor activity,” Dr Powell said.

“We don’t have an advanced build-to-rent sector like the UK, we don’t have enough social housing, which has forced more people into the private rental market, and we’re now seeing overseas migration restart as well as overseas students and tourism and more lucrative short-term leasing. There’s just no quick fix for this.”

 

City-by-city breakdown

While rents increased 14.6% for houses and 17.6% for units across the combined capital cities, how did the individual markets perform during 2022?

For houses, rents increased by:

For units, rents increased by:

Keen to buy an investment property in 2023? I can help you finance the purchase. Contact me today to start the process.

 

With property prices declining in many parts of the country, and many people’s borrowing capacity falling as well, this is a different market than we’ve seen in many years.

So here are some important tips around buying, selling and securing finance right now.

Buyers 

Buyers are usually the big winners in falling markets, because they generally face less competition and can score better deals.

During downturns, the number of for-sale properties generally rises. Unsurprisingly, then, property listings in December were 4.6% higher than the year before, according to SQM Research. That means now could be a good time for you with more choice and greater chance of securing a bargain.

 

First-home buyers

If you’re a first-home buyer, you may be able to take advantage of federal and state government housing incentives. Reach out if you’d like me to explain which ones you might qualify for.

 

Relocators

If you’re moving home – whether you’re upsizing, downsizing or ‘same-sizing’ – think carefully about the order in which you do the two transactions.

In a falling market, it is worth considering selling first (when prices are higher) and buying second (when they’re lower), however keep in mind you may need interim accommodation between the two.

 

Upsizers

A falling market can be a great time to upsize. That’s because while you have to sell your old home for a certain percentage less, you get to buy your new home for a similar discount. That can lead to an overall ‘profit’, because the dollar saving on buying a dearer larger home is often greater than the dollar loss on selling a cheaper smaller home.

 

Sellers

If you don’t need to sell, now may not be the best time; instead, it may be better to wait until prices are rising again.

If you do need to sell, it’s vital you price your home accurately. In December, the number of old listings (those that had been on the market for more than 180 days) was 14.3% higher than the year before. Why? Well, according to SQM: “As there remains more sellers than buyers, dwellings on the market that are not priced to market, don’t sell.”

 

Finance

As interest rates have been rising, the average person’s borrowing capacity has been falling. My strong advice is to contact me before you begin your property search, so I can test your borrowing capacity at different lenders (it varies from bank to bank) and organise a pre-approval for you. That way, you will know your budget before you start making offers.

If you’re moving home and want to buy before you sell, I can help organise a bridging loan for you. 

New or used? It’s a question that almost all car buyers ask themselves at some point and there are arguments for each.

Based on our experience, with the help of our network of car dealers and feedback from clients, we’ve put together this guide to help you make the right choice for you.

New vs used cars: the pros and cons

To start, we’ll have a look at some of the pros and cons of buying a new car compared to a used car.

Buying new

Pros

1. It’s new

For many of us, a car is the second most (or most) expensive asset we’ll ever own and knowing that no one else has ever used and/or potentially abused it can be pretty compelling.

That new-car smell and unblemished… everything, really confirms that no one else has ever spilled food or coffee inside, let fur babies roam about in the back or driven too fast over bumps.

2. Lower running costs

Capped-price servicing*, brand new parts, fresh tyres and needing zero repairs can mean lower running costs, at least for the first few years.

*Some dealerships offer capped-price servicing, which means you’re provided a list of the maximum cost of scheduled services ahead of time so there’s no bill shocks.

3. Finance can be cheaper

Did you know that around 90% of new vehicles on Australian roads are purchased under finance? New cars almost always attract cheaper interest rates because typically, new cars have a higher value and a lower chance of breaking down.

4. You choose the features, specs and equipment

Buying a new car means choosing the colour, trim level and dealer options to suit your needs and preferences.

Most models have a range, usually referred to as ‘trim levels’. As the trim level (and price) increases, more features are added, for example, larger wheels, a more powerful engine and driver-assist technology like adaptive cruise control. 

5. Warranty

Although late-model used cars are often still under their factory warranty, a new vehicle means you’ll have the maximum amount of time while it’s covered.

6. The latest tech

A new car means you’ve got the most modern technology which includes safety, design and driver-assistance features.

Cons

1. Depreciation

The value of a new car can drop dramatically, around 30% by the end of the first year in many cases. This can make selling the vehicle a sting in the hip pocket when you go to sell it.

2. Wait times

New cars have delivery wait times, some of which can blow out to months. This means you’ll need to plan in advance, which can cause issues if your current car is struggling.

3. It’s expensive

Buying new from a dealer often means that you’ll be paying top dollar and you likely won’t be able to haggle the price much, if at all.

Buying used

Pros

1. The price

If you fancy your haggling skills, you could negotiate a great deal on a used vehicle from a private seller. For example, if the car you’re looking at has some wear and tear, you can usually use them to knock the price down.

2. Availability

Not too fussed with the trim level or options? Unlike new cars, you can pretty much get your hands on a used car whenever you’re ready.

Many new vehicles attract lengthy wait times that can sometimes extend to months. 

3. Lower prices can mean lower insurance premiums

As used cars are cheaper than new versions, you won’t need to insure them for as much which means lower premiums.

4. Resale value

Depending on the year, make and model, you’ll likely lose less in terms of depreciation on a used car. This is because the bulk of the depreciation occurs within the first few years of a vehicle’s life.

For example, at the time of writing, a new top-of-the-range Toyota Camry comes in at just over $50,000. You can pick up an equivalent 5-year old used Camry for around $36,000, roughly a 28% discount.

5. Trade-in convenience

If you currently have a car, you may be able to trade it in if you are buying your next car from a used-car dealership. This can be convenient and speed up the selling process. Just keep in mind that it is a good idea to weigh up how much you may be able to get for your car in a private sale compared to at the dealership before you trade in.

Cons

1. Uncertain history

Regardless of the service history, you can never know exactly how the car had been treated before you bought it.

2. You’ll need to do your due diligence

Try before you buy – or at least pay a professional to do so. When buying a used car, it is a good idea to get it inspected by a qualified professional to ensure there’s no hidden damage.

3. Wear and tear

Most used cars have some form of damage. For example, chips and scratches on the paint, faded headlights or marks on the interior.

These may not affect the way the car drives, but it is up to you to determine what type of imperfections you are content with.

Top tips: Ask yourself these questions when deciding on a new or used car

If you’re undecided whether a new or used car would suit your needs better, here are some thought starters that could help.

1. Will you spend long periods of time in the car?

If you need to travel a lot for work, to commute or enjoy road trips, you could be spending large amounts of time in your car.

A new car means a clean and comfortable interior, which could include the latest driver-assist features like a big navigation screen, and safety alert systems to give you peace of mind.

2. Will you park the car outside most of the time?

If so, you risk sun damage (like headlight and paint fade).

A used car might be better as there’s less depreciation to worry about.

3. Will your passengers be kids and pets?

Although these passengers can be tough on interiors, having the latest safety features can be really important.

New cars come with the latest safety gear.

4. Will you do a lot of stop-start driving in heavy traffic?

Driving in peak hours can mean a lot of petrol consumption and be tough on brakes and other components.

A new car will mean a full warranty and ideally, capped-price servicing. Newer cars may also offer greater fuel efficiency.

5. Will you be carrying large, heavy or bulky cargo?

Sports equipment and building supplies for example can wreak havoc on a car’s interior.

A used car that already has some wear and tear, or is worth less overall, can mean less concern about interior chips and scratches.

6. Will the price and running costs match your budget?

Do the math. Really consider your budget and future plans, sit down and go over all the expenses and running costs.

Getting a few quotes and knowing your numbers can really help when planning for a new or used car.

Reach out to our team today and find out your options when it comes to finance, and which may best suit your needs. There are no obligations to simply get your numbers aligned.

This is the eighth month in a row we have said “The Reserve Bank of Australia (RBA) has increased the cash rate”. In its final meeting for 2022, the bank increased the rate from 2.85% to 3.1% in its ongoing bid to cool rising inflation. 

This is 3% higher than the start of the year, which marks the top end of where borrowers were stress tested for new home loans, meaning many homeowners will be feeling the pinch of higher repayments as they service their loans. The small reprieve being the RBA does not meet in January, so there will not be another increase for at least two months.

There has been a lot of talk around what the rising cash rate and ensuing mortgage interest rates means for people who already have a loan, but what about those who are wanting to enter the property market? Rising interest rates means a lower borrowing capacity (the amount a lender is willing to lend you) and the turbulent property market may seem a deterrent for some. However, there are a number of reasons why this could actually be a good opportunity for first-home buyers to enter the property market.

1. Falling property prices

If you’re considering buying property, you’ve probably seen the widely reported news that property prices have dropped in many areas around the country. Property insights provider CoreLogic released data showing houses in some areas in Sydney have dropped in value by up to 25% over the last year and some Melbourne suburbs dropped by nearly 15%. These were the two hardest-hit cities in the property downturn. 

While this is not great news for homeowners, it can be a great opportunity for people wanting to get into the market. It means homes may be more affordable than they were a year ago. It also means we are moving toward, if not in, a buyers’ market – compared to last year’s seller’s market.

2. Increasing rents

If you’ve looked for property to rent recently, you would know competition is high, the prices are up and other applicants are offering anything from higher rent to months upfront in a bid to secure a property. According to a recent report by Domain, Australians are experiencing the longest period of rental price growth on record. Nationally, the annual change to September was 12.8%, with Brisbane experiencing the highest increase at 22%.

When you purchase your own home, you become your own landlord. Variable rates for home loans are likely to increase and decrease over time, however rents on properties tend to continue to trend upward. Buying your home to live in helps you to get out of the rising-rate environment.

3. Projected flattening of interest rates

The cash rate has increased steadily over the last eight months, and with it interest rates on home loans. The RBA has said it is open-minded about how many future rate increases it will make, however economists at the big four banks have made predictions on when it will peak – ranging from 3.1% to 3.85%. They all predict this peak will happen at some stage in 2023.

There are two potential pros for this for people looking to purchase property. Firstly, if we hit the peak in 2023, they are unlikely to experience the same turbulence homeowners experienced through 2022 with the rapidly rising rates. Secondly, the stress test applied to loan applications (where lenders test if you could afford to pay your loan if the rate was 3% higher than it is on the day you apply) means you should remain within your “comfort” range on repayments if economic factors are brought into control as projected.

4. Higher savings rates

The flip side of the rising cash rate is that the interest rate on savings accounts usually also increases. This is good news for people saving a deposit to purchase property. While we were experiencing the lowest cash rate on record, savers took a big hit where their savings were receiving very little if any interest. Now savings accounts can have interest rates over 4% (if the bank’s specified conditions are met), helping give a boost to that deposit. This combined with the decreasing property prices can put buyers in a better position to get onto the ladder.

 

If you’re planning on buying property, a broker can help get you on track. We can help you get your finances in order and help you understand your borrowing power so you can bid with confidence.

With property prices falling and interest rates rising, you might be wondering if now is a good time to buy an investment property.

Ray White chief economist Nerida Conisbee said there were six questions to ask yourself as part of the decision-making process.

 

1. Can you get a home loan?

Your ability to qualify for a loan depends on your unique circumstances. Still, Ms Conisbee said that with rising interest rates making mortgages more profitable for banks, they’re keen to lend. “Provided you can pay back the loan, you’re likely to be able to get a loan relatively easily,” she said.

 

2. Can you afford higher interest rates?

The Reserve Bank has signalled that further rate rises are coming, announcing in November that it “expects to increase interest rates further over the period ahead”. So if you’re going to buy an investment property, you need to be confident you can afford higher loan repayments.

 

3. Where do you want to buy?

Australia is not one big property market; rather, it has lots of different markets, where prices and rents perform differently. This is something you need to consider during your due diligence, Ms Conisbee said. “Where and what you buy right now can lead to dramatically different investment outcomes even in the short term,” she said.

 

4. What’s your strategy?

Ms Conisbee said there’s generally a trade-off between capital growth and yield: a property that delivers more of one will generally deliver less of the other. “Investors typically concentrate on capital growth, however, rental yield is equally as important, particularly if you’re looking to hold long term. Right now, we’re seeing low capital growth overall but strong growth in rents,” she said.

 

5. How long will you hold the property?

This is not a good market for house-flipping, according to Ms Conisbee. “With price increases slowing, and in some cases falling, it’s far less likely you can make a profit in a short amount of time,” she said. “Holding long-term means that it matters less what part of the cycle you buy in.”

 

6. What are your other options?

Investing in property is not without risk. But other asset classes also have downsides. “Shares are highly volatile, putting money in a term deposit yields very little return and alternative investments such as Bitcoin are seen as even higher risk than normal,” Ms Conisbee said.

 

Interested in property investment? If so, get in touch. I’ll be happy to explain the pros and cons, crunch the numbers on your behalf and help you get finance.

Buying is cheaper than renting for houses in approximately one in seven suburbs and units in approximately one in five, according to Domain.

Domain found that houses in 13.8% of suburbs around Australia were cheaper to buy than rent in September, after comparing rental prices with property prices and assuming a home loan interest rate of 4.93%.

But conditions varied significantly from location to location:

Domain also found that units in 21.0% of suburbs in Australia were cheaper to buy than rent:

Metro v regional

The Domain research revealed some other interesting nuances.

For example, while houses in 13.8% of suburbs were cheaper to buy than rent, this fell to 6.3% in the combined capitals but rose to 27.3% in the combined regions.

Also, while units in 21.0% of suburbs were cheaper to buy than rent, it was 14.5% in the capitals and 44.3% in the regions.

Meanwhile, buyers who get ahead on their mortgage – and therefore reduce their interest bill – have a greater chance of finding a home that’s cheaper to buy than rent.

As previously mentioned, houses in 13.8% of suburbs were cheaper to buy than rent – but this increased to 21.4% for buyers who contributed an extra $50 per week to their mortgage and 29.3% for $100 per week.

For units, that share increased from 21.0% to 32.3% and then 43.6%.

Your mortgage … or someone else’s?

Renting can be a great solution depending on your particular life circumstances. That said, rent money is often described as dead money. 

That’s because while renting might be cheaper than buying in many cases, your monthly rental payment is used to pay off someone else’s mortgage. Conversely, when you buy, each monthly mortgage principal and interest payment adds to your equity and therefore your wealth.

If you’d like to get on the property ladder, I can help. Reach out if you’d like me to model different repayment scenarios and organise a pre-approval for you.