Construction 2: The Real Renovation Remuneration Story

March 27, 2019

For the second blog in my Construction series, I look at the simple home renovation.

I have helped many of my clients turn the simple renovation into two things;

  • The home of their dreams
  • The foundation of a property portfolio

These are their real renovation stories (used with permission, thank you to all who have let me share your inspiring stories!)

Read more

You should be outraged…

February 27, 2019

You need to be outraged … the Royal Commission WILL affect you. 

The banks have got away with it again, and you, the consumer, are going to made to pay – through your home loan.

 This is how;

On a $300k home, the bank makes $6,000 in clear profit the first year alone. and every year to follow. 

On a $500k home loan, that’s $10,000 clear profit EACH YEAR.

Read more

A Buyers Market

January 10, 2019

Most people misunderstand badly the term “buyers’ market” and hence never take advantage of one.

A buyers’ market is one where no-one is buying.

Consequently, it is a terrible time to sell.

In a buyers’ market there are more sellers than buyers, buyers can take their time, negotiate price and/or conditions to suit themselves and if a seller doesn’t “meet” their demands then the buyer moves on to a seller who will.

Read more

Lots of Noise but Very Little Clarity

November 22, 2018

Who wouldn’t want house price to go down? – I’ll tell you who – that would be EVERY person who owns a house.

One side of politics at the moment sets the country against itself – the politics supposedly of the “haves” and the “have-nots”. What a sad way to view life and aspiration.

Here is a truth – EVERY person who buys a house (be it their first or their tenth) wants house price to be down when they buy.

Read more

Two Significant Threats

September 27, 2018

Two Significant Threats to YOU Personally

Number 1. Identity theft and fraud are now prevalent in ways not seen before.

Someone uses your name and date of birth and drivers licence / passport details to fraudulently obtain a $20k personal loan or credit card from an unwitting lender. In the process that person changes your address. You find out some months later when contacted by a collections agency because you are in default. Your Credit File is of course, by now, ruined.

Read more

Interest Rate Update

August 31, 2018

Following the most recent Reserve Bank meeting earlier this month, it is being widely interpreted that the official cash rate is likely to stay on hold until late 2019 (Bill Evans, Westpac Chief Economist. There are now even interpretations of rates on hold until late 2020. ClickHere

The factors in play: the exuberance of regulators (APRA / ASIC) have done all of the Reserve Bank’s heavy lifting. The Royal Commission is causing banks to pull back even further. The Treasurer now mentions an “unintended” credit tightening.

Read more

A Tale of Three Cities

June 21, 2018

The hottest topic in real estate at the moment is whether or not there is a so called “property bubble”.

The best way to define a bubble is when property price rises more rapidly than the long term trend line.

The long term trend line reflects “normal” growth. This long term growth reflects underlying factors such as supply and demand and economy wide inflation. In times when interest rates are low, speculation becomes an “abnormal” factor and short term pressures build. Central banks and regulators have a role to play using interest rates and rules to dampen demand.

Sydney aside, let me give an example from a relatively quiet capital city market – Adelaide. A house that I am familiar with recently sold for $1,000,000. What is unusual is that it had been held by the same owner for 70 years – purchased originally for $4,000.

70 years is long enough to have seen multiple housing cycles – any growth over that period is by definition “normal” growth. Even in quiet little Adelaide that represents 7.5% compound growth for 70 years. That is the power of compound interest. At 7.5% compound growth value doubles roughly every 10 years. $4,000 to $1,000,000 – hard to believe isn’t it. Try it – start with $4000 and double it 8 times = $1,012,000!

Is that a bubble? Absolutely not. Have there been times in between 1948 and 2018 when Adelaide has been over exuberant…? Ha-ha, probably but I don’t recall.

An almost identical house in Camp Hill in Brisbane – sold recently for $1,100,000 and bought for $4,000 and held by the same owner for 71 years. Remarkably similar!! (information supplied by PS Property Advisory.)

This story could be repeated in any capital city.

Has Sydney been in a bubble recently? Once again I have some personal experience – shifting to Sydney in 2002 and needing to buy a home. The value of Sydney property did very little for the next decade (to 2012) and then it certainly played catch up between 2012-2015, then as happens in property cycles, exuberance took over. Sydney median house price has now fallen, and if you look carefully (see a. in graph below) it is now virtually right back on the long term trend line. That however is not the full cycle. Assuming this one follows similar cycles, price will dawdle lower still for several years to come until it falls back below that trend line.

 Sydney house price long term trend line 

But is Sydney housing over priced at the moment? History would suggest not.

What will happen in other cities?

Typically, when Sydney is “out of its growth cycle” then the “greener grass” value of other cities begins to have appeal. To pick Brisbane as another example, as Sydney price dawdles lower and Brisbane dawdles higher, then the value (relative to Sydney) of the “other” capitals – Canberra, Brisbane, Hobart, Adelaide eventually peak in coming years. Those other capitals are now at the beginning of a fairly long upward trend. (I leave Perth and Darwin out – where values run much more hot and cold due to being heavily influenced by mining cycles.)

Anyone who owns a house hopes for capital growth, anyone who is waiting to buy hopes for a downturn. Markets don’t respond to an individual’s hope, markets do however follow long term trends.

Whether you are buying your family home, or using property as a long term investment vehicle – the trend really is your friend. Another truism (which is in fact true) is that it is much more about “time in the market” than it is about “timing the market” There are as many winners as there are losers in the short term speculation market – that’s how it goes.

For anyone who holds property for the long term in a solid segment (which I would call capital cities simply because of their size) eventually everyone wins.

Ask Alan

@mortgagebrokeratyourfingertips

 alan.heath@askalanheath.com.au 0411 601 459 

Very Big News!

April 26, 2018

The Sydney property market has plateaued – with prices for both houses and units off the boil since June 2017 as the peak (Domain March Quarter House Report – Apr 26th).

APRA played a large part in this Sydney slow down by applying investor restrictions to the entire country (that was unfair, in my opinion).  To APRA’s credit they have now (announced 9:02 am Apr 26th) removed these restrictions.

How this will now play out in the home loan market will become clear in coming days – but here are my predictions and their significance for you:

  • Banks have been “loading” rates to investors and using that loading, offering spectacular deals to owner occupiers. For the last two years “owner occupiers” have been the “only game in town”.
  • Banks will now reduce rates for NEW investment loans – to compete for business … BUT
  • This probably signals the end of the best deals for owner occupiers so, if you are thinking of buying a home you would be foolish to delay.
  • Banks have terrible form in reducing rates for existing customers. I would expect the best way for existing investors to respond is to wait and see – threatening to refinance will probably be the best way to get a better rate.
  • Interest only loadings have been applied by ASIC (not APRA) – I expect those to remain for now.

This is VERY big news – I will have more to say as this unfolds.

 As always you can call or email me anytime.

The Goose that Laid the Golden Egg…

March 1, 2018
 Have APRA indeed killed the Golden Goose of the Investor market? 

Have APRA indeed killed the Golden Goose of the Investor market? 

APRA’s enthusiasm to kill off investor lending has worked, possibly a little too well.  The Golden Goose of investor lending, rather than slowing down to a waddle (10% year on year growth), has something closer to a terminal illness. (The Adviser 28 Feb 2018)*

Today I had a phone call from a major lender stating that “We will price match or beat ANY offer in the market from a reputable lender”. That lender has had an overall DECREASE in investor lending.

This is hardly a surprise. Put prices up and demand slows. Regulators just don’t know how to tap the brakes – they almost always over shoot.

The message – if you are an investor on the sidelines – is that you should consider (based on cost of money) re-entering the market.

Today’s news is one of those – “you heard it first here” moments.

* https://www.brokernews.com.au/news/breaking-news/investor-housing-loans-sputter-247163.aspx

As always, you can call or email me anytime.

Backyard Cricket: The Reserve Bank pads up to re-enter the game…and the dollar rises.

July 20, 2017

So it seems the Reserve Bank hasn’t quite pulled up stumps yet. Widely published in yesterday’s media, a comment from The Reserve Bank minutes has been blown out of proportion.

With the current cash rate at 1.5%, The Reserve Bank is quoted as saying that a cash rate of 3.5% is the “new Neutral”. The media’s take on this is that rates are going up… And the crowd goes wild! Hang on, that’s right, it’s just more noise.

Previously the Reserve Bank had considered 5.0% as “Neutral”, so by re-evaluating this ‘middle line’ of the economy at 3.5% instead, the Reserve Bank is simply signalling that the peak of the next rate cycle is now predicted to be around 1.5% lower than the previous cycle.

No comment was made however, as to when any moves towards this new “middle line” will be made. Why? Because there are still other players in the game to consider. APRA and ASIC’s recent round of regulations and the government’s bank levy are still all in play.

The sooner the Reserve Bank comes into bat by adjusting the cash rate, the sooner the loadings imposed by regulators will fade. This is why investors should just sit tight while this plays out.

And finally, in response to all the media noise, the Australian dollar has jumped.  Online shopping just got cheaper again, and that overseas trip might be back on the cards!

In relation to your home loan your response should be to:

·       Calculate and start paying your loan NOW as if the rate was already 6%pa

·       Let your budget adjust and let any surplus go into your loan as possible redraw for a “rainy day”

And as always you can call or email me anytime, it’s what I’m here for…

 

Ask Alan : Download Free : App Store: http://apple.co/1ObU9AI : Google Play: http://bit.ly/1MP04tP

Lvl18, Riverside Centre 123 Eagle Street, Brisbane
m :  0411 601 459   t : 07 3106 1444  e : alan.heath@askalanheath.com.au