Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Finance in Five
64 Plays4 months ago
In this episode of Finance in Five, Jayden and Simon tackle the latest developments in the property and finance sectors. They discuss the delay in interest rate cuts until 2025, rising mortgage stress, and new government incentives for first-time home buyers. Discover how property affordability compares between Melbourne and Brisbane, the surge in investor activity, and essential tips for navigating the current market.
Need personalised advice on buying your first home? Get a free assessment from Hunter Galloway - the home for homebuyers across Australia. Visit huntergalloway.com.au .au or call 1300 088 065.
Recommended
Transcript
Introduction to Finance Podcast
00:00:00
Speaker
Hey guys, welcome to this week's finance advice where we take you through the latest in property and finance. This week we're going through the rising cost of deposits, the latest investment trends, and some huge government incentives that have hit the ground this week. That's right, Jaden. We'll also be talking about the increasing mortgage stress amongst Australian homeowners and what this means for first home buyers. Plus, we've got a lively Reddit discussion comparing the affordability of Melbourne and Brisbane. So if you're a home buyer, you're looking to invest, whatever you're at, we've got something here for you. So let's get started.
Navigating the Australian Housing Market
00:00:32
Speaker
Welcome to the Buying Your First Home Podcast, your personal guide through the Australian housing market. Here we tackle the big questions and the small details that come up when buying your first home. From financial prep to finding the right neighbourhood, we're here to ensure that you've got all the knowledge at your fingertips. So let's take the first step towards unlocking the door to your new home.
00:00:57
Speaker
All right, well, let's dive into the first story for today. It's the latest forecast from ANZ about interest rates. So previously, most of the banks were saying there's going to be rate cuts sooner than later in the 2024 calendar a year, but those expectations have been pushed back. with AIDS, they're actually saying that rate cuts aren't going to come until early 2025. So this delay can have pretty big impacts to you if you're looking at getting the market could mean your borrowing capacity isn't going to go up anytime soon if there's no rate cuts. And if you're currently in the market, it could mean that your payments are going to stay high up for longer. Yeah, so let's just jump into the details here. So up until recently, all the big four banks were pretty much aligned with their expectations on rate cuts. So
00:01:40
Speaker
They all said rates are probably going to drop in November this year. But ANZ's kind of just separate from the pack. They actually think it's going to be a bit later than that.
Interest Rate Predictions and Economic Factors
00:01:50
Speaker
And it's interesting to note that another fellow here from Judo Bank, Warren Hogan, he actually thinks that interest rates are going to go up. So a lot of differing opinions here. Always interesting to see. Did he change his job title from chief economic officer, a fellow?
00:02:08
Speaker
Yeah, but you're right. It's interesting. I think Warren Hogan was one of the outliers there that said the cash rate had to go up three or four times, which was, I think, a bit of a headline grab. But definitely the latest data coming out of the government, there's a lot of tax drops later in the year. There's costs of living rebates. There's also an election year, which ends at saying, well, these things could actually be inflationatory. It could push the inflation up. It could mean the Reserve Bank is unable to cut rates as high as they could. But then there's other data points here, Simon, could say, you know, with some of the changes hardship, but it could end up going the other way. Yeah, look, I would hate to be in the Reserve Bank personally, because it's not an easy job. They have to basically try and balance inflationary pressures to make sure that inflation doesn't happen too quickly. And they have to try and balance that with all the other needs, the related to interest rates. So, you know, house prices, mortgage hardship and all these other things. So not an easy job and certainly not one that I would ever take anytime soon.
00:03:02
Speaker
But there is some data here that is showing that financial hardship related to mortgages has actually been on the increase. So from ASIC, they showed a 54% rise in hardship notices in the last financial quarter of 2024 compared to the previous year. So they're calling for banks to enhance support for struggling borrowers. You know, despite mortgage restraints, though, on average, most Australian borrowers are still managing to meet their repayments. So it's a bit of an increase, but it's from a low base. So it's not as concerning as it might sound at first glance. Yeah, the current spin rate, so that's the S and&P's performance index rate of mortgages that are in dual-inquencies are below 1%. It's 0.93%. So historically, it's still really low, kind of crazy low base. yeah We've had 13, 14 interest rate rises over the last couple of years, so they were expecting it. But fortunately, we've had a pretty robust job
Borrower Support and Mortgage Stress Solutions
00:03:56
Speaker
market. So that's the other data point that the Reserve Bank's
00:03:59
Speaker
you know, checking out and making sure, well, if immigration comes off, if the unemployment goes up, that's where they might have to call these leaders sooner rather than later. But definitely, it's looking like yeah there could be a bit of a change in the landscape there with what the predictions are with interest rates. Yeah, I suppose at this point, it's worth just mentioning if you are listening and you are experiencing some financial hardship or mortgage stress, there are certainly some options to explore. So A lot of banks will actually offer hardship programs, so it's always worth having a chat to your bank if you are struggling. Probably the other big one which can give you a decent win is to look at refinancing your mortgage. so You can often get a better deal if you're looking at switching banks. You can sometimes find a better rate. There's a lot of options that you can do to sort of make your mortgage more affordable, so it's worth exploring your options there for sure.
00:04:47
Speaker
Yeah. And there are some government programs that can help you in financial hardship, but I think that's a point Simon. Like if you're having issues, chat to your bank first. Like they've got a lot of programs they can look at changing, like who's partner lost their job. They're like, well, what should we do? They contacted the bank and they changed them to interest in repayments for just a short period, just to help them get through that the next couple of weeks while she finds a job and then gets into it. So definitely not worth digging your head in the sand for that. Sure you know while we're on the subject of financial hardship and other is some upcoming measures that will ease household pressures so there's these tax cuts and energy rebates. That will be helpful so if you if you are hoping to have a rate cut earlier than expected and it's not quite reached and you.
00:05:30
Speaker
feeling a bit like you're struggling, then and at least there is going to be some relief on the way as well. But yeah the thing is, it's kind of like in COVID when the then Reserve Bank governor said the interest rates would be on hold the next four years and got that wrong with these economists forecasts, much like the weathermen, they can be the best weather person in the world, but get the forecast wrong twice a day and these economists are no different. So based on assumptions, based on lots of dark points, I think things could change later in the year and that's what even the other banks are saying. so It's probably a case of running your own race if you're looking at getting into the market, maybe factor in a rate rise or two, but it looks like the rate cuts will probably come next rather than going up for sure. Yeah, and I suppose if you are looking at ah expecting to have a rate cut as a home buyer, you think, oh, well, that's going to make you know the mortgage a bit more difficult. Maybe my borrowing capacity is lower than I'd hoped it was going to be, but there is a benefit here as well. so
00:06:26
Speaker
whenever rates get dropped, house prices go up. So that's just the rule. You know, people have more borrowing capacity. It's more affordable to get a home. So the price of the home will go up when interest rates get dropped. So if you're able to get in now before these rate cuts happen, you will actually probably be able to get a better deal. So it's not necessarily the worst news if you're looking at buying at this stage. In fact, it can be to your
Queensland's Housing Incentives
00:06:51
Speaker
advantage. So if we go to the next segment, we're going to look at the next, actually the Queensland government. So there's a couple of things that have changed. Some of these things happened to South Australia as well last week. But focusing on Queensland, the first home owner concession has increased. So previously, if you're first home buyer buying Queensland,
00:07:07
Speaker
the stamp duty was waived up to $500,000. It's being increased to $700,000 and between $700,000 to $800,000. You get a bit of a discount. so It just means you can get into a home with a bit less deposit. You could get into a home for, say, $700,000. Previously, you'd need about $55,000 as the minimum savings, and including your stamp duty. you're saving $17,000, $18,000, they only need about $35,000 plus or minus to get in. So it's a huge, huge difference there. But to offset that, Simon, I think they've made some changes to the foreign investor surcharge as well. Yeah, that's right. So they wanted to give a bit of an advantage to Australian first-time buyers to you know increase the threshold, which is great news. And in order to sort of offset that, they've increased a 3% land tax surcharge for international foreign investors.
00:07:55
Speaker
which actually aligns with what New South Wales and Victoria are doing currently as well. So, you know, the foreign investors contribute more, which balances the impact of the increased concessions. So, you know, it's a bit of a seesaw situation, but certainly good news for the Australian first-home buyers rather than foreign investors. No, definitely. Really good news story out there. So we should see what the federal government does with the home guarantee scheme. So that renews on the 1st of July. And at the moment in Brisbane Metro, it's up to $700,000 FET scheme. So it's a 5% deposit scheme. yeah Victoria, it's $800,000 and New South Wales is $900,000. So I just wonder if there's going to be any changes to those because
00:08:34
Speaker
that scheme's been in place three or four years and those amounts haven't really changed as much as the market has in that time, so it'll be interesting to see
Property Price Growth and Deposit Challenges
00:08:42
Speaker
what happens there. So on to the next one, Simon. How much do you need for a house deposit in each Aussie city? Now, I gave you here, too. like Obviously, there's some crazy numbers. We've gone through the data last couple of weeks. We've seen some price growth. And because of that, I guess the saving times are increasing, too. Absolutely. Like the property market, it's been a wild ride and I don't think it's ever not been a wild ride around here for the past decade or so. You never know what's going to happen and prices are just kind of, you never know where they're going to go. But let's just kind of dive into sort of the details here and you know, look at what's changed since five years ago, just to kind of give you a bit of perspective about
00:09:19
Speaker
why it feels more expensive to buy a home. so you know In Sydney, median house price is now 1.42 million, which is up from 1.14 million in 2019. If you're looking for the standard 20% deposit, that's increased by $55,800. The total amount you need for 20% deposit is $282,800. so A lot of money for sure. On that, we're actually working on a video which we'll publish in the next few weeks, so make sure you subscribe to the channel. But go through a couple of other ways of getting into the market, especially these price points where in Sydney, if you're buying for 1.4 million, it falls outside of the home guarantee scheme. There are some other products that are available on the market now where you can buy a home with a 5% deposit, sometimes less, including one from a bank. ANZ started an LMI waiver with a 5% deposit. The minimum price is
00:10:15
Speaker
over $2 million, dollars which sounds crazy. It's like a high-income one. But there are a couple of elders out there, so we worked on a video that'll be out in the next couple of weeks, depending on your getting, because you don't necessarily need 20% deposit, even when you're buying outside the home guarantee scheme thresholds. yeah Let's just get back to some of the figures here just to cover them off. So in Melbourne, median house price is 941,000, which is up from 902,000. So you'd need an extra 6,400 for the 20% deposit. So nowhere near as much of the jump as in Sydney.
00:10:46
Speaker
Brisbane, on the other hand, has absolutely surged. so In 2019, the median house price was $583,000 and it's currently sitting at $920,000. Yeah, some huge jumps there that have gone up with the deposit, and I guess. We'll include some of the links below for some of these increases. but There's probably have to be different ways of approaching it, because just in a lot of cases, your income is not going to go up by, you know, in Sydney, you have to save another $55,000 over those few years periods or potentially get in. So that's why a lot of people sometimes choose to sort of get in sooner rather than later, is getting the market and start paying down your loan. I guess adding to that pressure, Simon, with some of the incentives and everything else,
00:11:28
Speaker
and a different gear investors getting back into the market. So not just first home buyers, I guess, especially in Perth and some of those cities, like it's been a big gold rush to get an investment property as quick as possible. That's right. Investors, they're diving back into the market at a rate that we haven't seen in over two years. So a huge amount of investor activity in the market, especially in some of the main capital cities. So the new home loan commitments to investors grew by 5.6% from March, which is the fastest increase since November 2021. So
00:12:01
Speaker
and People are seeing that there's money to be made and they're looking at investing in property. you That's kind of driven by the huge growth that we've seen in some of these markets, Perth, Adelaide, and Brisbane.
Market Trends and Rental Rates
00:12:12
Speaker
so These are more affordable markets, well especially Perth. It's one of the best deals out there, you know bang for your buck, and it has good rental yields as well. so One of the reasons why Perth's rental market is so good is that it's got a really low vacancy rate, the lowest amongst all of the capital cities. So that puts upwards pressure on rent. So people are coming in to invest because they're expecting to be able to get a good return with increasing rents and increasing property prices as well. And that does mean more competition if you're a first home buyer, because I think we've covered this a few times. But investors and first home buyers, you're often competing for similar properties. So if you're going out there to buy,
00:12:53
Speaker
expect that you might have a bit more competition now from some of the property investors as well. So next up, let's go through the latest Corelogic housing report. I'll include the links below. There's been some big changes and I guess like falling down that path, like a bit of change in the rental yield space too. So let's go through, I guess starting from the top, the biggest one was to try that. So Australia's residential real estate market is valued at $10.7 trillion, dollars making up 56.2% I have so well fifty six point two percent more than half of the house of wealth is made up by residential housing which is just an insane thing to think about. Yeah well they always say that the home that you buy is probably the biggest investment you'll ever make in your life and i think this really shows that so there's a lot of wealth. Bound up into these houses and that's why i'm earning your own home in australia is always been the dream you know it's not only the place to live it's also a source of wealth so this is kind of supported by the growth in the market so
00:13:50
Speaker
Dwelling values overall in Australia increased by 1.9% in the three months to May 2024. And even the properties in the lower quartile, so the bottom 25%, they rose faster. So they rose at 3% in the same quarter. So that means that the lower price segment of the market is growing even faster than the rest of it. And despite this recent quarterly growth, the annual growth actually has slowed. So 8.3% currently from 9.4% earlier in the year with the combined regional capitals only growing 6.8% compared to the combined capitals growing at 8.8%. So in the last quarter there has been significant growth but year on year it's not quite as rapid as it has been in the past.
00:14:35
Speaker
Look at the city-specific trends. Sydney's value has increased by 1.9% over the quarter, 8.8% annually. It was a similar story in Brisbane. Perth was up 22% with a quarterly and increase of 6.1%. I guess the interesting part of that is more if you're in the market and looking, it goes to show if you kind of leave it six months, if you leave it a quarter, potentially, you're going to have to recalibrate your prices. So if you are looking one for frustration, I see all the time as you might have been looking for the last six months, you're like, well,
00:15:07
Speaker
That doesn't make sense, like that household sold for 500,000, or maybe more than 500,000. For argument's sake, 500,000. In September last year, now they're wanting potentially 550 or 600, or just because of the price growth. So you need to factor some of these in there, because the recent comparable sales, if you're looking for sales six months ago, aren't going to factor that in. And really, this is underscored by the new listing. So we've actually started to see an increase here. This is nationally, so it's all different depending on the postcode in the area. But in the four weeks to June 2nd, new listings were actually up 17% from the same period last year. So that's good. It's going to give more options and hopefully ease some of the upwards pressure on prices, but still historically pretty low. The number of listings remains subdued with 1.6 total listings. So like available stock in the market, slightly lower year on year. So it means that the properties are still getting snapped up pretty quickly. They're not staying in the market available.
00:16:02
Speaker
Yep. And so the rental markets, as anybody who's renting would know, the national rental rates increased by 8.5% annually and cities with a 9.1% rise. So increased rentals is something that I think is a big issue with the affordability crisis. And it's going to probably continue to rise unfortunately, because there is a pretty low overall vacancy rate across the country. So I think one of the other things to consider if you are thinking about buying a home is that Every year that you wait, your rent's also going to take a bigger chunk of your cash and you know why would you want to pay someone else's home loan when you could be paying your own? If you can find a way to get in there and make it happen, then ah you'll be doing better in a lot of ways for sure.
00:16:46
Speaker
yeah Yeah, there's definitely more needed there, but unfortunately there's more stock. I think it's still going to be more pressure. We've also seen the national median time on market. So how long the properties were settled around before they get sold? Was it 31 days? So that's pretty steady compared to last year. But I guess to echo your point earlier, Perth was just insane. So the median time on market was 10 days. So stuff is just selling in probably minutes there not even time for the first open so you just need to depending on what stage you're at at your journey if like a lot of the people we help whether you might be just looking online getting a feel for things it can sometimes be worthwhile just getting out there and getting a feel for actually how things are on the ground in your specific suburb in the types of properties you're looking at because i've had a couple of surprises lately where a couple clients people have helped
00:17:31
Speaker
we're looking at apartments thinking, oh, it should be pretty easy. It shouldn't be that competitive. And we're actually, because of the affordability, and even like you're saying with that data before, in the sort of lower, more affordably priced properties is actually becoming more demand because that's where everyone can kind of get into the market. So in that sort of market, I think it's important to keep in mind that you want to be pre-approved for your loan. So if you are the market looking, hit us up at Hans Galaway. We make sure pre-approval is fully assessed. So at least when you find a place, you can jump on it really quickly. Yeah, and on that note, Jayden, we talk about these markets like the Australian market or even the Sydney or the Perth market, but really there's no such thing as one property market. The Australian market is different from each city and even in each city, there are different regions that have their own dynamics.
City and Suburb Dynamics in Housing Market
00:18:15
Speaker
so
00:18:16
Speaker
As you said, getting your boots on the ground and actually going to look at what's happening in the suburbs that you're interested in is really the best way to see what's happening and what your approach has to be. so If you're in a hot market where the properties are selling in 10 days, i mean that's a very different beast to a place where the median sale time is 45 or 60 days. You've got to look at how much you're offering for the property and potentially what kind of clauses you're offering in the finance clauses and all these other bits and pieces. so If I was in Perth, I'd be looking at a quick finance clause. Yeah, it's possible in Perth, but from the reports I've had, like I said, when you're competing as investors, they're probably less sensitive to that. They might have bigger deposits and you might need to consider some of the other terms, potentially going there with option conditions on there. but
00:19:00
Speaker
Moving on to the next point, I saw this interesting one on Reddit earlier in the week where I was comparing Brisbane now being the second most expensive city in Australia. Someone was raising or buying an apartment in Melbourne is actually cheaper than Brisbane. For me, it was jarring. Having grown up in Brisbane, we're always seem to be affordable and easy to get into and Melbourne seemed unattainable and expensive and it's crazy to think that this has flipped itself around. Yeah, when we grew up, we were always told Brisbane is just a big country town, you know, and Melbourne was like a proper city. Like when I was a kid, Melbourne seemed almost like a New York of Australia in a certain way. And I guess, I mean, times always change. And if you're looking to buy an apartment in Melbourne, you can actually get in for a lower median property price, although they are a little different. So the size of Melbourne apartments can be a bit smaller due to the different building standards that they've had, probably having a bit less living space.
00:19:57
Speaker
On the flip side though, if you want to change cities and look at living in Melbourne, I mean, it's a fantastic city with a great lifestyle. So more of that cafe environment, tons of amenities, certainly a lot of people really love it there. So that's another consideration. If you're out looking and you're finding Brisbane more expensive than you like, you know, why not look at a different city? Yeah, I actually found it interesting. Some of the Melbourneites, Melbourneians, we're just saying like some of the apartments in Melbourne, the way they were built, it can be more common to have bedrooms without windows. So that this kind of sort of had like, you know, not super livable. And also with the changes in their cladding laws in Melbourne, I've had some clients that have found some amazingly cheap apartments in 350,000 great locations.
00:20:40
Speaker
but they're having to do remediation so the buildings are covered in combustible cladding and so it might seem really cheap until you review or you find out like that's weird it's been on the market for six months and discover that there's actually some underlying issues there so you definitely want to do due diligence before you buy something planned. Absolutely and I probably wouldn't also be buying site unseen from a different state or a different city you know you'd want to get in there and see the property in person and make sure you know what you're buying As you say with the due diligence one of the most important things is checking out strata and seeing you know what the state of the buildings are and what kind of liabilities there are as well you don't want to buy a place and find out you've got a fifty thousand dollar contribution to a major structural issue with the building for sure.
00:21:24
Speaker
Yeah. And this stuff can change pretty quickly. So like Simon mentioned in an episode a couple of weeks back where in Brisbane, that was probably seven or eight years ago. So it was a fair while ago, but there was a bit of a glut of apartments in Brisbane's Florentine Valley. You know, rental is really cheap, apartments are plentiful. It was a great time to be alive. I guess if you're trying to get an apartment in the city or in the Valley and now because of limited construction and different things, there's not been that much, but it can turn around pretty quickly. So hopefully with the government really recognizing the local councils, recognizing that you know supplies an issue with some change to town planning hopefully we should see this getting addressed in the short term to help you know that affordability as well yeah
00:22:05
Speaker
Well, I guess it's probably time to wrap things up. Just ah see what we've covered today. So, you know, we've covered a fair amount today. and We started off looking at the interest rates and what that means for you if you're either a home buyer or if you currently have a mortgage. Either way, there is unlikely to be any rate drops before November at the earliest, maybe even in February, even later. Then we had a look at their first home buyer concessions. So the increase in stamp duty concessions for Queensland home buyers is a huge win. I think that's a great thing. You can save nearly $20,000 on a home, which is fantastic. We covered a bit about the deposits and how that has changed. And also we had a discussion about a little teaser there, Jayden, for some ways that you might be able to have a lower deposit, even with a more expensive property that goes outside of the government schemes and grants.
00:22:56
Speaker
A quick little review here at the monthly housing chart pack from CoreLogic and what's been happening in the market overall. And then we wrapped it up with the little coverage of the Melbourne versus Brisbane apartment showdown. Thanks so much for watching guys. If you can need any help, hit us up at huntingla.com.au. Until next time, we'll see ya.