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Finance in Five
92 Plays3 months ago
Unlock the latest insights on property and finance trends in this week's episode of "Finance in Fiverr." Dive into the current state of the rental market, with a slowdown in rental growth offering potential relief for renters and opportunities for first-time buyers. Explore specific city trends, like Perth's hot market with a median selling time of just 10 days, and learn how changing preferences and oversupply are impacting unit rentals in major cities. Plus, discover the latest in lending trends, including record-high new home loans and how this might shape your borrowing strategy. Tune in to stay ahead in the property game!
Ready to explore your options? Get a free assessment from the experts at Hunter Galloway: huntergalloway.com.au
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Transcript
Introduction: Navigating the Australian Housing Market
00:00:00
Speaker
Hey guys, welcome to this week's Finance and Fiverr. We take you through the latest in property and finance trends. So we're going through the state of the rental markets and specific city growth trends and some lending trends and what they mean for your borrowing power. 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.
00:00:39
Speaker
Simon, let's head off from the
Current Market Value and Opportunities for First-Time Buyers
00:00:41
Speaker
top. The CoreLogic chart housing pack was released this month. The combined value of residential real estate hit $10.8 trillion. dollars So what's it mean for the market and I guess for everyone out there? I think the main thing here is that i mean property has always been a big part of building wealth in Australia and and the fact that we've now reached $10.8 trillion dollars of residential real estate value just really goes to show how important it it is for for people to to own a home and and also as an investment class, you know what people really care about. Property is wealth here in Australia and that's probably likely to continue in in the long term. Probably also some increased pressure maybe on policymakers to address the affordability issues. We do want to make sure that ideally that our government is making sure that houses are affordable for for all Australians and not just the the elite for you. yeah interestingly in that pack there was some
00:01:27
Speaker
Surprising figures, there's a bit of a slowdown in rental growth in some of the major capital cities. So a welcome sign for people. So the the rental growth slowed down from 10.6% to 8.6% in April. So yeah it's good news if you're trying to save while you're renting, it means you're hopefully going to have to reprieve from some of those rental increases and possibly hopefully will follow on to mean there's going to be reduced activity for investors who've been trying to get into the market, chasing that that yield. It could create opportunities for first-time buyers if you're sort of waiting push for opportunities. If investors aren't getting the rental growth, it could mean they might sell and present an opportunity to get into the market. Yeah, and interestingly, there's a particularly noticeable slowdown for unit rentals in Sydney, Melbourne, and Brisbane. There's a few reasons why this could be. It's possible that there is an oversupply. I think in Melbourne, certainly, there has always been like a large supply of units. In Brisbane, not so much these days, but a few years back, if you remember, Jay, we looked around the Brisbane skyline and there was about 20 skyscrapers all building
00:02:23
Speaker
apartment blocks and so maybe there's a bit of a hangover effect from that as well. Either way, this probably means there's a bit of an oversupply of units in these capital cities and could be related to the changing preferences. So ever since the pandemic, I think people have been looking for bigger living spaces, change the way they live with having a home office as well and maybe these smaller units aren't as attractive to these people, which is a great opportunity if you are looking to buy. If you're looking to get your first home, then ah you could look at buying ah like a smaller unit somewhere in the capital city and use that as a stepping stone to the next property after that. Yeah, and another figure that was pretty interesting was the quarterly growth pace eased to 1.8% in the June quarter.
00:03:03
Speaker
can walk down from 3.3% in June 2022 so I guess there's a couple of things here like it could indicate there's a bit of cooling making easy pressure but the fact is it's still growing there's still growth there probably more bigger picture it hopefully should regulate that growth rate because it's probably you know, those higher portions in some of those markets where it's growing 15, 20, you know, in Perth predictors grow to 30% of the next couple of years, there needs to be a tempering there just a bit of catch up. So estimated sales in June was still above slightly last year's figures, 8.6 above June last year. So definitely pretty robust market from the sales perspective, there's still increased competition on the available properties and and still
00:03:44
Speaker
A lot of eyes that they're seeking to get in the market and and there's still no slowing down. Definitely with with the demand out there. Yeah, let's take a look at some of these capital cities in more detail as
City-Specific Trends and Buying Strategies
00:03:53
Speaker
well. So, Perth, 6.4% increase in home values last quarter. I mean, Perth has always recently been one of the strongest performers. So, not really surprising there, but the crazy part is a median selling time of 10 days. So, properties are selling in a week and a half in Perth. Like, this is a Hot hot market so if you are buying in Perth you need to be prepared to move quickly I'd say that you deserve probably a good chance of continued growth in these conditions like price is it in Perth are gonna continue to go up for sure you definitely that days on market is one of the biggest indicators is just showing the demand of things getting snapper quickly there's more buyers and sellers it means
00:04:30
Speaker
the price going to continue so definitely keep an eye on that days on market or median selling time out there. Melbourne next there's a 0.6% decrease in home values so potentially opportunities there for home buyers you know could be the right time to get in now that it's starting to you know values are slipping there. and could be a good weight against long-term growth, obviously in specific areas. You need to be careful of oversupply. There is a lot of construction sort of out west and and even the apartment in the city, there's there's been a bit of activity there. You know, this temporary dip could present a bit of an opportunity there. Finally looking at Brisbane and Adelaide, both of these cities have had shorter selling times compared to last year. So again, we're looking at that median time on market. And this is probably a sign that like, as always with the, when you're looking at this, there's probably no surprises. that This is the case of Brisbane and Adelaide are also being hyper performing. These markets are still fairly competitive. In contrast to say Sydney and Melbourne, I think you know you are going to have a bit more competition if you're looking to buy in Brisbane, Adelaide and Perth for that matter. Just something to keep in mind is that your approach to where you're buying is very different. So if you're buying in a
00:05:32
Speaker
a hot market, you've got to lead forward, you know, with your best offer, like Jayden calls it is elbows out strategy, you know, you go in there with your elbows out to to make sure that you get the best chance of securing a property that you that you're interested in. If you're in a slower market, there's a bit of a different approach. So if you're looking at, say, Sydney or Melbourne, you can potentially look to negotiate more, i look to get better conditions on the contract and those sorts of things. So the type of market you're in is very important when you're buying. And so it's always worth keeping an eye on which way things are going in the city that you're buying in and even in the suburb that you're buying in as well. Yeah. The the other data point I found pretty interesting here was the total listings. So the total listings was 0.6% higher than last year, which is good news because more listings, more choice.
00:06:16
Speaker
yeah to sort of send out regrets to the different buyers, but it's still 17.3% below the five-year average. So it looks like this persistent under supply issue is going to continue, definitely in the short term, potentially going to continue to put price pressures on there and in highly sought after areas. Like you said, Simon and Perth, there there's just more buyers than sellers at the moment.
Financial Planning for Home Buyers
00:06:38
Speaker
Moving on to our next segment now, Lending Trends. so There's a record high for the average new owner occupied home loan. It was $626,000 nationally. Gone are the days when the first home buyers buying for $300,000, $400,000. It's just not even realistic. Even half a million dollars seems to be sort of long gone now. so Yeah, interesting one here, Simon, to start the conversation, like it means probably you may need to shift the way you're looking at your repayments. If you need to get in the market, like a lot of the people looking at their home guarantees can be the 5% deposit, but potentially these high prices are going to mean you're going to need to stretch your average loan size. Yeah, and I guess that's if you look at the fact that, you know, property is now at 10.6 trillion, the average home loan increasing to support that underlying cost of homes is not.
00:07:21
Speaker
surprising, although it is a shocking figure. I mean, $626,000 as an average new home loan, that's big numbers. you know This is something to be careful of if you are buying and especially in this kind of climate where the interest rates are likely to go down, but no one knows exactly when. If you are trying to buy a home and you're really stretching past what's comfortable for you, you just need to be a bit careful there. Sometimes it's a better case of looking to buy a place that isn't quite as perfect for you, but it's within your budget and won't cause you financial stress. And the counter to that as well is like it depends on your situation. Sort of seeing people who you might know there's a pay rise coming through, you've got bonuses, you still want to be comfortable obviously, but everyone's situation is different because yeah, like at that average loan size, $626,000 per the average loan, it's about $950 a week in repayment. So it'd be interesting to pull up maybe a couple weeks we'll get average rent and that sort of stuff but it does depend on state too because in New South Wales it's the highest average loan size of 767,000 Queensland 586,000 down to WA 538,000 so we weigh in Queensland in particular at all-time high so we are seeing that it does vary state to state With the growth off the back of sort of WA, like you're saying, Simon, before Adelaide, Queensland, it's meaning that higher loan sizes may be expected and you need to sort of factor that in factory in. Like you said, Simon, if there are interest rate increases, what that means to you in the future. I mean, it's a good point you raised as well about
00:08:48
Speaker
you know if you have bonuses coming in or other changes say like a new graduate or like a recent graduate or example and and you know that you are going to going upwards in your career and you're likely that your you know your pay and salary is going to increase over the next few years because you've got sort of that trajectory going on then you know you can be forward to be a bit bolder with how much you initially spend. um so Likewise, if you you know potentially have an inheritance or any of these other things that kind of give you additional money from some source, then yeah you can definitely be bolder. but if you if you kind of if there's not going It all comes down to about what kind of changes are likely on the horizon with your finance, either like for more money or less money. like If you are planning on having children, then you need to kind of sort of calculate how that's going to affect things as well. So always just think about your financial situation over the scope of the next few years when you're buying so you can feel more comfortable about when you do buy. Definitely. And the other interesting stat here was the share of new investment lending was up 37.1%. So it's the highest since May 2017. So it's surprising to see that back. We've seen investors had a
00:09:49
Speaker
A rough couple of years, there was the Royal Commission, there were some changes to lending guidelines with minimum deposit amounts for investment lending, but this is slowly easing up. So investor activity, I think, is going to be increased over the next a while. So it's going to mean there's more competition for first-home buyers and could indicate yeah investors are getting more confident with future capital growth, rental yields. and I guess an extreme, like with the national election next year, keep an eye out for for policy intervention. I think it's going to be a pretty big topic ah for for the Australian election next year, the federal election. So wait and see what what sort of transpires there. Yeah. And on that note, Jayden, like found this just the other day that one in 20 Melbourne homes are actually unoccupied. So it's almost 100,000 homes that are just sitting there vacant. And on the subject of investors, there's a good chance that a lot of these are owned by investors who are
00:10:39
Speaker
going from all that speculative investment practice. So they'll just buy it and hold it empty and just purely go for capital gains, which is not really what you want to see when there is a rental housing crisis across the country. Disturbing figures almost like the vacancy rates in some of these areas are much higher than you would expect given where the rental market is at. runs with geats is like 12.7%, the CBD 12.4%, South Melbourne 12.1%. So a lot of these around the 10% vacancy rate of you know properties are sitting there vacant with no one living in them. And it's not really what we want to see. I remember a property commentator a few years ago saying, and this was pretty anecdotal, but you know saying like, well, if you look at the skyline and some of these areas,
00:11:20
Speaker
on a week, not on a weekend, you can see almost the lights in some of these towers. It's mostly empty or that there were a lot of, this was an issue in Brisbane a couple of years ago with people in particular overseas investors, buying residential property off the plane because it was allowed by Ferb and just buying to lock up for that gain. So like I think it's something that needs to be addressed because some of these empty houses, like you you said, there's yeah almost 100,000 houses could theoretically house 250,000 people based on the average size. So that's pretty crazy considering there's 48,000 applicant or households on the Victorian Social Housing Weightless. So if if the homes were rented, like the stock of of rental stock in Melbourne could be increased by like 20%. It's more homes for people.
00:12:00
Speaker
potentially helping the affordability and the housing issue fundamentally. Yeah. and Luckily, the the government is trying to do something about it. There is this Victorian vacant residential land tax, which is coming in in 2025. One percent of capital improved value increasing by one percentage point each year that the property is vacant. So I mean, that is a good idea. You know, if you're going to buy a property and leave it empty for capital gain, then they're going to tax you on it. Hopefully that makes it less attractive and makes them think about other options for how they could use the property. So this applies to residential zoned land in metropolitan Melbourne that hasn't been developed for at least five years. And they're also looking
Regulatory Changes Impacting Renters
00:12:38
Speaker
for tip-offs. So if you if you're in Melbourne and you see a vacant property, then let them know about it because they certainly want to know.
00:12:44
Speaker
So next up, some new rental laws in Western Australia. So there's a couple of changes here. This has happened to a couple of states. There's been some minor tweaks with rental bidding. We talked about a couple of weeks ago. ah What's the change here, Simon? And how's it going to impact renters or even first home buyers that might want to cancel their lease in the short term? So two big changes here. One of them is that tenants are allowed to have pets and make minor modifications. so Either you can't be denied a pet by a landlord unless they have their specific bylaws that they can show or they can make a special appeal. But overall, if you have a pet, that shouldn't be a reason why you can't rent a property. And then you can also make modifications like you know hanging pictures on the wall, just the basic stuff. The other big one is that rent increases are limited to once every 12 months. So even if you're on a six months rental lease, they're not going to be able to bump up that rent each six months. so
00:13:35
Speaker
good news all round, you know, it makes renting more attractive, also makes it easier to save up if you're not getting stung with those increases in rent every six months or whatever, then you've got more chance to save up your own deposit. Good stuff there. It's all good and potentially could hopefully lead to a bit of a swing back for the owner, especially in yeah with stuff selling in in a matter of days, a couple of, you know, under ah two weeks, which is insane. Simon, for our next segment, you got a couple of practical advice tips here. So what are you sort of thinking with this? The big thing here is that if you're buying in a market that is where ours is, you know, with huge property values and huge average loan sizes, being able to focus on building your larger deposit is is really the best thing you can do. There's always a risk here because you can delay your entry into the market, which risk is further price increases. But until you reach that point where maybe you can be eligible for the home guarantee or basically focusing on getting your deposit saved up as quickly as possible. I mean, it sounds like easy advice, right? But it's not.
00:14:35
Speaker
and jane was going to say I've got to count on this because I had someone I helped in December. So like only six months ago, he bought a unit in Brisbane in Newstead for 500,000. It was just under 500, like 498 or something like that. bought it, used the minimum deposit, had to pay lenders mortgage insurance because he didn't fit with the home guarantee scheme, but he was of the view that he'd missed out on a place two, three years ago before COVID, prices have almost doubled. He just wanted to get in the market to get in. Didn't mind his minimum deposit. Didn't mind paying LMI to get in the market. And with the view that that was going to become an investment property in the next sort of three to five years. Anyway, he hit me up earlier this week and said, oh, hey, there's been some sales in my building that are saying the properties are worth
00:15:19
Speaker
$600,000 now. Oh my god, it seems a bit extreme. That's $100,000 in property growth in six months. Like the market isn't quite hasn't gone up sort of 20%, but let's have a look at the valuation. Anyway, we got a couple of bank valuations and and he was right. like The bank valued it at $600,000 when he paid $500,000. six months ago so i think that the hard thing here too and what's a bit of a balancing act is he just never would we have to save up a hundred thousand dollars in six months so it's it's that that balancing act where like i said you you definitely you needed a positive some sort unless you got the help of a guarantor and your income situation is agreeable you can potentially afford to make higher payments but potentially you need to look at your own situation say well do i want to wait
00:16:00
Speaker
Well, this property suit me for the next five years. Like if it's only gonna suit you for a year, then you're paying a lot in lenders mortgage insurance and everything else. And you speculate on the property market growth. But if it can make sense, if you can get in, then potentially get in when you can, when you can afford it, when it suits your lifestyle. Definitely valid points, Jaden. Absolutely. I think the other thing in terms of advice here is that Whether you're, whenever you're looking at buying, make sure you do have your finances sorted out before you start hunting house hunting. It makes it a lot easier to get your loan approved and and get a better borrowing capacity. If you've, make sure you've got a good credit score, make sure that your debts are under control. You know, if you have a lot of credit cards open, close them off and make sure that you're kind of in the best position to get finance. Because again, if you're looking to get enough to borrow for a larger loan value, you need to, you do everything to maximize that borrowing capacity.
00:16:51
Speaker
and make sure you get pre-approved as well. Yeah. Yeah. And everyone's situation is different. Like I sat down with a couple this week and we're going through the numbers and and things like she'd just paid a big chunk of a hex off and it was down to $14,000. Like, oh, this is really great. Like it's only $14,000. That's good. But that $14,000 hex reduced their borrowing capacity by $70,000. So it was a difference when they're buying a home for $550,000 to $620,000. So they said, well, that's you know we've got the cash there for the hex like does it make sense and then that's the other thing well you might use some of your deposit to pay off that hex and that's where we can help so as a mortgage broker at Hunt's Galloway we can give you a free assessment just to see what's going to make sense you might not be looking to buy until next year but at least you know what you need to do to get everything in the right order and and and ready to go so
00:17:34
Speaker
I think yeah there's a couple of things to to think about there, but yeah, some some good points overall. and you can We've got a couple of courses actually as well, so I'll include a link below to our community that's got some resources to work out if now is the right time to buy. Should I buy? Should I continue to rent? Not even from the finance perspective, but from the the personal perspective and and what that looks like and the figures, you know the difference running the numbers if you own a home for 10 years and you pay that down or you stay renting and and potentially the rental increase and what that looks like. Simon, so I guess like wrapping it up there, take us back from
Conclusion: Key Trends and Future Outlook
00:18:04
Speaker
the top. So we we covered a couple of interesting trends there with the CoreLogic data, like residential property seems to keep marching up. But what are the sort of keys that you sort of put out in that first section? So yeah, I think the the key thing here is is just to be aware of what youre what's happening in your local market. You know, theyre Perth and Brisbane and Adelaide, they're all
00:18:25
Speaker
continuing to grow quite rapidly. Sydney and Melbourne not so much so check out your local market conditions. We've even got a a monthly update that we put out about the property market on the Hunter Galloway website as well. um Anything like that to just to know what you're dealing with and that gives you a chance to figure out how to approach buying in that market. That's probably the key thing now. The other one I guess keep lookout for any legislative changes that property vacancy issue hopefully will get resolved in Melbourne because that's a crazy amount of properties, 100,000 that are sitting there. that could be leased out and help with the cost of living there and i'm I'm sure it's a similar story in other states. ah And some new rental laws which are really positive if you're obviously looking trying to save and worried about your rental kind of going up because of the yeah shortage there, um it's it's pretty good.
00:19:10
Speaker
That's it for today guys. Like I said, check out our new community. I'll include a link below. There's Q and&A's there and some live sessions that we're going to be running as well just to help with some of those questions because it's just overwhelming the home buying process. It doesn't matter if you're in the savings stage, if you're currently searching or if you own a home, you're trying to grow a portfolio, um we can help you out there. Until next time, we'll see you guys later.