Property ranked as 'best investment option right now' by experts: survey

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You’ve heard the saying ‘safe as houses’, right? Well, it seems that old adage may ring true even in the current pandemic, with many of the nation’s top economic experts saying that’s where they’d put their money right now.

A Finder survey asked 28 leading experts and economists to weigh in on future cash rate moves and other issues related to the state of the Australian economy.

When asked: “Where do you think is the best place to invest your money right now?”, the leading response was “property”, with 1 in 3 experts (32%) backing it as their top option.

This was followed by shares (21%), gold (14%), superannuation (11%) and then cash (7%).

But hang on, isn’t the property market meant to be in trouble?

Rest assured it’s not all doom and gloom out there.

According to CoreLogic’s latest data, nationwide median housing values fell just 0.6% in July and fell 1.6% for the quarter, bringing the median dwelling value to $552,912.

However, to put that into context, over the past year national housing values have risen by 7.1%.

Sydney property prices led the way with a 12.1% increase in median value, followed by Melbourne (8.7%), Canberra (7.2%), Hobart (5.9%), Brisbane (3.8%) and Adelaide (2.4%).

Perth (-2.5%) and Darwin (-2.2%) were the only capital cities to record negative growth in housing values over the past 12 months.

Tim Lawless, CoreLogic’s head of research, said housing markets have remained relatively resilient through the COVID-19 period so far.

“The impact from COVID-19 on housing values has been orderly to-date,” says Lawless.

“Record low interest rates, government support and loan repayment holidays for distressed borrowers have helped to insulate the housing market from a more significant downturn.”

However, with fiscal support set to taper from October, and repayment holidays expiring at the end of March next year, Lawless says the medium-term outlook remains skewed to the downside.

“Urgent sales are likely to become more common as we approach these milestones, which will test the market’s resilience,” adds Lawless.

Other interesting property market predictions

Here are a few other interesting stats and predictions we took out of the Finder survey:

– Almost half of experts (42%) believe now is a good time for homeowners to put their property on the market, while a quarter said homeowners should wait two years.

– Two-thirds of surveyed experts (65%) believe Australia will see GDP growth in 2020, despite the Treasurer confirming in June that the nation is now in recession.

– All experts believe no further cash rate cuts will be implemented this year. However, more than two-thirds (72%) of experts forecast an increase in 2021 or 2022.

– More than half of experts surveyed (58%) believe other banks will follow in St George’s footsteps to reduce lenders mortgage insurance (LMI) to $1 for first home buyers with a deposit of just 15%.

Seen a property you like? Get in touch

As mentioned earlier, it’s expected that properties priced for a quick sale will hit the market in the coming months – properties that may prove difficult for some buyers to resist.

So whether you’re looking to add to your property portfolio, looking for a change of scene, or keen to buy your first home and break into the market, get in touch today.

We’re here to help you find a loan that’s just right for you.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Is now a good time to lock in a fixed rate?

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With interest rates at record low levels, today we’ll look at a question that many are asking: should I lock in a fixed rate home loan?

You may have recently received a call directly from your bank, or seen more ads than usual across the internet spruiking super low fixed-rate mortgages.

Here’s why: lenders are scrambling over one another to lock-in customers right now.

And their weapon of choice? Fixed-rate home loans.

With so many families doing it tough right now, locking in a low fixed interest rate can be an appealing option to reduce your monthly repayments and obtain peace of mind.

And while it may very well be a good route for your family, like most things in life, it’s important to weigh up the pros and cons before you leap.

Consideration 1: The bank is not offering it out of the goodness of their heart

Let’s get the obvious one out of the way: banks are not promoting fixed-rate home loans right now as an act of goodwill.

They’re there to sell a product. And they often use this product in particular when they’re trying to stop clients from walking away. Not only are you locking in a rate, but the lender is locking you in, too.

Consideration 2: Loss of flexibility

We all know the big benefit of locking in a fixed rate: you get a guaranteed low rate for however many years you lock it in for.

But it also comes with a downside, which is: if things improve and you want to pay your loan off quicker, switch products, or switch lenders, you don’t have the flexibility to do so.

Indeed, breaking a fixed home loan can be expensive, often costing anywhere between thousands and tens of thousands of dollars.

Consideration 3: How low can they go?

The Reserve Bank of Australia (RBA) cut the cash rate to a record low of 0.25% in March – the second rate cut that month.

Now, most experts believe this is as low as the RBA will go – and even RBA governor Philip Lowe has made it clear that he regards 0.25%, rather than zero, as the “effective lower bound” for official interest rates.

But that doesn’t mean the banks can’t drop their interest rates lower independent of official RBA rate cuts.

As mentioned above, competition in this space has been heating up recently and lenders are all eager for a bigger slice of the pie.

When you might want to lock the rate in

All that said, there are times when locking in an interest rate may be the best option for you and your family.

The big one is if your circumstances have recently changed and you’re seeking some stability.

This includes if you’re starting a family and you’re going from two incomes to one. Or if you or your partner’s income has been affected by COVID-19 and you’re wanting to lower your monthly repayments instead of seeking hardship options.

Another key factor is if you can’t sleep at night because you’re worrying that rates will go up. That said, it’s worth noting that the RBA recently stated: “the cash rate would remain at a very low level for an extended period”.

Still on the fence? Give us a call

Like many things in life, when it comes to home loans, there’s no one-size-fits-all solution.

While locking in a fixed rate home loan may help you secure a lower interest rate during this time of instability, it also comes with a few drawbacks.

So if you’d like to find out if locking in a fixed rate is a good fit for you, give us a call. We’re happy to run through all your options with you – not just the one product!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Has the tide turned? Household lending surges

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Lending to Aussie households spiked 3.9% in July, the strongest growth seen since October 2014, according to the Australian Bureau of Statistics (ABS).

The bumper month follows a 1.9% rise in June 2019, suggesting the tide has finally started to turn in the lending market.

“Whoa. Quite the surge in housing credit in July,” remarked CoreLogic’s head of research Tim Lawless, “haven’t seen numbers like this since 2015/16”.

Lending for investors rose 4.7% in July with rises across all states and territories, while lending to owner-occupiers also recorded substantial gains at 5.3%.

Meanwhile, home loans to first home buyers rose 1.3% in July. This is the fourth consecutive month of growth for this segment.

Why the surge?

The rise came the same month that the prudential regulator, APRA, eased loan serviceability standards.

Essentially, APRA stopped telling lenders to assess whether borrowers could afford their repayment obligations based on a minimum interest rate of 7%.

BIS Oxford Economics’ Maree Kilroy adds that investor sentiment also received a boost following the Coalition government’s federal election victory, and pointed to back-to-back rate cuts in June and July.

“After withdrawing from the market for several years, investors have reacted positively,” Kilroy says.

Lawless agrees that the surge is due to “two rate cuts, easier credit, sentiment boost post-election and removal of macro-prudential”.

And his colleague, Cameron Kusher, suggests this might only be the beginning.

“Importantly this is only to July. We could see these figures go much higher by the time we are right in the middle of spring,” Kusher says.

Get in touch

As Kusher suggests, this might just be the beginning of a lending surge.

Spring usually brings plenty of new properties onto the market – everything looks nicer in spring!

So if one of them happens to catch your eye, get in touch and we’ll be happy to guide you through the process of obtaining finance.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

On the hunt for a new loan provider?

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One in 10 consumers have switched credit products in the past year, according to new research, with Millennials and women in particular pouncing on offers from small banks, credit unions and building societies.

The financial landscape is shifting.

Over the past 12 months, 10% of consumers have switched credit providers, according to the Australian Consumer Credit Pulse 2019 report from Equifax, as once-loyal customers increasingly check out what lenders outside the Big Four banks have to offer.

Is now a good time to consider a switch?

With the RBA recently delivering back-to-back rate cuts, there’s no shortage of borrowers who are considering following suit and switching things up.

In fact, a further 11% of consumers intend to apply for credit in the next three months, says Equifax, and of these, half are looking to switch providers when they make their application.

James Forbes, General Manager, Marketing Services at Equifax, says that over the past 12 months the Big Four banks have ceased to be the first preference for many consumers who are switching credit products.

“Instead, they’re increasingly choosing small banks, credit unions and building societies,” Forbes says.

So what credit products are people switching?

Home loans and credit cards. They’re the big two.

Of the one in 10 people who made the switch over the past year, a quarter moved their home loans and nearly half moved their credit cards.

Home loans are also a popular product among the 11% of consumers intending to apply for credit in the coming months, making up half of the intended applications.

Who’s switching things up?

According to the report, the younger you are, the more likely you are to switch lenders.

In fact, out of all consumers who switched credit products in the past year, 43% were aged 18-34, and 32% were aged 35-50.

Women are also more likely to switch three or more of their credit products, while men are likely to switch just one or two.

What’s driving the behaviour?

Unsurprisingly, lower costs – including interest rates and fees – were the major consideration for switching across all credit product types, Equifax says.

However, consumers also cite better customer service and brand reputation as important considerations.

“In the wake of the Royal Commission, consumers are increasingly thinking about more than just cost when applying for credit,” says Forbes.

Keen to pounce?

With the RBA recently delivering back-to-back rate cuts, if you haven’t looked into your refinancing options lately, now might be the time to consider doing so.

Rest assured that we’re following the market closely and will be happy to run you through some mortgage and refinancing options if you’re on the hunt for a new lender.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Granny flat could boost your property value by 30%

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Backyard cricket pitch not getting much of a workout these days? Sick of your weekends being taken up with mowing and gardening? Installing a granny flat could be a lucrative solution – boosting the value of your home by 30% and adding around 27% to rental income.

That’s according to a combined analysis by CoreLogic and Archistar, which shows more than half a million east coast homeowners have enough free yard space to build a granny flat at least 60sqm in size.

Constructing a two bedroom granny flat would require an initial investment of up to $200,000, while the outlay for a one bedroom dwelling would be approximately $120,000. The full report is here.

The benefits of a granny flat

The report found that for a house worth $500,000, building a granny flat could add around $150,000 to the value of the property.

It also found that building a two bedroom self-contained granny flat apartment could add an additional 27% in rent each week.

CoreLogic head of research Tim Lawless says building a granny flat is becoming an increasingly compelling proposition for homeowners in a relatively lacklustre market.

“Many properties identified as suitable for a granny flat are in densely populated and traditionally expensive areas,” says Lawless.

Archistar co-founder Robert Coorey says many home-owners “are sitting on a pot of gold” in the form of excess land.

“The family benefits of a secondary residency can’t be overlooked, whether that’s giving adult children more privacy while they save for a mortgage, keeping loved ones close as they become more reliant on care or having additional accommodation for overseas visitors,” Coorey says.

How to assess your property’s granny flat potential

Got a big backyard and want to see what you can do with it?

Granny flats can’t be built just anywhere. The property must have appropriate town planning rules, the land area needs to be large enough, and the existing property must be located in a position that allows for the development.

As it happens, Archistar has developed a platform that can help you view in 3D the potential to add a granny flat on your property.

“Archistar’s platform helps home-owners by instantly assessing thousands of zoning and planning laws and producing a report, so it’s worth taking this step and consulting a local planning expert before you proceed,” says Coorey.

Last but not least – finance!

If you’re interested in ripping up the backyard cricket pitch and adding a granny flat to your property, feel free to get in touch.

As discussed, granny flats require an initial investment of $120,000 to $200,000. So if you’d like to run through your financing options, you know where to find us!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.