Is Home Ownership Really an Impossible Dream?

Posted by Simon Dehne on February 4, 2018 in Latest News with No Comments


There’s been a lot of talk recently about the plight of Generation Y. According to recent reports, this group of under 28 year olds are considered “property orphans”, with supposedly no hope of ever owning their own home.

With their home ownership dreams dashed before they’ve even begun, no dependents and a decent sized disposable income, this generation has taken to spending rather than saving towards their first home.

But is really as bad as it sounds or is there some hope for Generation Y? At Helpcompare we’re all about finding creative solutions that help first home buyers achieve their dreams of home ownership. And we believe it’s vital to change this generation’s perceptions. It’s more important than ever to get a foot onto the property ladder.

Working with Helpcompare means you have access to a number of home loan solutions. Explore our comparison website or call us to have a chat about how we can help you achieve your dreams on 0419 448 910 or 1300 886 100.

The Purplebricks effect: LJ Hooker launches DIY disruptor

Posted by Simon Dehne on March 1, 2017 in Latest News with No Comments


Australia’s second biggest real estate group, LJ Hooker, has taken on the wave of disruptors eating into estate agents’ income, by becoming a disruptor itself.

In a move that will see the 88-year-old company undercut the commissions of its own 8000-strong real estate network, LJ Hooker’s new online-focused Settl business will empower vendors to sell their homes by themselves, in exchange for paying a low fixed fee.

The DIY business, which will be run as a stand-alone entity, will include the assistance of a Settl estate agent if required for services such as open-for-inspections and auctions.

LJ Hooker chairman Janusz Hooker, the grandson of founder Sir Leslie Hooker, likened the launch of Settl – which comes out of its proptech incubator LJX-Labs – to when Qantas created low-cost carrier Jetstar to service a different market segment.

“These will be two brands – LJ Hooker and Settl – serving two distinct customers,” Mr Hooker told The Australian Financial Review.

Mr Hooker said Settl would cater to the needs of millennials and “digital natives” who wanted to “pay less and do more themselves”.

But he was adamant that there remained a strong future for the traditional high-street model, where vendors pay a commission, typically between 1.5 and 2 per cent of the selling price.

“Part of the market still wants to fly Qantas, but there’s a new market that wants to fly Jetstar. We’re creating a new market – it’s not a zero sum game. The launch of hybrid real estate businesses has increased the size of the market,” he said.

Many in the industry will see the launch of Settl as a direct response to the arrival in Australia six months ago of highly successful low-cost British operator Purplebricks, which has cut thousands of dollars from home selling costs by charging a fixed fee, and the growth of commission-free DIY platforms like buyMyplace.com.au and forsalebyowner.com.au.

In contrast, listed high street agent McGrath has lost about 70 per cent of its value since floating with listings down by a fifth. LJ Hooker canned a $400 million IPO last month after the McGrath float flopped.

Mr Hooker said LJ Hooker was holding its own on commission rates and would not tarnish its full service offering by reducing them. “We don’t have policy of going down to zero,” he said.

He also played down talk in the industry of disruption. “It’s a hyped-up word. We’re meeting consumer demand by doing things in a different way. We’ve been in this business 88 years and we’re continuing its pioneering heritage.”

Pricing for Settl has not yet been revealed, but is expected to be in line with other DIY offerings in the market when it goes live in the second quarter of the year.

Josh Rowe, CEO of property price prediction app realAs.com, backed the new LJ Hooker venture.

“A company that is not prepared to cannibalise their own business to meet customers’ changing needs will eventually fail,” Mr Rowe said. “Netflix was originally a DVD mail order business with 20 million users at its peak. Now as a streaming service it has 99 million users,” he said.

“Perhaps LJ Hooker is the Netflix of real estate in Australia.”

Read more: http://www.afr.com/real-estate/residential/the-purplebricks-effect-lj-hooker-launches-diy-disruptor-20170227-gum2lb#ixzz4a4apjxVT
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Today’s housing crisis is worse than the 17pc home loans of the 1980s

Posted by Simon Dehne on February 26, 2017 in Latest News with No Comments


Today’s housing crisis is worse than the 17pc home loans of the 1980s

Caitlin Fitzsimmons
Published: February 26, 2017 – 12:15AM

“But we paid 17 per cent interest on our mortgage!”

This line is often wheeled out by older generations to explain why younger people don’t really have it tough in today’s housing market.

It’s rubbish.

It’s quite true that interest rates rose rapidly in the late 1980s. The advertised rate for home loans hit 17 per cent in June 1989 and stayed there until March 1990, according to Reserve Bank records. It’s also true they were in the double digits for most of the 1980s.

I don’t doubt it was painful for anyone paying a mortgage at the time.

I don’t know what it’s like to wake up every few months and find interest rates have been hiked again. I don’t know what it’s like to take a second job just to keep a roof over my head.

I do know what it’s like to wake up every few months and find that prices have gone up by another $20,000. I know what it’s like to spend months going to auctions and be constantly pipped to the post by Baby Boomers adding to their investment portfolio. Like many housing “haves” of my generation and younger, we finally succeeded only because of help from family, and I am truly grateful.

The truth is every generation has its challenges, but younger Australians definitely have it tougher when it comes to housing affordability.

It’s often pointed out that the ratio of debt to income is higher than ever. In March 1990 owner occupier housing debt was 28 per cent of household disposable income, according to Reserve Bank figures. It has gone up steadily ever since and, as of September 2016, was 98.4 per cent. These are national figures and would be much higher in Sydney and Melbourne.

But let’s consider the difference in interest rates between the 1980s and now. To do that we can look at a different measure: interest repayments for housing debt as a proportion of household income. This would include investment property.

When interest rates were 17 per cent, the proportion of household disposable income that went on the interest payments for the home loan was 6.1 per cent. It’s currently 6.8 per cent.

That means a higher proportion of today’s household incomes are going on mortgage interest payments than in 1989-1990, even though the advertised rates are now 5.25 per cent rather than 17 per cent.

It was worse in June 2011 when the ratio was 9.4 per cent because advertised interest rates were higher, at 7.8 per cent. Since then property prices have surged 22 per cent in Melbourne and 40 per cent in Sydney, according to the Australian Bureau of Statistics. That’s going to hurt if (when) rates go back up.

Even if mortgage repayments happened to be precisely the same proportion of your income, I would argue it’s better to pay 17 per cent on a smaller debt than 3-4 per cent on a large debt.

Let me explain. Most mortgages are 25-30 years in duration, spanning a range of interest rate cycles. What matters most is how much money you owe, and the long-term average rates over the life time of the loan.

If you have a relatively small debt and interest rates are high, it will hurt for a while, but ultimately the rates should come down.

If you have a large debt and interest rates are low, it’s likely interest rates will eventually go up and your principal will still be high.

It gets worse. If you buy a house in an era of low interest rates, and then rates rise, the market is likely to stagnate. So you’ll be stuck paying off a high debt at higher rates, but it won’t be offset by capital gain, at least for a while.

On the other hand, if you buy a house in an era of high interest rates, and then rates fall, the value of your property will usually increase because buyers have more purchasing power.

This is exactly what happened in the 1990s. When interest rates finally came down after the recession, home owners didn’t breathe a sigh of relief and pocket the extra money.

Instead they collectively decided to upgrade their homes, and buy investment properties, and thus the housing boom was born.

If you managed to survive the 17 per cent interest era of the late 1980s, then by definition you were already a home owner by the time the 1990s housing boom rolled around.

The other thing that matters is wages growth. During the 1980s, inflation was high and wages along with it.

So even though interest rates rose throughout the 1980s, households were mostly able to absorb the expense because their incomes also increased.

Inflation and wages growth have been relatively low since the recession more than 20 years ago.

Baby Boomers, or indeed anyone who bought a home before 1990, have mostly benefited from being in the right place at the right time.

Research shows successful people tend to underrate the importance of luck in their success.

Some beneficiaries of the housing boom think they deserve it, that it’s the just reward for their hard work and thrift.

In reality it’s a windfall gain.

And that’s fine, no one is trying to take it away. But the appropriate response to a windfall gain is to acknowledge that it happened and act with gratitude rather than entitlement.

Many older people do feel grateful for their good fortune, and, of course, some older people have not benefited from the housing boom at all.

Yet, it’s clear there is a lot of entitlement out there. Only last week we published a letter from a reader who, along with their spouse, owned more than $3.2 million in super and was worried they might lose their health care card as a result.

Last week I was on a panel discussion with the Grattan Institute’s John Daley and financial commentator Peter Switzer on “why every generation feels entitled”.

The thing is, I don’t think it’s true. Younger generations just want a fair go.

It’s not entitlement to think it’s a problem if the typical household can’t afford a typical home. It’s not entitlement to think that access to jobs and schools, not to mention social connection with family and friends, need to be part of the equation.

At the same time, most of us also think there are even more pressing issues – like meaningful action on climate change.

There is no greater entitlement than a planet that supports life.

Caitlin Fitzsimmons is editor of Money. Find her on Facebook and Twitter.

Land Tax could be the real balance for property growth for investors

Posted by Simon Dehne on February 24, 2017 in Latest News with No Comments


Is it still a sellers market?

Posted by Simon Dehne on February 22, 2017 in Latest News with No Comments


There were 2,280 dwellings auctioned off in Australia’s capital cities in the week ending 19 February, marking it the first time the number of auctions had surpassed the 2,000 milestone in 2017.

According to CoreLogic’s Property Market Indicator Summary, there were 689 more properties put up for auction last week, up 43 per cent on the week before.

The milestone was passed following a “substantial rise” in auctions in the Sydney and Melbourne markets, with Melbourne seeing the most dwellings (1,103) up for auction.

However, despite the volume of auctions reaching the highest level so far this year, the preliminary clearance rate for the combined capital cities remained in the high 70s (77 per cent).

Sydney had the highest clearance rate (83.5 per cent), followed by Canberra (81.5 per cent) and Melbourne (76.7 per cent).

Although the preliminary combined capital city clearance rate was higher in this week than the same period last year, the number of auctions held was lower, with 2,347 auctions held over the same week last year, returning a 71.8 per cent clearance rate.

CoreLogic found that the top auction sale over the past week was for a five-bedroom property in Chatswood, NSW, which sold for $4.95 million.

The appetite for properties in Australian capital cities has been increasing recently, with CoreLogic previously finding that turnaround times for properties is decreasing.

For example, the average time on market for Melbourne dwellings dropped to a historic low of 29 days at the end of 2016.

Meanwhile, the typical Sydney dwelling sold after an average of 33 days in December 2016 compared to 39 days in December 2015.

Brisbane was the only city with a ‘days on market’ figure trending higher. While dwellings were taking an average of 43 days to sell at the end of 2015, the average rose to 57 at the end of 2016.

Speaking at the time, CoreLogic head analyst Cameron Kusher noted that the average number of days it takes to sell a residential property has been falling over recent months, which reflects an overall improvement in housing market conditions.

On average, it took 38 days to sell a home in December 2016 across Australia’s capital cities (down from a high of 50 days in August 2016). Four of the eight capital cities now have an average ‘days on market’ figure below 40 days, while most other capital cities are seeing this figure starting to trend lower.

Mr Kusher commented: “The average days on market figure provides valuable insights into the performance of the housing market by measuring the average difference between the date at which a property is listed for sale and the day at which it goes under contract.”

He added: “The days on market figures will be important to follow throughout 2017. After the current growth phase has run for more than four and a half years, we are still seeing a rapid rate of sale in Sydney and Melbourne.

“Low levels of stock available for sale and many willing purchasers continue to drive a rapid rate of sale in Sydney and Melbourne while the rate of sale is improving in most other capital cities.”

Source: Mortgage Business

live streaming app to revolutionise real estate auctions

Posted by Simon Dehne on February 16, 2017 in Latest News with No Comments


A Melbourne start-up is capitalising on our love affair with auctions by developing an app to enable consumers to watch auctions either live or on demand from anywhere in the world. A potential buyer can “virtually” attend dozens of auctions across several states over a weekend.

Click here

85 per cent of Aussie homeowners don’t know their own interest rate

Posted by Simon Dehne on February 9, 2017 in Latest News with No Comments


WANT to know why it feels like you have a leaky wallet? A whopping 85 per cent of Aussie homeowners don’t know their interest rate yet 94 per cent know their mobile number.

Latest “Know your numbers” research by UBank has found homeowners could save tens of thousands of dollars if they reviewed their interest rates, especially for their mortgage.

“While 94 per cent of Australians can remember their mobile phone number and 93 per cent can remember their PIN number for their debit/credit card, only 15 per cent can remember their home loan rate,” UBank found.

The results were shocking given mortgages were the most expensive purchase of a person’s lifetime generally.

“Of those surveyed, 44 per cent could only recall an approximate figure for their home loan rate while the remainder or 41 per cent simply didn’t know their rate at all”

Men were twice as likely as women to know their mortgage rate “to two decimal places”, UBank found.

Men were twice as likely as women to know their mortgage rate “to two decimal places”, UBank found.Source:Supplied

Men were twice as likely as women to be accurate about what their rate was “to two decimal places”, and surprisingly Gen X (20 per cent) did better than both Baby Boomers (13 per cent) and Millennials (13 per cent) on that score too.

UBank chief executive Lee Hatton said actively monitoring and seeking the best rate should be a priority for homeowners.

“Buying a home is one of the biggest investments of your life, so it’s really important that you find the right loan that suits your individual needs. Simply knowing your exact home loan rate and managing it closely could save you thousands of dollars a year.”

The research also found that 54 per cent of Aussies were feeling financially strained, while a third constantly worried about their financial future.

“Unfortunately, more and more Australians are making significant sacrifices due to being financially overstretched. The better acquainted you are with your numbers, the less stress and more money you’ll have in your back pocket. It’s important Australians borrow less and live more.”

Originally published as 85 pc don’t know own interest rate

Source: news.com.au

RBA Rate Announcement

Posted by Simon Dehne on February 7, 2017 in Latest News with No Comments


A steady start to 2017. Despite the tumultuous political and economic landscape across the world, the Reserve Bank of Australia (RBA) has elected to leave the cash rate on hold at the record low of 1.50%. Whilst the hold was widely predicted by economists, there is still a strong belief in the market that rates will eventually increase as we approach 2018. Governor Philip Lowe had this to say in his official statement: “Inflation remains quite low. The December quarter outcome was as expected, with both headline and underlying inflation of around 1½ per cent. The Bank’s inflation forecasts are largely unchanged. The continuing subdued growth in labour costs means that inflation is expected to remain low for some time. Headline inflation is expected to pick up over the course of 2017 to be above 2 per cent, with the rise in underlying inflation expected to be a bit more gradual.” “Conditions in the housing market vary considerably around the country. In some markets, conditions have strengthened further and prices are rising briskly. In other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Growth in rents is the slowest for a couple of decades. Borrowing for housing has picked up a little, with stronger demand by investors. With leverage increasing, supervisory measures have strengthened lending standards and some lenders are taking a more cautious attitude to lending in certain segments.” So, what does all this mean for you? Despite the recent cash rate hold, lenders are free to change their rate at their own discretion. Keep a close eye on any rate movement, and consider whether your current loan is the right one for you, right now. Source: Finsure Services

Tim Lawless, head of data at CoreLogic RP Data, returns to Mortgage Business to discuss housing prices across Australia in light of the mining downturn, interest rates and commodity prices.

Posted by Simon Dehne on October 4, 2016 in Latest News with No Comments


More people are using Mortgage Brokers

Posted by Simon Dehne on August 11, 2016 in Latest News with No Comments


Ian Narev, CEO of the Commonwealth Bank of Australia, has said that the bank sees the mortgage broking industry as “an ongoing channel where customers are going to want to do business”.

The statement came following the bank’s end of year financial results, which revealed that brokers made up 49 per cent of new business in the bank’s Australian home loan portfolio, up 4 per cent from last year, while its proprietary network for new business dropped by the same amount.

Likewise, brokers made increases on the overall portfolio, making up 45 per cent of home loan sales to the end of June 2016, up from 43 per cent at the end of the last financial year (while the proprietary portfolio dropped by 2 per cent).

At the briefing for the financial results on Wednesday, Mr Narev was asked what the bank was going to do about boosting the level of proprietary network sales, which “have been flat [or falling] for seven consecutive years”.

Responding to this, Mr Narev said: “Go back eight years … we said at the time it was as good as we would ever get in investing in proprietary networks, and as good as we would ever get in continuing to build on the historic strength of the Commonwealth Bank, which is home loans.

“We said way back then that we [thought] the broker market would be a critical channel where customers were going to choose to deal with their banks [and] that no matter how well we did, that would be a factor that would continue. And we’ve seen it continue.

“So, we say two things; we see the broker channel as an ongoing channel where customers are going to want to do business — [as] the proposition of the broker channel in terms of its neutrality and its separation from the banks is pretty clear to customers — [and] we also say that we are going to invest in making sure that as many of our customers as possible are going to want to do proprietary business with us.”

However, Mr Narev acknowledged that even at the best of the bank’s ability, its proprietary networks would “never be so good that [they could] reshape the market”.

“If you look at the Commonwealth Bank’s performance relative to others in the market, we’re pretty happy where we got to,” he said.

Mr Narev went on to say that the bank will continue to make investments in the quality of its digital channels to “work on the strategy where customers are getting a much more seamless interface between deposit products, home lending products, their super, their insurance and other wealth management needs”.

“But, I would say that if I were here in 10 years and had a market share above 25 per cent, and the margin is where it’s at, I’d take that any day of the week.”

The CBA results show that retail banking home loans rose by 9 per cent on the last financial year (to $4.1 billion), helping to drive the 3 per cent increase in cash net profit, which came in in at $9.4 billion after tax.

Overall, the bank had 1.9 million home loan customers in 2015/16, and handled 25.3 per cent of the Australian home loan market share and 21.8 per cent of the New Zealand home loan market share. Just over half (51 per cent) of the CBA’s balance sheet was home loans, which it described as “stable/long term”.

While home loan arrears were stable year on year, and while the NSW portfolio improved, the Western Australia and Queensland portfolios continued to “experience stress”. The bank also suffered from loan impairment expense, which was up 27 per cent to $1.2 billion, predominantly due to “higher provisions for resource, commodity and dairy exposures”.

The fully franked final dividend was $2.22 per share, taking the full year dividend to $4.20, which is flat on the prior year. The CBA paid out 76.5 cent of its profits as dividends.

Speaking of the bank’s dividend and interest rate cut decision, Mr Narev said: “We’ve got nearly two million Australian home loan customers, and we get it, they want to pay as little interest as they can on their home loans … But we’ve also got 11 million depositors, 800,000 Australian households who own shares and millions more who own them through their pension funds … and collectively they have an investment of about $100 billion in the Commonwealth Bank. Just like the home loan customers, these are Australians from all walks of life. This is not the elite of Australia.

“As a result of the decisions that we made last week, if you’re a depositor you have the opportunity to earn more from your deposits, if you are a borrower, you are paying less on your borrowings, and if you’re a shareholder, you’ve got some greater degree of security of your dividends. And critically, overall we’ve continued to be strong as an institution.

“Our job is to continue to achieve that balance. Sometimes we’re going to be unpopular by doing it, but the alternative is to have a weaker bank and a weaker economy.”

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