27 Mar 2018
The busy Autumn property season is upon us, and what an exciting time of year it is! In recent weeks, we’ve seen auction volumes surge as one of the year’s peak selling periods kicks into gear. With so much more stock on the market, property prices in some markets are falling, so you could have greater room to negotiate a deal on a property purchase. If you’re in the market for a new home or property investment, be sure to speak to your mortgage broker about your plans as soon as you can!
Interest Rate News
As widely anticipated, this month the Reserve Bank of Australia (RBA) decided to keep the official cash rate on hold at 1.5%. Some analysts say interest rates will remain on hold throughout 2018, while others predict there could be a rate rise later in the year. Either way, interest rates remain low and there are plenty of competitive home and property investment loans available. Talk to us to make sure you’re getting the right deal for you.
Property Market News
The Autumn auction market is sizzling, with volumes surging past 3,000 for the first time this year during the week ending February 25. Auction volumes continued to grow the following week, with over 3,400 auctions held around the country for the week ending March 4. However, whilst average auction clearance rates were well over 70% for the last week of February, they were not quite so strong the following week.
In Victoria for the week ending March 4, there were a whopping 1,630 scheduled auctions, with a preliminary clearance rate of 68%. New South Wales also had a high volume of properties go to auction – 1,239, and 66% sold. In Queensland, 271 properties were scheduled for auction, and 45% sold under the hammer. South Australia held 111 scheduled auctions, but cleared only 42% of stock. The ACT had 114 scheduled auctions, achieving a good clearance rate of 71%, while 30 properties went to auction in Western Australia but only 27% sold. In the Northern Territory, there were only 5 scheduled auctions, but there was a 100% clearance rate! And finally, Tasmania had only 7 auctions, down considerably from the week before, with a clearance rate of only 17%.
In recent weeks, we’ve seen home values fall slightly across many of Australia’s capital cities. According to CoreLogic, in February, most markets were showing marginal declines of less than 1% including Melbourne at -0.05% and Sydney at -0.59%. The only markets to show an increase in home values were Hobart at +0.70%, Adelaide at +0.02% and Brisbane/Gold Coast at +0.05% – but these increases were also marginal.
With auction stocks high, clearance rates dropping and home values steady, the property market may finally be showing indications of swinging in favour of buyers. Interest rates are still low, so the busy Autumn property market may give you the opportunity to negotiate a great price on your new home or investment property. Many lenders are offering very competitive deals on home and property investment loans right now, so speak to your mortgage broker about your finance options. They’ll compare the products and find you a loan that meets your needs and marries with your personal financial circumstances. Please get in touch!
As the end of the month approaches, we’d like to wish you and your family a very happy and safe Easter holiday season. Please read our article for some suggestions to make your family Easter celebrations more fun than ever – enjoy!
Fixed Interest vs Variable Home Loans in 2018
If you’re buying a property or considering refinancing your home loan in 2018, you may be asking yourself whether to fix your interest rate or not. Many people think about switching to a fixed interest rate mortgage when interest rates are low, in the belief that it will insulate them from future interest rate rises. In some instances, this approach could prove worthwhile, but not always and perhaps not for your situation. In this article, we explore the pros and cons of fixed, variable and split rate home loans to help you make an informed decision in 2018. If you’d like to explore your home loan options, please get in touch with your mortgage broker.
Are interest rates at their lowest and will they go up?
The official cash rate, as set by the Reserve Bank of Australia (RBA), is what traditionally determines the base rate lenders use to set their home or investment loan interest rates. It has been at an historic low of 1.5 per cent since August 2016 and many experts are predicting it to remain steady throughout 2018. Tim Lawless, the head of research at property data analytics group CoreLogic, said the RBA would likely keep interest rates on hold during 2018, with an interest rate drop unlikely.
At this point, it would seem interest rates are indeed at their lowest. So, does this mean a fixed rate product would be a better option than a variable home loan? It could be, but not necessarily!
Pros and cons of fixed interest rates
With a fixed rate home loan, you can lock your interest rate in for a set period (usually 1 to 5 years). The advantages are that you can anticipate exactly what your repayments will be, and budget accordingly. Refinancing to a fixed rate mortgage may also be worthwhile if you are on a tight budget and need certainty about the cost of your repayments. You may pay a bit more in interest in the long run, but it could be worth it for the peace of mind.
The disadvantages of fixing your home loan? Fixed rate loans usually, but not always, have a higher interest rate and cost more than variable rate home loans. So, unless interest rates go up beyond what you’re paying at your fixed rate during your fixed period, you won’t make any savings compared to a variable rate loan. If there are interest rate drops, you won’t get the additional savings as you would if you had a variable rate loan.
There may also be limitations on making extra repayments on a fixed rate loan. In some instances, you may still be able to make extra repayments to pay the loan down quicker, but they may be capped at a low amount or there could be fees involved. Sometimes, redraw facilities may not be permitted on fixed rate loans, and there could be break fees if you refinance or pay off the loan within the fixed rate period.
Pros and cons of variable interest rates
Variable rate home loans usually have slightly lower interest rates than fixed rate home loans (but again, not always – it pays to ask us to shop around). If interest rates fall, your rate will usually fall too, as they tend to move with changes to market interest rates. Often, you can make extra repayments with variable rate home loans, allowing you to pay down your mortgage faster and potentially save money on interest. You can also access a range of handy features with variable loans, such as offset accounts or redraw facilities.
The disadvantage of variable rate home loans is that if interest rates rise, yours will too – but as Tim Lawless from CoreLogic says, that’s unlikely to happen in 2018. Budgeting can also be trickier, as your repayments will fluctuate if interest rates do change.
Another option – split your home loan
If you want to hedge your bets, you could consider a split rate mortgage. This is where you fix part of the home loan, while the rest is variable. In this way, you can mitigate some of the risks of interest rate rises while benefiting from useful features and extra repayment options. If you’d like to know more, talk to us and we’ll explain whether a split mortgage could be beneficial to you.
Call us before you decide
“Should I switch to a fixed rate home loan?” is one of the most common questions mortgage brokers receive from customers. It all comes down to your personal financial circumstances and what works for you – it’s not just about beating interest rate rises. If you’ve had the same home loan for a while or your fixed term is coming to an end, refinancing to a different loan product or lender may be worthwhile in any case.
Speak to your mortgage broker to explore your options. They may also be able to find you a better interest rate, or different loan features that could help you save money, so don’t hesitate to call today!
Office Buildings – Are they a good investment?
Residential property investment has long been popular among Australians, but far fewer venture into commercial property – like office buildings. While residential real estate may be more familiar, there are many benefits of commercial property investment, which is why it’s worth considering as a viable investment option. In recent times, we’ve seen strong demand for offices, coupled with short supply in some areas, which may help to make it a profitable investment. In this article, we explain why it may be worth considering commercial property investment as part of your property investment strategy, but remember to talk to your financial planner and your mortgage broker before you go ahead!
The pros of commercial property investment
Commercial property investing can offer significant cash flow benefits. Some commercial properties offer rental returns of more than 8 per cent, compared to the current median rental yield across the combined capital cities of 3.32 per cent (based on CoreLogic data). What’s more, commercial properties usually offer greater rental certainty due to the long-term nature of leases. Commercial leases often run for between three and 10 years, and agreements usually contain a term for set rental increases in line with inflation.
With commercial properties, there are also fewer ongoing expenses involved. Tenants usually cover most maintenance, rates, insurance and body corporate fees, unlike with a residential property, where the owner foots the bills. Another perk is that if the tenant puts in a new fit-out at their own expense, the improvements may increase the value of your property without it costing you a cent.
The cons of commercial property investment
It can sometimes be difficult to find new tenants for commercial properties, so as an owner, it’s important to be prepared to cover the expenses if the property is untenanted for an extended period.
Economic factors can also heavily impact on the health of a commercial property investment. For example, economic downturns, high unemployment or poor business confidence could affect demand. That being said, research and choosing the right commercial property in the right location can usually mitigate these risks, just like with residential property.
What should you research?
As with any property purchase, research is key to finding the right investment opportunity. Be sure to research local prices and market conditions, any council restrictions or zoning regulations that could affect your investment, and upcoming infrastructure developments.
In terms of location, think about the property attributes your tenant might desire. Is it in close proximity to transport hubs? Car parking? Perhaps it’s close to other complimentary businesses? Always remember the rules of supply and demand – it’s best to make sure there isn’t an oversupply of similar properties in the neighbourhood.
What are the benefits of choosing an office for first-time commercial property investors?
Office buildings may offer a less daunting entry point into commercial property investing for first-timers because of the strong demand at present. According to the Colliers International Office Demand Index (Quarter Four, 2017), Australia’s major office markets are set for a strong start to 2018, on the back of increased demand and activity in 2017.
Colliers measures demand in terms of demand and supply per square meter. In the final quarter of last year, office property markets nationally recorded a 19 per cent year-on-year increase in enquiries (demand), from 415,737sqm in the last quarter of 2016, to 492,947sqm in the final quarter of 2017. Increases were seen across all segments of the market and overall, there were 942 deals for 785,252sqm of office space in 2017. Ask us for a copy of the report if you are interested!
For some investors, buying commercial property such as an office can be a sound investment strategy. If you already own residential investments, expanding into commercial property investment may allow you to diversify your portfolio and generate an attractive income. If you’d like to find out more about your finance options, please speak to your mortgage broker. Commercial property finance can be more complex than residential finance, but your mortgage broker can walk you through the process and find a commercial property loan that ties in with your unique financial circumstances and goals. Please call today!
Colliers International Office Demand Index (Quarter Four, 2017)
10 Great ideas for your Easter celebrations
It’s hard to believe it’s already Easter, but by now you would have noticed all the chocolate eggs appearing around the supermarket. Easter is a special time for families, and in this article, we share some great ideas for your celebrations this year! Remember, if you have any plans to purchase a new property during the busy Autumn property purchasing season, your friendly mortgage broker is here to help with all your home loan needs!
Dye your own eggs
Dyeing and decorating eggs is a great way to get into the spirit of Easter, particularly if you have children. It’s super easy and fun! Simply boil up some eggs then make the colouring. Mix 1 teaspoon of vinegar and 20 drops of food colouring in 1 cup of hot water. For different colouring effects, leave the eggs submerged for different amounts of time. Get creative with glitter, stickers and multiple colours, and let the good times roll!
Easter egg hunt
Easter egg hunts conjure up fond childhood memories for many of us, so why not celebrate this year with an egg hunt in your backyard? You could even go all out and make it a clue-based Easter egg hunt if your players are a little older. If you’re looking for an egg hunt on a bigger scale, check out your local entertainment guides or newspapers. There may be community events such as this Easter egg hunt and family picnic in Melbourne.
Easter brunch for the adults
Another idea is to host a lavish Easter brunch and invite your nearest and dearest. There are plenty of great Easter recipes online, for example, this lamb recipe with caramelised onion and carrots sounds divine. If you’re looking for a dessert to ‘wow’ your guests, try making this hot cross bun and rhubarb cheesecake. It’s positively decadent!
Taking part in a feel-good activity like volunteering is be a wonderful way to celebrate Easter. You could help in a soup kitchen or lend a hand at your local opportunity shop. Retirement villages often need volunteers to chat to the elderly and keep them company. For inspiration, check out the volunteer opportunities on GoVolunteer. There are heaps of options, from becoming a volunteer tutor to refugee high school students to doing some light gardening in an aged care facility. You may even be able to find a volunteer activity for the whole family!
Real story of Easter
If Easter has religious significance for you, you may like to share the story of Easter with the kids. You could curl up on the couch as a family and watch biblical moves, or check whether your local church has any special Easter services or displays.
Host an Easter hat parade
New clothes, or a new hat at Easter is an ancient tradition, but these days it’s the realm of little kids who love getting crafty and dressing up. Celebrate both tradition old and new, by hosting an Easter hat parade! Invite all your kids’ friends to put their creative thinking caps on and bring their Easter hats to the party. Prizes for originality are a must.
Bake an Easter bunny cake
If you love seeing the ubiquitous Easter bunny at this time of year, why not bring him into your home as well? You could bake an Easter bunny cake and enlist the help of your kids. If cooking isn’t your strong point, here’s a great recipe for an Easter bunny cake, complete with a how-to video.
Make Easter basket gifts
Making an Easter basket is another fun activity to do with the kids. Why not move away from traditional baskets and go for a non-conventional design? You could use a glass jar and turn it into a terrarium filled with Easter eggs and decorations. Alternatively, transform an old watering can into an eye-catching Easter “basket” by getting creative with some ribbon. Check out this slide show for inspiration.
Make Easter cards
Put the kids to work making Easter cards for family and friends. It’ll keep them busy and the recipients will love receiving a handmade gift from a child in the mail. Cut up last year’s cards or collect Easter-themed cut-outs from junk mail advertisements. Discount stores usually stock a treasure trove of creative bits and pieces for this kind of activity.
Have a toy exchange
Recycle and spoil the kids at the same time by hosting a toy exchange or swap party! Go through your little one’s belongings and purge any unwanted items (you may have to do this when they’re not around). Invite other mums to do the same. You could make it fun by giving the kids “tokens” to redeem for new toys. Anything that’s left over at the end could go to your local charity shop.
We hope you find these Easter celebration ideas handy. We’d like to wish you and your family all the best for the Easter Holidays. Remember to give your mortgage broker a call if you need support for your Autumn property purchasing plans, once the holiday break is over!