15 Feb February 2019
Welcome to our February Newsletter
We hope you survived all the madness of back-to-school week and returning to work after the summer holidays at the end of January! While February is certainly a busy time of year in most households around the country, it isn’t always the same story in our property markets. The quiet season has resulted in falling home values and low auction clearance rates in almost every capital city around the country.
Interest rate news
This month, the Reserve Bank of Australia (RBA) met for its first meeting for the year and elected to keep the official cash rate on hold at 1.5%. Meanwhile during January, some lenders increased home loan interest rates slightly to account for the rising costs of borrowing, while several smaller lenders reduced rates to make their offer more competitive.
Property market activity
Whilst there was a significant drop in new property listings in December 2018, SQM Research revealed the total number of property listings in our major capital cities surged. This is an indication that property is taking significantly longer to sell, with more vendors favouring private sales with no time-limit in order to achieve their desired price.
For the last weekend of January, Victoria held only 44 auctions with a 59% clearance rate, however there were 850 private sales. NSW held 17 auctions with an 82% clearance rate, and there were 963 private sales. ACT held 17 auctions with a clearance rate of 82% but there were only 56 private sales. South Australia held 142 auctions with a 42% clearance rate and private sales reached 229. Western Australia held 57 auctions with a 40% clearance rate and there were 335 private sales. Queensland held 24 auctions with a 71% clearance rate, but there were a whopping 832 private sales. Northern Territory had no auctions and 7 private sales, whilst Tasmania had only one auction and 155 private sales.
Home value movements
When property prices are stagnant or falling, conditions tend to favour property buyers as vendors are more likely to negotiate. According to figures released by CoreLogic, vendors are now having to offer bigger discounts to sell their properties – the median discount was 6.1 percent across the last three months to the end of January 2019.
As a result, during January home values fell in every capital city month-on-month, except Canberra where there was a small increase of 0.22%. Victoria experienced a drop of 1.60%, NSW 1.35%, QLD, 0.26%, SA 0.34%, WA 1.06%, NT 1.69% and Tasmania 0.16%.
If you’re in the market to buy a home or invest in property, there are certainly bargains to be had. Thorough research can help you determine locations that are still experiencing capital growth. If you need help with finance or would like to consider refinancing your current home loan, please don’t hesitate to give us a call.
Can you exit an off-the-plan purchase?
Considering buying a property off the plan? It sounds good in theory, with the possibility of stamp duty concessions and other benefits for first home buyers. But in 2018 there were quite a few people who got caught out by the hidden risks. Read on to find out what you need to know if you’re thinking about buying off the plan this year, or if you’re having second thoughts about an off the plan purchase.
What does ‘buying off the plan’ mean?
When you buy ‘off the plan’, it means the property you’re buying is not built yet. Typically, you’ll only have to pay the deposit upfront, then the balance of the purchase price once the property is completed. Because an off the plan purchase is a new build home, you may qualify for stamp duty exemptions or first home owner concessions, depending on your circumstances. (Check your state or territory’s rules online).
What are the risks?
Lenders may offer conditional approval for off-the plan purchases, but they won’t lend you the funds until they have performed a valuation of the property upon completion. In 2018, many buyers were caught out because their off-the-plan property was valued at less than the agreed purchase price and the lender would not lend the amount required to complete the sale.
There may also be other risks with purchasing an off the plan property, including:
- The final product may differ from your expectations.
- There may be delays or the development may not proceed. Your deposit should be refunded if this happens, but in the meantime, your money will have been tied up.
- If the developer holds on to your deposit (rather than putting it in a trust account), your money may be at risk if the developer goes bankrupt.
Terminating an off-the-plan contract
Terminating an off-the plan contract can be tricky, but there may be grounds to do so. For example, if the vendor has engaged in misleading conduct or the developer doesn’t complete construction before the sunset date, you may be able to terminate the contract.
However, if you want to terminate the contract because a lender has valued the completed property at less than the agreed purchase price, you may have difficulty. You could potentially lose your deposit and may have to compensate the developer for any loss.
Seek legal advice about your options if you wish to terminate an off-the-plan contract. More importantly, ask your solicitor to examine any contract before you sign, to ensure you have appropriate exit clauses in place – more about this below.
Selling before settlement date
Some buyers decide they want to sell the property before settlement. This is legal under most off-the-plan contracts and can prove to be lucrative if the property’s value has gone up, but there are risks involved.
- Have your conveyancer check that the contract allows for re-sales prior to settlement.
- Speak to your accountant about the tax implications of reselling the property (you’ll likely be up for capital gains tax).
- You’ll have to pay stamp duty, additional legal fees and any agent’s commission, so be sure to factor these costs into your calculations.
- If you find a buyer but your contract with them falls through, you’ll still be bound to settle with the developer.
- Ask the developer to include a clause in the contract that allows you to terminate it if the completed property is valued at less than the agreed price.
Talk with me before you get started
If you do decide to go ahead with your off the plan purchase, I can help to organise pre-approval on your home loan and help you choose a lender that will work with you on this type of purchase. I can also refer you to a reliable conveyancer or solicitor to help you avoid the legal pitfalls. If you’re having difficulty organising finance to complete an off the plan purchase, please get in touch asap!
When to leave your lender
Valentine’s Day makes us think about loyalty – which is an admirable quality in any relationship. But is your devotion to your home loan provider justified? It’s important to ask your mortgage broker to help you review your home loan from time to time. We’re here to check the interest rate, review it’s features and make sure it’s still giving you everything you need and desire.
Here are some tell-tale signs that it may be time to part ways with your current lender and start afresh with someone new.
Your home loan is getting old
Without suggesting you go on ‘Home Loan Tinder’ and start ogling a new lender every week, we have to say the days of staying with the same one for 30 years are long gone. If you’ve had your home loan for more than two years, it could be time to review it. The home loan market is increasingly competitive and new products are being released all the time.
For example, take offset accounts. These transaction accounts are linked to your mortgage, and any money you deposit is offset against your outstanding loan balance, saving you money on interest. They just keep getting better and better, with a larger proportion of your loan available to offset.
Another popular option is a redraw facility. This allows you to make extra repayments on your mortgage and save on interest, without committing to a shorter loan term – you can access and withdraw those extra funds at any time.
The honeymoon period is long gone
When you first take out a home loan, lenders may offer you a sweetheart deal to get you in the door. It’s not uncommon for them to waive fees or discount interest rates to new customers – this kind of loan arrangement is frequently referred to as a honeymoon period or honeymoon loan. But once the honeymoon is over, the loan may revert to a more expensive or less convenient loan than you would like. If that’s the case, it’s time to look at new options.
Your lender doesn’t listen to a word you say
Nobody likes to nag. If you’re always chasing your lender about rates or ways to save, it may also be time to hit the bricks. Similarly, if you’re sick of talking to a voice recording over the phone and crave real human interaction, there may be other lenders who place greater importance on giving you the attention you deserve. If this is the case for you, ask us about our home-brand home loans, where we provide you with the after-care service ourselves.
Your needs are not being met
Maybe you’ve scored a higher paying job and want to pay down your mortgage faster. Perhaps you’re adding to your family and temporarily need to rely on one income for a time. If your needs have changed, you may find it more fulfilling to be with another home loan provider and a mortgage that marries with your current financial circumstances and goals.
Remember, there are plenty of fish in the sea!
As your mortgage broker, we can access 100s of loan products from a wide variety of lenders. We’ll also know which lenders and products are right for you, considering your personal financial circumstances and goals. Let us be your match-maker!
Don’t stay in an obsolete relationship with your lender. If you’d like to know more, or would just like a home loan health check with no obligation to switch lenders, please get in touch.
Why first home buyers should start small
When it comes to buying a home, bigger is better, right? Maybe not. All over the world, people are changing their attitude to the size of home they live in. This is particularly true amongst millennials, and if you’re looking to build your first home to take advantage of stamp duty concessions and first home owner grants, there may be many advantages to thinking small.
What are the benefits of building a small home?
- They cost less to build because they require less labour and materials
- Can often be pre-fabricated, so can be built more quickly
- A small home requires a smaller plot of land
- They use less energy – it’s easier to minimise your carbon footprint
- Less maintenance costs
- You can pay off your mortgage sooner
What qualifies as a small home?
A small home can be anything from a cabin in the woods to a city high-rise apartment, or a unit in the suburbs. The concept also paves the way for a much more creative approach to home design, and many smaller homes are made from re-cycled materials like old shipping containers, or wood and bricks from demolished homes.
If you’re interested in building a small home, you could consider employing a reputable builder of granny flats and/or modular homes. In Australia there are a great many to choose from, and this option has benefits like helping you build a more luxurious small space home, as you can collaborate on the design. These builders often create small space homes in the factory, then transport it to your site partially built, which helps to save on costs.
In Australia, it can be difficult to get a mortgage for a home or apartment that is less than 50 square meters and many councils will not approve plans to build homes or apartments smaller than this. Before you build or put down your deposit on a small home, you should check with your local council about relevant building regulations in your area and talk with your mortgage broker to ensure finance can be arranged.
What is the Tiny House Movement?
The Tiny House Movement is a group of people all over the world choosing to live in houses or apartments with no more than 50 square metres of interior space. That’s about one quarter of the size of the average home. In the USA, the movement is so popular that it’s driven at least three successful TV shows dedicated to tiny house living. However, here in Australia, if your tiny home has wheels, you could find it bogged down in red tape.
Things to note about building a tiny or smaller home
Almost all councils in Australia treat small homes the same way they would any other building on your property, however if it has wheels it may be considered a caravan or trailer, regardless of whether it is rurally located or in the suburbs. You need to check with local authorities first before you build anything and get the proper approvals on your plans.
Building regulations apply to all homes, not just small homes and ones with wheels. If you are converting a couple of shipping containers into a home, for example, you will still have to ensure you modify them in such a way that your new home meets local building codes.
Additionally, not all lenders have an appetite for financing tiny homes or small space apartments and units. It pays to chat with me, your mortgage broker, about your plans before proceeding. That way, we can get pre-approval on your construction loan with a suitable lender, so you can go ahead with confidence. There are several ways to finance a new-build home, whether it’s tiny or not, so please give me a call today to get the ball rolling.