Melbourne To Take Sydney’s Place As Major Housing Market Drag

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The deterioration of Sydney’s housing market will likely continue to affect Australia’s overall property scene this year, but according to some industry analysts, the city will not be much of a drag as it had been before. Instead, they predict that Melbourne will take Sydney’s place as the major housing market burden.

On the other hand, dwelling values in Sydney are expected to decline by 3.3%, but the rate of decline would not be similar across housing categories. Moody’s Analytics economist Katrina Ell told The Daily Telegraph that detached house prices are expected to record higher price declines, as they saw faster growth in recent years.

On the other hand, the unit market is expected to become a bright spot as it rebounds with modest growth this year.  Moody’s Analytics also anticipates that value in Perth will decline by as much as 2.8% this year. In contrast, dwelling values in Brisbane and Adelaide are calculated to grow by of 1.2% and 2.6%, respectively.

Overall, the housing market downturn is set to persist over the following months, which Ell said could have implications for the wider economy.

“Given that most of the household wealth is in the relatively illiquid asset of housing, there would be greater systematic implications if debt repayment difficulties suddenly become a broader concern. If unemployment were to rise, it would force many households to sell at once,” she said.

 

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Fewer House Listings Recorded In December 2018

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It was a muted end of the year for the residential property listings in Australia as the number of homes for sale went down by 9.2% to 328,203 due to the holiday season.

While this seasonal decline is expected, SQM Research said areas such as Sydney, Melbourne, and Canberra recorded larger-than-expected drops in listings at 17.7%, 17.2%, and 15.5%, respectively. Of all the city capitals, Hobart clocked the lowest rate of decline at 5.8%.

“Listings in December had some large falls. However, let us keep in mind there was a surge in listings recorded in November and that December.  Traditionally records a large fall in properties for sale as this is a holiday period,” SQM Research Louis Christopher said.  Christopher projected that prices would continue falling in Sydney and Melbourne over the next months. However, he observed that asking prices in the two cities actually increased slightly during the previous month, up by 0.7% and 0.3%, respectively.

The largest monthly boost came from Canberra, where house asking prices rose 2.5%. However, unit asking prices in the city declined by 1.1%.  Sydney recorded the highest increase in unit asking prices at 0.7% but the largest decline in house asking prices at 1.6% over the month.

 

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Why Some Say Turning The Debt Taps Back On Is Irresponsible

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Treasurer Josh Frydenberg welcomed the New Year by urging banks to continue approving housing loans in a bid to drive the Australian economy — a thing that, according to some market watchers, is very irresponsible to say.

Speaking in regional Victoria last week, Frydenberg told banks to keep their books open and to approve more home loan applications. “You have a social and economic responsibility to ensure affordable and accessible and timely loans to the broader public. It’s in the banks’ interests, it’s in the economy’s interests, and it’s certainly in the public’s interests,” the treasurer said.

These sentiments followed the release of the CoreLogic December home value index, which showed a 2.3% quarterly decline, the worst since 2008.

After more than a year of mortgage lenders tightening their lending screws in compliance with regulations, housing credit has slowed significantly. In fact, official figures show that credit growth moderated to 4.9% in November last year, well below the 10-year average of 6.3%. North said that allowing banks to lend more would not do any good, as home prices relative to income are significantly higher than in most other countries around the world.

“We have more than a million households with a mortgage who are struggling to make mortgage repayments today. We don’t want to stoke that fire more,” he said.  He added that it is only appropriate for banks to keep their lending standards tight and focus on the capacity of the borrowers to make repayments in assessing applications.

“Our analysis shows that around 40% of loan applications are now being rejected, compared with 5% a year ago, because people don’t actually meet the lending criteria,” he said.

Do High Rental Yields Always Translate to High Returns?

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When it comes to property investing, getting higher rental yields and achieving higher returns are the ultimate goals. However, new research shows that the former does not necessarily result in the latter.

According to a report by RiskWise Property Research, which analysed five-year trends across Australia’s housing market, higher rental yields do not automatically translate to high overall returns for investors. In fact, while properties in cheaper areas were able to give investors a steady stream of income in the short term, they resulted in lower overall returns in the medium to longer term. Closely looking at it, it does not seem surprising as home values in cheaper markets take more time to appreciate.

RiskWise chief executive Doron Peleg told The New Daily that low-rent houses would be able to realize a 63.1% increase in net equity assuming a 20% deposit. On the other hand, high-return homes would be able to clock only a 29.5% increase. This means that low-rent dwellings were able to improve their values by more than twice that of the high-rent ones.

“When you break down properties with high rental returns and low rental returns, you see purchasing the high rental returns is extremely affordable, whereas a low-rental-return dwelling costs roughly three times more, which generally means they are blue chip,” he said.

This also means, as Peleg puts it, that while many properties can “pretty much pay for themselves,” investors might be missing significant overall returns in the long run.

 

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Is the Great Australian Dream a thing of the past?

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Perhaps due to the current conditions of the housing market, many Australians think the Great Australian Dream of owning a home is a thing of the past.

A new survey by Real Insurance found that two-thirds of Aussies would rather have freedom and flexibility in life over the commitment of saving for a home. Nine in 10 respondents said that achieving happiness in life is more important than having accomplished the traditional Australian dream of owning a home

“So, it seems that putting happiness, including travel and freedom, above anything else in life is the new Australian Dream. There’s nothing more important in life, after all, and reiterates how adaptable and resilient us Aussies are when faced with a challenge,” Real Insurance said. While 70% still think it is important to personally own a home in the future, three in five prospective homebuyers might find it hard to do so, as they are locked out of the property market.

The study also found that for those who are saving for a home, clothing, hobbies, tech gadgets, and eating out are some of the most common things they spend less on. “Our research shows that us Aussies are a resilient bunch who love a bodacious dream to aim for in life. So, we’re adapting our dream to meet a more realistic reality in the face of high property prices,” the study said.

Western Australia’s mortgage ‘delinquents’: The stories behind the stats

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Ms Meerman’s team of three counsellors based at Midlas in the Midland CBD helped Perth’s north-east deal with more than $50 million worth of debt last financial year. In the past six months, half of their clients were having issues paying off their mortgage. Mortgage delinquency occurs when someone falls more than 30 days behind on their home loan repayments.

Despite slight improvements on delinquency rates across the country and in WA, it remains a rampant issue. Recent figures from Commonwealth Bank suggest more than 1.5 per cent of its WA customers were in arrears on their home loan, second only to the Northern Territory.

Moody’s April 2018 mortgage delinquency map showed four of Australia’s worst performing regions were in WA: the WA outback, the Wheatbelt, Mandurah and Perth’s north east, which includes Midland. While the numbers paint a concerning picture, behind them are thousands of families who have experienced job losses or sickness, which is causing huge financial strain and serious mental health issues.

 

“It is really sad and most of these clients coming into me, they’re in their 50s or early 60s, they have worked their whole life, they’ve never been out of a job this long.

“It’s about their identity as a person and they feel like they’re failures. They’re facing bankruptcy, they’re at the end of their life with nothing to show for a lifetime of work.”

Ms Meerman said these clients usually had great payment histories on their home loan and it was frustrating for her to see banks pursuing them relentlessly after missing payments.

 Construction woes trickle down to families

Waikiki resident Samantha*, her husband and teenage daughter are healthy but they were affected by the ailing WA construction industry.

Her husband lost his job in April for three months, which was a huge blow to the family income.

“It wasn’t his choice to lose the job … he works with timber and that feeds the building industry and when that collapsed his company started retrenching people, he was sort of the last one on so the first one to go,” she said. The family’s mental health was strained from the financial stress coupled with the often crushing nature of job hunting her husband was going through.

“I think (my husband) applied for over 100 jobs. He would go for interviews, sometimes three at the same place and not hear anything.

“It got to the stage where he would’ve gotten a job in Welshpool, and travelled three hours a day just to have a job to pay the bills.

With the help of a financial counsellor both Samantha and Adam were able to get the bank off their backs and navigate their ways out of financial strife in ways they would have never thought of themselves.

Ms Meerman said falling behind on mortgage payments was a complex and stressful time, which is why the free service the financial counsellors network provides was so important.

She said the first thing they asked was whether the lack of income was because of illness or injury.

“If that’s the case you want to get onto your insurances ASAP. Not just insurances you know you’re paying for but the ones you might not know you have on your loans and with your super.

“Some people are insured for quite a lot of money through their super. They can pay out their house.

“I have seen people lose their house when they could have actually paid it out.”

Visit financialcounsellors.org for more information.

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Amid an epidemic of mortgage stress, a perfect financial storm is on the way

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Homeowners, particularly in the mining states of WA and Queensland, are already grappling with a number of factors including unemployment, under-employment, stagnant wages growth and weak house prices.

Another looming threat is rising interest rates, with three of the four major banks raising variable home loan rates earlier this year independent of the Reserve Bank of Australia.

Andrew and Rachel Hayden built their dream home in Perth’s south-eastern fringe three years ago, but they are expecting a mortgage default notice from their bank within a month.

“We put probably $600,000 into it and [are] probably going to sell it for $480,000 — shocking,” Andrew Hayden said

He said he wanted to unlock his superannuation to pay his mortgage but couldn’t until the bank served him a default notice.

The couple’s financial problems began when Rachel Hayden fell ill 18 months ago.

The mother of five was forced to stop work and Mr Hayden had to shut down his business to care for her.

“[I feel] absolutely gutted,” she said. “You do everything by the book, everything. Gutted for the kids, they don’t do sports or anything and haven’t because you just can’t afford to.

“It took us so long to get here and we thought yes, no wasted rent money or anything like that

A perfect storm of rising mortgage costs

Credit Ratings agency Moody’s has predicted the situation will worsen as a growing number of interest only loans convert to principal and interest, adding about 30 per cent to monthly fees based on current interest rates

About 40 per cent of all mortgages funded by banks during 2014 and 2015 were interest only, and many of them included clauses which stipulated homeowners would have to start paying principal payments after five years.

Throw into the mix flat wages growth nationally, underemployment on the east coast and stubbornly high unemployment in the west, and according to Keith John, founder of Pioneer Credit — which buys debt off the banks once people default on their loans — you have a perfect storm.

“A perfect storm in the sense of, and I think we’re seeing it play out now, really low retail sales and a general lack of consumer appetite, and … people are desirous to paying down debt but don’t have the capacity that they did a year ago, or two or three years ago,” he said.

 

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Home Loans

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Home loans make the process of buying a new home more affordable than ever.   When you buy a home, you should understand as much as you can about the process, as well as the questions you will be answering.  This way, you will be familiar with how things work and you will find the entire process to go much smoother.

 

When you look towards a home purchase loan, you will need to fully understand the interest rates. They are never the same and will vary among the different financial institutions, as well as from time to time. When you buy a home, it is very important that you keep up with the economy.  Any change in interest rates for a home loan can either increase or decrease the amount you pay back.

 

When getting a home loan, you will also need to understand the terms and the length of the loan.  Almost all financial institutions and lenders have a variety of different plans or periods for you to choose from.  If you choose a longer period, in most cases your interest rate will drop.  You can find this out yourself by using a mortgage calculator.  This way, you will know how much your mortgage payment will be before you decide to further pursue the loan.

 

As you probably already know, your ability to pay the loan back is very important.  Some lenders require that you keep your loan full term, while others may provide you with the option to pay it off any time you wish. Home loans that give you the option to pay it off early will normally save you quite a bit of money in the end.

 

Even though the early payoff option is great to have, it can also come back to haunt you if you end up defaulting on the home loan.  Or, if you decide to sell your home in the future, the early payoff can haunt you as well. For those very reasons you should always consult with a specialist before you commit to any type of home loan.

 

For the potential home buyer, home loans offer several different opportunities.  Before you rush out and get a home loan, you should always know what you are agreeing to.  You should also look into the company you are thinking of getting the loan from as well, so that you can better prepare yourself when you go through their process of getting your loan.

Unsecured Business Credit And How It Can Help Cash Flow Problems

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Unsecured Business Credit and How it can Help Cash Flow Problems

 

At some point in time, the reality with most businesses is that fluctuation periods would eventually come and such companies will have to face problems regarding their cash flow. A company may experience a financial crisis wherein more cash may be going out than entering as profit.

 

It is very important for any enterprise to never run out of funds, especially if the life of the business is dependent on being able to make large purchases of goods for production

 

What Is An Unsecured Business Line of Credit and How Does It Help?

 

An unsecured credit line for your business is a type of financing resource that can provide your company with the money that it needs without requiring collateral. This can provide you with the temporary funds that your company may need for operations to continue.

 

This is extremely vital especially when funds are simply either lacking or not available but your business is greatly dependent on making purchases for production and profit to come in. Aside from that, this type of credit line can also be beneficial for commercial use in such a way that it involves fewer risks for your part as the business owner as no collateral is involved.

 

Most lenders offering this credit line can also charge less interest and even a bigger credit limit as compared to other sources of finance.

 

What you should know about trying to secure such a credit line is that it may not be as easy as you want it to be or that it may not come right at an instant. In applying for unsecured credit lines, lenders would usually take the extra step of checking on your company’s credit history. This is necessary for them to do, as they are risking more by providing you with finances without the collateral.

 

And, thus, before you can be approved for an unsecured line, make sure that your company has maintained a favorable credit score. These lenders are interested to find out if whether your company is capable of making the right payments and purchases for both your parties to gain good income.

 

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