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Property Market Predictions 2019 – 2021

Where will our property markets be in 3 years?

That’s a question people are asking now that our real estate markets have moved to the next stage of the property cycle – one of falling property values in some areas and slower growth in other locations.

We are now seeing the predicted softening in both the Sydney and Melbourne markets after many years of growth.

First time home buyers are surging back into these markets replacing some of the demand left by retreating investors.

While there are a lot of property pessimist out there, one group of forecasts — those by BIS Oxford Economics suggests we are in for a soft landing.

Their Residential Property Prospects 2018-2021 report, which predicts the Australian property market outlook, is well worth reading.

BIS Oxford Economics is the only company I know which produces residential real estate forecasts over a three-year horizon and places them in the public domain in June each year.

So what’s ahead?
House price growth around Australia has been slowing in recent months, led by falling values in many locations in Sydney and Melbourne, Australia’s largest and most expensive property markets.

That trend looks set to continue driven by tighter lending standards from Australia’s banking regulator – APRA at a time that our banks being allergic to risk following their belting in the Royal Banking Commission, along with weak wage growth, affordability constraints, an increase in apartment supply.

These tighter lending conditions – the inability for many investors who could have in the past borrowed more – are really having the same effect as a rise in interest rates.

They’ve slowed down demand especially the Sydney and Melbourne property markets

In short… we’re in for a soft landing with further price falls in the short term and the stabilising real estate values.

Taking inflation into account, modest price declines were forecast in most capital cities over the next 12 months.

And then all capital cities will turn around and show price growth over the next 3 years, but the results will be fragmented.

BIS suggests the current slowdown is due to tighter lending criteria, particularly a crackdown on interest-only loans, and record levels of dwelling construction being completed (above 200,000 per year), which may lead to an oversupply in some states.

Prediction

And the good news is that our housing markets won’t crash, being underpinned by record low interest rates, a “relatively stable, albeit subdued, economic environment” and strong population growth.

But there should be some “upside” from 2021, as “high net overseas migration inflows [are] likely to be sustained in the coming years” — and “economic conditions begin to strengthen and supply falls back below underlying demand”.

Population growth will absorb the huge supply of new dwellings from the recent construction boom, although any growth in rental will be minimal, according to BIS.

Recent research from QBE predict the following:
1) Interest rates to rise a little over the next 3 years – but only by 0.5%, not the large increase in rates some are predicting, and this is unlikely to occur until 2020
2) Inflation slowly nudging its way up
3) Employment growth continuing, albeit at a slower rate and the unemployment rate holding steady
4) Continued strong population growth due to overseas migration
5) Our economy growing much the same as it has in the last few years.
As you can see they predict strong economic fundamentals – nothing to suggest a property crash ahead.

Here is a State by State roundup:-

SYDNEY
Sydney Property Market Forecast

Median house price in June 2018: $1.12 million

Forecast median house price June 2021: $1,150,000

Growth 2018 to 2021: 3% Sydney

The downturn in Sydney prices is expected to continue, with the report predicting house prices to fall by 2 percent over the next financial year, before they start rising again

Sydney prices are expected to rise just 3 percent by 2021, the slowest out of every Australian capital city.

The Harbour City has seen its prices soar by 85 percent since 2013, with investors — which account for over half the values of mortgages in that period — pushing up prices to record highs.

In the face of retreating investor demand, the report forecasts that first-home buyer activity will support apartment prices.

While the top end of the market is suffering from lack of buyers for prestige home and the lower end markets like Sydney’s South West or the Central Coast are being held back by affordability issues, some of the inner and middle ring suburbs are strongly outperforming the averages.

BIS predicts Sydney’s median will fall by 2 percent in the next financial year (2018/19), but an undersupply of dwellings will prevent larger price falls.

“By 2019/20, a combination of the correction in prices, the undersupplied market and some improvement in the economic outlook is forecast to see prices stabilise, and potentially show modest rises into 2020/21.”

Need Finance for your next purchase or want to check you have the best loan? Contact Boss Money www.bossmoney.com.au

MELBOURNE
Melbourne Property Market Forecast
Median house price in June: $870,000

Forecast median house price June 2021: $920,000

Growth 2018 to 2021: 6%

House prices in the Victorian capital surged 65 percent in the last five years, reaching a peak of $892,000 in December 2017.

Even though the Melbourne property market it is taking a breather after 5 years of exceptional growth, there is no sign of a collapse in sight.

Record population growth continues to fuel demand for housing, maintaining an overall undersupply in the market, the report stated.

While the national population grew by 1.6% in the year ended 30 June 2017, the highest growth was in Victoria, with a 2.3% increase in population and experts have predicted it is likely to surpass Sydney as the largest city of Australia by as early as 2031.

“While new dwelling completions are forecast to continue to rise through 2018, as the large pipeline of apartment buildings under construction work their way to completion, supply will be largely met by population growth,” the report’s author Mr Angie Zigomanis said.

House prices are forecast to tread water through to 2021, rising below the pace of inflation.

The report said the emerging downturn in new dwelling construction could spark a modest uptick in prices.

Although the wider market is not expected to tip into oversupply, BIS Oxford Economics anticipates there will be pockets of apartment oversupply given the extent of new unit construction compared to houses.

Unit prices are forecast to fall 2 per cent over the next three years.

BRISBANE
Brisbane Property Market Forecast
Median house price in June: $550,000

Forecast median house price June 2021: $620,000

Growth 2018 to 2021: 13%

BIS’s forecast is that Brisbane will see the strongest growth over the next three years, jumping 13 per cent to a median of $620,000.

An oversupply in the apartment sector is dragging down Brisbane’s wider housing market, but the sunshine state is starting to see a boost in interstate migrants — particularly from Sydney — with prospective buyers lured by Brisbane’s comparative affordability.

“Some green shoots look like they are starting to emerge in the Brisbane market,” Mr Zigomanis said.

“However, any upturn is likely to be delayed until economic conditions pick up and excess stock is further absorbed.”

Brisbane real estate has been buoyed by steady population growth driving demand and underpinned by good economic fundamentals including jobs creation and a low unemployment rate.

Queensland has now become the number-one destination for internal migration, taking over from Victoria and overseas migrants are starting to see Brisbane as the place to be, bringing 12,847 residents into the city.

Need Finance for your next purchase or want to check you have the best loan? Contact Boss Money www.bossmoney.com.au

CANBERRA
Canberra Property Market Forecast
Median house price in June: $700,000 Canberra

Forecast median house price June 2021: $770,000

Growth 2018 to 2021: 10%

Canberra’s housing market has proven to be somewhat of a quiet achiever in recent years, with momentum tipped to continue in the short term.

House prices are forecast to increase 5 per cent over the next financial year before slowing over the following two years, culminating in an overall rise of 10 per cent by 2021.

Apartments were tipped to record price growth of 6 per cent over the next three years.

The report noted Canberra’s rental market was very tight, recording a 0.7 per cent vacancy rate in the March quarter.

PERTH
Perth Property Market Forecast
Median house price in June: $520,000

Forecast median house price June 2021: $570,000Perth Property Update

Growth 2018 to 2021: 10%

The Perth housing market has been in a slump for 4 years now.

Perth house prices have declined by 13 per cent since 2014 but the worst could be over.

“House prices in the Perth market appear to be bottoming out,” Mr Zigomanis said, pointing to stronger overseas migration and a reduction in the number of West Australians moving interstate.

Perth’s vacancy rate remains high at 5.1 per cent and rents have collapsed, falling by up to 30 per since since 2013.

The report predicted the recovery of the Perth market would be a “long, slow grind as the city has to work through a significant oversupply…”

Perth is expected to see “minimal growth” for the next couple of years, before it sees “stronger growth” in 2021.

HOBART
Hobart Property Market Forecast
Median house price in June: $485,000 Hobart 2

Forecast median house price June 2021: $525,000

Growth 2018 to 2021: 8%

Hobart has been the strongest property market over the last few years, but remember — it is a very small market which can be easily moved in either direction.

“However the current migration inflows largely comprise younger adults and families with children, suggesting people moving for Hobart’s affordability or expats coming back to raise a family,” he said.

The median house is tipped to rise by 5 per cent over the next year, and then slow in following years.

Both houses and unit prices are forecast to grow by 8 per cent by mid-2021.

ADELAIDE
Adelaide Property Market Forecast
Median house price in June: $510,000 Adelaide

Forecast median house price June 2021: $555,000

Growth 2018 to 2021: 9%

With South Australia’s automotive manufacturing industry shutting down, its economy and property market are currently subdued.

A soft economic environment and lacklustre population growth will result in modest house price growth over the coming years, according to BIS.

“Economic conditions in South Australia are expected to remain subdued in the short term,” Mr Zigomanis said, pointing to a high unemployment rate and the shutdown of automotive manufacturing. “Purchasers are expected to become more cautious.”

BIS predicts its shipbuilding industry will drive future employment and slowly boost interstate migration into Adelaide, lifting its median house price to $555,000 by 2021

House prices are expected to grow by 9 per cent by 2021.

DARWIN
Darwin Property Market Forecast
Median house price in June: $505,000

Forecast median house price June 2021: $520,000 Darwin

Growth 2018 to 2021: 5%

Darwin peaked in June 2014 and since then, house prices have nosedived 19 per cent

but the report’s authors said they expected them to have bottomed out.

A general oversupply means prices are forecast to remain flat over the upcoming financial year, followed by two years of limited growth.

House prices and unit prices are expected to life by 5 percent and 4 percent respectively.

Need Finance for your next purchase or want to check you have the best loan? Contact Boss Money www.bossmoney.com.au

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REFINANCING YOUR HOME LOAN

Source: AFG

As time marches on, situations change. Perhaps you’ve changed jobs? Or there’s a new addition to the family? Maybe you would just like a better rate? Maybe it’s the advent of school fees, or perhaps the kids have flown the coop? Or maybe that leaking shower or tired kitchen has just reached the end of its life. A shift in circumstances may mean it is time to revisit your home finances.

For many, the idea of refinancing a mortgage can be daunting. Fees, fixed versus variable interest rates and monthly charges all need to be considered. The right refinanced loan could help you pay off your mortgage faster and for less, clear unhealthy debt or help you upgrade and add value your home, all of which are steps in the right direction.

Common questions for those thinking of refinancing

Can I get a mortgage where I pay less than I’m paying now?

With lenders adjusting their rates outside of the reserve bank now is a great time to shop around check that you have the right loan for your needs, and a consultant is a great starting point. It will depend what interest rate you’re currently paying, what type of home loan you have (e.g. fixed, variable, interest only, line of credit) and what features you want in your loan.

Speak to a consultant who can quickly explain your options.

Can I consolidate credit card or other debts into a home loan?

This is one of the reasons many people refinance.  The advantage is that you pay a much lower interest rate on a mortgage than for most other forms of debt – e.g. credit cards, overdraft facilities, personal loans etc.

Providing you have sufficient equity in your property, you may be able to consolidate all your debt on a home loan. If you take this option though it is important to make sure you maintain your repayments at their current level or you could end up paying more over a longer period of time.

Speak to a consultant who can quickly explain your options.

How much money can I borrow?

We’re all unique when it comes to our finances and borrowing needs. Get an estimate on how much you could by contacting a consultant who can help with calculations based on your circumstances.

How do I choose the loan that’s right for me?

There are hundreds of different home loans available, so contact a consultant who can recommend the right loan(s) for you.

How often do I make home loan repayments – weekly, fortnightly or monthly?

Most lenders offer flexible repayment options to suit your pay cycle. Aim for weekly or fortnightly repayments, instead of monthly, as you will make more payments in a year, which will shave dollars and time off your loan.

What fees/costs are involved in switching mortgages?

Penalty fees could apply if you’re paying off your current mortgage early, especially if you’re exiting a fixed home loan.  But these may be offset by repayment savings when you switch home loans.  Contact a consultant to discuss which fees would apply in your circumstances.

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WHAT IS LENDERS MORTGAGE INSURANCE (LMI)?

Lenders Mortgage Insurance (LMI) protects the lender in the event that you default on your loan. It is paid as a once-off insurance premium or fee when your loan is advanced. It does not affect your interest rate.
LMI is only applicable if your loan poses a relatively high risk to the lender—usually because you are borrowing a high percentage of the property value.

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WHAT IS CREDIT SCORING?

Whenever you apply for credit—whether it’s a home loan or a mobile phone contract—your application is given a credit score. The score represents your risk of non-payment to the lender credit, and it is usually assessed by a computer.

Credit scores are influenced by a wide range of factors which don’t always reflect your true credit worthiness. A mortgage consultant may be able to help with credit scoring issues.

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WHAT ARE GENUINE SAVINGS?

What is considered “Genuine Savings” and why do most banks require it even if you have a good income?

In response to the increase in first home buyers applying with no deposit or savings, most Australian lenders now require mandatory genuine savings for most home loans.
We work with several lenders that don’t require genuine savings, but most do, and most work somewhere within these guidelines.

  • 80% of property value: Genuine savings not required.
  • 85% of property value: Genuine savings not required by most lenders.
  • 90% of property value: Genuine savings required by most lenders
  • 95% of property value: Genuine savings required by almost all lenders
  • 100% of the property value: Guarantor loans required for buyers without genuine savings.

To learn more, please enquire online or call us on 0476 111 000 to speak with one of our specialist mortgage consultants.

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THE LOAN APPLICATION PROCESS

Applying for a home loan typically entails four phases:

Initial Conversation

This is the first contact you’ll have with your mortgage consultant. We’ll discuss your situation, your needs, objectives and goals, and then determine if you’re likely to qualify for a loan. At this point, you’ll decide whether to use us as your mortgage consultant.

Returning your application and documents

If you decide to use us, we’ll ask you to complete a customer information form. We’ll also ask for supporting documents such as your ID, pay slips and bank statements. The process will go faster if you can provide these up front, all at once.

Initial assessment

After we have your application and supporting documents, we’ll do a preliminary assessment of your situation. This is a very detailed process where we identify..
• any possible problems from a lending point of view
• your borrowing capacity
• which lenders can help
• which loans offer the best fit at the lowest interest rates

Loan recommendation

After the preliminary assessment, we’ll recommend two or three loans that fit your needs and ask you to pick the one that works best for you.

Lodge the loan to the Lender

Once you’ve chosen your loan, we’ll prepare your application for the lender. We’ll ask you to provide any final documents and sign the lender’s privacy form. Then we’ll prepare the application and highlight the strengths that make it most appealing to that particular lender. When everything is assembled and ready, we’ll submit (or “lodge”) the application.

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5 BASIC TIPS FOR FIRST HOME BUYERS

Buying your first home can be exciting, but it can also be stressful and overwhelming. These five tips will help build your knowledge and confidence.

1. Do The Groundwork

Before you start looking at houses, make sure you cover a few basics.

  • Take a hard look at your finances and determine what you can afford. Set a budget that you can manage without overextending yourself and stick to it. You might have to pass on a wonderful house, but you’ll lead a better life.
  • Learn about the government grants and incentives that can help with your first home purchase.
  • Get pre-approved for a home loan.

2. Develop a Routine

Buying a house is work. It takes time and persistence. Establish a routine that enables you to get it done. You might want to set aside time in the evenings after work for your online research online and save the weekends for looking at houses. The schedule is up to you. Just make sure you have one.

3. Get Savvy

Learn as much as you can about the buying process, and make sure you understand the terminology. If you’re unclear on a term or a practice, search online until you understand it completely. This small investment of time will help you avoid big mistakes.

4. Hire an Inspector

When you find a home you like, don’t let your heart overwhelm your head. Hire a qualified inspector and have the home inspected, inside and out. You’ll spot any potential problems (e.g. pest infestations, structural problems, electrical issues) that could impact the price of the house.

5. Work with a Mortgage Consultant

When buying your first home, it’s easy to make mistakes. Consider working with a qualified mortgage consultant to help with the process and the paperwork. A good consultant will save you time, money and—quite possibly—a great deal of heartache.

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BUYING A PROPERTY? 4 QUESTIONS YOU MUST ANSWER

Are you dreaming of buying your first property or looking to upgrade/downgrade into a new one? Here are 5 questions that can help you plan out how to buy a property in Australia.

1) What type of property do you need and where will you live?

Choosing a property to live in isn’t a choice you should make hastily and it’s all about “location, location, location” as the media would like to have us believe. Before you make your choice, consider the following:

Are there any infrastructure projects going on around where you want to buy?

Have a good look in and around where you want to buy your residential property. Infrastructure projects such as transport (extension of rails, bus transit roads, etc.) or job creation projects (mining, airports, etc.) in the area can lead to higher property prices.

Do you want to value the property yourself or get an upfront property valuation report?

A valuation report is an assessment of the property you want to buy to determine its value. Generally, your mortgage consultant can get you an upfront property valuation report within 3 to 4 working days. You can also value the property yourself but note that many banks and lenders won’t use the valuation.

Have you considered the type of the residential property you’re buying?

A lender’s decision is affected by whether or not a property can be readily sold. For example, many lenders are conservative when it comes to flood-zoned or bushfire affected properties.

Is the postcode of the location of the property on the bank’s restricted list?

Almost all major Australian banks and lenders have their own location guide or a postcode list they use to determine the maximum loan amount and lending policy for each area. The ‘restricted list’ includes high risk locations, e.g. high density areas or inner city suburbs. However, this may vary from lender to lender.

Has the residential property been inspected?

Ask your solicitor regarding this. You can negotiate a better price for the property if any significant problems like plumbing or floorboard issues pop up. Once you’ve got an idea of where you’d like to live and what type of property best suits your needs and lifestyle, what next? Well, no matter whether you’re buying directly from a vendor or you’re attending an auction, you shouldn’t put a deposit down until you’ve secured a reliable pre-approval on your home loan. For auctions specifically, you’ll have more confidence as a bidder and you’ll also have set a bidding limit depending on how much you’re approved to borrow.

2) Have you contacted a mortgage consultant?

Although not entirely necessary, this is one option without which you could have a tougher time in buying a home. Unless you’re buying the property with cash, there are many reasons why  organising a mortgage consultant is helpful in long-run.  Not only do consultants teach you how to buy, they also have a number of lenders to choose from and tend to have strong lender relationships to get you a great home loan deal. You can take advantage of their wealth of knowledge and experience and the best part is that their services are completely free in most cases!

In addition to a good consultant, Tom Uhlich recommends that first home buyers look for a qualified conveyancer.  A conveyancer or solicitor is a licensed professional who looks into the legal side of things when it comes to buying a home, including the contract of sale and ensuring that there’s good title on the property.

If you don’t know any good conveyancers, we have a list of recommended conveyancers that can help you buy the residential property you have your eyes on.

Do you want help planning to buy a property?

Not only can we help you plan to buy a residential property, we can also guide you through the entire home loan process up to settlement and even support you beyond this with regular mortgage check ups.

 

3) Have you worked out your expenses for purchasing a property?

Just in case you didn’t know, there are a few expenses other than the interest on your home loan when it comes to purchasing real estate.\

These ‘extra costs’ will usually need to be paid upfront:

Lender’s fees: Be sure to find out the costs involved with your mortgage before you sign up with a lender because they won’t be the same for all lenders.
Property valuation fees: Property valuation fees will vary from lender to lender. Generally, they won’t exceed $300 and in some cases, you may get the valuation done free of cost. You can also get an independent valuation done for a more detailed report but it will cost you anywhere from $50 to $300 in most cases.
Stamp duty: This is a tax charged by state governments on the purchase price of a property. It will vary from state to state but on average it costs about 3% to 5% of the property value.
Registration of transfer fees: These fees cover the registration of your property ownership with the relevant state office and will vary from state to state.
Inspection costs: Depending on whether you have building and pest inspections undertaken and the extent to which they’re required, these costs will vary.
Legal fees / conveyancing fees: You can ask your solicitor or conveyancer about the fees they’ll charge you to manage the conveyancing costs required for your new property.
Lenders Mortgage Insurance (LMI): When borrowing over 80% of the property value, most lenders will charge you what is known as LMI to ensure that they’re covered if you default on your mortgage repayments. The cost of LMI will vary depending on your lender and their requirements. There are even ways to avoid this cost completely.
Council rates: You’ll need to pay rates to your local council. These vary from council to council and state to state.

4) Have you prepared yourself to apply for a home loan?

Apply for a home loan, get approved, get the money and buy your home. Now if it were only that simple! Australian banks and lenders reject hundreds of applications all the time because the applicants either weren’t actually ready to take out a mortgage or they didn’t seem ready to the credit department.

Before you apply for a home loan, make sure you’ve got the following sorted out:

Home loan documents: When assessing a home loan application, banks tend to be very particular about the documents provided. You’ll need to provide income evidence like payslips, tax returns or a letter from your employer.
In some cases, you may also need an accountant’s letter, gift letter or any other documents depending on your situation and your deposit.
Good credit history: Most banks hesitate to finance bad credit applicants. Have you been paying your bills and debts on time for at least 6 months and do you have any black marks on your credit file due to defaults? Just one missed payment on an electricity or water bill can see your application declined.
Tom said that around 15-20% of the first home buyers that he’s assisted had a bad credit history.
If you’re in a similar situation or if you can’t provide all of the traditional documents for a home loan application, then a specialist lender may be able to help you.
Genuine savings: In most cases, you’ll need at least 5% in so-called genuine savings when borrowing more than 80% of the property value. Most banks typically consider genuine savings as money that you’ve saved over a period of time, usually at least three months. In addition, you’ll need to have a good income.
If you don’t have a deposit at all then you can borrow the full costs of buying a home without a deposit by taking out a guarantor home loan.

Ready to buy your dream home?

Call us on 07 3303 0111 or 0476 111 000 0r tom@bossmoney.com.au or complete our free assessment form and one of our specialist mortgage consultants can help you qualify for the right home loan for your needs as well as provide resources and guidance on the entire home buying process.


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WHY DO BANKS GIVE LAWYERS, ENGINEERS & ACCOUNTANTS SPECIAL TREATMENT?

Not many lawyers, engineers or accountants know this but Australian lenders have a bit of a love affair with you guys.
That make you feel strange, what we’re saying is that banks are willing to offer massive discounts on your home loan because they consider these professionals to be low risk borrowers with good incomes.

As former graduates, you know that getting a full-time job in your industry is pretty tough so if you’re working in your dream job right now, don’t you feel like you should be rewarded for your many years of study?

What home loan discounts can you get?

Well, for one, lenders are willing to lend you more than 80% of the property value without charging Lenders Mortgage Insurance (LMI), a one off free usually charged when borrowing more than 80%.
If you have a good asset position and are able to borrow less than 80%, then banks can actually offer you discounted interest rates that are way below the bank standard variable rate instead.
These offers aren’t generally advertised by banks so it’s best to speak to a mortgage consultant about these discounts.

How much can you save

LMI can amount to more than $20,000 for a million dollar property, so you could actually save thousands of dollars that you could use to go on a holiday, buy a new suit or, I don’t know, buy shares if you’re really boring.

What do you need to do?

As long as you’re a qualified, and you’re a member of an approved associations, you should be in with a good chance to qualify for reduced interest rates and waived LMI.
Some lenders don’t require evidence of your membership however they will require a copy of your degree or evidence that you’re currently practicing.

Not sure if you qualify?

Get in touch with one of our mortgage consultants and we can tell if you do!
Call 07 3303 0111, 0476 111 000 or complete our free assessment form today!

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