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Thursday, April 23 2015

With the property market on the move getting to a 20% deposit is a major challenge. Particularly when you consider Brisbane’s median price is heading towards $500,000.

By the time you get to your $100,000 the market could have moved on another $50,000 or $100,000. So you are forever playing catch up.

Buyers also forget the other costs like stamp duty, conveyancing, bank fees etc which can add up to around 5 - 7% of the property’s value. So for your $500,000 property you may need more like $125,000. Again as prices rise these cost will push upwards.

Even for first home buyers once the price gets above $500,000 stamp duty kicks in.

People think of mortgage insurance as a dirty word but the reality is it is just a means of getting into the market sooner. In some circumstances it is possible to purchase a property with just a 5% deposit plus costs. In other words $25,000 plus other costs.

What is mortgage insurance?

Mortgage insurance protects the bank or lender, should a home loan go into default, guaranteeing that the lender will get its money back if the property needs to be sold and there is a shortfall in repaying the loan.

While a 20% deposit generally provides a good buffer against any drops in property value over the life of a loan, mortgage insurance can also provide the same protection, meaning borrowers can purchase property with a smaller deposit.

How is it paid?

The insurance premium is a one-off payment, and in many cases it can be added to your loan and paid off progressively over the life of your loan.

The premium payable is determined by both the loan amount and the loan to valuation ratio. The higher the loan amount and the higher the loan to valuation ratio the higher the premium.

What’s in it for you?

In a rising market it allows buyers to get into the market sooner. In the time it takes to save a higher deposit amount, property prices may well have surged by more than cost of the insurance so, for some properties and purchasers, it can make good financial sense to purchase earlier even with the added cost of mortgage insurance.

To find out if mortgage insurance would be beneficial to you contact us today.

Posted by: Greg Carroll AT 11:37 pm   |  Permalink   |  Email
Wednesday, April 22 2015

A major driver of Sydney's phenominal property price growth has been the Chinese investor market. While many local buyers have found themselves priced out of the market cashed up Chinese buyers have been driving the market. But with median prices nearing $900,000 and yields falling below 3% the value proposition is becoming questionable.

This has resulted in a shift in focus with Brisbane emerging as a desirebale market for Chinese buyers. Prices are affordable with a median still below $500,000, major infrastructure projects are underway across the city. Brisbane’s accessibility to quality universities, major employment hubs and its clean lifestyle with an abundance of open spaces were major drivers for the Chinese to purchase in Brisbane.

A number of businesses that specialiase in assisting Chinese investors have advised a significant increase in activity. One advising 90 properties were sold in the last week.

The Brisbane market has been steadily trending upwards for the last year and half but this significant "buyer block" has the potential to change the game and create additional upward pressure on prices. 

Posted by: Greg Carroll AT 12:52 am   |  Permalink   |  Email
Monday, April 20 2015

The outcome of the next Federal election could have a bearing on the likely direction of negative gearing. 

Prime Minister Tony Abbott has quashed speculation over the future of negative gearing by promising there will be no changes. "Yes," was his answer when asked on Thursday whether he could rule out changes to negative gearing.

However Shadow Treasurer Chris Bowen said it would be "irresponsible" to rule out changes to negative gearing before the election. 

Mr Bowen indicated that Labors policy may be that only buyers of new property may be able to access negtaive gearing benefits. He has indicated those who already hold investment property would not be effected. This also clearly seems to be the view of the government.

I think the message is if you want to take advantage of negative gearing and enjoy the tax benefits associated with property investment the time to act is now before any changes come into effect. The Federal electon is due next year so there is not a great deal of time left.

Contact us to discuss your investment plans

Posted by: Greg Carroll AT 05:06 am   |  Permalink   |  Email
Monday, April 20 2015

(Source: AFR)
Australians who believe $1 million is enough for a comfortable retirement are in for a rude shock, according to one of the leading providers of retirement incomes.

Superannuation industry veteran and chairman of retirement income at Challenger, Jeremy Cooper, said if the typical $1 million nest egg was used to buy a lifetime income in the current interest rate environment, it would fetch about $1297 a fortnight – the same as the government pension. 

"Assumptions and assertions that $500,000, or even $1 million, in super, in the current environment, will guarantee a comfortable retirement are suspect," Mr Cooper, chairman of retirement income at Challenger, argued

"The brutal reality is that a fair price for an age pension in today's interest rate environment is around $1 million. For that amount, a couple will get $33,717 of income a year. A comfortable retirement would cost more."

Debates about superannuation tax concessions risked misleading the vast majority of Australians who view their superannuation in terms of lump sum payouts instead of reliable income streams, he argued. 

Mr Cooper's statement comes after the government's intergenerational report found that by 2055, Australians' life expectancy would have climbed to 95.1 years for men and 96.6 for women, compared with 91.5 and 93.6 for people born today – reflecting the need for more retirement planning. 

Current low bond and interest rates would severely affect the returns of investors, many of whom are preparing for a lump sum windfall instead of steady income. 

Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia, agreed $1 million is not an adequate amount for a comfortable retirement and said super assets below $2.5 million should not be taxed – to boost their savings. There was also not enough focus on setting up reliable income streams, she said. 

Posted by: Greg Carroll AT 04:43 am   |  Permalink   |  Email
Friday, April 10 2015

It is of no surprise that the profile of private rental tenants has changed dramatically over the past 30 years with an increasing number of families with children and older people renting for the long term.(AHURI) Australian Housing and Urban Research Institute at Swinbourne University of Technology is being used to inform government policy. The number of households in the private rental market doubled to 1.8 million over the past 30 years with the biggest growth in Queensland and the ACT,according to a bulletin based on research released in February.

Families with children represented more than 40% of renting households in 2011, a much higher proportion than in earlier decades, the bulletin noted. The number of group households has also risen,with more than one in ten private properties being rented by unrelated housemates in 2011,up from just over one in 25 in 1981 Traditionally single tenants and young families made up the largest proportion of renters.But renters to lone person households fell to one quarter in 2011 from just over 40% in 1981 Renting households are also getting older.More than half of renters were over the age of 35 years in 2011 compared with around 40% in 1981.

"While the age profile of households in the private rental housing remains young relative to all households,the median age of household heads is growing more rapidly than for households in general.This is likely to lead to the private sector being home to larger proportions of elderly households in the future" the bulletin noted. For your investors,the findings suggest properties that would suit families with children or appeal to older people will be the ones most in demand,perhaps increasingly so in the future.

Posted by: Greg Carroll AT 09:12 pm   |  Permalink   |  Email
Friday, April 10 2015

The number of Australians aged 65 and over is projected to more than double by 2054–55, with 1 in 1,000 people projected to be aged over 100. In 1975, this was 1 in 10,000.

Australians will live longer and continue to have one of the longest life expectancies in the world. In 2054–55, life expectancy at birth is projected to be 95.1 years for men and 96.6 years for women, compared with 91.5 and 93.6 years today.

The average annual rate of growth in the population is projected to be 1.3 per cent, compared with 1.4 per cent over the past 40 years.

By 2054–55, the participation rate for people aged over 15 years is projected to fall to 62.4 per cent, compared to 64.6 per cent in 2014–15.

The number of people aged 15 to 64 for every person aged 65 and over has fallen from 7.3 people in 1975 to an estimated 4.5 people today. By 2054–55, this is projected to nearly halve again to 2.7 people.

Female employment is projected to continue to increase, following on from strong growth over the past 40 years. In 1974–75, only 46 per cent of women aged 15 to 64 had a job. Today around 66 per cent of women aged 15 to 64 are employed. By 2054–55, this is projected to increase to around 70 per cent.

During the 1990s, Australia's productivity grew at an estimated average rate of 2.2 per cent per year. Today, Australians produce twice as many goods and services for each hour worked as they did in the early 1970s.

The economy and incomes are projected to continue to grow, but at a slightly slower rate than over the past 40 years.

Posted by: Greg Carroll AT 08:48 pm   |  Permalink   |  Email