"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."
Monday, April 20 2015
(Source: AFR) 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 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.
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.
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. Thursday, March 26 2015
Credit scoring Of course what affects your credit score is a closely guarded secret but over time lenders have let a little bit slip here and there. Pre-approvals are worthless And don’t even get me started on online loan calculators. As we discussed in our last newsletter what your income is and what a lender is prepared to use are two different things. I think the approach most lenders adopt is when someone makes an initial enquiry they just say yes. That way there is a strong likelihood that person will come back to them for their loan if they sign a contract. And the lender gets first shot at it. If the loan is declined or then modified from what they first advised it’s no skin off the lenders nose they just move on to the next deal. Lenders want you to fix your loan Most fix rate loans also stop you paying off the loan too quickly. Lenders pay big money to interest rate strategists to work out where rates are heading and where the cycles are. Fixed rates are designed to make you pay a higher cost of funds than if you stayed on variable. Your chances of winning the bet are very low. If you don’t believe me go and have a look the Big 4’s combined net profit. Lenders want you to cross-securitise It’s not all about the rate And then there is the cost of mortgage insurance – this can vary by several thousand dollars between lenders. You’re too old Valuers dictate the market Many lenders acknowledge privately that valuers underscoring properties and being inconsistent in their valuation methods has become an issue and are killing good quality property transactions but no one seems to be prepared to do anything about it The important this in all this is to get appropriate advice. We work with an extensive range of lenders and are familiar with all their different rules, policies and approaches. This means when we work with clients we give them a realistic appraisal of their options and ensure that the structure that is put in place is designed to benefit them and not the banks. Contact us for an initial chat to discuss your home loan requirements Thursday, March 26 2015
Demonstrating your ability to meet loan repayments and repay the loan is essential to successfully qualifying for a loan. Therefore a key factor will be your income. However what you actually earn and what a lender will allow in terms of assessable income can vary significantly and have a dramatic effect on your borrowing capacity. Below I’ve covered some of the general criteria lenders use to assess income. Employment Full time and permanent part time If you have a history of changing jobs or profession on a regular basis then this could go against you. Casual Self-employed or contract worker Working in a family business Income In terms of income lenders are trying to establish regular and reliable sources of income. So if you are an employee, have been in your job for some time, and are paid the same amount week in week out then 100% of your base gross income will be considered. The areas where it becomes greyer are as follows: Overtime If it is not industry standard then two years tax returns or group certificates plus a letter from your employer may be required. Commission/Bonuses If you have been in your position for less than 12 months this it is likely only your base salary will be considered. Car allowances Some will lenders will only allow 50% to be used or will simply have a dollar cap that is applied. Self-employed and contract Rental income from investment property Rent received from boarders Dividends from investments or share trading Child maintenance Centrelink payments You can see from above what you actually earn and what can be included for assessment can end up being quite different. And this can vary significantly from lender to lender which is why it is important to talk to a specialist like us who has access to an extensive range of lenders and understands where you position will be more favourably assessed. Greg Carroll is an expert on the area of finance with over 27 years’ experience in finance and business strategy. He is an active investor in property and shares. Holds qualifications in Economics, and Finance and Investment. And has written a number of books in this area including Home Loan Secrets and 17 Sins of Cashflow Management. Thursday, March 26 2015
Before you take on any type of borrowing it is really important for you to determine what you can comfortably afford in terms of loan repayments, irrespective of how much a lender will allow you to borrow. Just because you can qualify for a certain loan amount doesn't necessarily mean that is what you should take on. Lenders assess your capacity to repay as at today. Other than factoring in a small interest rate buffer they do not factor in other future events such as having children, school fees, medical bills, increased petrol prices etc. Most will make an allowance for living expenses based on the number of people in your household, but these expenses are based on averages. They do not factor in costs like private health insurance or cable television. Budget planning gives you greater control over your finances. It can put you in a position where you have money available to meet your all your expenses so you are not “chasing your tail each month.” Also once you have your finances under better control you will then be in a position to start building your wealth. How much money you earn has little bearing on how wealthy you will be. I regularly come into contact with people who have six-figure incomes but have ten of thousands of dollars in debt racked up on credit cards, and almost no equity in their house. If their income was cut off tomorrow, they would end up with virtually nothing. On the flip side I often meet people who are on modest incomes but have good equity in their house, clear their credit card each month (or often have no credit card at all), and are steadily building an investment portfolio. And do you know what? These people aren’t frugal with their money…they’re just smart with it. The only difference between these two groups is one has a disciplined approached to their finances. So the first step for you is to decide which one you want to be. If you chose the later then read on. If not I wish you well. So how do I set up a budget? What you ideally need to do is review your current income and expenditure and put it into a spread sheet over a 12 month period. To get an accurate picture you should get around 3 to 4 months of your bank and credit card statements and record every item of expenditure – alcohol, fuel, groceries, haircuts the lot. Try to get it down to the last cent. Importantly make sure you record the actual timing of when income comes in and when expenses are actually paid. For example if you pay your electricity quarterly then record the expense in the month it is due, don’t just spread the cost over 12 months. The reason you are doing this is so that you can see the peaks and troughs in your expenditure. You will probably find that you have a lot of expenses in some months and not as many in others. People often find themselves short of cash because they spend up in the months when they don’t have many bills coming in, but then don’t have anything in reserve when the bills do arrive. Once you have done this, review it and make sure you haven’t missed anything. Also make sure you put in an allowance for holidays, birthdays, Christmas presents, and other occasions. It’s amazing how these can add up. I guarantee if you haven’t done this before you’re in for a big shock. You will probably find you are spending far more in certain areas than you thought. You will probably also be surprised to see how much expenses such as insurance can add up. Once you are sure you have recorded everything, you should then sit down and review your budget. What you are now looking for are areas you can cut back on or improve. This is going to be different for everyone but I guarantee in most cases there will be areas where you can make savings. Do you really need cable television? Could you cut back on takeaway? Is it worth shopping around for some competitive quotes on insurance? Hopefully once you go through this process you should find that there is something left over from your income. If not you may need to go back and review your budget. If you already have a home loan or lending this may also be a case where it is worth reviewing your finances as a restructure may assist in reducing your expenses further. Once you have completed this process you should have a clearer picture of the level of repayments you can comfortably afford. Once you have your budget mapped out you can then adjust it along the way as your circumstances change. If another expense comes up you add it to your budget. In this way you can see where you are going and identify any potential trouble spots before they occur. If you could see that things were going to be a bit tight in two months time because of a number of bills coming up then you might curb your expenditure a little bit now to compensate. Seeing what is coming in advance means you can make small adjustments along the way rather than being forced into drastic action. Contact us to arrange a review of your home loan. You might be missing out on significant savings. Greg Carroll is an expert on the area of finance with over 27 years experience in finance and business strategy. He is an active investor. Holds qualifications in Economics, and Finance and Investment. And has written a number of books in this area including The Property Investment Bootcamp, Home Loan Secrets and 17 Sins of Cashflow Management. This information is provided in good faith but is not intended to be comprehensive and does not constitute specific advice. The above information does not take into account individuals specific circumstances. MTA Finance Australia Pty Ltd accepts no responsibility or liability for anyone relying on this information. You should always seek independent advice in relation to your specific circumstances. Thursday, March 26 2015
Dos 1. If you travel to inspect or repair your property, or to collect rent, you may be able to claim the cost of your trip. Don'ts 1. Do not claim travel expenses that are incidental to the main purpose of the trip. For example, if you pick up rent on the way to work, because the main purpose of your trip is private and you cannot claim any cost of this trip. Tuesday, March 24 2015
Housing affordability is declining in Brisbane. In 2012 85 out of 173 suburbs had a median price below $550,000. This has now fallen to 73 suburbs, or 42.2 per cent. And only 40 suburbs priced at $500,000 and below. Monday, March 23 2015
(SOURCE: Property Observer) A CLSA analyst says interest rates in Australia will be less than 1% within two years and could even go to zero. Christopher Wood, the managing director and chief strategist of the Asian-based equity broking and investment firm, made the forecast in an interview with The Australian Financial Review. "I think less than 1% within the next two years. They are going to end up a lot lower than people still imagine," said Wood. The AFR notes the most recent Bloomberg survey of economists indicates an average interest rate forecast of 2% for the end of the year and the first quarter of 2016. Wood told investors to sell US mortgage securities before the subprime disaster. "It's not whether interest rates go up, it's whether Australian interest rates go to zero," Wood said. "When I was in Australia 15 months ago everyone thought that interest rates had bottomed and were going up. But now there is greater awareness among fund managers that it is going to stay lower for longer." Wood said the drop in gross domestic product means the Reserve Bank of Australia needs to keep cutting interest rates, but it is caught in a difficult position. "The issue from Australia's central bank standpoint is that it doesn't want to cut interest rates because of the housing market which, from a value point of view, is overextended," he said. "You do have asset price rises driven by Chinese buying. But the bank is under pressure to cut rates, so I think it will have to come down to macroprudential controls and they are very political." Friday, March 20 2015
Two recent reports have flagged the strongest areas for price growth in Queensland. The results will no doubt be a surprise to many as they bust some myths about the best areas for growth. The latest data from Real Estate Institute of Queensland (REIQ) reveals that Ipswich ranks as the strongest Queensland price growth region. Ipswich's median house price increased by 6.7% over the quarter, the largest gain recorded by any area across Queensland. Brisbane’s while improving only moved by 3.4% over the same period. Meanwhile Hotspotting’s latest price predictor report has Logan City as the number one predicted growth region in Australia. The Price Predictor Index is a tool based on trends in sales volumes which provide an indicator of future price movements. Logan City has more growth suburbs than any other Local Government Area in Australia with 4 of the nation’s top 30 rising suburbs. Hotspotting puts Logan’s performance down to its affordability, good road and rail links, proximity to jobs nodes, and abundance of schools and shopping options. These reports again bust the myth that the closer you are to the CBD the better the growth. Unfortunately many would be investors turn their nose up at areas like Ipswich or Logan City because of preconceived ideas about the market or potential tenants without any actual data to back up their beliefs. I’m not certain of the origins of this myth but often when we ask people what their investment plans are – many say they want to buy close to the city because they believe that’s where you obtain the best growth. Our own research tells us that good growth opportunities exist in many places and if you limit your focus to inner city only then you are cutting yourself off from significant upside gains. For property investment advice find out about our Property Investment Service What are the things you need to know before you invest in property? Click here |