Forum Replies Created
Hi Lukey,
Is it just me or is property going to become literally unaffordable to future generations?
It’s a good question. I think it is a perennial question too. I recall hearing similar questions for the last decades that I have been aware of. Back in the day, 3 years of a wage would buy the average house (1950’s and 60’s). Things changed over time – probably as our options changed. e.g. As women going to work became the norm, prices rose to accommodate the extra income available. Or was it the other way around? Did women go to work as prices became higher – which was the chicken, and which the egg? I’m not sure.
I do recall hearing some time back that it took 3 generations for a Japanese family to purchase a family home. We’re not there yet, but are we headed there? Could be perhaps…..
Anyway, your question reminded me of an earlier post that pointed to a world map showing the “number of years of wages needed to buy a house country-by-country”, and I thought it is an opportune time to re-post that link. https://www.numbeo.com/property-investment/rankings_by_country.jsp
From that link, you can see that Australia now sits at around 10years of wages to buy a house. NZ is similar, but some other countries require 30 to 40 years of a wage to buy in their country. There is another map I have yet to find that allows you to hover over cities individually (e.g. Sydney, Melbourne, Adelaide, etc) rather than a country average. Here’s that link too. https://www.numbeo.com/property-investment/gmaps_rankings.jsp
Benny
Sad to say, not a lot has changed in the last three months – except that “Extinction Rebellion” protagonists appear to have gone to ground (thank heaven for that!!). Solar panels continue to be added to the grid. The more that are added, the more sensitive the grid becomes.
Think about this – the grid needs stability to prevent brown or blackouts. With more and more transient inputs added (i.e. they CAN’T operate full-time – their operation is thus transient) the ability of the grid to continue to provide a solid, unchanging 240v becomes harder and harder. Like, when it is broad daylight, coal generators aren’t needed so much as the solar input is providing power. Then the Sun goes down, and coal/gas must pick up ALL the slack…. Instantly !!!
Add to that, with Banks not lending to build more “fossil fuel generators” and the old ones needing maintenance (and some brain-dead States blowing up their coal-fired gennies), when will the existing base load generators fail, leaving us on our proverbial knees re energy? Solar CAN’T work at night – how will folks power their electric vehicles overnight?
Sorry – there are too many questions for mine re this so-called “green energy”. How much fossil material needs to be mined to CREATE these solar acreages in the first place? And don’t these panels have a lifetime of 10 years? What then?
Come in nuclear – you can’t come soon enough !!
Let’s highlight that interesting comment from the last post – it bears thinking about:-
if fossil fuels have led to wilder weather events, WHY would anyone in their right mind move to an energy source that depends totally on weather (solar and wind)?
Nuff said?
Tonight’s the night, Josephine !!! We’ll know the result then… if we don’t already know, that is (nudge, nudge….).
The main question is “What’s next?”
Benny
Hi Allan,
My thoughts would be to “Don’t overly complicate things”. I’m sure there will be people who will be happy to pay $200+ per week just to have a roof over their heads. I think if I were in your situation, I’d be setting a base price (let’s say $200 per room for argument’s sake) but have a flat rate for utilities. Maybe $20 per week flat rate – you then make up the difference with the bills.
If children involved, then sure, add an extra amount per child ($20/week?) By having a fixed amount stated, anyone taking the room knows their required input accurately and can say Yes or No to that amount. You pick up the difference (or pocket it) if utilities are more (or less) than the $40/week you get.
Note, the prices I quote above are realistic for Brisbane prices – you might choose a different base figure based on your area.
The above method saves arguments over power bills and who used what amount of water, power, etc. It also saves time getting all bills and then divvying them up, then trying to sell those divvied up amounts to the sharemates. It also saves nasty surprises if a power bill hits an abnormal high and they are only just scraping by with your roof over their heads. Give them a fixed rate (rent + utilities) that they can depend on.
Let’s see what others think…… :)
Benny
Hi Stargazer,
I’ve been playing with the figures you provided. I have sent you a Private Message with my findings. As I am not an Adviser of any kind, I’d rather keep the results under wraps until you find out if my thoughts were largely correct, in which case I wouldn’t mind sharing them on here (if you are agreeable).
For now, check your messages – you may find a nice surprise !!! ;)
BennyHi Heisenberg,
Oh, what I meant by roll over is – whatever my wife and I can save thru tax deductions (for investment property) to be used to replenish the funds (albeit not completely) that were used to cover rental shortfall and outgoings? Hope I’m not wrong to think this way?
Ah, now I understand what you meant, so thanks for the explanation. Right now might be just the wrong time to attempt negative gearing, as mentioned above, so do tread carefully.
By the way, with some folks “coming unstuck” around these difficult times, it may be that you may yet find a bargain, and help someone else to “move on” anyway. Not to be unfair, but folks have things go bad at times, and often they find they just want to clear the deck and start again. With home buyers struggling to find finance, they might need an investor (even if paying them less for their property) to buy them out so they can move on. By making an offer, you might be the only one doing so, and they may accept that lower offer rather than keep feeling the pain of a mortgage that has suddenly got way too expensive to maintain.
Do get with a Mortgage Broker or similar to check your finance availability before going searching though – you need to know your limit, eh?
Good luck,
Benny
Hi again,
Thanks for the extra info. I don’t know Melbourne at all, but I hear the situation for renters is dire throughout Aussie right now. Can that translate into having renters buy a little 1bdr? I’m not sure, as borrowing has also got harder with the HUGE increase in Interest Rates over the last 12 months or so.
If an opinion helps, 1bdr’s were always the “poor cousin” of RE investing. They were always harder to sell in times gone by – but today, with everything else now so expensive, perhaps the timing is right for a sale. The lower price point helps someone with less deposit saved. They may also be sick of paying ever-increasing rents too, helping them to decide on saying “Yes” to your place. So if ever there was a good time to sell a 1bdr, this could be it.
I can’t comment on the FSBO aspect as I’ve never done it. I also don’t hear of it much in Aussie, but perhaps Melbourne is different? Anyway, good luck with the sale,
Benny
Hi Heisenberg,
Yeah, wrong time perhaps eh? The current situation has the costs of building, buy prices, fuel, rentals, insurances, and interest rates, all going through the roof. Now an increase in rental helps your situation, but everything else hurts it. The big mover (for me) was the astonishing climb in Interest Rates.
In years past, a Central Bank would lift rates two or three months in a row, then sit back to see the effect before lifting more. Not this time – we have 12 lifts in 13 months – they didn’t allow folks to come up for air !!! Interest Rates on most IO loans went up by around 150% !!! This of course has people struggling to keep a property positive geared. Like, can one seriously put their rental rate up 150%? But as you would know, rents HAVE soared recently, but nowhere near enough to offset the increases in Interest. Thus landlords sell, and some folks renting are now living in cars.
Then there’s the “mortgage cliff” awaiting anyone who has a Fixed Rate loan coming due for refinancing soon. i.e. They were on a Fixed Loan with Interest around (say) 3% and now can’t get a 7% loan (with the lenders wanting proof the lendee can handle a further 3% on top of that – eek). What happens to them?
What MIGHT happen if enough can’t refinance is that more homes will appear on the market, and prices may start to drop again. But I wouldn’t hold my breath on that either. What I think is more likely is that the RBA will realise they have forced the economy into a recessionary state, and that they will see the error of their ways and cut rates again.
I was bleating about the RBA since they first raised rates in 2022 – hoping they might read this forum (yeah, right) and realise their errors sooner (go here to check it out if you wish – https://www.propertyinvesting.com/topic/5083103-how-does-an-increase-in-the-rbas-cash-rate-help/ ). I think they should have raised rates off that Emergency Setting of 0.1% around the time we first had employment under 4% (about 18 months prior).
So I don’t think you are doing anything wrong, and putting aside $$ is always a good move ahead of any new investment venture. Meanwhile, why not read around to glean some ideas of how others have succeeded. e.g. check out some good books, forum posts, go to seminars, etc to round out your knowledge ahead of that time.
Oh, and this comment of yours has me scratching my head – “…. and then roll over the next financial year?” I was wondering just what that meant. What were you planning to “roll over”? Oh, and do check out Offset Accounts if you are saving $$ – these are such a benefit if used correctly. I hope you are using one already. :)
Benny
Hi Stargazer,
As you said to Steve, ( “i probably am lucky to be where i am asset wise,” ) I think you have done pretty well to accumulate what you have despite the problems faced. So, what now? I guess that is your question, right?
Straight off, I have one or two to ask you – if you provide answers, they might light your way somewhat…… here goes:-
1. Dates of purchase (roughly) of these properties, and dates of changes from PPOR to IP, etc. These dates may be significant…..
2. “About half” in your Offset – was that half of val, or half of the mortgage owing?
3. From the few figures I see, these look to be positive geared today – is that right? i.e. they don’t cost you to own any of them?
An old saying heard in my earliest investing days – “If you don’t sell, you don’t owe CGT” On the surface, perhaps that is you today ???? Can you hold these? Are they covering maintenance, insurance, rates, RE fees, etc and still putting money in your pocket?
I’ll leave it at that for now – interested to hear back from you, ;)
Benny
Hi Ceegee,
I believe you have it right, but that is simply an opinion I have, based on reading articles from others who KNOW. Hopefully someone with the proper credentials will come by to provide a proper response. That is not me – sorry,
Benny
Hi Red and Jane,
First off, which city the unit is in would likely make a difference to any answers. e.g. I wouldn’t be suggesting auction in Brisbane (where the usual “sold at auction” rate is around 50%). That might work better in other centres, of course. Also if you give an area of a city too, that might help give more context.
$7k plus 2% sounds way off to me. But then, I’m from Brisbane, where a $350k property’s RE commission would be somewhere near $9k total, and not $7k plus another $7k. Of course, that quote might be RE speak for “an auction campaign” where they (supposedly) spend heaps on advertising and promoting ($7k? – yeah, right) and then charge you a further $7k on sale.
I’ll leave it at that for now – let’s see if others have more ideas,
Benny
And just this morning, our local paper has found figures that confirm that some investors are bailing out (often just to save their own homes) as things are just getting too tough.
Apologies if this needs you to register with the CourierMail or buy to read it. I have a subscription, so I just read it. To help though, here are a few salient points from the article:-
– Landlords are fleeing the market as the financial stress of meeting rising mortgage repayments worsens, only putting further pressure on the rental supply crisis. The portion of investor-owned property sales across Queensland ballooned to nearly a third of all homes sold in June — jumping about 8 per cent in just one month to 29.5 per cent — higher than any other state, according to new research by PropTrack.
– Industry experts say property investors are selling because they can no longer afford rising rates, increased management costs and new government regulations.
– The Queensland government implemented new legislation that came into effect on July 1 prohibiting landlords from increasing rent more than once a year. Back in June 2022, it also introduced legislation that would calculate land tax based on an owner’s entire Australian property portfolio, rather than solely on properties held within Queensland. That announcement triggered a strong backlash, prompting the government to abandon the proposed changes in September last year. But MCG Quantity Surveyors managing director Mike Mortlock said the damage had already been done.
– government disincentives and negative sentiment towards property investors were forcing investors to sell up
– Brisbane mortgage broker Glen Barnes of Barnes Finance Solutions said mortgage repayments now “far exceed” rent returns. “Generally speaking, investment property holdings for some owners is now too much coupled with the mortgages on their principal places of residence and other general cost of living pressures,” Mr Barnes said.
How are things where YOU are? With rental vacancy rates around 1%, and this article showing it may well get worse, I shudder to think where we’ll be next year. Along with a fresh RBA, a fresh State Govt wouldn’t hurt – some of their brain-dead antics have helped fuel this disgrace.
The only question now is “WILL the RBA do nothing, or will they continue with their brain-dead antics and lift rates yet again?” You and I know what they should do, but time will tell.
The news today is that the rates remain on hold for another month – or is that 6 weeks (given that the “new look RBA” is talking of having just eight meetings per year instead of eleven as it has been).
Whatever, with one voice on local radio saying that “Those on a mortgage cliff that currently pay $3100 a month on their mortgage will soon be paying $5000 a month, thanks to the Interest Rate increases applying once their Fixed Rate expires.” So, a 60% increase !! I hope they’ve had a good wage increase recently.
I hope the RBA keep up with the recent practice of leaving the cash rate on hold while we wait to get news on inflation figures as the months pass.
Benny
An interesting article arrived in my Inbox today – it came courtesy of an ABC news reporter in this article:-
The report contains an interview with Sebastian Watkins, the co-founder of Lendi who said this – “Lendi merged with Aussie Home Loans in 2021. The combined group now has more than $100 billion in loans. And not all of the customers are going to be able to keep their houses. It’s a substantial shift, you’re talking about some people paying 3 or 4 per cent more on their mortgage … overnight,” Mr Watkins says. (Is that perhaps the “Understatement of the Year”?) His focus was on the mortgage cliff ahead, as folks come off a low Fixed Interest Rate onto current newly-high variable rates. But it was that “3 or 4 percent” that always gets me…..
3 or 4 percent? Of course, he is right, and yet he’s not right too – as (you’ve read it here before) that “3 or 4 percent” is likely to morph into 100% or more once that miniscule 3 or 4 percent is added to their mortgage interest rate.
Mr Watkins also said “I think it’s incredibly concerning – I don’t think we talked about it enough, there’s going to be a severe amount of whiplash.”
For sure, powers that be should be talking about, or at least thinking about it. The RBA in particular.
A quote from a local investor reads thus: “CBA reckon that only about 60% of the recent hiking cycle has been passed through to the market, thanks to the insulation of fixed rates. That means that the RBA can do nothing, and there’ll still be a substantial amount of tightening to come, which is also why they SHOULD do nothing. Inflation is easing, households are feeling the pinch, and there’s still more to come.”
The only question now is “WILL the RBA do nothing, or will they continue with their brain-dead antics and lift rates yet again?” You and I know what they should do, but time will tell.
Hi Justin,
I haven’t used them. Didn’t know of them until today, but I took a look at their website since you asked the question. Here’s what I gleaned from the site
It appears to me that they may only sell new homes, which is always a caution in my book. Not always, but a common “hook” from some marketeers is to “sell” the Tax Benefits of a new property with large “Write-off” dollars available to help to minimise your Tax. What is not mentioned is how buying in a new area can see no or low Capital Growth for several years. Also, be sure you know what other similar developers are offering for similar properties. All part of due diligence, but a slick Sales routine might have you rushed through the process, so always beware of that one.
I noticed they were “giving away a car” which had my antennae tingling…. Why does a property developer offer a free car to one lucky user of their services? Hmmm……. Who pays for that?
Re-iterating though, I don’t know of them – just a general warning to look for certain signs to be sure the firm you choose appears to be one of the good guys. :)
I hear this morning that Philip Lowe’s contract will not be renewed come September, and that a new governor will be announced later this week. I’m not sure if it fills me with confidence just yet, but time will tell. I imagine Mr Lowe will remain around until September anyway, occupying the Governor role for two more months. After that, who knows?
At least by September we should have a fair idea just how things are travelling economy-wise. But that won’t stop the RBA from lifting rates in Aug and Sep if the mood takes them….. Hopefully though, this change might haul them up for a bit and allow them time to contemplate their respective navels.
Here’s hoping…….
:)
Ladies and gentlemen, introducing Judith Curry :-
https://www.youtube.com/watch?v=i4YUnZIKneY
This lady is a climatologist who has some very pertinent views to share. I especially liked the part from about minute 26 where she mentions two useful alternatives to wind and solar. One interesting point she made was this – if fossil fuels have led to wilder weather events, WHY would anyone in their right mind move to an energy source that depends totally on weather (solar and wind)?
Further to that, she mentions both the hugely increased amount of mined materials that are needed to create (what is it in Australia today) 22,000 solar panels PER DAY for the next 7 years, plus the fact that these require vastly greater areas of land for both the placement and the subsequent transmission lines for these solar or wind farms.
All in all, it is the frantic rush with little cogent thought around the whole subject that is leading to doubtful decisions being made in the political arena on the subject of power.
Hi Toby,
An interesting question, and some good thought behind your words.
I feel like when the mainstream media harp on about something this much, there’s usually an agenda, and the opposite of what they’re saying is true.
Hehe, I wondered if your comment was too kind to the mainstream media – my thoughts re many of them is that they have no idea, in which case forget an agenda. :) But then, there are some good commentators, and I think it can be worth considering their views.
I heard just yesterday that Westpac are looking at adjusting their Qualifying Rate (and about time too in my book). Back in the day, 2% was the normal QR, and I believe it made sense to increase it to 3% as the Cash Rate dived to unheard of levels (0.1%? Such a brain-dead move in my book). Why was it EVER deemed to be sensible to go THAT low?
Anyway, back to the QR – for those new to investing, the Qualifying Rate is applied by lenders to your situation as you apply for a loan. They take the Interest Rate of the day and add 3% to it – if your income and other figures still say “Yes” to getting the loan, then you’re good. The problem today is that, after a period with such low rates, and new borrowers taking on new loans, and THEN having their Interest Rates increased by 160%, they strike problems. Even if they have Equity in their houses, a lender will add a further 3% as they consider whether to grant a loan. In my view, with the Cash Rate having screamed upward, surely it is unlikely to go a further 3% higher any time soon. So, why keep it so high? Go Westpac !!
Of course, Toby, there is always “the other side of a story” and lenders still WANT to lend. Hence Westpac’s move – will others follow? Hmm, it’s perhaps likely !! And then, perhaps Labor will NOT renew Phillip Lowe’s gig come September – what will THAT look like? Could it be that Rates may go down again, especially if it appears that we are heading for recession? Perhaps the new Governor won’t be so hellbent on getting Inflation down to 2% overnight. But then, the rest of the world and its situation will play a part in our economy too. Maybe we CAN’T reduce our rates as we still want to attract investment.
As always, things morph as time passes. Just HOW things will morph is yet to be seen. There are WAY more inputs than just one thing that affects the path into the future when it comes to an economy. Consider the thoughts so far that have been espoused in the media. Houses were going to crash during Covid – they dropped (for three months) then off they went again in a boom. Today, even as Cash Rates rise, property (for now) is still increasing in price all over. As are Rents.
Now my question is, when these mortgage cliff victims have to sell their homes, where do they go? They still need somewhere to live. So they rent, propping up the rental market, or buy elsewhere, which changes nothing. So will the overall market really be hit that badly?
My crystal ball is cloudy right now, but I think it is good to consider all sides when making a call. And keep looking for deals that are around that fit with your situation. Best I can think right now is to quote my recollections of Steve’s teachings – i.e.
Look to make the quickest profit in the shortest time, for the least risk and lowest aggravation. AND
Always have an Exit planned before buying in to a property AND
Do deals that make money not lose it (ie.. don’t negative gear) AND
Success comes from doing things differently… (to most others?)
I know he says a heap more, but those few will keep you on the right side of the equation. And by the way, Toby, that was a great question. I’d love to see others’ views re the same.
Benny
Hi Toby,
You’ll be pleased to know that I’ve talked with Steve’s finance man, Chris, and he will be contacting you to discuss your situation.
In short, I gathered from Chris that what you want to do IS possible, just like Steve has said in the book, but that there are “rules and/or limits or ways to go” that Chris will advise of. After that, I figure you’ll be in a much better place of understanding.
And for anyone else having concerns about “Will this work?” do take the time to contact Chris (or someone else like him) so that you can KNOW just how it does (and perhaps doesn’t) work. It might not work for all people in all situations, but it certainly does work for some. Is it for you?
Benny
PS And yes, I recall the phone number changed a few years ago – the new number is now 03 8592 0270. You’ll be able to make contact via that number. Just leave a message if it goes to voicemail.
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This reply was modified 10 months ago by
Benny. Reason: Adding the new phone number
Hi Charlie,
Thanks for that info. And Toby, why not follow the book’s invite and check this all out with Steve’s Finance guy? The book had a link that should still work. If you have any issues, come back on here.
Benny
PS I checked out the “Big Picture” topic and found a link that may hold a lot of useful info re Trusts – go here:-
Hope it helps !
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This reply was modified 10 months ago by
