The national prices fall about 10 per cent from their peak – the second-largest slump in 43 years – seems to have stalled in Feb! (AFR)
CoreLogic’s five capital city index has gone sideways.
Why?
However there is still a lot of pain on the horizon
Home buyers with big mortgages are on pain
Why I think there will be a lot of pain on those that have taken on huge mortgages on their own homes
Interest rate increases have yet to hit on one-third of all home loan borrowers are on fixed-rate products. A total of $350 billion worth of mortgage debt (close to 900,000 loans), will shift to variable rate in 2023.
These borrowers will be smashed by a huge increase in their cost of capital, which in most instances will jump from about 2 per cent to 6 per cent - causing pain
Inflation is on the rise
We’ve been spending like it is 1999 and quickly burning through the saving buffers.
People are spending more than they are earning!
Only 40 per cent of borrowers are less than three months ahead on their repayments. A big chunk of our society is very vulnerable indeed.
High risk premiums are lower than they should be .
An increase in interest rates are cushioned by tax deductions available and an increase in rentals!
But ….Purchasing Power and serviceability has crashed 33 per cent to date.
This could be an opportunity of sharing capital growth with those that have deposits with those that have cash flow!!
Property is still a great investment in Australia, and in my view will continue to be
It will be interesting to see the governments experiment on partnering with those who can’t afford housing . The shared equity housing scheme
Maybe investors should take note on what the government is doing! Personally I think shared equity is genius and a win win win for all
Government are planning to release 1 million new homes across Australia to deal with housing, social, and economic challenges facing the nation.
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Rental properties are scarce and rising and property prices unaffordable and unobtainable for most millennials with no help from their families .
According to the powers that are managing the $10 billion housing future fund, what is needed is more investment from the private sector in affordable housing, , faster zoning, planning and more land release by state and territory governments, particularly around “well-located” state land near train stations and TAFE campuses.
Challenges
- low level of experienced local labour
- inefficient productivity practices across construction and bottlenecks in supply chain
How do you solve these wicked problems ?
'Greenshots' - the 21st century equivalent to the last century's 'moonshot' success. Share 5 areas the industry MUST focus on to solve this challenge:
1. design buildings and products for disassembly with sustainable, circular materials;
2. shift from product to materials centric operating model (placing materials at the core of precincts and ventures);
3. deliver products-as-a-service putting responsibility back onto brands vs customers, governments, and citizens when dealing with all forms of waste (i.e valuable resources);
4. shrink the manufacturing and service via (micro assembly service centre operating model), across each city and region across Australia; and
5. sustainable, circular finance backed by trusted layer of transparency around materials usage across your network of products, cities, and precincts.
Some of the things the government is doing
Treasurer Jim Chalmers and the state treasurers to meet to solve these wicked problems
Up to $500 million a year will be used to build social and affordable homes, repair and maintain housing in remote Indigenous communities, provide transition housing options for women and children leaving domestic violence, and fund specialist services for veterans experiencing homelessness.
Collins said of the 30,000 homes to be funded under the scheme, 20,000 would be social housing, of which 4000 would go to women and children leaving domestic violence or older women on low incomes at risk of homelessness.
Helping 10,000 essential workers such as police, nurses and cleaners enter the property market by co-investing with them
#constructionindustry #builtenvironment #homes #cities #greencapital #proptech #circulareconomy
Since 1988 average wealth per Australian has increased from $50k per person to $550k .
It’s interesting to note that property prices have doubled every 10 years .
Has the majority of Australian wealth increase been largely as a result of property price gains .?
If average property has increased from
150k in 1990 to 300k in 2000 to 600k in 2010 to 1.2m in 2020
Do you plan to purchase a property in next 5 years ?
Skyrocketing home prices and increases in mortgage rates have diminished first homeowners down payment and buying power.
Forbes suggest that you shouldn’t pay more than 25% of your monthly after tax income on mortgage payments.
According to BetaShares modelling - 42.8% of Income is used to pay mortgages with the national house price now 6.2 times the average after-tax annual household income!
Mortgage rates in Aus have increased from 2-3pc to 5-6pc
Mortgage rates in USA are in 7s and in South Africa in the 10s!)
Do you think interest rates will continue to rise?
What effect will this have on the economy?
Is it still a good time to buy property?
Share your thoughts in the comments below.
The model utilises median capital city house prices, the average combined after-tax income for a couple, a 10% house deposit and the average discount variable rate
When lenders determine your serviceability , they use a debt-to-income ratio .
They add up all your debt payments and dividing it by your gross monthly income.
Say your monthly income is $7,000, your car payment is $400, your student loans are $200, your credit card payment is $500 and your current home payment is $1,700. All that together is $2,800. So, your DTI ratio is 40% since $2,800 is 40% of $7,000.
In general, a good DTI to aim for is between 36% and 43%. Some lenders will go higher, but the lower your DTI, the more likely you are to be pre-approved for a mortgage. Different lenders have different DTI requirements, though, so compare multiple mortgage lenders to find one that works for you.
Maybe consider renting your dream home and buying a less expensive investment home - to get into the property market?
Source:
https://www.forbes.com/advisor/mortgages/mortgage-to-income-ratio/
Skyrocketing home prices and increases in mortgage rates have diminished first homeowners down payment and buying power.
Forbes suggest that you shouldn’t pay more than 25% of your monthly after tax income on mortgage payments.
According to BetaShares modelling - 42.8% of Income is used to pay mortgages with the national house price now 6.2 times the average after-tax annual household income!
Mortgage rates in Aus have increased from 2-3pc to 5-6pc
Mortgage rates in USA are in 7s and in South Africa in the 10s!)
Do you think interest rates will continue to rise?
What effect will this have on the economy?
Is it still a good time to buy property?
Share your thoughts in the comments below.
The model utilises median capital city house prices, the average combined after-tax income for a couple, a 10% house deposit and the average discount variable rate
When lenders determine your serviceability , they use a debt-to-income ratio .
They add up all your debt payments and dividing it by your gross monthly income.
Say your monthly income is $7,000, your car payment is $400, your student loans are $200, your credit card payment is $500 and your current home payment is $1,700. All that together is $2,800. So, your DTI ratio is 40% since $2,800 is 40% of $7,000.
In general, a good DTI to aim for is between 36% and 43%. Some lenders will go higher, but the lower your DTI, the more likely you are to be pre-approved for a mortgage. Different lenders have different DTI requirements, though, so compare multiple mortgage lenders to find one that works for you.
Maybe consider renting your dream home and buying a less expensive investment home - to get into the property market?
Source:
https://www.forbes.com/advisor/mortgages/mortgage-to-income-ratio/
The rental market in Australia is tight - with under 1pc vacancy in Sydney, Melb and Canberra with Adelaide, Perth and Hobart under 0.3pc .
As supply reduces - prices tend to rise
Immigration over next 4 years will grow by 200,000 per annum
What does this mean for the property market and investors in the medium to long term ?
Historically , property has doubled every 10-12 years
In 2035 - the next 13 years - will property in Australia increase or decrease ?
Take the poll
