Interest rates are rising and yet house prices continue to rise !! Why?

Homeownership is the Australian dream - and it seems that it’s becoming  harder and harder to buy a home! 

Those looking to enter the property market face a triple whammy of 

• high prices, 
• costly mortgages and 
• lack of supply 

making owning your own home  deeply unaffordable, with little sign of relief on the horizon. 

Mortgage rates soared from less than 3% to more than 6%. 

For the median family buying the median home, mortgage payments doubled from roughly 14% of monthly household income in 2020 to nearly 29% in June, the highest since 1985!

And yet prices continue to rise!!

Why?

 There are still buyers out there. They have very few options 

• Each house needs just one buyer 
• Lack of supply 
• Rents increasing 
• Net Migration 
• Australia is the best place to live 
• People feel secure if they own a home 

A strong housing-market contributes to the well-being feeling of a person, family, city and nation. 

The hope 

Let’s hope the property continues to increase - and that our children will still be able to afford to become homeowners ! 

It sounds like inflation - and it feels like growth  and growth is good? 

What am I missing ?

I remember buying our house when property prices were at 17pc . 

$200k sounded beyond affordable - yet we did it - and that property is now worth 10x -or $2m . 

• property increased , interest rates reduced, wages stayed the same - property still affordable 

• property increases  , interest rates rise , wages stayed the same - how can people afford to buy? 

A solution ?

• Maybe but to rent vs buy to live in - Australians become a nation of investors ?

https://www.economist.com/finance-and-economics/2023/08/30/how-can-american-house-prices-still-be-risingHow can American house prices still be rising? from TheEconomist

Solving the wicked problem of a housing crisis on Oz

A wicked problem in Oz that the Labour Government is trying to address 

- a housing and rental crisis - there is a lack of supply - and there is a push to increase migration - 

For skilled  people 

To cater for asylum seekers  

What are things government can do to solve the wicked problem of the rental and housing  crisis? 

Build more houses so that supply equals demand.

The government is looking to add $3.5 billion of incentives to  achieve 1.2 million homes over five years over 5 years - or an average of 20,000 homes for 60 consecutive months 

This has  never been accomplished

The monthly average is 15,986. 

20,000 has only been reached seven times in the past 180 months. 

What are things that can be done ?

Will property in Oz continue to rise?

How do we support those who can’t afford (frontline workers ) and disadvantaged to have their own home?

- share your ideas in comments below  and vote  below

It’s not that easy to switch lenders for better rates 

First home buyers now have to demonstrate they can pay their mortgage at 9% in order to refinance their loan, The Australian Financial Review reports. This has meant a large number of first home buyers are forced to stay with their existing lenders, which benefit the big banks. Read more: https://lnkd.in/gUV4ZxaW

Buyer's agent Jack Carter writes on LinkedIn that in the current environment, borrowers are unlikely to be able to refinance that easily and the impact is going to be felt by those most recent borrowers who are on lower incomes. "This is normally your mortgage belt suburbs that feature a large proportion of first-home buyers who are highly leveraged," he writes. Read more: https://lnkd.in/gnFKFJqQ 

CoreLogic Australia's Eliza Owen writes factors other than the mortgage cliff could be driving the rise in the number of new listings in recent weeks. "With home values rising for the past five months, this may be prompting more selling decisions that did not take place when the market was in decline last spring. Some prospective sellers may also be looking to get ahead of the spring selling season when competition among vendors is likely to be more intense," she writes. Read more: https://lnkd.in/gMjKf-vU

Is the mortgage cliff causing homeowners to stay with their existing lenders? 

What impact do you think this will have on the property market? 

 

Westpac bullish on property

The strength of Australia’s housing market in 2023 has surpassed expectations, leading Westpac economists to upgrade their forecast for prices.

Strong migration inflows, tightening rental markets and low on-market supply have been important drivers, although affordability is challenging and likely to constrain price growth over the longer term.

Senior economist Matt Hassan has more… 

https://lnkd.in/gwAnEh4s

For more information and various property calculators  go to

www.bsi finance.com.au

Sydney prices back to hypergrowth or is it a bubble?

Sydney’s property market recovery accelerated over the June quarter, with Domain’s latest house price report finding the city’s house values gained $77,000 (5.3%) in just three months. 

 

That’s four times faster than the March quarter and is the steepest quarterly gain since late 2021.

 

Taking the two consecutive quarters of growth together, Sydney house prices have now recouped $97,000 of the $151,000 value they lost during the recent downturn. 

Where to next? 

This is a link to a poll 

This is a link to a poll 

𝗜𝘀 𝗶𝘁 𝗯𝗲𝘁𝘁𝗲𝗿 𝘁𝗼 𝗯𝘂𝘆 𝗮𝗻 𝗼𝘄𝗻𝗲𝗿 𝗼𝗰𝗰𝘂𝗽𝗶𝗲𝗿 𝗼𝗿 𝗶𝗻𝘃𝗲𝘀𝘁𝗺𝗲𝗻𝘁 𝗽𝗿𝗼𝗽𝗲𝗿𝘁𝘆 𝗳𝗶𝗿𝘀𝘁?

I have been asked this so many times - 

Buy to Invest or Buy to Livein ?

My answer? 

Both options are good and it depends on your circumstances , what you can afford, goals , view of the property market on 20 years and propensity to take risk !

When we decided to enter the property market , we could only afford to buy a 1 bedder, but wanted to live in a house! 

My wife wanted to buy

• a home for emotional reasons . a place to call her own, pride of ownership
• a home to create cherished memories. 
• a place that she could not be asked to leave - a feeling of security
• Pay the home off as quickly as possible 
• Financial predictability (although interest rate hikes have been a killer of late!)
• Freedom to renovate

I wanted 

• To live in a property we couldn’t afford to buy 
• A property that would grow in value 
• A property that we could afford to buy
• Flexibility (renters are free to move and are exempt from home maintenance)
• A property that we can rent out and get negative gearing 
• A property in an area that has maximum growth potential 
• A property that if we had to sell - there would not be emotional heartache 
• A property that we could gear to the max (best to grow wealth is to leverage)

We decided to buy an investment property 35 years ago . And over the years - instead of paying off the loans - we have acquired a portfolio of properties - all geared -  and still rent !! 

The retirement strategy - sell a few to pay off the mortgages and live off the rents of investment properties!  

Is this the right strategy ? 

Not sure - but it was a plan - we made a decision and we took action ! 

This strategy has enabled us to buy our own home if we so desired (however, we are happy where we live) 

Are we financially better off with buying investment properties ? 

I think so :) 

Both strategies need the following priorities 

•  location, 
• amenities,
• proximity to schools and workplaces, 
• potential for capital growth and 
• market demand.

If you are looking to enter the property market these are the 5 things you need to do

• do your research, 
• evaluate your options, 
• assess your goals and create a plan
• seek expert advice, and 
• make an informed decision and take action!!!

Buying your home is an exciting adventure and  it’s potentially the most expensive and potentially valuable decision that you will make! 

I would be delighted to sit with you and help you model a few scenarios - and of course help you find the right loan !

  Ask me  a question . I am  here to help

#property #realestate #investment 

#buyersfirst #10x 

Is inflation a bad thing - surely growth is good???

Picture and interesting article in afr

The stunning turnaround in house prices hides some worrying issues in the housing sector and the broader economy says James Thomson of afr

Property has increase 3pc since February

Does this mean the economy is in a healthy position?

Immigration

• Lack of stock 
• Higher interest rates and serviceability and
• house prices have locked buyers out of the market 
• Building approvals at there lowest 
• Building company’s are collapsing - higher prices - can’t honour fixed price contracts
• Banks are conserving cash for uptick in bad debts

James Thomson  is saying that property prices is not reflection of the economy - which seems to be struggling - but a result of Immigration led demand,  low listings and Ltd supply of new stock ……

And yet 

• employment seems at an all time low, 
• travel agents have never been so busy and 
• people seem to be partying big time . 

Isn’t this a good thing??

Is inflation so bad?

Inflation is not seeming to stop the spend !l- so government is increasing interest rates to try and stop the spend !!!

Is inflation such a bad thing? Is it not just a reflection of growth? 

Not sure why the government is trying to stop inflation and growth? 

What do you 💭 🤔 think?