Viewing by month: April 2013

How investors can leverage current lending conditions – additional tips

 

With the Reserve Bank of Australia (RBA) keeping the official cash rate on hold again in April, many market observers are keenly awaiting the outcome of next month’s interest rate decision. Two key questions are being asked – Will the RBA reduce the official cash rate by another 25 basis points? And, if it does, how much of the rate cut will be passed on by the banks?

But, for now, there arguably remains a very favourable domestic lending environment, with many attractive finance and refinance packages available on the market. A few weeks ago, we published the first story in a two-part series by CENTURY 21 Home Loans’ Chief Executive Officer, James Green, about how investors can leverage current lending conditions. We’ve now decided to share part two, which is currently appearing in the April edition of CENTURY 21 Wentworth’s Property Investor. This story should help to highlight some additional finance and refinance tips that are worth considering.

Top finance and refinance tips for investors - part two

Over the past month, we have seen the national housing market continue to improve with capital city dwelling values posting a 1.3 per cent increase in March and auction clearance rates remaining in positive territory. During this period, the Reserve Bank also elected to hold the official cash rate at three per cent, and CENTURY 21 Home Loans received a record number of monthly loan applications, which is no small feat when one considers that March is traditionally a quieter month for mortgages. 

Although the national housing market appears to be on a steady growth trajectory, there are still prime investment opportunities available in many areas at affordable prices. 

But how does an investor ensure that they are maximising their borrowing power? Particularly at present when there is so much competition between lenders? There are a number of important factors that should be considered.

In last month's article, I outlined several key strategies for utilising mortgage brokers, refinancing investment loans, paying down interest-only loans, and leveraging interest rates to your advantage. In the final instalment of this two part series, I will focus on three equally important, but perhaps less obvious finance and refinance tips. These include: ensuring that your property gearing strategy aligns with your investment goals; harnessing property equity; and considering self managed super funds (SMSF) as a potential vehicle for property investment. 

ENSURE THAT YOUR PROPERTY GEARING STRATEGY ALIGNS WITH YOUR INVESTMENT GOALS 

A property that is positively geared generates an income that outweighs expenses, and therefore makes a profit for the investor. Negative gearing, on the other hand, occurs when the expenses of an investment property (for example, interest and depreciation) outweigh the property's income. 

The benefit of a positively geared investment is obvious - higher returns and better cash-flow. These types of properties may be particularly suited to investors who can't afford to service an expensive loan, because their rental returns will effectively cover mortgage repayments.

When low interest rate environments combine with strong rental market conditions, positively geared properties can generate some very favourable outcomes for investors - provided that their primary investment goal is passive income rather than capital growth. Positively geared investors will, however, face a higher tax liability than those who negatively gear. 

Negative gearing will see an investor's property expenses increase; however, they may make more money over the long term through tax deductions and capital growth. With interest rates currently at relative lows and property prices seemingly on the up, negative gearing could be a smart option for purchasers looking to secure long-term investments in high growth areas. 

At the end of the day, both negative and positive gearing can produce either great or bad outcomes for an investor; the outcome will depend on a number of factors including the type of property, market conditions, the level of property maintenance and, importantly, the investment goal underpinning the purchase. 

If you expect to earn a large income over the next five to ten years, then you might want to look into making a negatively geared property investment. If, however, you're approaching retirement age, you may be better off purchasing a property that will effectively pay for itself - that is, a positively geared investment.

HARNESS YOUR PROPERTY EQUITY 

If you're in a position where you've paid off a mortgage or a substantial part of a mortgage, you may want to consider harnessing the equity in your property (or properties) to finance additional property acquisitions or refinance your home loan(s). There are a variety of liquidity, flexibility, taxation and portfolio expansion benefits that can result from this type of financing and, as such, it's certainly an option worth looking at. 

Investors commonly look to borrow against the equity in their property (or properties) to pay a deposit for another investment property. This is particularly useful for investors that are looking to diversify their portfolios and maximise their tax deductions. 

It is important to realise, however, that property equity can be used to fund more than just the deposit of a property investment. For investors with large amounts of property equity, it is possible to harness such equity to borrow 100 per cent of the purchase price of a property, plus costs. In doing this, an investor can focus on paying down their principal loan while leaving their investment loan (their deductable interest) at its peak level.

Of course, everyone is different, and some investors won't want to negatively gear their property purchases, let alone to the maximum extent. Ultimately, the best course of action will depend on the purchaser's financial, lifestyle and investment goals. 

CONSIDER USING A SELF MANAGED SUPER FUND TO INVEST 

According to a recent report from the Australian Taxation Office (ATO), self managed super funds (SMSF) were the fastest growing superannuation sector within Australia as of June 2012, making up almost 10 per cent of the industry. This trend looks to be growing within the real estate marketplace, with more and more Australians unlocking the equity in their SMSFs to purchase investment properties. 

Why are SMSFs becoming such a popular property investment avenue? Because investors are becoming increasingly aware of the tax advantages associated with this type of financing structure. For instance, the capital gains tax rate is 10 per cent for SMSF funded property investments that are held for more than 12 months, and this rate can potentially reduce to zero per cent if the fund is in the pension phase. Moreover, a SMSF can be used as a vehicle for negative gearing; there is 15 per cent tax paid within the super fund that can be offset against any negative gearing losses.

It is important to note - however, that a SMSF is not going to be a suitable option for all investors. In fact, an investor cannot purchase a residential property through a SMSF unless the property is for commercial or investment purposes, and not for the fund members or their associates to live in. These are just two of many rules relating to SMSF property investments and, as such, it is important to seek professional advice before proceeding with any transaction. 

Who should you consult for advice? I would recommend speaking to your mortgage broker, accountant and financial adviser in order to ascertain whether or not SMSF property investing might be a suitable avenue for you. 

You may want to speak to both your mortgage broker and accountant at the start of the process because you need to know how much equity you have in your SMSF before you can consider whether or not a SMSF investment strategy is conducive to your financial planning goals. You don't want to spend money speaking to your financial adviser about an investment strategy that may not even be possible.

If - however, you find that SMSF property investing is a feasible prospect, it will be important to consider how this type of investment could impact on your retirement plans. For example, you might be planning to retire in two years and, as such, may not want purchase a property that consumes your entire super. This is again why your mortgage broker, accountant and financial advisor will be invaluable sources of guidance. 

A growing number of Australians are taking the time to carefully consider their options and examine factors that may affect their capacity to invest. The most important thing to do when considering finance or refinance options is to stay informed on the market, and seek professional advice. To this end, a CENTURY 21 mortgage broker can be a beneficial resource as they will provide you with a range of options to help you select the best product and associated rate for your personal situation.


 


0 comments | Posted by Charles Tarbey on 29/04/2013 at 12:00 AM | Categories:

Tips for maintaining a healthy garden all year long

In the interests of your property’s curb side appeal, it is important to properly maintain your garden – no matter what season you’re in.  With winter gradually approaching, there are a number of simple steps that property owners can take to ensure that their gardens remain thriving and aesthetically appealing throughout the cooler months. 

1) Avoid over-moving your lawn: lawns are often mowed too much in the winter months which can lead to a significant decline in their quality. To avoid this, you may want to consider allowing your lawn to grow a little longer than usual in the months leading into winter; this will help the soil to retain its warmth – something that is needed for a healthy and even-growing lawn; 

2) Plant for spring: for those looking to maintain a colourful garden over winter, there are several durable flower options than may help to do the trick. These include, but are not limited to, pansies, snap dragons, carnations and sweet violas. These flowers should last throughout winter and bloom during spring, provided that they’re maintained properly;

3) Consider bare-rooted plant varieties: the cooler months can potentially offer some cost-savings on garden maintenance. Australia’s dry climate means that bare-rooted plant varieties often survive longer due to the lower evaporation rate. Nurseries will also often significantly discount the price of bare-rooted plants because of increased stock levels. The term ‘bare-rooted’ simply refers to any plant or shrub that is sold without soil or a pot; 

4) Amend your soil profile: another important component of preparing your garden for year-round appeal is the integrity of your soil. Soil needs to be refreshed regularly in order for plants to receive maximum nutrition. There are a number of ways that you can amend your soil’s profile such as adding blood and bone to promote growth, using manure to improve nutrition, and spreading mushroom compost around the roots to ensure robust absorption. 

Australia’s subtropical weather conditions can sometimes wreak havoc on a property owner’s garden. However, through employing these few simple preparatory steps, you can increase your chances of having a garden that grows and flourishes all year long. 

 


0 comments | Posted by Charles Tarbey on 26/04/2013 at 12:00 AM | Categories:

The benefits of landlord insurance in unpredictable situations

Being a landlord can be unpredictable; while you can, to a degree, control the way that renters treat your property via a tenancy agreement, there are unforeseen circumstances that can arise which may end up costing you a considerable amount of money. As such, landlord insurance is an important option to consider as it will help you to better protect your assets and income. To provide some more information around landlord insurance and the options available, I’ve decided to share the following piece by EBM Insurance Brokers, which appeared in the March edition of CENTURY 21 Wentworth’s Property Investor.

 

Insurance is essential when bad things happen to good tenants


Even the best tenants can't fully protect a landlord's assets and income - as many landlords can tell you.

 

For instance, take a look at landlord insurance claims lodged last year; they tell the story of what can go wrong - from driving lessons to car fires and burglaries.

 

"My tenant was teaching his wife to drive," said one claimant.

 

"As she pulled into the driveway, she hit the mailbox and, amidst the panic, hit the accelerator. They went through the front doors of our rental property."

 

The tenants couldn't live in the property while repairs were being carried out. Luckily, the landlord had an EBM RentCover Platinum policy, which paid out more than $14,000 for the cost of home repairs and rent lost while the property was being fixed.

 

Other cases have involved a burglary:  "Burglars smashed up the place. They ruined their (the tenants') stuff as well as our carpets, curtains and blinds," said another unlucky claimant.

 

"They had to stay with a relative while the place was made liveable again."

 

A RentCover Ultra policy covered the damage and loss of rent.

 

A third case involved a fire. In this instance, the claimant's tenants woke up one night to find their apartment full of smoke, but there wasn't a visible fire. It turned out that a car in their basement car park was on fire and the smoke was filling their apartment.  Extensive cleaning was needed to make the apartment liveable again.

 

Thanks to a RentCover Ultra policy, the clean-up, replacement of damaged items and loss of rent did not come out of the owner's pocket.

 

RentCover General Manager, Sharon Fox-Slater, said that landlords could potentially lose the lot if they were sued following a death or serious injury.

 

"A professional property manager is vital to reducing the risks posed by tenants, but 'stuff' can still happen," she cautioned.

 

"An asset worth hundreds of thousands of dollars should be professionally managed and fully protected with insurance, but research shows that one in five landlords who use professional property managers still don't have landlord insurance."

 

"Even the best of tenants can suffer circumstances beyond their landlord's control or, for that matter, beyond their own control. Many different everyday situations can lead to occasions where rental properties are damaged and untenable," concluded Ms Fox-Slater.

 

As with any type of insurance, landlord policies need to be reviewed periodically to ensure that the sums insured are up-to-date as rents, repair costs and property values change.

 

For more information about the range of options and services offered by EBM Insurance Brokers, feel free to visit http://www.ebminsurance.com.au/.


0 comments | Posted by Charles Tarbey on 22/04/2013 at 12:00 AM | Categories:

Lift in home loan approvals suggests strengthening housing market

CENTURY 21 believes that the lift in home loan approvals over February 2013 could point to a further strengthening of Australia’s residential property market. 

 

According to recently released figures by the Australian Bureau of Statistics (ABS), the total number of owner occupied housing commitments increased by two per cent (seasonally adjusted) in February, following four months of declines.

 

“While it’s early days, a lift in housing finance approvals over February is good news for Australia’s residential property market, and comes at a time when other sectors of the housing industry are also showing signs of improvement,” said Chairman and Owner of CENTURY 21 Australasia, Charles Tarbey.

 

“In recent months, we have seen notable increases in capital city dwelling values, buyer enquiry levels and auction clearance rates, as well as less discounting by vendors. These figures, in combination, should send a positive message to prospective buyers who may be looking at entering or re-entering the market.”

 

The ABS data showed that finance approvals for new houses rose 1.5 per cent in February, while approvals for new homes and established homes jumped 0.6 per cent and 2.1 per cent respectively.

 

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice. Additionally, if you would like to speak to a mortgage professional about suitable loan packages, please contact CENTURY 21 Home Loans.


3 comments | Posted by Charles Tarbey on 19/04/2013 at 12:00 AM | Categories:

Building approvals rise in February

 

Recently released figures from the Housing Industry Association (HIA) show that dwelling approvals rose by 3.1 per cent in February 2013.

 

“We have seen indicators of consumer sentiment improve over recent months and we may well be seeing an early sign that this is flowing through to activity on the ground. After two consecutive months where approval numbers slipped back it is pleasing to see a material improvement in February,” said HIA Economist, Geordan Murray.

 

“A 4.2 per cent increase in approvals for detached houses was the main driver of this result although approvals for multi-unit dwellings also posted a 1.6 per cent increase during February.”

 

“Interestingly, much of the increase in the detached dwelling segment at the national level can be attributed to an 8.0 per cent increase in detached dwelling approvals in New South Wales. There were 1,601 detached homes approved the state in February making it one of only three months since 2005 when detached dwelling approvals have broken through the 1,600 mark. The other two occurred during the financial crisis when federal stimulus policies were in full effect,” concluded Geordan Murray.

 

In February 2013, total seasonally adjusted building approvals increased by an impressive 23.0 per cent in South Australia, 5.4 per cent in Western Australia, 3.8 per cent in Queensland and were flat in Victoria (up by 0.3 per cent).

 

Seasonally adjusted building approvals fell in New South Wales (-7.7 per cent), and Tasmania (-5.3 per cent). In trend terms building approvals in February increased by 3.1 per cent in the ACT and fell by 10.5 per cent in the Northern Territory.

 

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice.



0 comments | Posted by Charles Tarbey on 15/04/2013 at 12:00 AM | Categories:

Vendor discounting eases

A recently released report from RP Data shows that vendor discounting fell during January 2013, pointing to further improvements within Australia’s housing market.

 

The report revealed that the average discount on a typical home was -7.5 per cent from its initial list price, while the combined capital cities figure sat at -6.4 per cent.

 

At the same time last year, discount levels were recorded at a greater -8.1 per cent nationally, and, -7.2 per cent across the combined capital cities.

 

“This spike in activity equates to a higher level of competition amongst buyers at a time when there are fewer homes available for sale,” said RP Data’s Senior Research Analyst, Cameron Kusher.

 

The report also showed that capital city dwelling values had increased by 3.3 per cent between May 2012 and February 2013.

 

According to Mr. Kusher, if sellers have to apply fewer discounts in order to sell a property, it is a positive sign for the housing market.

 

 “Lower levels of discounting by vendors can also mean that sellers are becoming more realistic about their final sale price. Having said that, there is always going to be a level of negotiation on price,” said Mr Kusher.

 

“With home values continuing to increase over more recent months we would expect that the level of discount over the coming months will produce further improvements in the level of discounting by vendors.

 

“An improvement in levels of vendor discounting is also expected to be supported by higher auction clearance rates evidenced so far in 2013 and the recent increase in sales transactions and lower number of properties available for sale, particularly new properties being listed for sale,” concluded Mr Kusher.

 

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice.


0 comments | Posted by Charles Tarbey on 12/04/2013 at 12:00 AM | Categories:

Rate hold accompanies improving housing market

CENTURY 21 believes that the decision by the Reserve Bank of Australia to leave the official cash rate on hold will help to create ongoing stability for those Australians looking to secure finance for a property purchase.  

“At its April meeting the Reserve Bank elected to keep the official cash rate at three per cent for a fifth consecutive month,” said Chairman and Owner of CENTURY 21 Australasia, Charles Tarbey. 

“CENTURY 21 has witnessed notable increases in buyer activity and buyer inquiry of late and, with this latest rate hold, this positive trend should continue provided that there are no major shocks within domestic or international economic environments.”

As part of its decision, the Reserve Bank reasoned that it was prudent to leave the cash rate unchanged as inflation is likely to be consistent with the target rate while economic growth will likely be slightly below trend over the coming year. 

The Reserve Bank’s decision follows the recent release of RP Data-Rismark’s Hedonic Home Value Index results, which showed that median home values In Australia’s capital cities rose 1.3 per cent in March. The monthly increase saw capital city dwelling values rise 2.8 per cent over the March quarter – the strongest quarterly result since March 2010.

“In addition to rising capital city dwelling values, factors such as strengthening auction clearance rates and improving housing affordability in many markets are encouraging indicators of both the current state of the national housing market and the potential for continued improvements over the course of 2013,” concluded Charles Tarbey.  

CENTURY 21 encourages prospective buyers that are looking to purchase real estate to ensure they have obtained the appropriate professional property and finance advice before doing so.  

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice. Additionally, if you would like to speak to a mortgage professional about suitable loan packages, please contact CENTURY 21 Home Loans

 


0 comments | Posted by Charles Tarbey on 08/04/2013 at 12:00 AM | Categories:

Capital city dwelling values rise 1.3 per cent in March

Dwelling values across Australia’s combined capital cities recorded a 2.8 per cent rise over the March quarter according to RP Data-Rismark, taking the cumulative capital gain to 4.7 per cent since the market bottomed out in May last year.

Dwelling values posted a solid rise over the month of March, increasing by 1.3 per cent across the combined capital city index. The positive conditions were broad based, with every capital city recording a rise, apart from Adelaide where the market remained steady over the month. 

Perth recorded the highest level of growth over March with dwelling values surging 3.4 per cent. 

Hobart and Darwin also recorded a large lift in dwelling values, rising 2.5 per cent and 2.4 per cent respectively over the month.

Every capital city, except Adelaide (-0.5 per cent), has seen dwelling values rise over the past quarter and, the only capital city not to record a rise in values over the past 12 months is Hobart (-1.2 per cent). 

“The March 2013 result is one of the strongest we’ve seen over the three years since March 2010,” said Rismark International CEO, Ben Skilbeck.

“Not only were there no value falls recorded across the capital cities, but, over the past three years, the all dwellings result of +1.32 per cent for the month was second only to the +1.40 per cent increase observed in September 2012. Further, it was the strongest quarterly growth seen since the three month period ending May 2010."

RP Data Research Director Tim Lawless said, “Since the capital city housing market bottomed out at the end of May last year we have seen dwelling values rise by 4.7 per cent after falling by 7.4 per cent from their market peak back in late 2010. 

“The most significant recoveries have been recorded across Darwin where values have risen 13.9 per cent since bottoming out in January last year, and Perth where values are up 9.4 per cent since the market trough in November 2011.

"Both these cities are recording rental growth higher than 10 per cent year on year which is providing a significantly higher total return compared with other cities.

“The RP Data-Rismark Accumulation Index, which factors in the gross yield as well as capital gains, is showing a total year-on-year gross return in Darwin of 13.9 per cent and Perth is recording a total gross return of 10.6 per cent, both significantly higher than the combined capitals average of 6.9 per cent gross.”

Across the broad price segments, it looks as if the middle priced housing sector is continuing to show the healthiest market fundamentals. 

Based on the RP Data-Rismark Stratified Hedonic Index, dwelling values across the middle sixty per cent of the housing market have increased by 1.6 per cent over the year to February, compared with a 0.9 per cent fall in dwelling values at the most affordable end of the housing market, and a 0.6 per cent fall at the most expensive end of the pricing spectrum.

Apart from the capital gains being recorded across the housing market, other indicators are continuing to suggest that the housing market recovery will continue. Mr Lawless noted that both auction market and private treaty indicators are showing strong results. RP Data’s mortgage platforms have also shown a surge in activity.

"Auction clearance rates haven’t been below 55 per cent on any occasion so far this year, and over recent weeks the capital city weighted average clearance rate has been around the 60 per cent mark with Melbourne and Sydney nudging the 70 mark,” said Mr Lawless. 

“Additionally, vendors selling their homes by private treaty have been discounting their prices by a lesser amount in order to make a sale. The average selling time was consistently shortening prior to the Christmas / New Year slow down.

"RP Data's Mortgage Index, which tracks activity across the RP Data mortgage platforms, reached levels not seen since August 2009, suggesting housing finance commitments are likely to show a decent lift when the ABS publishes the data for February and March later this year," concluded Mr Lawless.

For more information about the residential property market in your areas of interest, please feel free to stop by your local CENTURY 21 Real Estate office for expert and clear advice.



0 comments | Posted by Charles Tarbey on 05/04/2013 at 12:00 AM | Categories: