Stock markets around the world have rattled investors over the past week but could a major crash wreak havoc upon the Australian property market?
Share markets are undergoing a rollercoaster ride and many economists believe a recession is imminent, with experts estimating a 65 per cent chance of it occurring within the next 12 months.
A mind-numbing $6.4 trillion has been wiped off global stocks in three weeks.
But even if those losses are compounded, is it likely to flow through to a property retraction or crash?
During Australia’s last major recession, back in 1990-91, property prices fell in some parts of the country. Melbourne real estate slipped 6 per cent but the country’s property pool overall proved exceptionally resilient.
Given that recession was one of the worst since the Great Depression of the early 1930s, this was quite an achievement.
Melbourne’s property prices fell and didn’t recover to 1989 levels until 1996 but its outlying poor performance came off the back of a heady 1980s boom and was seen as an inevitable correction.
Borrowers despairing at the current interest rate level would be suffering paroxysms if they were faced with the insanely high 17.5 per cent repayments confronting mortgagees back then. It was the relatively quick decline of those rates that underpinned much of the resilience of property prices through those economically challenging times.
Recessions creep up on property owners and prospective investors but how has Australia handled the sudden impact of stock market crashes that hit like a car crash?
The Global Financial Crisis of 2008-09 was a harrowing experience for those with superannuation, share portfolios and careers in finance and elsewhere.
But once again, property prices barely registered an interest in the events that caused tremors around the world. Australia in general was less impacted than the rest of the world but shares still dropped more than 10 per cent and the Aussie dollar lost 30 per cent of its value.
Property? There was minor blip in 2009 before dwelling values resumed their upwards trajectory.
Source: ABS/Finder
An overview co-authored by the Australian Bureau of Statistics and Reserve Bank of Australia (RBA) noted that the credit and money markets in Australia have also proven to be more resilient than in many other countries, necessitating considerably less intervention by the RBA than occurred in many other countries.
“In large part this reflected the health of the Australian banking system,” the report noted.
“The Australian banks had almost no holdings of the ‘toxic’ securities that severely affected other global banks.
“The health of the Australian banking system facilitated the effectiveness of the monetary and fiscal response, particularly by allowing much of the large easing in monetary policy to be passed through to interest rates on loans to households and businesses, in stark contrast to the outcome in other developed economies.”
The 2024 Financial Landscape
Share markets around the world have been on a tearaway run to record levels around the world in the years since the pandemic.
Before this week’s burst of volatility, when Japan’s Nikkei Index lost 12.4 per cent of its value in a day before adding another 10 per cent the next day, and the US and Europe markets contracted very sharply, it was all buy, buy, buy.
From New York to London and Tokyo, 14 of the world’s 20 biggest stock markets had hit record highs in the past couple of months.
In the US, from where many international financial contagions have emanated, analysts had been pointing to a strong economy, moderating inflation, robust corporate profits, and trust in the Federal Reserve to buoy investor confidence and help stocks rise. However, they warned that trouble could be around the corner if any of those factors were to fall out of balance.
That factor has emerged as unemployment.
Last week’s US jobs data shocked on the downside, sparking fears of a slowdown across the world’s largest economy.
Whether this result’s impact on stock markets has just contributed to a ‘healthy correction’ or is the harbinger of more turmoil to come will be known in coming months.
Potentially expanded Middle East conflict, or even the same eventuality beyond Ukraine and deeper into Europe, China’s slowing economy and unpredictable regional sabre rattling, and the potential for a global herd reaction if another large equity sell-off was to take place could all throw a major spanner into the international economy’s often-opaque inner workings.
But as Covid proved, when Australian property was seen as a safe haven in an uncertain world, even the complete freezing of global supply chains was not enough to pull the real estate market down.
There’s little reason to believe Australian property would be too adversely affected unless an international conflict became a truly global conflagration.
When property prices did last fall in Australia, during 2017–18, it was matters closer to home that were the driver. There was no economic crisis, and property prices had been rising steadily in the years before.
Low interest rates and loose lending policy have always driven price growth more than almost any other factor.
In 2017 and 2018 low interest rates had everyone borrowing whatever they could get their hands on.
In response, lenders became very strict and APRA came down with some very hard-hitting policy changes as a result of the Financial Services Royal Commission.
When people could no longer throw wheelbarrows of money at property, prices retreated.
For now, the likelihood of property market crash is fairly remote.
Even if there is a massive stock market crash, property responds slowly to such volatile scenarios and with the current low rate of loan delinquencies few sellers would be forced to offload property and therefore add supply to the market that might lower prices.
The current imbalance between housing supply and demand that has driven prices to record levels around the country are not being addressed, population growth is still high even if migration levels are being reduced, and interest rates have stabilised.
With those parameters in play, even if stock market tremors become a fully-fledged quake property prices are unlikely to have their foundations shaken.
Article Q&A
Does a share market crash affect property prices?
Australia’s recent history suggests property prices are largely immune to share market crashes and other major events, such as international conflicts and even pandemic lockdowns.
Property buys for $250,000 or less come with their own quirks and nuanced investment profile but whether it’s a serviced apartment in Perth or a car bay in Sydney, there are options out there.
While some investors have taken a back seat amid rising interest rates, overly competitive markets and high inflation, other investors are jumping straight in on sub $250,000 investments.
Interestingly, you can still invest around Western Australia and beyond with a smaller budget and end up with a prime location – not just a regional bush block with a knock over shack.
Buying residential property under $250,000 anywhere in Perth is mostly limited to one-bedroom or studio units within the greater metro area.
The serviced apartment sector is a great pick up for the right investor looking to achieve a consistent and higher rental return for a residential asset.
Strictly for investment purposes and with no opportunity to ever live in the property, serviced apartments are a market sector all to their own that form part of a larger hotel letting pool.
The buyer receives a fixed return on their investment while the hotel group use the property for short term accommodation.
They are a specialised asset class that can represent value buying in Perth under the $250,000 threshold. Some of the properties available present an excellent buying opportunity, especially for those on a tighter budget.
A serviced apartment right at the doorstep of the convention centre is just $220,000.
Located close to the Swan River, this apartment offers a 7 per cent net return but is strictly for investors.
Similarly in Adelaide, investors can purchase an office in the CBD for $200,000.
This prestigious address office comes with ample common facilities, such as a rooftop recreational area, lap pool and gymnasium.
It may be a great commercial investment but buyers need to be aware that if it is vacant when they buy it, they have to pay 10 per cent on top of the purchase price for GST.
Melbourne CBD To Regional Queensland
Often, lucrative investment opportunities such as this apartment in Perth and office in Adelaide come with a catch – not suitable for the novice investor.
Property prices in Perth and Adelaide are generally lower than other major cities in Australia, but it is important to note that they have grown significantly over the past two years, pricing many first home buyers and investors out of the market.
Other investments sub-$250,000 include a small CBD studio in Victoria, old shack on a big block in regional Queensland or a single car space in the Sydney CBD.
With a budget of $210,000, you can purchase a tiny studio on Collins Street in the Melbourne CBD.
This tends to be the size of a single garage but some banks won’t lend on property this small, so it is advised to do your research with the bank before you buy.
For investors with an appetite for ‘fixing up’, regional Queensland could meet your criteria. In Mount Isa, investors can purchase a piece of real estate with a three-bedroom house on it for $189,000.
In fact, it includes more than 1,000sqm of land with a small shack and double garage but don’t forget to budget for a little TLC for these style investments, as they will require a bit of work to get them up to liveable condition.
Ambitions in in this budget in Sydney are somewhat humbler.
The median house price in Sydney is currently, $1,174,867, but with $150,000, investors can seek a CBD parking space less than 300 metres from Town Hall Station. Just don’t expect it to be furnished.
Article Q&A
What properties can be bought on a $250,000 budget?
From serviced apartments in Perth and Melbourne CBD studios to Mount Isa homes on a large block, there are property investments available for a quarter of a million dollars.
With property prices high around the country and building costs not subsiding significantly any time soon, do prospective property buyers wait or act?
The cost of living and building has been steadily rising in recent years.
Economic fluctuations, market dynamics, and geopolitical factors all contribute to this trend, making it clear these costs are unlikely to decline anytime soon.
Consequently, individuals are urged to consider purchasing now, as property prices are expected to continue climbing.
Building costs have surged nearly 40 per cent over the past four years, posing a significant challenge to the Albanese government’s goal of constructing 1.2 million homes by 2029.
According to the Australian Bureau of Statistics, housing market inflation remains a key contributor to rising consumer prices. After mid-2023, building costs stabilised at a 5 per cent annual increase due to high demand for state government infrastructure projects, leading to higher prices for materials and labour.
Stephen Havas, Managing Director of residential building company Garth Chapman Queenslanders, noted substantial rises in material costs and regulatory changes resulting in an additional $70,000 to construction costs.
These rising expenses threaten to reduce demand and the viability of construction firms, potentially causing the government to miss its housing targets.
Several key factors contribute to the rising cost of living and construction expenses. Raw material prices have escalated due to supply chain constraints, increased demand, and trade policies.
Labour shortages in the construction industry have driven up wages and, consequently, overall project costs. Stricter building codes and environmental regulations further add to expenses. Moreover, incorporating advanced technologies and sustainable practices, while beneficial in the long run, increases initial building costs.
CoreLogic’s home value index indicates that rising costs have reduced the feasibility of new development projects, as reflected in monthly dwelling approval figures, which are running 38 percent below the decade average this year.
Many potential builders are hesitant to proceed given the uncertain cost landscape.
As inflation continues, the cost of goods and services will likely stay high, affecting various aspects of daily life and construction.
While some supply chain disruptions may ease, new challenges are likely to arise, maintaining pressure on supply chains and costs.
These ongoing issues can include geopolitical tensions, logistical bottlenecks, and raw material shortages, all contributing to sustained high prices.
The Federal Government’s recent stage three tax cuts, effective from 1 July 2024, aim to relieve cost-of-living pressures, offering an average annual saving of $1890 for 13.6 million taxpayers.
However, a potential interest rate hike could offset more than half of these savings for 3.2 million mortgage-paying households.
While the government promotes its economic measures, the Coalition criticises these as a “cost-of-living con job.”
With inflation unexpectedly high in May, economists predict the Reserve Bank of Australia will increase rates, adding $103 per month to the average homeowner’s mortgage repayments.
State-specific impacts include NSW homeowners losing 70 per cent of their tax cut savings due to higher repayments.
The tax cuts, initially proposed by the Coalition and modified by Labor, benefit low and middle-income workers more than high earners. Despite concerns these measures may fuel inflation, RBA Governor Michele Bullock suggests households might use the extra cash for repayments or savings.
Assets As Inflation Hedge
Given these trends, it is prudent for individuals to consider purchasing sooner rather than later.
Real estate and tangible assets often serve as a hedge against inflation, preserving value over time.
Investing in property could provide financial security in an environment of rising costs. As property values increase, early buyers have the potential to build significant equity, creating opportunities for their future.
Purchasing property now allows individuals to benefit from future appreciation, leading to potential wealth accumulation.
The cost of living, construction boom, inflation, migration, property values and affordability are all critical factors in property purchases.
History shows, however, that the key to long-term success in property ownership lies in staying in the market, making careful and affordable selections, and persevering through challenging environments.
By doing so, investors can reap medium to long-term rewards, as better-quality properties will eventually pay off.
Helen Avis, Director of Finance at Specialist Mortgage, has been named a finalist in the Residential Broker of the Year category at the prestigious Australian Broking Awards 2024.
With years of experience in refinancing, sourcing Australian home loans, and assisting Australian expatriates in purchasing property while living abroad, Helen Avis has made a significant impact in the broking industry. Her dedication to providing tailored solutions and exceptional service to Australian borrowers has set her apart as a leading professional in the field.
The Australian Broking Awards is the pinnacle event for the broking industry, celebrating excellence among mortgage and finance brokers, brokerages, and aggregation groups. This year’s finalists list includes over 250 high-achieving professionals and businesses across 29 categories, highlighting those who demonstrate professional growth, innovative practices, and a commitment to their clients.
Managing Editor of The Adviser, Annie Kane, praised the finalists, noting the critical role brokers have played in helping borrowers navigate a complex financial landscape marked by interest rate uncertainty, tightened serviceability, and a competitive property market.
The awards will be presented at a cocktail luncheon at The Star, Sydney, on Friday, 30 August 2024.
Helen Avis expressed her gratitude for the recognition, stating, “Being named a finalist in the Australian Broking Awards 2024 is an honour. At Specialist Mortgage, our commitment to the broking industry and our dedication to connecting with the community and engaging with clients are at the core of our service. This acknowledgment reinforces the strength and impact of our efforts.”
The Australian Broking Awards remains a testament to the outstanding contributions and achievements of those at the forefront of the broking industry, and Specialist Mortgage is proud to celebrate Helen Avis’s success and continued dedication to helping Australian borrowers achieve their property dreams.
Specialist Mortgage, a part of the SMATS Group, specialises in providing tailored mortgage solutions for Australian expats and foreign investors. The team of experts led by Helen Avis, have consistently provided tailored mortgage solutions to clients worldwide, helping them achieve their property ownership dreams.
With a focus on personalised service and in-depth industry knowledge, Specialist Mortgage has established itself as a leader in expatriate and foreign national home loans.
Property buyers and sellers alike stand to save potentially big dollars if they time their property purchase right in relation to the seasons.
When considering purchasing an investment property, seasonality is often forgotten as one of the important aspects to consider.Seasonal changes will have an impact on buyer and seller sentiment, which in turn influences property prices and the movement of the market.Understanding the seasonal patterns will help property investors to time their purchases and sales, capitalise on seasonal trends, and maximise their returns.
How does seasonality impact property markets?
Spring/Summer
While the overall effect of seasonality will vary by region and state, general trends and patterns can be observed when comparing the cooler months to the warmer months.During the spring and summer months, the Australian real estate markets tend to be more vibrant.
Warmer weather encourages more open house inspections, auctions, and overall property activities (like gardening and renovating).
The warmer weather and sunshine often influences buyers to be more positive and optimistic and generally willing to get out and explore open homes in a positive light, which can influence the overall sales price for the seller.
The longer daylight hours and favourable weather conditions means there might be more stock available for sale on the market, more open homes, and more sales via auction campaigns.
Investors should take note of this, because when there is more activity and positive buyer sentiment, this is likely to increase real estate prices, particularly as it gets closer to Christmas and some buyers start to feel a little desperate to get into a home before Christmas, which might push up prices.
Sellers will usually take advantage of this increased activity and market their properties more aggressively, hoping to attract higher bids across the spring and summer months.
Characteristics of spring/summer markets:
increased buyer activity and competition
sellers are more willing to list properties
more open house inspections and auctions.
Autumn/Winter
Conversely, the cooler months across autumn and winter typically see a decline in market activity.
Colder temperatures and shorter days may deter potential buyers from attending open houses and auctions, especially if it is unusually rainy or cold.
Seller sentiment may also wane, leading to fewer property listings.
This slowdown can be more pronounced in regions with harsher winter climates, such as Victoria, while warmer areas like Queensland we expect to see less of an impact.
Now consider Victoria, with its colder and more variable winter climate, experiences a more noticeable seasonal effect.
Buyers might be less inclined to venture out, and sellers may prefer to wait until spring or summer to list their properties.
It is likely some of the colder towns may experience reduced market activity and some supply issues when it’s cold.
There is an exception though.
Think about the areas close to snowfields and snowy mountains that are buzzing with activity over the winter months and ski seasons.
We are likely to see more properties come onto the market, and more buyer activity because the properties will be shown off in their best light – with views over the snowcapped mountains or holiday homes listed for sale to show off how they are busy and booked over the winter months.
Sometimes visiting tourists love the location so much they start to investigate options to purchase a holiday home or even relocate if they love the area during their visit. There is more about this below.
Characteristics of autumn/winter markets:
decreased buyer activity and fewer open houses in most areas.
less motivation for sellers to list properties, unless in areas close to the snow.
potential for fewer auctions and slower market pace.
Other Considerations
There are always going to be exceptions to these rules. This is just the overall impact that seasonality can have on property markets, so it is really important to understand the market you will be buying in as well as how the seasons will impact that area.
Think about the below considerations:
Queensland
Queensland is known for its generally warm climate. Because it experiences milder winters compared to southern states, the colder climates won’t have as large an impact on the property markets here.
Because of its warmer weather, winter does not significantly deter market dynamics and many people who live in the southern states might consider relocating to Queensland into coastal cities like Brisbane and the Gold Coast that experience more consistency in the property markets, even during winter.
Property prices don’t drop as much during the winter months in Queensland, as the weather remains conducive to outdoor inspections and tourism.
Strategic Considerations For Property Investors
If you are investing in property it is important to understand these seasonal trends so you can make informed decisions.
Timing the market:
Investors looking for better deals might consider purchasing during the winter months when demand is lower, potentially securing properties at reduced prices. Selling during the summer months can attract more buyers and potentially yield higher sale prices.
Region Focus:
In warmer regions like Queensland, investing can be more consistent year-round, reducing the need to heavily time the market.
In colder regions like Victoria, investors might find better opportunities by targeting winter purchases and summer sales.
Specialty Investments:
In ski resort areas, focusing on winter investments can be highly profitable due to the seasonal tourism boom.
Vacation homes and short-term rentals in these regions can provide substantial returns during the winter season.
Market Adaptability:
Staying informed about local market trends and climatic conditions can enhance investment outcomes. Whether investing in steady coastal markets or booming winter resort areas, a nuanced approach to seasonality can significantly enhance investment success.
Article Q&A
Do the seasons affect property sales?
While the overall effect of seasonality will vary by region and state, general trends and patterns can be observed when comparing the cooler months to the warmer months. During the spring and summer months, Australian real estate markets tend to be more vibrant.
Foreign property buyer numbers have taken off, with international real estate investors shaking off their post-Covid blues and turning their attention to Australia.
Foreign buyers are returning to the Australian property in large numbers, with total transactions soaring by 27 per cent over the previous financial year.
The Australian Taxation Office on Friday (21 June) released its Register of foreign ownership of residential land, which showed that Victoria had become the preferred choice of foreign investors.
Foreign buyers spent $4.9 billion on 5,360 Australian dwellings in the financial year to 30 June 2023 (the most recent data available), with Victorian investment leaping a massive 32 per cent over a year.
Foreign buyers paid an average price of $914,000, which is just below the overall average price across the country of$959,300 in the March quarter, according to the Australian Bureau of Statistics.
The data also showed that buyers were expressing a degree of confidence in the Australian property market, with buyers far outstripping sellers.
They sold 1,119 homes, with a total value of $1.0 billion. It is noteworthy that the definition of sale also includes when a foreign buyer becomes a permanent resident or citizen, even if they don’t actually sell the property, so the actual sales number is inflated against the buyer figure.
The number of offshore buyers in New South Wales was flat, and actually decreased by 1 per cent, from 664 to 656. Meanwhile, the number of buyers in Queensland and Victoria jumped. The number of buyers in Queensland climbed 17 per cent, while the number of buyers in Victoria jumped 32 per cent, by about a third.
Source: ATO
While Queensland attracted more buyers over all, New South Wales attracted more millionaire buyers. Foreign buyers purchased 284 homes in New South Wales during the year that were worth at least $1 million, compared to only 200 in Queensland.
“Victoria got by far the most millionaire buyers, with 569 foreign buyer transactions worth over $1 million each.
Overseas Buyers Not Super Wealthy
A widely held perception that foreign buyers are wealthier than local buyers was dispelled by the data.
Residential properties with values under $1 million formed the majority of residential property purchase transactions, accounting for 78.2 per cent of property transactions in 2022-23. This is an increase compared to 75.4 per cent in 2021-22.
Nor did this investment lead to any significant population growth. Of the 5,360 purchase transactions in 2022–23, 164 registrants became a permanent resident or gained Australian citizenship during the year (and are included in these statistics).
Daniel Ho, Juwai IQI Co-Founder and Group Managing Director, said the 27 per cent increase in buying last year shows that overseas buyers were bouncing back after the travel slowdown during the pandemic.
Source: ATO
“Why do foreign buyers like Australia?
“This report, encompasses buyers from all over the world, including all parts of Asia, North America, South Africa, and the UK and Europe, and such a wide population has varying motivations, but they all have some things in common – they appreciate Australia’s strong economy, good education system, and attractive lifestyle.”
“In many cases, these buyers paid 7 per cent or 8 per cent of the purchase price on stamp duty and tens of thousands of dollars, or more, on foreign buyer application fees (compared to local buyers) and once they own their property, at least until they become permanent residents or citizens, they will pay an additional land tax every year.”
Mr Ho said Australia’s apparent popularity was actually reflective of a wider international trend.
“People have been moving to Australia in record numbers, and that shows up in the foreign buyer reports but it’s not just Australia, because we see the same thing happening in the US, Canada, Europe, and the UK.
“There is a significant wave of post-Covid migration as people act on plans they had to put on hold during the pandemic.
“We also see it in Southeast Asian countries like Thailand, which have seen rapid intake of their golden visa programs since the pandemic.
“If the Australian government succeeds in reducing the number of foreign students and other migrants coming to the country, we can expect foreign buying to be affected.”
There are signs that foreign buyers are expanding their search beyond the east coast of Australia.
Victoria, New South Wales and Queensland still represent 86.9 per cent of all sale transactions, making up 91.3 per cent of the value of sale transactions for the reporting period.
But this is down markedly from 2021–22, when Victoria, New South Wales and Queensland represented 97.0 per cent of all sale transactions and 97.8 per cent of the value.
Tracking purchases over five years shows that South Australia features among the top three states, along with Victoria and Queensland, when it comes to transactions on vacant land.
Foreign Buyers Still A Small Pool
Foreign buyers comprise just 1.1 per cent of residential property sales across Australia.
Terry Ryder, Managing Director, Hotspotting, told API Magazine, that the latest number actually underlined just how little foreign investment there is in Australian residential real estate.
“There may have been a 27 per cent annual rise in transactions, but that’s from a really low base.
“Foreign buyers have been slugged in major increases in taxes in recent years, a trend that continued with the latest Federal Budget and some of the state budgets.
“It’s resulted in fewer foreign investors compared to historical norms and that has impacted the supply of apartments.
“Foreign buyers were once a major source of off-the-plan sales that allowed high-rise developers to get sufficient pre-sales to secure finance and proceed with a major project.
“Using foreign buyers as a cash cow with no electoral consequences is very short-sighted and has contributed to the rental shortage and the overall undersupply of new dwellings.”
Your 2024 Guide
How To Make Buying Australian Property As An Expat As Easy As 1, 2, 3?
For Australian expatriates wishing to invest in property back home navigating the process can seem daunting. Being armed with the right information and planning makes buying Australian property as an expat a feasible and rewarding endeavour. Helen Avis of Specialist Mortgage is a seasoned professional when it comes to expatriate finance. Here, let Helen Avis step you through the basics to successfully navigate the Australian property market.
Are You Ready To Purchase Australian Property?
Like everything in life you need to be prepared before starting anything. Before jumping straight in it’s crucial to research and understand the Australian property market. Consider factors such as market trends, property prices, rental yields, and economic conditions. Engage with local real estate agents and online resources to gather relevant information or speak to one of our friendly mortgage professionals and they’ll point you to the right person. We have a network of agents, accountants & brokers to provide you with the knowledge you need before embarking on one of life’s biggest investments.
Can You Afford An Australian Home Loan?
Don’t forget about your financial goals and budget too. It’s all very well to know what suburb is providing a sound return on investment but can you actually afford it? It’s important to first know the purchasing budget you are working with. That way you, and your mortgage broker will get a better understanding of your purchasing range and the properties you can look at.
Having a chat with an experienced Australian expat mortgage broker will give you a good indication of your borrowing capacity, and how much deposit you will need to have for the Australian property you are going after. Your Australian mortgage broker will then being able to pin point some of the incentives you may be eligible for also.
Get Professionals In Your Corner For All Things Aussie Property.
We’re not experts at everything so why pretend to be? To navigate the complexities of the Australian property market, we do advise to engage the services of professionals such as a real estate agent, mortgage broker, and a solicitor. A reputable real estate or buyer’s agent can assist in finding suitable properties, your mortgage broker can help secure financing options tailored to your needs & a solicitor will guide you through the legal processes involved in property transactions.
Did you know if you purchase a property in New South Wales on the East Coast of Australia, whilst only holding a PR status and not hold an Australian passport, you would be subject to an additional 8% stamp duty surcharge on the purchase? It’s important to understand your liabilities and having an expat mortgage broker will only strengthen your options when purchasing Australian Property
The Fund Part – Accessing Australian Home Loans.
Arranging finance is tricky for everyone, and as an Aussie expat or repat there can be some loopholes and barriers. Exploring your financial options like securing a mortgage from an Australian lender or utilising existing funds in an Australian banking institution can really help. Talk to us, or consult a mortgage broker so you can understand the requirements, interest rates, and terms and conditions associated with Australian expat mortgages and non-resident lending.
Virtual Reality When Purchasing Bricks And Mortar Investments.
The biggest question we get all the time is how can I purchase property in Australia if I’m not physically in Australia? I can’t go and inspect properties?!
Yes, its always best if you can personally inspect potential Australian properties but in this digital age it is not uncommon for even locals to not even set foot in their future home. You can now leverage technology to conduct virtual property inspections, seek detailed property reports, and engage with trusted individuals to assess properties on your behalf. Ensure the property aligns with your investment goals, location preferences, and meets necessary standards.
Once you have identified a property, (digitally or elsewise!) make an offer through your real estate or buyer’s agent. Ensure the offer is contingent upon due diligence, including property inspections, finance approval, and legal requirements and negotiate the purchase price and terms to reach an agreement beneficial to both parties. You can do this all electronically and remotely if required.
After due diligence and legal processes are completed, proceed with settling the property purchase. Coordinate with your solicitor, lender, and real estate or buyer’s agent to ensure a smooth settlement process. We too can take care of this entire process for you with our dedicated team that work with expat clients daily. We know the ins and outs and act as your proxy every step of the way.
Purchasing Aussie Property Worldwide.
Buying Australian property as an expatriate may require additional considerations and processes, but with thorough research, professional assistance, and careful planning, it is an achievable goal. By understanding the market, adhering to regulations, and engaging the right professionals, expats can successfully invest in Australian property, benefiting from long-term capital growth and potential rental income. Is it time you invested in Australian soil?
Specialist Mortgage, a part of the SMATS Group, specialises in providing tailored mortgage solutions for Australian expats and foreign investors. The team of experts led by Helen Avis, have consistently provided tailored mortgage solutions to clients worldwide, helping them achieve their property ownership dreams.
With a focus on personalised service and in-depth industry knowledge, Specialist Mortgage has established itself as a leader in expatriate and foreign national home loans.
Investors and first home buyers are making a big return to the property market, with three state capitals seeing particularly strong real estate demand and higher loan values.
As the inflation beast is gradually brought to heel, borrowers are becoming increasingly confident that interest rates have reached their zenith and are again borrowing with relative gusto.
It’s first home buyers who are leading the charge, with investors not too far behind.
The latest Australian Bureau of Statistics (ABS) data shows that in November new home and investment property loans were up 13.1 per cent over the year.
The value of new loan commitments for investors was rising higher than owner-occupier borrowers. Investment lending increased by 18 per cent to reach $9.72 billion while owner-occupier new loan commitments were up only 10.6 per cent over the year to reach $17.86 billion in loans.
But it was first home buyer activity that stood out, with a 25.8 per cent increase in the value of new loan commitments for first-time buyers that saw the value of new loans reach $5.25 billion.
Source: CoreLogic
Canstar’s lending expert, Steve Mickenbecker, said the figures suggested Australian had confidence in the property market excelling in 2024.
“You could say investors are back, with new lending up by 18 percent year-on-year, suggesting they hold a healthy expectation for property prices over the coming few years.
“Looking at the number of buyers, first home buyers’ participation represents 37 percent of all new loans.
“First home buyers have in recent years had to weather the impact of rate rises on borrowing power.
“Canstar’s analysis shows for the average income, a solo borrower has seen their borrowing capacity fall since April 2022 by $137,000 and likewise, a double-income couple’s budget has been depleted by $331,000.”
Real Estate Institute of Australia (REIA) President, Leanne Pilkington, expressed relief that there was a return of investors.
“The results follow the latest ABS data showing the consumer price index rose 4.3 per cent in the 12 months to November 2023, down from 4.9 per cent per cent in October.
“The 13 interest rate rises have finally curtailed inflation, with all signs showing the economy is now heading in the right direction.”
Ms Pilkington said owner-occupier loans recorded moderate growth in November with some states such as Tasmania and NSW showing signs of stabilising.
Investors as a portion of total lending by state (based on value, excluding refinancing)
Source: CoreLogic
ABS data shows new loan commitments in Queensland rose 3.3 per cent, Victoria rose 2.0 per cent, South Australia rose 6.9 per cent, in the Australian Capital Territory rose 9.4 per cent and in the Northern Territory rose 6.0 per cent while New South Wales fell 1.1 per cent, in Western Australia fell 2.9 per cent and Tasmania fell 15.2 per cent.
While new loans may have slipped in Western Australia, the value of the average loan size reached record levels there, as well as in Queensland and South Australia, reflecting the strong capital growth in those property markets over the past year.
Queensland reached $557,510, South Australia $510,057 and Western Australia $497,275 in average loan size.
Helen Avis, Director of Finance, Specialist Mortgage, said Perth was seeing a lot of interest from eastern states buyers.
“With stock levels so low – there are now just over 3,000 properties for sale in Perth and many are being sold as soon as they are listed – it’s little surprise that borrowers are taking bigger loans to achieve their property goals.”
Maree Kilroy, Senior Economist for Oxford Economics Australia, agreed that Perth could expect further strong growth in 2024.
Following the rebound over 2023, we expect 2024 will be a softer year with home prices increasing a more muted 2.7 per cent nationally.
“Units are expected to outpace houses as affordability pressures, migration patterns, and weak apartment completion volumes intensify competition in the city apartment markets.
“While Sydney and Melbourne are expected to record relatively softer growth, Perth is well-equipped to lead the pack as the city develops a more sizeable dwelling stock deficiency.”
Rate Cuts Could Mean Game On For Refinancing
Refinancing largely stabilised in November after three months of steep declines.
The value of refinanced mortgages rose slightly in the month of November, lifting by a modest $121 million – the first increase in four months.
RateCity.com.au research director, Sally Tindall, said that while we’re now well past the peak in refinancing, the value of mortgages switching each month is still at elevated levels.
“Rock bottom rates in 2021 might have shone a spotlight on refinancing, but the rising cash rate has been the blowtorch that’s spurred many borrowers into action.
“The latest ABS data shows over 700,000 mortgages have refinanced since the start of the rate hikes, switching more than $360 billion worth of loans.
“Refinancing could well drop further in the first half of 2024, however, if we do see cash rate cuts later in the year it could be game on for some borrowers ready for their next move.
“It’s fantastic to see first home buyer numbers rising again in the month of November, despite rising rates and property prices.
“These numbers are likely to lift further in 2024, particularly when the government’s much touted Help to Buy scheme finally gets up and running.
“While this scheme will help lower-income first home buyers on to the property ladder without having to shackle themselves to super-sized debts, the places in this scheme are set to be capped at just 10,000 per year, which is unlikely to be enough to cater for the potential demand,” she said.
Article Q&A
Who are the most active buyers of Australian property?
The value of new loan commitments for investors was rising higher than owner-occupier borrowers. Investment lending increased by 18 per cent to reach $9.72 billion while owner-occupier new loan commitments were up only 10.6 per cent over the year to reach $17.86 billion in loans. But it was first home buyer activity that stood out, with a 25.8 per cent increase in the value of new loan commitments for first-time buyers.
Which states have the most new loan activity?
ABS data shows new loan commitments in Queensland rose 3.3 per cent, Victoria rose 2.0 per cent, South Australia rose 6.9 per cent, in the Australian Capital Territory rose 9.4 per cent and in the Northern Territory rose 6.0 per cent while New South Wales fell 1.1 per cent, in Western Australia fell 2.9 per cent and Tasmania fell 15.2 per cent.
At a time when the household saving to income ratio declined to its the lowest level in 16 years, new data has revealed that home ownership remains the biggest source of personal happiness.
In the pursuit of happiness, there’s a special kind that comes from owning your own Aussie home.
Recent research from Great Southern Bank has revealed that homeowners are happier than renters. There’s a unique sense of fulfilment that accompanies having a place to call your own, and it extends beyond mere bricks and mortar.
The Aussie Dream: More Than A Roof Over Your Head
According to the No Place Like Home report, 70 per cent per cent of respondents agreed that owning a home is an important factor in their happiness.
Half plan to buy a home to live in within the next three years. Half of renters are also hopeful of buying a home to live in within the next three years too.
What the research shows is there is still growing aspiration to own a home, with it not just being homebuyers that are looking. Forty-two per cent of existing homeowners are thinking of buying their next home – either upsizing, downsizing or making a lifestyle change.
Embarking on the journey to home ownership is more than a transaction – it’s a voyage toward a happier, more fulfilling life – and the research proves it.
Owning a home is not just about having a roof over your head. It’s about embracing a lifestyle that reflects the warmth of the Australian spirit.
Here’s What Makes Homeownership Down Under A key To Happiness:
Stability And Security
A home is a sanctuary, a place where you feel secure, and your roots are firmly planted. It’s a stable haven in a world that’s constantly changing.
Community Connection
Aussie neighbourhoods foster a strong sense of community. From barbecues in the backyard to conversations over the fence, owning a home brings you closer to a network of friends and neighbours.
Investment In The Future
Beyond immediate joy, homeownership is an investment in your future. It’s a cornerstone for building wealth, providing a sense of financial security for years to come.
Personalisation And Pride
Your home is a canvas for self-expression. The ability to personalise and transform your space brings a deep sense of pride and accomplishment.
Freedom To Flourish
With a home of your own, you have the freedom to create the life you desire. Whether it’s raising a family, starting a new chapter, or enjoying your golden years, home ownership paves the way for your unique journey.
More Than Just Bricks And Mortar
The report found most people (81 per cent) consider their home their ‘happy place’, and almost three quarters (72 per cent) believe home is wherever their family or loved ones are.
Just over half say having a home is about having a place to celebrate their culture and traditions.
Home ownership is a journey that can be difficult.
Australian Bureau of Statistics data released Wednesday (6 December), showed the household saving to income ratio declined from 2.8 to 1.1, the lowest level since December 2007.
Household saving declined due to a strong rise in income payable (+6.3 per cent), which experienced its highest growth through the year (+27.9 per cent) since September quarter 1977. Income taxes drove the rise, in the absence of the Low and Middle Income Tax Offset, which ceased over 2022-23.
Inflationary pressure led to increased nominal household consumption (+1.4%), as consumers faced higher prices for goods and services, further contributing to the decline in household saving.
“Gen Z and millennials tell us that saving a deposit is the key barrier to taking that first step towards buying a home,” Megan Keleher, Chief Customer Officer, Great Southern Bank, said.
“It’s clear, however, that Australian home owners do become happier over time, as they build the equity in their home.”
Happiness is at its highest for mortgage-free home owners and Baby Boomers, with 57 per cent in each group saying they are happy with their current housing situation, compared to just 29 per cent of long-term renters.
The report found that 51 per cent of renters are feeling heavily burdened by their financial commitments – significantly higher than 36 per cent of home owners.
Long-term renters are also more concerned about the cost of living (84 per cent) and housing affordability (80 per cent) compared to those who have purchased their own home (73 per cent and 62 per cent).
“Every individual’s home ownership journey and personal experience is different, but the report highlights that owning your own home does bring increased happiness for the vast majority of Australians,” Ms Keleher said.
Getting Those Keys
Navigating the path to home ownership may seem daunting, but with the right guide, it becomes a joyous adventure.
Award-winning mortgage broker Helen Avis, Director of Finance, Specialist Mortgage, said finding a team that can help with the pathway to home ownership was a fundamental part of the process.
Home ownership may appear a distant dream but there are finance experts who can help make it achievable.
Tailored financial solutions – Every home owner’s journey is unique. We work closely with you to understand your goals and customise financial solutions that align with your aspirations.
Exploring the mortgage terrain – The world of mortgages can be complex. We simplify the process, providing clarity on terms, interest rates, and the various options available to you.
Maximising your buying power – We leverage the team’s expertise to ensure you get the most out of your investment. From finding the right loan to securing favourable terms, we are committed to maximising your buying power.
Ongoing support – Whether you’re a first-time buyer or looking to expand your property portfolio, we provide ongoing support to ensure your financial goals are met.
Article Q&A
How do you get to buy your first home?
According to the No Place Like Home report, 70 per cent per cent of respondents agreed that owning a home is an important factor in their happiness. The path to that ownership is difficult but mortgage professionals can implement strategies to make it achievable.
Are household savings in decline or rising?
Household saving declined due to a strong rise in income payable (+6.3 per cent), which experienced its highest growth through the year (+27.9 per cent) since September quarter 1977. Income taxes drove the rise, in the absence of the Low and Middle Income Tax Offset, which ceased over 2022-23.
Our Top tips to slash that mortgage in 2024
From cutting years off the length of a mortgage to maximising rental income, these seven tips highlight how there is much more to a good property manager than collecting rent and doing property inspections.
If you’re one of the 2.2 million Australians who own an investment property, cash flow is the priority.
With an estimated 80 per cent of Australian property investors employing the services of a professional property manager, your property manager should be one of the key professionals who help improve your cash flow.
While most property investors look to their accountant to help improve the cash flow of their investment property, they often forget the value a professional property manager can bring to a property’s cash flow.
Here are seven strategies your property manager can implement to improve your cash flow:
1. Optimise rent disbursement frequency
Consider the benefits of more frequent rent disbursements.
While monthly payments are common with most property managers, switching to weekly disbursements can save you on interest costs, if you match your mortgage repayments accordingly.
For example: If you consider a loan amount of $500,000, with an interest rate of 6.6 per cent, paying principal and interest on a 30-year loan term, the savings can become obvious.
Swapping from monthly mortgage payments of $3213 to weekly mortgage payments of $803, the interest savings over the 30 years could be up to $163,730 (or reducing the loan term by six years, five months).
By aligning rent disbursements with your mortgage repayment schedule, you can effectively reduce interest expenses and improve your cash flow.
2. Maximise rental income
By staying informed about market trends and conducting regular rent reviews, property managers can ensure income is not left on the table.
Many places haves generated weekly rent increases of up to $200, highlighting the potential for significant income growth.
Property managers will, of course, be bound by any state’s legislation regarding rent increases.
3. Minimise vacancy periods
Vacant periods can have a significant impact on cash flow.
A property manager should manage lease renewals and minimise downtime between tenancies.
Furthermore, your property manager can implement targeted marketing campaigns and utilise online platforms to attract prospective tenants quickly, reducing vacancy periods and optimising your cash flow.
4. Reimbursing water consumption charge
Ensure that all allowable water consumption charges are passed on to tenants.
Whether your property is new or old, your property manager can implement systems to accurately track and bill tenants for water usage, helping to offset your expenses.
In some areas, strata title properties don’t issue individual property consumption information, and this can impact your ability to seek reimbursement of water consumption from your tenants.
5. Fair pricing from tradespeople
Qualified tradespeople are essential for maintaining your property, but their costs can vary.
Your property manager can leverage their network of trusted professionals to ensure fair pricing for maintenance and repairs, preventing overcharging and minimising expenses.
Additionally, your property manager can obtain multiple quotes for larger projects and negotiate favourable rates on your behalf, ensuring cost-effective maintenance solutions without compromising on quality.
6. Implement preventative maintenance programs
Proactive maintenance can prevent small issues from escalating into costly repairs.
By scheduling regular inspections and addressing maintenance issues promptly, your property manager can help you avoid unexpected expenses and preserve your property’s value.
Additionally, a property manager can develop customised maintenance schedules tailored to your property’s specific needs, addressing potential issues before they impact tenant satisfaction and annual rental yield.
7. Manage insurance claims efficiently
In the event of an insurance claim, your property manager should be experienced in managing these claims, which can facilitate a swift resolution.
Their expertise in property management and established relationships with insurers and local tradespeople can expedite the claims process, ensuring minimal disruption to cash flow.
Your property manager can document and report property damage promptly, liaise with insurance adjusters on your behalf, and oversee repairs to ensure timely completion and reimbursement. By efficiently managing insurance claims, your property manager can safeguard your investment and maintain uninterrupted cash flow.
Article Q&A
Should I use a property manager for my investment property?
A property manager can help optimise rental income, minimise expenses and ensure a steady stream of revenue, even slashing years off the duration of a mortgage by optimising rent disbursement frequency.
