No Change! RBA keeps the rate the same

While economists have been divided on whether a cash rate cut was to be expected this
afternoon, the odds for an alteration ahead of today’s meeting were the highest they’ve been
since the rate last moved in August 2016. 


However, the Reserve Bank of Australia has announced that the rate will remain on hold at
1.5%.


Given the election set to take place at the end of this month, it is less surprising that the RBA
would hold off on instituting a change. Both the government and opposition are promising
tax cuts intended to boost household finances, encourage spending and stimulate the
economy at large.


According to CoreLogic head of research Tim Lawless, “The flat CPI reading for the March
quarter wasn’t enough to drag interest rates lower, although the likelihood of a cash rate cut
over coming months remains high.”


“While inflation remains below the RBA’s target range, labour markets generally remain
relatively strong, supported by New South Wales and Victoria, and the decline in housing
values has lost some speed over recent months,” he added.
RBA Governor Philip Lowe said the board would be “paying close attention” to the labour
market at its upcoming meetings, hinting any sustained up-tick in unemployment could lead
to a rate cut.


“The inflation data for the March quarter were noticeably lower than expected and suggest
subdued inflationary pressures across much of the economy,” he said.
The statement revealed the bank does not expect inflation to get back up between its target
band of between 2-3 per cent before 2020.


“The main domestic uncertainty continues to be the outlook for household consumption,
which is being affected by a protracted period of low-income growth and declining housing
prices,” Dr Lowe said.
He said the house price adjustment was continuing. Prices dropped by 10 per cent last year in
Sydney and Melbourne, according to CoreLogic, with analysts predicting a similar drop this
year.


“The demand for credit by investors in the housing market has slowed noticeably as the
dynamics of the housing market have changed,” he said.
Economists and the business community have been divided on the wisdom of cutting already
low rates in the lead-up to an election.
The RBA has intervened in a federal election campaign to change borrowing rates only twice
in Australian history. It ultimately decided to keep the status quo despite the Australian
Bureau of Statistics reporting lower than expected retail trade figures.

Home owners will now have to wait until June to see if they will get relief from rising cost-
of-living pressures, as the central bank gives itself time to assess the impact of the policies of
an incoming Labor or Coalition government.

Buying in Partnership

How would you like to double your deposit and double your income to buy your first property? Sounds pretty good doesn’t it? That’s the reason why many young homebuyers are now working together with a partner, friend or relative to break into the property market.

Although there are some excellent benefits to entering a property partnership, there are some pretty nasty horror stories out there too – so you need to make sure you protect yourself against the worst.

Make sure you have similar goals for your property purchase.

Do you both agree on how long you would like to keep the property for? Do you want to rent it out, or will you be living there together? Make sure everyone is on the same page before you enter into any contracts.

Buy with someone who is at a similar stage in life.

If you buy with a family member who has a baby on the way, you might be asking for trouble. Likewise, buying with a sibling who is too young to appreciate the importance of keeping up financial commitments could be just as much of a recipe for disaster.

Take a moment to check your financial compatibility.

You will be responsible for the loan if the other party becomes unable to pay, so take the time to have some open discussions about money, and make sure you are both equally committed to paying things on time and keeping track of the bills.

Decide if you want to be housemates.

If you plan to live together in the home, make sure you both agree about things that could cause arguments such as having pets in the house, allowing partners to sleep over, housework and other potentially touchy subjects.

Get Legal Advice.

Find out about your options legally if something was to go wrong, and decide whether you want to be Joint Tenants, or Tenants in Common. This might depend on whether you will pay an equal share of the deposit and loan repayments.

Create a formal agreement.

Get a formal agreement drawn up that covers as many issues as you can think of. Hopefully you won’t have any problems, but it might be helpful if you already agree on the solution ahead of time.

Property partnerships can turn into nasty legal battles when parties don’t agree on important issues, such as whether or not to sell the property. If you can thrash out some of these issues now you will save yourself a lot of worry in the future.

Keep records of spending.

Make sure you keep it even and try to keep records of who paid for what, just in case you have problems down the track.

Hopefully your property partnership will be a very positive experience, and if you follow these steps you should be well on your way to being a great team.

RBA holds cash rate at 1.5% yet again

The Reserve Bank has kept the official cash rate at a record low 1.5 per
cent for a 32nd straight month, as widely anticipated by economists.
The decision at Tuesday’s April board meeting means the cash rate has
not moved in 32 months.
The rate, which reflects what the central bank charges commercial banks
on overnight loans and influences all other interest rates, was last cut in
August 2016 and hasn’t been hiked since November 2010.

Some Common Home Buying Blunders

Your home is likely to be the biggest purchase you make, so it’s something you want to get right.

Mistakes can be stressful and costly. Here are the biggest ones buyers make and some tips to help you avoid them.

1) Letting your heart rule your head.

It’s often easy to be dispassionate about an investment property but when it comes to your own home, emotions can run high.

Buyers often make the mistake of falling for features in a home or loving a certain location, only to find, once they move in, they have compromised on what they really need.

Arm yourself with a list of non-negotiables – the features you simply must have now or soon down the track, such as extra bedrooms for a growing family, office space for a home business or proximity to public transport.

If a property doesn’t tick all of your must-haves, keep hunting.

You should also decide whether or not you want to renovate or have a lot of time for maintenance. Heritage properties can win over hearts but often require deep pockets and lots of upkeep. Similarly, a fixer-upper in your price range and preferred location may end up being a money pit you can’t really afford.

Look beyond fancy fit-outs and styling – the furnishings will go with the vendors.

Stick to the buying basics – location, price, layout and condition – to decide if the property is right for you.

2) Believing the selling agent is working for you.

Real estate agents are paid by the vendor with commission from the sale. The higher the sale price, the more they put in their pocket.

Don’t fall for sales spiels that tempt you to spend more than you can afford or settle for a property that doesn’t meet your needs.

Some buyers are levelling the playing field by hiring their own agents to find a property and negotiate the sale. Fees for buying agents vary, but generally they charge for their time, plus take a commission from the sale. If you have no time to house hunt, it may be worth the extra cost.

3) No homework.

There is no such thing as too much research when it comes to property. You should set aside several weeks to get around to as many properties as possible, narrowing your search to three target suburbs when you are ready to buy.

Check out recent sales of comparable properties in the area and build on this research as you go, keeping in mind property prices can move fast in a boom.

You should also find out if there are any amenities and infrastructure planned for the area, such as new roads, public transport, hospitals or schools, which can boost real estate prices.

Another key question is how long the property has been on the market.

If looking for an investment, research rents and what the area has to offer tenants, such as a lively restaurant or cafe scene and reliable public transport.

4) Starting the hunt without loan approval.

Knowing how much you can afford will take a lot of stress out of your search. A pre-approved loan sets a boundary so you can focus on properties in your price range and gives you peace of mind that you will be able to move fast when you find the right one.

Give us a call on 1300 252 088 to make sure you have this all in place.

5) Buying beyond your means.

It can be tempting to stretch your budget for what seems like the right property, especially if interest rates are as low as they are now.

But rates are cyclical and what goes down, eventually goes up. If you are extending to afford a property while interest rates are low, you are going to struggle to make your mortgage payments when they start to climb.

It’s wise to calculate your repayments should rates rise by two to three per cent and build that reserve into your budget. That way, you have some comfort when the cycle eventually turns.

6) Not getting the property inspected.

According to NSW building advisory service Archicentre, only one in 10 buyers gets a professional building and pest report on a property before they buy it. Most inspections cost a few hundred dollars, a small price to pay for peace of mind on a purchase as significant as a home.

A licensed inspector can check for pests, such as termites, and building flaws or issues, such as wood rot or rising damp, all of which have the potential to cause costly dramas if unchecked.

Always ensure the sale contract is subject to getting the all-clear on the building inspection. If something surfaces, you can either back out of the purchase or negotiate a lower price to compensate for the required repairs.

7) Not getting the sale contract checked.

The contract you sign when you hand over a deposit is legally binding, so have it scrutinised by a lawyer or conveyancer.

They will check it for any sale or zoning conditions that could disadvantage you, such as restrictions, or covenants that may be imposed.

A lawyer or conveyancer can also check property documentation, such as sewer diagrams, to make sure there are no issues with any renovation or extension plans.

Your legal expert can also help adjust the contract terms for your benefit, such as negotiating a longer settlement period if required.

RBA announces March cash rate

In its second announcement of the year, the Reserve Bank of Australia (RBA) has announced
that the official cash rate will remain on hold at 1.5%
In a statement the RBA said the central scenario is still for the Australian economy to grow
“by around 3% this year”.
Speculation around the decision has intensified over recent weeks due to emerging trends
across the lending environment, including out of cycle rate increases from the banks, the
correction in the property market and rising arrears.
Mortgages more than 90 days in arrears climbed to a record 0.75% in December, according to
S&P Global Ratings. While five years ago only 39% of prime mortgage arrears were more
than 90 days overdue, the figure has since risen to 55%, with the largest hike witnessed in the
Northern Territory.
According to CoreLogic, a sharp slowdown in residential construction activity – coupled with
low retail trade – indicates that weak property market conditions are already spilling over to
the broader economy.
As such, it believes there is a “growing possibility” that rates could fall later this year.
“The performance of the housing sector over coming months should provide some clues
about future monetary policy decisions,” said CoreLogic head of research Tim Lawless.
“A further deterioration in the pace or geographic scope of declines could tip the balance in
favour of a rate cut later this year as the RBA becomes wary of the wealth effect moving into
reverse,” he added.
Last week the shadow RBA board advised the rate should remain on hold, as it has since
August 2016. According to a media release, its advice is based on the national economy
“currently not showing any clear direction”.

First Cash Rate in 2019 Announced

The Reserve Bank of Australia (RBA) has made its first cash rate announcement of 2019, at a time when most of the industry is still concerned with the fallout from the Royal Commission report.

To no surprise, the rate has remained on hold at 1.50%, where it has stayed since August 2016.

While RBA governor Philip Lowe has said the next rate move will be a hike, some experts are beginning to expect a rate cut could be the way forward.

CoreLogic head of research Tim Lawless said of today’s decision, “The hold decision was widely anticipated, considering a subtle uplift in CPI and steady labour market conditions, however financial markets are increasingly leaning towards the next move from the RBA being a cut rather than a hike.

“With CoreLogic’s January hedonic index revealing national dwelling values are falling at the fastest rate since the GFC, while Sydney and Melbourne’s rate of decline is now the most rapid since at least the early 1980’s, there is the potential the RBA may be becoming less comfortable with the performance of the housing sector. Add to this a consistent downtrend in dwelling approvals, weakening consumer sentiment and softer retail trade figures, and it looks like the household sector could start to weigh down economic growth.

“The weeks preceding the RBA meeting saw several smaller lenders pushing mortgage rates higher in response to persistently high funding costs, following an average 14 basis point rise in owner occupier mortgage rates since September last year. If we see mortgage rates rising more broadly, we might see the RBA become more willing to consider a rate cut in an effort to offset higher funding costs and support heavily indebted household balance sheets.”

John Kolenda, managing director of Finsure, said there was a likelihood of a post-election rate cut.

He said, “There is increasing pressure on the RBA to lower rates, particularly when you weigh up all the negative factors which includes the coming federal election, the response to the final report of the Hayne Royal Commission, the falling property market and external matters such as the US-China trade war and Brexit.

“There are just too many headwinds at the moment. You also have banks increasing their rates independently of the RBA due to cost of funding issues. Consumer confidence is the strongest economic indicator and as we can see from downturns in retail spending, consumer confidence is lagging.”

In his commentary around the rate decision, Lowe said, “The housing markets in Sydney and Melbourne are going through a period of adjustment, after an earlier large run-up in prices. Conditions have weakened further in both markets and rent inflation remains low. Credit conditions for some borrowers are tighter than they have been. At the same time, the demand for credit by investors in the housing market has slowed noticeably as the dynamics of the housing market have changed. Growth in credit extended to owner-occupiers has eased to an annualised pace of 5½ per cent. Mortgage rates remain low and there is strong competition for borrowers of high credit quality.”

 

How to negotiate on price and knock out the competition

All’s fair in love and war, and the same might be said for negotiating with real estate agents.

Whilst you want to get the best possible deal on your purchase, the agent is responsible for getting the best possible price for their client – the vendor.

Depending on how long you have been looking, you might be tempted to just pay the asking price to free up your Saturday mornings again.

But just think – how much sooner could you pay your loan off if you saved tens of thousands on the purchase price?

If you want to get the best deal on your property purchase, try these 6 tips:

  1. Focus on positives all around. The best way to negotiate is for every party to feel like they won the game in some way.

 

  1. Communicate clearly and develop a rapport with the selling agent. Don’t try to pick holes in the property.

 

  1. Do your homework. If you want to be able to negotiate on price, you need to have a good idea of what similar properties in the area have sold for in the past couple of months. You should walk through plenty of open houses and keep a close eye on the sold results for your area. (If the selling agent offers to give you a list of sold results, accept politely but do your own research because they will probably choose the highest prices to help in their negotiation with you).

 

  1. Don’t try to buy outside of your price range. If a property is advertised at $500k to $550k, and your budget is $450k, don’t waste your time. You will only destroy your credibility if the right property comes up with that selling agent in the future.

 

  1. Try to find out what the vendor’s motivation for selling. If they need a quick sale, or if they require a certain settlement period, this could help you to negotiate a deal that works for everyone. By including something in your offer that sweetens the deal, this could put you ahead of other buyers in the race.

 

  1. Timing is everything. Some would advise that it’s best to make the selling agent chase you as much as possible. But depending on the area, you might have a win by putting your offer in early. In areas with slow property sales, a vendor might be shocked to receive an offer in the first few days on the market. If you make your offer valid for only a day or two, the vendor will need to decide whether they wait and hope that someone else will come along, or whether they accept your offer for a quick sale.

We only invest one hour of our time on the biggest investment of our lives – Avoiding the Money Pit

The typical home purchaser spends around 90 hours over 6 months browsing the internet, researching websites, visiting real estate agencies and inspecting no less than a dozen properties. However, we only spend a little more than one hour inspecting the home we eventually purchase. Not surprisingly, many of us discover ‘hidden problems’ after the settlement.

Purchasing a new home can be an exciting time. With the new location, more space and improved features it is easy to get caught in the moment. By the time we find our ‘dream home’ most of us are exhausted from the months of searching, the endless lost weekends, the constant disappointments of missing out or vendors just not quite meeting our pricing expectations.

The endless home viewings and burden of just one more property inspection can make it easy to become complacent with our property inspections. It can be difficult to maintain a thorough inspection process as one property merges into the next.

Before you exchange a contract of sale or sign a purchase agreement, it is always recommended that you engage a qualified inspector to conduct a rigorous building and pest inspection of your potential new home.

Why do I need these?

There are three good reasons why you should invest in a building and pest inspection report before you buy a property:

  1. You will know any hidden problems in advance.
  2. You can use the information to try and negotiate the price of the property or budget for the repair of any problems.
  3. You can engage with a specialist for advice about how any issues raised may affect the property at a later date.

Of course, the building and pest inspection reports will be only two of many things you will need to consider before buying a property however they will help ensure that the “congratulations – the home is yours!” is a happy moment.

Some Questions to ask when downsizing

• When is the right time?
• What is the right location for me?
• How much will you save and how much will you spend?
• What should I keep and donate?
• How much space do I need?
• What type of property is right for me?
• What items will I need to replace?
• How do you picture your life in your new place?
• What’s the community like?
• What are my must-have amenities?

The final cash rate of 2018 has been announced by the Reserve Bank of Australia.

RBA governor Philip Lowe announced the rate would be remaining at 1.5%.

As there is no cash rate meeting in January, this means the rate will have remained the same for at least 29 months in a row.

Experts and analysts were expecting the decision, citing low unemployment and wage growth.

While many over the last few months have begun predicting the rate might stay the same until 2020, the shadow board of the RBA has said there is “an increasing need” for a hike in the next six months.

CoreLogic’s head of research, Tim Lawless, said that “Considering the diversity of economic conditions, the hold decision comes as no surprise”.

Explaining what the RBA would be looking at, particularly in terms of the housing market, he added, “Labour markets are improving, but wages growth remains sluggish and inflation has softened.  It’s a bit harder to gauge the RBA’s view on housing market conditions, with the RBA continuing to call out weakening conditions in Sydney and Melbourne.

“CoreLogic data to the end of November highlighted that the Sydney market has already recorded a 9.5% decline in values since peaking in July last year and will likely surpass the previous record peak to trough decline of 9.6% which was set during the last recession between 1989 and 1991.

“Despite this weakness in the largest cites, dwelling values in Sydney remain 41% higher than they were five years ago, and Melbourne values are still 38% higher both of which show five year growth rates well in excess of most other capital city markets.

“Additionally, five of the eight capital cities have posted a capital gain over year to date however, from a macro view they have much less of an influence on the national figures than Sydney and Melbourne do.

“To date we haven’t seen the housing downturn impacting on household consumption or saving, however this is likely to be a key factor the RBA will be monitoring.”