Two new changes that could get you into your dream home faster!

Property Markets are going to crash!!  Well, that was the prediction for last year that never happened.

 

Calmer heads have now prevailed and can finally see what any sales agent or broker will tell you, the markets are BOOMING right now.

And for good reason. Property has shown to be virtually rock solid through Covid and in some places like Newcastle the market has gone up.

Even though Property is kicking goals right now the rest of the economy is still struggling and there is no better place for the government to pull some Macro levers than in the property and construction sectors.

To get the economy firing again people need to be in jobs and to spend money so the federal and state government of NSW have come to the party with a couple of very important changes.

If you are a FHB (First Home Buyer) and purchasing under the NSW threshold of $650K for existing or $800K for new builds then you already get a onetime free pass on paying SD (Stamp Duty).

The NSW government finally announced that for the rest of us (Not FHB’s) it was going to change how Stamp duty/transfer duty was collected.

Currently Stamp Duty is collected when a properties title is transferred or purchased and is determined by the value of the property. The higher the property the higher the stamp duty.

For new builds that purchase the land portion first you will only pay SD on the land value.

E.g., a $300,000 property will require a $8,935 payment of SD where as a $900,000 property will set you back $35,835. Or a $400,000 block of land will be hit with a $13,335 in SD.

What many are claiming to be a “long overdue” change to an “outdated tax” this could be the chance many buyers have been waiting for to upgrade or to purchase their next “stepping stone” property on their way to their dream home.

The NSW government has announced they will allow buyers to decide if they pay the full SD up front in one go or if they choose to pay a land tax style fee each year.

This will have drastic consequences to the property markets. There is no question about that.

The first of which is the extra cash that buyers will now have to increase their deposits. Previously buyers always had to keep enough for SD aside which often decreased what they could purchase. Now with the option to make your repayments incrementally once a year, buyers get an automatic Borrowing Capability boost.

Your Borrowing Capacity (BC) is not determined by your deposit but is directly tied to it. Even with a $2 million dollar BC if you have no deposit you could not purchase a property.

Let me show you a scenario using a 10% deposit.

Joanne has $70,000 deposit and wants to purchase a property to live in. She is not a FHB so will be required to pay Stamp Duty. Previously Joanne would be restricted to a property value of $512,000.  $18,735 would go to Stamp Duty leaving only $51,265 of her $70,000 deposit.

With the new changes Joanne can choose to pay the land tax version once a year and if she has the Borrowing Capacity can now afford a $700,000 property. Almost $188,000 in extra borrowing capability is going to mean that market distortions could take affect very quickly in 2021.

There is one other little quirk regarding the new change. It has been mentioned that if a property is transferred once and the buyer chooses the land tax option that property will continue to have land tax paid yearly if it is sold in the future. Again, potentially creating two different types of markets. This “quirk” still must be clarified by the government as it is only speculation at the moment.

 

So, who will benefit from these two types of Stamp Duty payment methods?

For investors paying your Stamp Duty as a land tax makes sense as any land tax is currently tax deductible though that has not been determined yet and you should speak to an accountant for any tax advice.

Paying your Stamp Duty all in one go as it is currently may be beneficial if you were entering your retirement years and are purchasing your final home. It may be more beneficial to pay all you Stamp Duty up front, so you are not paying Land tax yearly as you grow older and your savings/super diminish over time.

The second big change is the “relaxing” of the responsible lending legislation. The federal government has said that it intends to reduce the onus on the banks when buyers complete a loan application.

Currently the sole responsibility is on the bank or lender. The new changes will mean that if you say your living expenses are $3,400 a week then the bank will accept that they are as you have claimed. Currently they will assess 3 months of your bank statements to gain an average of your spending and then if it falls short of what an average family of your size and income would spend then the average is still used.

This can detrimentally affect customers Borrowing Capacity as the higher your LE (Living Expenses) the lower your BC. If you happen to be a great with your budget, then you can be unfairly limited due to the bank using a higher LE amount than you really do.

The suggested changes will allow the banks to use the living expenses amounts that you have claimed and could mean you can afford a more expensive property.

Depending on your situation it could increase your Borrowing Capacity by $50-$60K.

2021 will see some massive changes to the property industry all of which are designed to fire up the lagging economy.

Speak to the professionals at Open Plan Finance today and run your scenarios, dreams and goals past our team.

 

Written by:
Jason Hare
Mortgage Broker & Finance Consultant
Co-Founder and Lending Specialist
CEO | Lending Specialist
0400 805 206
jason@opfinance.com.au

 

 

8 Ways to Increase the Value of your Home

The location and size of your property will affect how much it’s worth, but there are some tips to help you boost the value of your home.

Here are 8 tips to boost home value:

  1. A fresh coat of paint

The easiest and least expensive way to update the look of your home while raising its value is a new coat of paint. Choose whether you want to redo the entire house or do just two rooms, or maybe a feature wall? In terms of colour, experts say that ivory is the only colour that boost the value of your home however, I personally feel that most neutral colours will work just the same.

  1. Put in storage

If you’re not going for extreme minimalism, the lack of storage space will be a major turnoff for prospective buyers. Consider open shelves for the kitchen, bathroom and laundry. In addition, putting hooks on the back of doors is a simple convenience that is usually ignored.  Also think about any ‘dead’ areas of your home that could be transformed into new storage nooks.

  1. Upgrade the outdoor

The desirability of your home will increase with an outdoor area beautifully designed for entertaining. Shade and shelter are important, but fire pits have become a standard feature in many backyards.

  1. Add gas heating and appliances

There are a couple of reasons why gas appliances are a popular home feature. Gas heaters, especially flame-effect fires, provide warmth and comfort while being environmentally friendly. Gas cooktops can boost the value of your kitchen as they are generally favoured over electric cooktops because they can provide immediate heat and even temperature compared to electric. Gas also generates less greenhouse gas emissions compared to electricity, making it eco-friendly.

  1. Easy switches

You can build an entire new bathroom with no renovation. Minor, but current updates, like swapping handles and taps, can easily improve the appearance of your bathroom. Old and grubby tiles could be repainted. For an outdated vanity, installing a more contemporary one can make a huge difference to the vibe of the space.

  1. Curb appeal

The desirability of your home can also be influenced by how it looks from the street. Putting up a fence may be aesthetically pleasing, but it won’t automatically add value to your home. However, repairing and painting any existing fence around the property is worth it. Another easy and cost-efficient way to boost curb appeal is by replacing or repainting your letterbox and front door to a different colour.

  1. Décor and interior design

The look and feel of your home can be greatly benefited by adding items such as cushions, rugs and throws. Update old-fashioned lampshades and think of investing in some artwork. If you put your home for sale, it’s important that prospective buyers can imagine the space where they will potentially live.

  1. Add a granny flat

The concept of generations of families living together and dividing the cost of living is becoming popular. If space allows, building a granny flat in your property can boost the overall value provided it is done right. It is also a good way to earn extra income that you can use for your mortgage repayments.

 

I service the Newcastle and the Lake Macquarie regions and have been offering my clients sound recommendations and  professional advise since opening One Agency Pinkerton Properties in 2013.   If you found this article helpful or know someone who may benefit from it, feel free to share it.  

 

 

 

What Does Off-Market Sale Mean?

Have you heard the word off-market listing and wondered what it means?

An off-market sale means a property that is selling or has already sold with no public advertising, with real estate agents contacting interested buyers privately.

Sometimes sellers choose to accept an offer without formally ‘going to the market’ and advertising on the real estate portals or in magazines or the newspaper.  

This can be advantageous to the seller especially if the purchaser offers a strong price in order to lock out any competition.  It also quickens the sale and avoids having to spend money on advertising.  But be warned, an off-market sale doesn’t always deliver the best results especially when their is no competition because it’s hard to know if you’re accepting the best price possible.

Anyone who is high profile prefers an off-market sale because of the anonymity it offers. Sellers with scheming families or neighbours can also see the benefit in keeping their home’s sale private.  Often sellers who are looking for an off-market sale are usually those in relationships/marriage collapse, financial trouble, deceased estates or the seller may be facing job changes. Whatever their reason is, the one thing they have in common with is their need to sell quickly with the least amount of people knowing about it in order to focus on the more important issues in their lives.

Important to know is that off-market properties are usually only available for a brief period of time and they are usually the outcome of perfect timing.

Advantages of an off-market sale

Buyer:

  • The competition is weak so you may be able to purchase for a lower price. You may be the sole buyer who knows the anonymous listing and this exclusivity can mean getting that property for a lower price than if you bought in an open market.
  • High probability that your offer will be accepted. Even if your first offer is below market price, the seller may consider accepting your offer to avoid having to prepare the home for open homes and inspections as well as avoiding advertising fees.

Seller:

  • A fast sale – if priced keenly.
  • Normally sold with additional terms and conditions. When a seller prefers a silent sale, the fast sale usually contains more conditions, including shorter settlement periods, higher deposits, or inclusive of any structural flaws.
  • Avoid having to present the property for open homes and inspections
  • Avoid advertising costs.

Disadvantages of off-market sale

Buyer:

  • You still need to find a home that checks all your requirements, such as location, features, condition and price. This may mean additional footwork.
  • Who you know will make a big difference and it requires a long time to establish those insider relationships.
  • Absence of marketing materials, which means you can’t create a visual list of potential off-market investments.

Seller:

  • High probability that you will sell at bargain price compared to if you advertise your home.
  • Zero possibility of going to auction or capitalising on the huge passive market of people who regularly go online to search for investment or owner-occupied properties.
  • You may still lose, despite believing you can save money by not advertising. The reality is that they cost themselves tens of thousands of dollars because off-market will not offer the competition of a marketed sale.

Frequently asked questions

  1. What motivates vendors to sell off the market?

People who opt for an off-market sale are typically going for either a fast sale or private sale. For these people, selling the house is more important than the sold price.

The anonymity of an off-market sale usually attracts high-profile people or those who want privacy in their sales process.

  1. Can you purchase property that is not on the market?

Yes. But you will need the help of agents to find off-market properties. It’s important to get to know the agents in your chosen location so that you can work with what may be available.

  1. Can you remove your home off the market then re-list later?

Yes. Your home may be taking too long to sell and you and your agent decide that re-listing later is the best strategy to take.

 

Although selling off-market properties is a growing trend in Newcastle, One Agency Pinkerton Properties has been selling off-market properties since the agency was launched in 2013.

If you’re thinking of selling your property off-market this year, contact Annette Pinkerton on 0418447856 to discuss how this can work for you.

 

 

How Do You Future Proof your First Home Purchase?

Property investment is generally regarded as long term. However, it can be tricky to purchase a first home that you won’t outgrow immediately.

The not-so-easy task of saving for a deposit, the absence of equity in their current home and borrowing abilities constrained by early-career salaries indicate that future-thinking first-home buyers have to weigh what they want in a home at present with what they’ll require in the future.

Looking towards the future
A majority of first-home buyers know that their purchase is just a means and purchase according to their present situation.  People buying their first home would like to choose something close to their work and look for something newer that looks easy to manage.  But it can be detrimental to focus too much on your present lifestyle. For example, young couples purchase in inner-city suburbs to be close to restaurants, cafes and pubs, then they start a family and immediately their location is redundant.  It can be a big mistake to purchase a home that isn’t going to meet your needs for long. You’d be wasting your transaction costs if you have to sell and relocate to another home within a few years.

First-home buyers’ thought processes are often influenced by market conditions. If the market is really strong, buyers will try to enter straight away and probably have less thoughts for the years ahead. However, they tend to plan more if the market is weaker.

Affordability issues often force inner-city first-home buyers to purchase smaller apartments, putting a limit to how long a property will continue to be suitable as the family grows.

But by expanding the search grid, new possibilities can open it. If your lifestyle allows you to live in other suburbs, you should open yourself up to the possibilities of what you can purchase.

Here is what we recommend: First-home buyers planning to expand their family should prioritise what they’ll require in the home itself over their present lifestyle. A family-sized property can be a more profitable long-term investment than an apartment.

Planning for improvements
As an agent I often advise first-home buyers to consider how the home will help attain future objectives and think about ways you can boost the value of the property through cosmetic upgrades or extensions to woo potential future buyers.  You’re not going to be living in the property forever. It is not where you’re going to raise teenagers in, but it might be where you’re living when your first baby arrives.

You need to make sure the value of the equity you’re adding to the home is safeguarded and does not vanish in a weak market.

Taking advantage
The present low interest rate could let first-home buyers afford a more permanent home. It’s the perfect time to look for something that is bigger than you thought you could buy. Anyone who has had to live in a cramped space understands the importance of having a bigger space.

As long as you don’t overextend yourself, now is that ideal time to enter the market where you’ll be able to get more features/amenities that you want in your home.  Buying for the future needs a thorough deliberation, and not doing your research can prevent you from buying a long-term home.  Ensure that you’ve done research on the location you’re purchasing in. If you’re aiming for long-term, you want to avoid a home you’ll outgrow immediately.

Determine if this is a neighbourhood you can imagine yourself living in for more than five years.