Is It Cheaper to Buy Than Rent Post-Covid?

New research from CoreLogic found that servicing a mortgage has become cheaper than paying rent on 36.2% of Australian dwellings, up from the pre-Covid-19 numbers of 33.9% posted in February 2019.

More than a quarter (26.2%) of dwellings are cheaper to purchase in the combined capital cities, while the numbers increased to 60.1% in the combined regional cities.

The analysis was done at the individual property level, using a group of mortgage assumptions and valuation estimates to come up with a ballpark figure for mortgage repayments. The numbers were then compared with rental estimates at the individual property level.

The assumption was that the buyer saved a 20% deposit and bought property at an interest rate of 2.4% on a 25-year loan term.

The combined capital cities had varied levels of mortgage serviceability compared with 2020, with data showing that in certain cities, the number of houses that are cheaper to purchase has decreased.

For example, in Sydney, 4.9% of dwellings are cheaper to purchase in 2021, down from 7.1% in 2020, while in Melbourne, it was 7.3% in 2021, down from 9.6% in 2020.

Sydney property prices have risen by 15.2% since February 2021 (amid low interest rate), which has boosted loan principals.

Rents in Sydney grew by just 2.1% compared to 2020, due to reduced rental demand because of the delated foreign migration.

Properties were cheaper to buy than compared to renting in 2021 thanks to significantly lower interest rate costs on mortgage debt since the start of the pandemic.

Based on the analysis by CoreLogic of data from the Reserve Bank of Australia, the average new mortgage rates for owner-occupiers have declined from 3.21% in February 2020 to 2.40% in May 2021.

CoreLogic: principal could decline because of higher fixed rates

Mortgage costs could increase as lenders start to increase long-term fixed rates along with increased funding costs.

For new owner-occupier borrowers, average long-term fixed rates have improved from recent lows by an average of roughly 12 bps, which would have already undermined serviceability in certain areas.

However, average fixed rates with at least a three-year term are still so far from pre-pandemic levels. Numbers are currently at 2.11%, down from 3.06% in February 2020.

But despite the moderate increase in longer-term fixed rates, renters should still assess their housing costs for longer-term renters, versus the cost of purchasing.

Higher mortgage rates would increase interest rates for buyers. However, for some, mortgage servicing may still be a smarter path than renting in this situation. This is because increased interest rates could weaken the housing market and reduce the principal.

It depends on individual circumstances, and evaluating the cost of various tenure types.

For mortgage brokers, there is business to be had from people who want to shift from renting to owning a home even when rates are increasing. However, they should be aware of the possible tightening in prudential standards.

Monetary policy could remain liberal in the near term, with projected growth in the cash rate fluctuating from late 2022, as forecasted by major banks, to 2024, according to the RBA.

In case average, long-term fixed rates go the full 100 bps, they would return to levels reported in October 2019, when dwelling demand was significantly high.

Taking all of these into account, there could be more proactive risk management and possible tightening in prudential requirements in the housing lending situation. So, you may want to note that there could be increased focus on serviceability assessment.

5 Living Rooms Items You Will Need in Your New Home

Moving to your new house is an exciting time, but there are some basic essentials that you need to make your new dwelling look, feel and function like a home.

Here are a few essential décor and furniture items that increase the comfort of your living area.

  1. Curtains

Curtains are one of the most useful items in your living room. Many people pick curtains for aesthetic purposes, but curtains provide many functions outside of style.  They are used to control light. Curtains let in light when you draw them open and hide it when you want shade.  Curtains also provide insulation. During summers, lighter and airier fabrics are recommended. In winter, it is better to layer up your window coverings to keep the cold away.  When choosing colours, consider the colour of the backing/lining as well. This is to make sure they look good both inside and outside of your home.

  1. The Right Sofa

The best seating arrangement will be customised to your space. You need to give it some thought when choosing the right sofa for your living room.  A two-seater and one or two armchairs are ideal for a small living room. You can also consider slimline, less bulky designs to minimise clutter.  For a bigger living room, choose a large three-seater or modular sofa.  And don’t forget to make sure the furniture that you’re moving into your new home will fit through the door. Take measurements, including the total width, height and depth, before purchasing a lounge suite.

  1. Cushions

Cushions are mainly thought of as décor, but they offer a few practical functions. Hence, they are considered as a must-have item in living rooms.  Firstly, cushions provide added back support for extra comfort while lazing on your sofa. Secondly, the added padding is very useful during winter, especially if your sofa is made of leather or vinyl fabric, which is cool to the touch.  In terms of the colour of your cushions, first, determine your colour palette. Are you using a neutral shade or a pop of colour? Then, experiment with the size of the cushions and the textures of the fabric.  All of these add to the fact that those little cushions make your living space more comfortable and inviting.  For inspiration check out my Pinterest page!

  1. Hard surfaces

After you have picked your sofas and chairs, you’re not done. Your living room will definitely need a coffee table and/or side tables.  The size, materials and shapes of these living room essentials will be determined by the size of your space and your preferred aesthetic. Your lifestyle will also influence your choices.  For example, if you have children, you might want to choose a round coffee table. While a modern-style lounge may call for a glass, marble or a type of plastic.  While coffee tables are the common choice, depending on the space available, you may opt for side tables.  For your colour palette, again, if you’ve selected neutral colours, pick a complementary colour to bring harmony to the space.  Or, you may choose to create a statement piece by using a bold, contrasting shade.  Whatever combination of colours you choose, one thing is clear: you’d want a space where you can place your cup of tea or glass of wine after a long, busy day.

  1. Mood lighting

Two things control light in your living room: curtains and electronic systems. Mood lighting is essential to living spaces, a place of relaxation.  To pick the right living room lighting, layer the lights, which means you have to use three types of artificial lighting: ambient, task and accent.  Ambient light, which imitates natural daylight, can be created with lamps for a calming vibe.  Task lighting is normally more focused, like a reading lamp.  Accent light, such as downlights and spotlights, puts certain design features on the spotlight to deliver your illuminated requirements.  Create the perfect relaxation space by playing with the three types of lighting.

 

 

Home Selling 101: Get Rid of These 7 Items When Selling Your Home

House hunting is exciting, and that feeling can come from envisioning yourself living in the house you’ve dreamed about for so long. However, it cannot be easy imagining the place to be yours when it still feels like it belongs to another.

Buyers will feel the same when they see your house during open inspections. They can be turned off by clutter and excessive personal belongings, leading to reduced competition and offers.

Most agents, including me, will recommend getting rid of clutter and styling the home using furniture to showcase its most attractive features.

Moving out completely while the house is on the market may not be for everyone, especially sellers who haven’t found their next home yet. But freeing the home of items that might turn off buyers will let a sale happen and ideally result in higher price.

  1. Noticeable Clutter

The first step is decluttering and this should be done weeks before listing the home.

These can be easy tasks like clearing kitchen counters of cumbersome appliances like blenders and microwaves to make the area appear bigger, or emptying the hallways and entryways of coats, shoes and bags to create a sense of space.

  1. Odd homewares

Styling your home sometimes means that your tastes may not fit that of some buyers.

“Keep it vanilla,” is what I recommend. This means anything quirky or odd for the house, any item that makes buyers pause will distract them from the features of the property.

When a property is styled well, it can help sell a property quickly.

  1. Photos and personal belongings

Buyers want to envision themselves living in your house. But that is not easy when your photos are hanging on walls and fridges.

Family photos scattered throughout the home will show too much of your personality to buyers, and this makes it hard for them to establish a connection to the property.

De-personalisation should be implemented in every room of the home. Too many personal items in the bathroom can turn off buyers, so the best thing to do is keep the toothbrushes and medicines away.

  1. Cupboard items

Buyers tend to open wardrobes, linen cupboards and the pantry when viewing a property, which gives a literal meaning to the phrase “open home.” But a wardrobe bursting with clothes and whatnots won’t help sell a home.

To make a property feel more spacious, I suggest using a minimalist strategy while the home is on the market. Imagine that you’re taking a holiday and are living with just the items you can take.  In other words, pack away all the seasonal clothing you are not wearing, books, vases and linen that you want to take to your new home too and store them off site if you have to. 

  1. Pet items

Half of Australians have at least one pet, but it’s still best to keep away of any sign of pet occupancy during open homes. Not all buyers love pets, and pet items can make a property disorganised and distract buyers.

  1. Home offices and studies

A sale price can be impacted by the number of bedrooms. Thus, sellers are advised to convert home offices and studies into bedrooms before sale.

It’s important to make it clear what each room is used for. Buyers might not be able to visualise a room when they see a study.

  1. Backyard junk

It is just as important to declutter your backyard. Left-over construction materials like bricks and timber should be thrown away, while garden tools should be stored properly.

Changing trends means some outdoor features that were once disliked are now popular. Ten years ago, people didn’t like vegetable gardens. Today, they’re a selling point, particularly with younger buyers.

If you are thinking of selling anytime in the next few months and are seeking advise, just ask Annette!

3 Things To Do When You Have Just Bought an Investment Property

It’s not yet time to rest after doing the work to successfully secure your first investment property.

There are three important things you should do before you can enjoy the fruits of your investment.

  1. Get a property manager

Hiring a property manager should make your role as a landlord relatively stress and hassle free. You should start looking as soon as you’ve decided to purchase.

Property managers know the better neighbourhoods or streets and may help you in identifying where the better quality homes are located.

One of the best ways to find the best property managers is through referral. Ask your fellow investor who they use and whether they’re satisfied. You can also search online.

What are the qualities of a good property manager?

  • They have to do what they say they will do.
  • They have to have an extensive knowledge and understanding of related legislation.
  • They need to have experience, preferably years of doing property management.
  • They should be able to understand your unique situation, which means they should be good listeners.
  • They should know what needs to be done to minimise any risk to you.

A good manager will also find a tenant who is ready to move in immediately after settlement day to maximise your rental return.   

  1. Arrange insurance

Insurance is a must to manage your risk in what will be one of your biggest assets.

New landlords should have the right insurance in place to protect them from incurring massive debts due to unforeseen circumstances.

With landlord insurance, you are covered if your investment property is damaged by natural or man-made disasters like fire, floods, hail storms or high winds. Some of the things it covers include window breakages, a burst water pipe, a leak due to a broken toilet or washing machine.

By paying a little extra you can also cover rent default should you stop receiving rent payment from your tenant or loss of rent if your property becomes inhabitable due to a natural disaster.

The cost of your landlord insurance will depend on the value of your property and its risk profile. It is even tax deductible. Your policy is good if it covers tenant-related risks, including loss of rental income and damage to your property caused by the tenant or their pet.

It’s important to get landlord insurance as soon as possible after your property purchase because there can be some grey areas between the purchase date and the settlement date. That something could go wrong between those dates is not unheard of. Without insurance, you could get in big trouble.

  1. Save extra money for maintenance and unexpected expenses

Strata fees include a component called a sinking fund levy. This is due to the fact that even well-constructed buildings will need repairs and maintenance in the future.

This is the money set aside for “rainy day” expenses, such as new paint or new floor coverings, won’t not mess up your household budget when these items need to be done.

As an investor, you have to understand that there are some things you need to pay for over the course of the year. You will need a contingency fund to pay for those things, as well as ongoing expenses such as council, water and strata bills.

You invested in a property to make money, but you also need to maintain that property and that costs money.