LandGipps Finance

Posts by LandGipps Finance

FOMO factor: more Aussies looking to buy with mates or siblings

Ever thought about buying a property with a friend or family member? You’re not the only one. The rising cost of property and FOMO has led to more than a quarter of Australians considering buying a property with a ‘non-traditional’ partner.

Most of us long for a place to call our own.

But what do you do if the price of your dream home seems to be rising out of reach?

Well, more and more young Australians are shedding the “mine” mentality, and adopting the “ours” approach in order to get a foot on the property ladder.

In fact, according to a 1,000 person nationwide survey by CommBank, a quarter of home buyers have considered buying a property with their mates, siblings or parents because of increasing concerns about housing affordability.

And this co-ownership mentality is being strongly driven by the fear of missing out (FOMO), with 35% of respondents admitting to being bitten by the FOMO bug.

What’s driving the trend?

In a nutshell: housing affordability, with more than 60% of survey respondents worried about being priced out of the market.

Other driving factors for teaming up with a mate or family member include being able to buy a bigger and better property, as well as spreading the financial risk if anything goes wrong.

And then there’s additional pressure from family and friends!

More than 4-in-10 prospective buyers admitted to feeling pressure from friends/colleagues who have already bought, or their parents/family who want them to buy.

Co-ownership hurdles and challenges

So, if purchasing a property with family or friends is a viable option, why don’t more people do it?

Well, that’s because there are a number of challenges involved.

For example, the vast majority of respondents said they harboured concerns about putting their relationship with a family/friend under strain/pressure.

Meanwhile, 1-in-10 respondents didn’t even know co-ownership with friends or family was possible.

Another hurdle is that co-buying and co-owning can be a more complicated process.

But rest assured that if it is possible and suitable for you, we can help guide you through it, including making sure that all involved parties are across their financial and legal obligations.

Get in touch to explore your co-buying or guarantor options

Co-ownership with friends or family, or having a parent go guarantor for you, isn’t suitable or possible for everyone.

But there are people out there for whom it might be a good fit.

If you think that could be you, and you want to learn more, then please get in touch.

We’d be happy to run you through a number of possible structured options and opportunities, as well as the challenges, hurdles and pitfalls you’ll want to consider.

And if co-buying doesn’t look like a good fit for you, we can run you through a range of other buying options – including federal government schemes – that might be more suitable.

by LandGipps Finance

Are your cashflow needs in order ahead of the summer trading season?

The summer trading season poses a raft of tricky cashflow and stocking challenges for retailers at the best of times, let alone following a global pandemic slowdown. But if done well it can set your business up nicely for the good times ahead.

Ahh summer, how we’ve longed for you – especially this year as much of the nation reopens its stores and borders following another winter of lockdowns.

But there’s just one (more) challenge facing many business owners this year.

Fewer than half (49%) of Australia’s small businesses have the trading stock in place to make the most of the end of lockdowns, according to research by small business lender OnDeck Australia.

And to make stock ordering matters even more tricky, 44% of small businesses say their cashflow has suffered as a result of lockdowns.

The findings aren’t too different from a recent Prospa survey, which found that 37% of SMEs required access to finance to ride Australia’s reopening wave, with the average amount of financing $46,000 per business.

For SMEs less than five years old, that figure jumps to $58,000.

The importance of cashflow during the global pandemic

The top reasons cited in the Prospa survey for requiring additional funds included purchasing tools, equipment, or machinery; restocking inventory; and investing in digital software.

The Prospa survey also found that 87% of respondents feared opportunities could be missed without access to additional finance.

Mr Nick Reily, National Partnerships Manager at OnDeck Australia, said with the pandemic continuing to create significant disruptions to global supply chains, cashflow can be critical for small businesses in the re-stocking process.

“Today, businesses need to be able to act fast, and order stock well in advance given possible delays in procurement,” he explains.

“When businesses have appropriate cashflow funding in place, they are in a strong position to have conversations with alternative suppliers if their regular supplier cannot have stock to them on time.”

Get in touch to find out about cashflow solutions for your business

If you think you might have a gap in your business’s cashflow over the months ahead, then it’s important to start considering your funding options before the summer trading season really heats up.

The sooner we can take you through your options, the better your stock levels can be ahead of the Christmas and new year period!

by LandGipps Finance

How well has your salary kept up with house prices?

You’ve probably noticed that house prices in Australia consistently outstrip growth in wages. But by how much? And what can you do to make sure you’re not forever chasing the great Australian dream?

Each generation faces its own unique set of challenges (and opportunities!).

And for the current crop, one big challenge can be breaking into the property market. Especially when you’re competing against older generations that have had at least a decade (or two, or three) headstart on the property ladder.

That’s not to say it can’t be done. Far from it. But it does require good planning, discipline, and motivation to stick to a plan.

Because historically speaking, and as you’ll see below, the longer you leave it, the harder it is to keep up.

How much have house prices grown compared to wages?

Over the past year there was a 2.2% annual increase in the Australian wage price index (WPI) – just short of the decade average growth of 2.4% – according to the Australian Bureau of Statistics.

Meanwhile, Australian housing values have jumped by more than 20% over the past year.

But hey, that’s just one year – and an absolutely bonkers year at that.

Let’s look at the trend over the past two decades to give us a clearer picture.

Over the past 20 years, wages have increased 81.7%, while Australian home values have grown 193.1%, according to this CoreLogic cumulative growth graph.

And here’s a state-by-state breakdown. As you can see, Tasmania has the biggest disparity between wages growth (79.6%) and house price growth (294%), followed by ACT, Victoria, NSW and then Queensland.

What does this mean for your next property purchase?

In short? It’s becoming tougher to save for a house deposit.

In the year to October, a 20% deposit on the median Australian dwelling value has increased by $25,417 to a total of $137,268, according to CoreLogic.

“With wages increasing just 2.2% in the year to September, it is difficult for household savings to keep up with this kind of increase,” explains CoreLogic’s Head of Research Eliza Owen.

“​​This tends to lead to less demand from first home buyers through periods of rapid property price increase.

“Another important implication of high house prices relative to subdued wages growth is lower purchasing power when it comes to mortgage serviceability over time.”

So what can you do about it?

Well, besides demanding a big pay rise from your boss, rest assured there are a number of options at your disposal.

For first home buyers, most states offer grants and stamp duty concessions/exemptions to help give you a leg up.

There’s also a number of federal government options, including the popular First Home Loan Deposit Scheme and New Home Guarantee initiatives, which on average enable first home buyers to make their home purchase 4 to 4.5 years sooner.

That’s right – 4 years sooner!

Then there’s the First Home Super Saver scheme, which allows you to save money for a first home inside your superannuation fund, which helps you to save faster due to the concessional tax treatment that super offers.

And for those of you looking to purchase an investment property, rest assured that there are ways to leverage the equity in your existing property to help you grow your portfolio.

So if you want to become less dependent on your annual wage for your wealth and retirement, and more invested in property, get in touch today.

We’d love to sit down with you and help make a plan to suit your current situation.

by LandGipps Finance

Think property prices will dip when rates rise? Don’t bet the house on it

Whether you’re looking to buy, sell or hold, there’s a good chance you’ve wondered whether the property market will tumble when interest rates rise, right? Today we’ll look at what happened to house prices when interest rates were hiked in the past.

Past performance does not predict future results – we’ve all heard that before.

But it’s also said that an understanding of history can help us prepare for the future.

So with all the recent talk of the Reserve Bank of Australia (RBA) increasing the cash rate in 18 months (or so), and fixed rates already going up as a result, now’s an important time to look at what has happened to property prices when interest rates rose in the past.

What does history show us?

History suggests that interest rates do not force property markets into booms or busts, rather it’s often affordability, local economic conditions, consumer sentiment, or access to lending that does, according to a Property Investment Professionals of Australia (PIPA) analysis.

The PIPA analysis looks at the six periods of increasing cash rate movements since 1994, and the corresponding national house price movements, which we’ve summarised below:

June 1994 to December 1994: Cash rate increase: 2.75%. House price increase: 1.1%.

September 1999 to September 2000: Cash rate increase: 1.50%. House price increase: 7.5%.

March 2002 to December 2003: Cash rate increase: 1.00%. House price increase: 35.7%.

March 2006 to December 2006: Cash rate increase: 0.75%. House price increase: 8.4%.

June 2007 to March 2008: Cash rate increase: 1.00%. House price increase: 8.9%.

September 2009 to December 2010: Cash rate increase: 1.75%. House price increase: 10.5%.

So what can we take from those figures?

Well, for starters, for those holding out for a cash rate rise in the hope of buying during a price dip, history is not on your side – not once did house prices fall during the above periods.

PIPA Chairman Peter Koulizos says the strength or weakness of property markets is often influenced by more than just cash rate adjustments.

“There has been much conjecture over the past 18 months that record-low interest rates are the singular reason why property prices have skyrocketed, when the cash rate was already at a former record low of 0.75% before the pandemic hit,” Mr Koulizos pointed out.

“There are clearly a number of factors at play, including some buyer hysteria I’m afraid to say, but one of the main reasons for our booming market conditions is easier access to credit, which was simply not the case two years ago when rates were also low.”

Most borrowers can also afford a rate rise: RBA and PIPA

The RBA doesn’t seem overly concerned about borrowers being able to afford their mortgages when the cash rate rises.

RBA assistant governor (economic) Luci Ellis recently told a parliamentary committee that the majority of borrowers were paying off more of their home loans than required by their contracts, particularly during COVID.

“People have been socking away money in offset accounts and redraw accounts during this period. And particularly where you had lockdowns, some people were not spending as much as they ordinarily would,” Dr Ellis explained.

“If and when rates do eventually rise, a lot of people will not actually need to raise their actual repayment, because they’re already paying more than they need to.”

It’s a sentiment shared by Mr Koulizos: “While we don’t expect rates to rise for a year or two yet – and when they do, they are unlikely to ramp up rapidly – the monthly mortgage repayments on an (average) $574,000 loan may increase by about $73 per week if the interest rate increased one percentage point.”

Get in touch if you’d like to know more

The moral of the story? You don’t have to sit around and wait for a cash rate increase to make your next move.

If you’re looking to crack the property market with your first purchase, get in touch today and we can run you through a number of government schemes that can help make it easier for you.

And if you’re already a homeowner and are concerned about what an increase in the cash rate might mean for your current mortgage (or next purchase), we’d be happy to run you through a number of options available, which could include fixing your rate, or putting extra funds into an offset account in advance.

by LandGipps Finance