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Newsletter | Your Monthly Finance Tips

Building 1Welcome to my March newsletter. It’s certainly been a busy year and lead up to autumn. I want to share with you three topics that you’ll need to know about in the coming months.

• Why are rental yields increasing after historic lows?

• Interest-only loans are becoming a thing of the past - what are they?

• There is an unseasonably high level of real estate available right now.

As always, I’m eager to have a chat if you need any help with a home loan.

Call me now on 0402 408994


Why Rental Yields are Increasing from Historic Lows

As we’re all aware, the Australian property market is in a downturn. CoreLogic has reported a 5.6% annual decline in values nationally which is the largest annual fall since mid-1983.

For property investors, rental growth has slowed to 0.4% annually but Sydney (-3%) and Darwin (-6%) are the only two capital cities in the negative. As you can see in my chart below, growth has slowed like this twice in the past decade.

Graph Mar 19 1

Graph Mar 19 2

 

So despite rents not growing, investment yields have. Lower property values mean higher yields because the property can be purchased for thousands of dollars cheaper than in the past, while cash coming in from the asset (rent) has continued to rise for most dwellings.

Property investment remains an excellent option for many Australians. If you want to discuss whether it’s right for you, give me a call.  


Interest Only Loans. What are They and Why are They on the Way Out?

Graph Mar 19 3

In the past year, lenders have significantly reduced the number of interest only loans they offer and approve for borrowers. Right now, CoreLogic reports that only 16% of loans have interest-only repayments.

What are Interest Only Loans?

Interest only repayments allow a borrower to reduce their monthly repayments so that they’re only paying off the interest portion of their loan. This means the customer won’t be reducing their loan balance but will have a slightly lower repayment.

This strategy can be effective for managing cash flow but should only be considered with the guidance of a mortgage broker.

What’s important to know is that sometimes interest-only loans automatically revert to principal and interest. This could throw a wrench into your budget if you’re not ready.

Let me know if I can help you run some numbers on loan repayments and their finer details.


New Listings Fall while Total Listings Grow.

Graph Mar 19 4png

A surprising and unique set of property data came out this week from CoreLogic. It shows that while there’s 14.4% fewer new properties coming on to the market for sale, the number of total properties for sale in Australia is 13.8% higher than it was a year ago.

If you’re looking to buy it’s important to know that stock is accumulating, so vendors may have to wait longer than they’re used to when they go to sell their property.

From a lending point-of-view, in a market that’s turning down, valuations can get tricky. If you get organised early with your finances, you’ll be able to mitigate these risks.