layercakedev, Author at Sanford Finance

Evaluating the property market in Australia: Is now the time to buy or sell?

Jun 1, 2023 | Property Market

The decision to buy or sell property is always a tricky one, as it’s a significant financial step that involves careful consideration of various factors – including market conditions.

Whilst it’s important to know that real estate markets can be unpredictable, understanding the key indicators can help you to make an informed decision. So, let’s look at the factors influencing the Australian property market.

Low Listing Numbers = Increased Competition for Buyers

With decade-low listing numbers, there’s not a lot of competition in the market for vendors – but competition is fierce for buyers as they battle it out to secure a property. This is one of the reasons that selling conditions have strengthened, as evidenced by above average clearance rates, faster selling time and less negotiation.

The total number of homes listed for sale across Australia is currently 28% below usual (as reported by CoreLogic). When these volumes are low, selling conditions strengthen, meaning that potential vendors thinking about selling may jump in now rather than waiting until the traditional spring period where activity surges and there’s a spike in competition.

Rising Prices

Home values for Sydney, Melbourne, Brisbane and Perth all recorded an increase in housing values from the lows recorded in February. A mid-month update based on CoreLogic Australia’s daily Home Value Index showed the upswing gathering momentum, especially in cities such as Brisbane where the index is up 1.0% over the past four weeks whilst the Sydney property market still remains the strongest.. Considering housing affordability measures remain stretched such a strong rate of growth is surprising, with many experts predicting that this price rise will not be sustainable in the long term.

Low Supply vs High Demand

As mentioned above, decade-low listing numbers and high demand has lead to fierce competition between buyers – as seen in auction clearance rates that have been holding at 70% or higher in recent weeks.

In a time where the market traditionally tends to cool off, the stats suggest that, if anything, the market is gathering momentum instead of slowing down. Strong clearance rates as well as faster selling times and reduced discounting rates indicate that it’s definitely a vendor’s market.

Recent data from the National Housing Finance and Investment Corporation shows a 115,000 dwelling undersupply for 2028.

Interest Rates Continue to Rise

The biggest challenge for potential and current property owners? Interest rates. With interest rates continuing to rise, demonstrating an ability to service a loan remains one of the biggest challenges for prospective buyers to face.

Interest rates are high, but assessment levels are three percentage points higher again – making it even harder for buyers to enter the market or secure their dream property.

Economic Uncertainty

In addition to rising interest rates, we’re also in the midst of a cost of living crisis where consumer confidence is low.

Should RBA cut interest rates, there’s a good change we would see a pick-up in both buyer and seller activity. It’s also highly likely that lower interest rates would be the catalyst for a further uptick in housing values, however, we’re not expecting a rate cut anytime soon and there’s speculation that rates may continue to rise this year.

Economists are split on their forecasts with predictions for further rate hikes, stability and some cuts later this year – all contributing to uncertainty and low consumer confidence levels.

A Helping Hand

Government policies and regulations play a crucial role in shaping the property market. Policies related to taxation, lending practices, and housing affordability can have both direct and indirect effects on the market.

At the moment, first home buyers in particular have a wide variety of grants, concessions and schemes available to them (outlined in our First Home Buyer Update here) that could make purchasing a property easier and more affordable.

Migration Predicted to Recover

With net overseas migration set to fully recover to pre-pandemic levels there will be more pressure on the housing market than we’ve seen in recent years.

With the return of international students and the surge in migration, it is estimated that an extra half a million people will be looking for somewhere to live in Australia in the next two years.

Low vacancy rates bringing investors into the market

We are experiencing a rental crisis across the country, with historically low vacancy rates encouraging more investors into the market. Unfortunately for investors, rising interest rates and property prices have made this challenging – as well as rising building costs making it harder for investors and developers to buy and renovate or rebuild.

Is now the right time to buy or sell?

In short? Maybe. Unfortunately it’s not a one size fits all answer.

Ultimately, making an informed choice that aligns with your own circumstances and long term goals is key when navigating the property market.

Luckily, we’re here to help. We’ll sit down to work out what your goals are, what your property budget may be and how we can help you secure a property. Contact us today to get started!

How the budget might impact you

May 11, 2023 | Government Grants

The government promised a Federal Budget that would build “stronger foundations for a better future” – but how will it impact you? We’re breaking down all of the budget announcements below.

Expanding the Home Guarantee Scheme

Siblings, friends and other family members will be able to use the Government’s first home buyer programs together to boost participation. The expanded eligibility will allow any 2 eligible people to be joint applicants for a guarantee. This includes the First Home Guarantee, the Regional First Home Guarantee and the Family Home Guarantee.

The Home Guarantee Scheme will also be extended to people who have not owned a house in the past 10 years. Read more about these schemes in our recent post here.

Social security and families

Increasing income support payments as of 20 September 2023 (proposed date). The Government will increase working age and student payments by $40 per fortnight.

Also, JSP recipients aged 55 and over (currently 60 years) who have been on payment for 9 continuous months will receive the higher maximum rate of $761.30.

Increasing help for renters

The maximum rate of Rent Assistance (RA) will increase by 15%. This means a single person with no dependent children currently receiving the maximum RA payment of $157.20 per fortnight will start to receive $180.80, as well as their income support payment. (Proposed start date September 20, 2023)

Expanding access to Parenting Payment (single)

Eligible single parents will now receive the Parenting Payment (single) until their youngest child turns 14, up from 8 years old. It will make these single parents $176.90 per fortnight better off rather than transferring to the JobSeeker Payment. (Proposed start date September 20, 2023)

Reducing energy bills

Eligible households will receive a rebate of $500 per year and eligible small businesses $650 per year on their power bills. (Proposed start, 2023-24 for two years)

Reducing health costs

The Government will invest $3.5 billion over five years to triple the bulk billing incentive for GP consultations for children under 16 and Commonwealth concession card holders. (Proposed start over 5 years from 2022-23)

Superannuation

Introducing payday super 1 July 2026. Employers will need to make super contributions on the same day as they pay their employees’ salary and wages. Currently they only need to contribute to super once a quarter. The Government estimates this would increase the retirement savings of a 25-year-old median wage earner by $6,000.

Increasing tax on earnings on Superannuation balances over $3 million

The Government is reducing super tax concessions for people whose total balance exceeds $3 million, bringing the headline tax rate to 30% (up from 15%). The higher tax rate is only payable on earnings corresponding to the proportion of a person’s super that is greater than $3 million. (Proposed start 1 July 2025)

Aged care

(Proposed start date 2022-23 and over the next 5 years)

The Government is providing extra funding to:

increase the pay of many aged care workers by 15%

provide an extra 9,500 Home Care packages

continue COVID-19 measures

strengthen regulation

postpone the new ‘Support at home Program’ and extend grant arrangements for the ‘Commonwealth Home support Programme’ for a further 12 months.

Small Business

The Government will improve cash flow for small businesses by temporarily increasing the instant asset write-off threshold to $20,000 for businesses with an aggregated annual turnover of less than $10 million. (Proposed start date 1 July 2023 to 20 June 2024)

Tax

Increasing Medicare Levy low-income thresholds (Proposed start date 1 July 2022) Low-income taxpayers will generally continue to be exempt.

Singles will be increased from $23,365 to $24,276

Families will be increased from $39,402 to $40,939

Single seniors and pensioners will be increased from $36,925 to $38,365, and

Families (seniors and pensioners) will be increased from $51,401 to $53,406.

For each dependent child or student, the family income thresholds increase by a further $3,760

First Home Owner Update – What’s changing on July 1

May 9, 2023 | First Home Buyers, Government Grants

First Home Owner Update – What’s Changing on July 1

From July 1, 2023, the New South Wales Australian Labor Party (ALP) will implement changes that will impact the way many first home owners purchase property. To make the transition easier, we’re going to run you through some of these changes and how they could impact you.

Stamp Duty Concessions

The ALP will introduce changes to stamp duty for first home buyers. Currently, first home buyers are exempt from paying stamp duty on properties valued up to $650,000, and receive a concession on properties valued between $650,000 and $800,000.

From July 1, 2023, these thresholds will be increased to $800,000 and $1 million respectively, providing even more support for those looking to purchase their first home.

Changes to the First Home Owner Grant

On July 1, the First Home Owner Grant will be increased from $10,000 to $25,000 for eligible first home buyers purchasing a newly constructed home or an off-the-plan property. This grant will be available for properties valued up to $1 million, and will provide a significant boost to those trying to get into the property market.

Removal of the Home Buyers Buyer Choice Scheme

Under the newly elected Minns Labor Government, the NSW Government will now abolish the First Home Buyer Choice scheme, reverting to the new stamp duty concessions as mentioned above.

Over 4,200 First Home Buyers had selected the First Home Buyer Choice options since it was rolled out in November 2022.

For those First Home Buyers who had already selected the property tax option there will be a grace period and it would be unlikely that the new NSW government would reverse any existing arrangements. We will continue to monitor this and keep you updated.

First Home Guarantee Eligibility to Expand

Previously, the First Home Guarantee and Regional First Home Guarantee Schemes were restricted to married and single people, as well as those in defacto relationship who were also Australian citizens at the time of application.

From July 1 this year, the Home Guarantee Scheme will expand, allowing permanent residents to access the scheme as well as allowing friends, siblings and other family members to jointly apply for the guarantees. These schemes will also be available to non-first home buyers who have not owned a property in the past 10 years.

For both of these schemes, the federal government acts as a guarantor on up to 15% of the loan. This enables eligible buyers to purchase a home with as little as a 5 percent deposit, eliminating the need for lender’s mortgage insurance.

Family Home Guarantee Changes

The criteria for Family Home Guarantee applications will also be expanded beyond just single natural or adoptive parents with dependents. This means that the guarantee will be available to eligible borrowers who are single legal guardians of children, such as aunts, uncles and grandparents.

Under the Family Home Guarantee, the federal government acts as a guarantor on up to 18% of the loan. This enables eligible buyers to purchase a home with as little as a 2 percent deposit, eliminating the need for lender’s mortgage insurance.

The availability of this guarantee will also expand to include permanent residents in addition to Australian citizens.

How do I know if I’m eligible?

Our team will help you identify which Guarantees could be applicable to you under the Home Guarantee Scheme (HGS)

We’ll help you find the right path to owning your own home and will be with you every step of the way. To get started, simply get in touch to organise a call or meeting.

What is a Limited Recourse Borrowing Arrangement?

Apr 13, 2023 | Investment Property, Self Menage Super Fund (SMSF)

What is a limited recourse borrowing arrangement? (LRBAs)

Limited recourse borrowing arrangements (LRBAs) are a type of borrowing structure that allows self-managed superannuation fund (SMSF) trustees to borrow money for the purpose of purchasing an asset, such as property or shares.

There are several parties involved in a Limited Recourse Borrowing Arrangement (LRBA), each with a specific role to play in the borrowing structure.

SMSF trustee: The SMSF trustee is responsible for making investment decisions and managing the SMSF’s assets. In an limited recourse borrowing arrangement, the trustee is also responsible for entering into the borrowing arrangement and ensuring that the loan is used for a permissible purpose. The trustee is also responsible for ensuring that the loan is repaid on time and that the SMSF remains compliant with all relevant legislation and regulations.
Lender: The lender is the entity that provides the loan to the self-managed super fund trustee. The lender may be a bank or other financial institution that specializes in providing SMSF loans. The lender’s recourse is limited to the asset purchased with the borrowed funds. This means that if the SMSF defaults on the loan, the lender can only take possession of the asset purchased with the borrowed funds, rather than pursuing the SMSF trustee for further payment.
Custodian: The custodian is a separate legal entity that holds the asset purchased with the borrowed funds on behalf of the self-managed super fund. The custodian is a crucial component of an LRBA, as it ensures that the asset is held separately from the SMSF’s other assets, and that the lender’s security interest is registered against the asset.
Bare Trustee: The bare trustee is another separate legal entity that holds the legal title to the asset purchased with the borrowed funds on behalf of the self-managed super fund. The bare trustee is a passive entity that does not have any decision-making power, and its only function is to hold the asset on behalf of the SMSF.

How an LRBA Works:

Separate Trust Structure: The property purchased through an LRBA is held in a separate trust (bare trust) until the loan is repaid. Once the loan is fully paid off, the property can be transferred to the SMSF.
Limited Recourse: If the SMSF defaults on the loan, the lender can only recover the loan from the property itself, protecting other assets within the SMSF.
Loan Restrictions: The borrowed funds can only be used to acquire a single acquirable asset, and any improvements to the property must be funded by the SMSF’s own resources, not through additional borrowings.

How Sanford Finance Can Assist

Investing in property through an SMSF requires careful planning and expert advice. At Sanford Finance, we help you navigate the complexities of SMSF property investment, ensuring you understand both the benefits and risks involved. Our team of experienced brokers will work with you to assess your financial situation, guide you through the compliance requirements, and connect you with the right lenders who specialize in SMSF loans.

Whether you’re considering purchasing your first SMSF property or looking to expand your existing portfolio, Sanford Finance is here to provide the expertise and support you need to make informed and confident investment decisions.

Ready to explore SMSF property investment? Contact Sanford Finance today to schedule a consultation with one of our expert brokers. We’re here to help you achieve your retirement goals through smart, strategic property investments.

Purchasing Property Through a Self Managed Super Fund

Apr 13, 2023 | Investment Property, Self Menage Super Fund (SMSF)

Are you considering purchasing property through a Self-Managed Super Fund?

Purchasing property through a self-managed super fund (SMSF) can be a smart investment strategy for Australians looking to secure their retirement future – but it’s important to know what you’re doing.

With the Australian property market experiencing consistent growth over the years, buying property through an SMSF can provide a range of financial benefits.

Source: https://www.realcrowd.com/post/reasons-to-invest

What are the benefits of purchasing property through a self-managed super fund?

One of the main advantages of purchasing property through an SMSF is the potential tax benefits. Income from rental properties held by an SMSF is generally taxed at a rate of only 15%, compared to the marginal tax rate that applies to individuals. This means that the rental income earned from an SMSF-owned property is taxed at a much lower rate, leaving more funds available for reinvestment or retirement income.

Other benefits of investing in property through a self managed super fund include:

Leveraging your investment by borrowing through limited recourse borrowing arrangements (LRBA)
When investing in property through an SMSF, investors can leveraging their investment by borrowing money through limited recourse borrowing arrangements (LRBAs). This allows investors to purchase property with a smaller initial investment and to benefit from any capital growth over time.
Increased control over investments
SMSF trustees can also benefit from increased control over their investments. Unlike traditional superannuation funds, SMSF trustees have direct control over the investment strategy and can make investment decisions in line with their specific goals and risk appetite. This level of control and flexibility can be particularly attractive to investors who want to take a more active role in managing their retirement savings.

What are the downsides of purchasing property through a self-managed super fund?

It’s important to note that investing in property through a self-managed super fund Is not without risks, including:

Fluctuating property values

The time and money involved in managing a property

The stress of dealing with leasing your property/choosing the right tenants/potential damage to property

With this in mind, it’s crucial that investors undertake thorough research and seek professional advice before making any investment decisions.

Is purchasing property through a SMSF right for me?

Overall, purchasing property through a self-managed super fund can be a sound investment strategy for those looking to diversify their portfolio, enjoy tax benefits and take greater control over their retirement savings. With the Australian property market showing consistent growth, SMSF trustees may find that investing in property is a smart move for their financial future.

If you’re interested in exploring your options and finding out more, get in touch! Sanford Finance has helped many clients secure property through their Self-Managed Super Funds as well as helped numerous clients with their general investment portfolios. We’ll work through the different options with you and find out which is best suited to your financial goals.

Get in touch with our team at www.sanfordfinance.com.au/contact or call us on 9095 6888