September 2012 Newsletter

September 2012 Newsletter

Welcome to our September newsletter

Home buyers and investors alike could snag themselves a bargain this spring, with early forecasts flagging suppressed property prices and lower mortgage rates over coming months.

For the third consecutive month, the Reserve Bank of Australia’s (RBA’s) Board decided to leave the official cash rate unchanged at 3.50 per cent at its September meeting.

Reserve Bank Governor Glenn Stevens said the RBA will continue to take a sit and wait approach as the effects of rate cuts made earlier in the year trickle down through the national economy.

“As a result of the sequence of earlier decisions, interest rates for borrowers are a little below their medium-term averages,” Mr Stevens said. “The impact of those changes is still working its way through the economy, but dwelling prices have firmed a little and business credit has picked up this year.

“With inflation expected to be consistent with the [RBA’s] target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance on monetary policy remained appropriate.”

But while the Bank seems comfortable with keeping rates on hold for the foreseeable future, not everyone is convinced.

ANZ’s head of economics and property research, Ivan Colhoun, believes growing pressures in the Australian job market and weak commodity prices could force the RBA to lower the official cash rate sooner than expected.

“Slower than desirable employment growth and a continuing upward drift in the unemployment rate will allow modest further monetary policy accommodation,” Mr Colhoun said.

“Weaker commodity prices in conjunction with a still high Australian dollar – if persistent – and the trend in deferrals of a number of resource projects reinforce this expectation.”

His comments follow a recent ANZ Job Advertisement Series which found the number of job advertisements on the internet and in newspapers fell by 2.3 per cent in August after falling 0.8 per cent in July.

While this is sobering news for some, many would-be home buyers and existing home owners could enjoy discounted mortgage rates as a result of any future rate cuts.

But if lower mortgage rates aren’t enough to entice you into the market, new research from RP Data has found national property price growth has come to a halt.

After recovering by one per cent in June and by 0.6 per cent in July following the RBA’s back-to-back rate cuts, dwelling values across Australia’s combined capital cities remained unchanged in August.

If you would like to discuss the opportunities that might be available to you this spring, please give us a call today.

Sincerely, Nick Foale

Be successful in this season

Shake off those winter blues and jump into a reinvigorated property market this spring!

With the property market likely to heat up over the coming weeks, it pays to enter it with a solid understanding of what awaits.

Here are few tips and tricks to help you capitalise on this spring’s selling season:

Variety is the spice of life
As the weather warms up, the idea of hopping out of bed a little earlier on a Saturday morning to attend an open house feels a little less frightening.

As a result, more vendors list their homes in spring than at any other time of year.

This is great news for home buyers since the greater range of property not only increases the odds of your securing a home but also improves the chances of finding a home that better suits your strategy and goals.

Clear thinking
One of the most important things for all home buyers is to keep their eyes open and their mind clear when preparing to purchase.

This point is particularly important during spring as most vendors would have spent the colder months tidying their homes and gardens in a bid to lure more home buyers in the warmer months.

Try to avoid getting caught up in the more cosmetic appeal of the property – aspects such as blooming gardens or greener lawns – at the expense of more important issues such as whether the roof is in need of serious repair or is the property close to schools, shops and transport.

Know what you want
The most important part of buying property is to know exactly what you want, from the type, size and location of the property, all the way up to how much you are prepared to pay.

Having a clearly defined strategy built on solid research is a home buyer’s best asset.

That strategy is also crucial when there are larger numbers of stock on the market since you need to be able to make a decision based on your needs and goals.

With your strategy front of mind, you will be able to sift through the various properties and make the best possible purchase.

To ensure you also get the best price in your next property purchase, bear in mind the following:

  • Be on the lookout for potential problems in the house or unit. Any defect, large or small, can give you major leverage when the time comes to discuss price.
  • Don’t get caught up in the sales game. Expect to hear that there are several buyers looking at the property.
  • Pre-approved finance is a major draw card for vendors. It not only shows that you are serious about purchasing a home but that you can secure finance fast.
  • Leave yourself some space to negotiate on price. While you don’t want to throw a ludicrous offer at the vendor, be sure to shoot low on your first offer.
  • Understand the vendor’s motivation for selling. If the vendor is looking for a quick sale, leverage off this during price negotiations.

Managing your property chores

Many investors underrate the value they add, but a good property manager can play a pivotal role in the success of your investment. 

Many Australians have barely enough hours in the day to manage their own households, with work, kids, groceries, home maintenance and other chores.

But once you purchase an investment property, you are responsible in many ways for managing your tenants as well.

If you would rather not deal with the toil and day to day chores of renting out a residential investment property, however, you may want to consider using a property manager.

To get the most out of your investment, it is important to choose the right property manager. Finding the right one is crucial since their responsibilities will be wide ranging – from liaising with tenants to keeping your property safe and secure.

First, you will need to consider your expectations for your property manager’s roles and responsibilities. Depending on how much time and money you want to commit, there are two options: a leasing only or a leasing and maintenance agreement.

As with all investing issues, the next step is to do your research. Find out the rental amounts for properties in the area where your investment is located, and familiarise yourself with relevant tenant-landlord laws. Note that these differ from state to state.

Next, speak to property managers at several real estate agencies and see how they respond to your questions. Do they reply quickly or do you have to wait days or weeks for a response? This is a good indication of what your future relationship will be like.

See if you can get some recommendations from people you know who may have investments or from some of the property professionals who are already advising you.

Always check how many properties the agency and each manager has responsibility for. Most industry professionals suggest that no more than 100 properties should be managed by one person if they are to provide an adequate level of service.

It is also important to check the property manager’s processes. How does the manager go about finding new tenants? What kind of background checks do they complete? And how do they handle disputes with tenants?

Before you enter into an agreement with a property manager, make sure you thoroughly read your rental agreement. Make sure you are able to release yourself from the relationship if they are not doing a good job.

Finally, be sure to keep in regular contact with your chosen manager for at least the first 12 months to ensure they are doing everything possible to make your investment successful.

Family first

If your income stream were to dry up tomorrow, how would you manage your mortgage repayments? Moreover, how would you look after your family?

Mortgage protection insurance can offer invaluable peace of mind, protecting both your income stream and your assets. So, how does it work, do you need it – based on your individual circumstances – and what are the different options available?

Insurance is often an afterthought. You’ve taken a big step in purchasing your first home and the mortgage repayments already eat up a large part of your income.

Consequently, forking out more money for insurance is quite possibly the last thing on your mind. But can you really afford not to have it?

Mortgage protection insurance is a life insurance product designed to pay off the amount owing on a mortgage in the unfortunate event of the borrower’s serious illness or death.

Such cover may seem unnecessary for young singles or couples who may have few responsibilities at this stage and can easily adapt if circumstances change.

However, add children or other dependants to the equation and you can no longer afford to live without it.

Mortgage protection insurance is an important tool to have if you are to secure you and your family’s financial future. But how do you choose the policy that is right for you when there are so many options available?

As with any insurance, the product you purchase should reflect your needs.

Maybe paying off the mortgage is not your main priority and it is more sustainable for your family to pay off other debts first.

It is important to work out what exactly you need the cover for – do your research and shop around. Some policies have waiting periods before you can claim or they will not cover you for pre-existing medical conditions.

Depending on the kind of cover you need, however, there will be a policy out there.

An alternative to consider is term life insurance, which pays a pre-determined benefit on the death of the insured which could then be used to pay off a mortgage or other debts as the family sees fit.

The best course of action is to evaluate your situation and to decide on an appropriate insurance policy that would cover your family if anything were to happen to you.

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