Tag Archives: interest rates

Why should you should consider renting?

Why should you should consider renting?When it comes to living in Australian property, purchasing with home loans seems to be the default choice. For many, there’s a general impression that renting property is some kind of short-term bridge between leaving your family and buying your first home.

But if you’ve had your eye on real estate news for the last few years, you’ll notice that purchasing real estate in Australia is getting increasingly difficult, particularly in certain capital cities.

While there are many great perks and benefits from owning property, there are also key advantages to renting that make it an appealing option.


Affordability is a big factor for anyone. In this field, the case for renting seems to have the upper hand.

The Housing Industry Association reported in June that the National Affordability Index dropped by 2.9 per cent. Sydney and Melbourne saw the greatest decreases, at 6.9 and 9.1 per cent respectively. This demonstrates that housing prices are rising faster than people’s earnings.

While people with low interest home loans can still find ways to adapt and purchase property, it outlines just how comparatively affordable renting could be.

The deal with yields

The best way to observe this comparison is not just to examine rental rates, but to take a look at yields. Sure, rates can give you a snapshot into how much it’ll cost you per week, but this alone will not give you a holistic view.

Yield figures on the other hand, will show you how renting stacks up to buying property in the current market, which is the real contest here. This can be defined as the percentage of rental income to the home’s purchase price.

For instance, CoreLogic RP Data research notes that the median rental price for a Sydney house was $610 in July. This figure might seem high and have you consider buying instead.

However, figures reveal that Sydney’s rental yield was down 0.2 per cent over the quarter, and decreased by 0.6 per cent over the year to July. This shows that rental income were in fact lower than they should have been when considering property prices.

This is true for many of the other capital cities as well, and is a sign that renting could the far more affordable option in relativity to housing prices.

Stable rates

Another good reason to look at houses for rent is the fact that rates have been mostly stagnating. Australia’s combined capital cities experienced a 0.7 per cent decline in rates over the September quarter, with every single one recording negative change.

Melbourne has lead the charge in rental growth over the year, showing a 2.1 per cent rate increase in the year to September but clearly, this figure is hardly something to worry over.

With stable rates that are lower than property prices would have them, anyone who may struggle with mortgage repayments should consider renting instead.

Burnie Property Market Steady

Click here to read the 2013 Property Market Outlook

Market conditions in Burnie, on Tasmania’s North West Coast, have steadied which will continue into 2013, as a result of low consumer confidence levels and lack of buyer incentives, but will pick up as the year progresses after reaching the bottom of the property cycle, according to the First National Real Estate 2013 Property Market Outlook.

The Outlook, released recently, is based on a survey of the 400+ member network, drawing on its experience at a grass roots level and providing insight into what member agents expect the market to do.

“People in the region are still opting to save their money, further evidenced by the tough retail climate,” Ms Deanne Lamprey, Managing Director, First National Real Estate Burnie said.

“The most significant factor affecting the North West Coast property market is the lack of confidence relating to the Labour/Green Government.”

According to the Outlook, property stocks are expected to increase, while the number of days a property is on the market should hold at current levels, showing the market is stabilising.

A lack of buyer and building incentives, coupled with the increasing number of competing properties available for sale will place downward pressure on property prices in the state.

“This presents some excellent opportunities for upgraders who are expected to show the strongest growth in activity for the region, driven by improved affordability and lower transaction changeover costs,” Ms Lamprey said.

There is an expectation the rental market will ease, as overpricing and job losses force people into moving away from the North West Coast region.

These job losses, along with rising living costs are expected to produce an increase in mortgage defaults for the region.

Ms Lamprey expects the Entry Level market, where properties are priced lower than $350,000, to see the most activity in the first six months of 2013.

Interest rates are expected to decrease further, but Ms Lamprey does not believe this will necessarily translate into any real change for the market.

Solar power continues to be the most sought after energy efficient feature of a property in the North West Coast region.

“Conditions on the North West Coast will remain the same unless change occurs at the political level such as a new state government comes into power, so that stamp duty can be abolished, incentives for building and buying introduced and investors return”.

Plan Ahead for Interest Rate Rises

Interest rates will inevitably rise again and it is best to plan ahead so you are in a better financial position when they do and can lessen any negative impacts.

Rate increases will obviously impact on households, especially in areas where mortgage stress is already being experienced.  Add to this spiraling living costs and affordability may once again become an issue for the property market

Draw up a detailed budget, factoring in rates at two per cent higher than current levels, and then adjust your spending, setting aside any savings generated for a rainy day.

It would also be wise to seek the assistance and advice of a financial planner for this exercise.  First National has access to a range of suitably qualified and experienced professionals for just this purpose.

Another suggestion to consider is consolidating debt under the one umbrella, where interest fees are often considerably less.

A home loan health check could also prove fruitful, especially where mortgages are five years or older and given the wealth of new products in the mortgage market, where the recent ban on exit fees could produce savings of thousands of dollars.

Alternatively, some financial advisors recommend their clients consider splitting the home loan so that half is on fixed rate and the other half is on a variable rate.

One of the easiest steps for mortgage holders to take is to make fortnightly repayments instead of monthly or bi-monthly.

This means the mortgage holder is making 26 payments per year, instead of only 12 or 24, which can make a lot of difference over the life of the loan, producing savings on interest costs and reducing the term of the loan.

Every Reason for Christmas Cheer

We really are the land of opportunity

Although 2011 was a year in which Australians felt considerable gloom and uncertainty about the future, we really do have much to be grateful for.

While interest rate movements, property price statistics and auction clearance rates are reported in excruciating detail, then analysed in depth by the 24 hour media cycle, home owners have much to be satisfied with when it comes to their property holdings and their performance.

Credit Suisse’s Global Wealth Report recently ranked Australians as the wealthiest people in the world. The reason? Our average wealth now rests at $403,000 and our median at $225,000.

The median measure tells us how the middle class is travelling, and, as we have comparatively high levels of home ownership on the world stage, our wealth distribution is relatively equitable.

In the United States, by comparison, median wealth is only $53,000.

Coincidentally, the median wealth of an Australian rental household is pretty close to that of the US – $55,265.

So, the encouragement is certainly there to buy and pay off your own home.

Australians who own their home outright are worth an average $737,394 and there have never been more government incentives and bonuses to help you buy your first.

Plus, with historically low interest rates and enviably low unemployment rates, we really are the land of opportunity. It puts all our worry about small movements in interest rates and slight reductions in house prices in perspective doesn’t it?

Lend A Hand For Renters

Is NRAS is losing its edge as affordability improves?

While the network supports NRAS in principle, it is no longer effectively impacting on rising rents, leaving those most in need of assistance flailing in their efforts to make ends meet.

First National is calling on the government to look at changing NRAS so it has more relevance and achieves what it set out to do, or consider other forms of assistance such as bringing back some of the grants and other incentives that were obviously phased out too soon.

First National says while it is good news for the property market to get first home buyer activity increasing as a result of the market conditions, it is not good when it is done at the expense of those renters who can least afford it.

Struggling renters need access to assistance schemes that meet their circumstances and offer real assistance, which NRAS initially did, but has since failed to recognise the growing demand of assistance required, making it obsolete.

We don’t see property market conditions altering too dramatically in the near future, and certainly not to the extent that they will improve the situation soon enough.