Australian Property Investor

Podcast Transcript Intro: Welcome to the monthly podcast of Australian Property Investor, Australia’s most trusted and widely-read property investment magazine. For information on how to subscribe to either our print or online magazine, as well as other great property investing information, please visit our website, www.apimagazine.com.au Shannon Molloy (SM): Hello, I’m Shannon Molloy – deputy editor of Australian Property Investor magazine – and in this episode we’re talking all things home loans. There’s no doubt it’s been a while since the going was this good for borrowers. For one, banks are sharing a smaller pool of potential customers, thanks to the GFC. So, needless to say, they’re increasingly keen to be competitive. Plus, the Reserve Bank has slashed interest rates several times in the past year or so. It looks like there’ll be a few more reductions across 2013. But are you taking advantage of these ideal conditions? Could you be saving even more on your home loan? To find out, I’m joined by Loan Market mortgage broker Josh Bartlett. Josh, thanks for your time. Josh Bartlet (JB): No problem at all. SM: Tell me, how competitive is the mortgage market at the moment?  JB: As far as a broker’s concerned, there are a lot of people out there looking at the moment. I’d suggest as far as brokers and bankers competing, we’re all starting to up our game as far as professionalism is concerned. We’re now realising we’re not back in 2009 or 2010 anymore. Our service levels need to jump to the next level to give customers what they need. SM: What’s the best way a borrower can nab the lowest possible rate with a lender? Is it simply a case of asking for a better deal?  JB: It’s a very interesting question. I often speak to a lot of clients who say they’re going to a CBA, Westpac of NAB. If they walk into a bank, I think they’re doing themselves an injustice. A lot of clients probably don’t realise what a broker does enough, to an extent. As soon as I sit down and go through what we have on our panel – 30 to 40 different lenders, a whole lot of different packages and finding the best structure and rate for them – they start realising how beneficial we really are. We can start looking at whether they want an offset account, a no-frills kind of product, interest only, principal and interest… that’s when we can start playing the banks off against each other. It’s important to look at what banks are doing with discounts at the time. A lot of customers wouldn’t realise that at any one time some banks are discounting heavily because they’re trying to build their book. Sitting down with a broker, it’s a great opportunity to find out which banks are discounting the highest.  SM: There’s plenty to consider when it comes to loan features. What are some of the frills and are they worth it?  JB: It depends on each client’s situation. If you’ve got a high disposable income, sometimes I like to sit down and talk about possibly having a package. A lot of banks charge an annual fee to have a package but sometimes it can benefit the client, depending on their income. When you get a package you might get an offset account, credit cards available to you and different little niches available. A lot of the time, people don’t use it. If you’re not an investor or have a few different loans, sometimes it’s not worth it at all.  SM: Opting to pay interest-only is popular with some investors. What are the risks and is it for everyone?  JB: Look, definitely not. It sometimes comes down to chatting to your accountant to see if it’s beneficial. It comes down to each individual’s circumstances to see if there’s a negative gearing benefit there. Other times, it comes down to generational preferences. Everyone has an opinion about what you should do. Old school investors, the older generation, they probably like to make sure their loan is being paid down all the time.

Podcast Transcript Intro: Welcome to the monthly podcast of Australian Property Investor, Australia’s most trusted and widely-read property investment magazine. For information on how to subscribe to either our print or online magazine, as well as other great property investing information, please visit our website, www.apimagazine.com.au Lauren Day (LD): Hi listeners, welcome to this month’s podcast. I’m Lauren Day, journalist with API, and this month I’m speaking with Sydney-based WBP property valuer, Chris Lackey. Today we’re going to discuss the Sydney market, and what investors should be looking for in 2013. Hi Chris, and welcome! Chris Lackey (CL): Hi Lauren, how are you going? LD: Good thank you! LD: Now tell me Chris, where is the Sydney market at the moment? CL: Look at the moment, we still have vendors and purchasers reluctant to engage with the property market. We’re generally seeing a continuation of the uncertainty, which was an issue during 2012. Just as an indication, we actually saw during 2012 total sales volumes in New South Wales drop by 7.8 per cent from 2011, which was quite interesting. LD: So what do you see happening then in the Sydney market in 2013? CL: I think we’ve got to try and look at what the drivers for the market will be during 2013, whether it be interest rates, which, I think buyers are probably going to wait and see what happens and if interest rates have actually bottomed. We’ve got major lenders getting together and supposedly talking about out of cycle rate reductions, which would be a first, certainly from my exposure to the Sydney property market. So I think buyers are still going to take a ‘wait and see’ approach and perhaps look for a bottoming of rates or a clear bottoming of rates and probably in terms of prices, based on what we know and what we can see for the future, Sydney property prices based on current fundamentals have probably bottomed, really as a continuing issue of confidence for the market. LD: So do you think now is a good time or a bad time to buy and why? CL: I think for buyers it’s always going to relate to their individual circumstances. I guess, I’m not an accountant or investment adviser, but property I guess should form part of someone’s investment portfolio to some degree. Sydney is a major commercial centre for Australia. In terms of big business, so in terms of last year’s performance, overall, I think Sydney performed best of all the states. It certainly remains a state which needs to be considered for an investment portfolio. LD: So you would recommend Sydney then as a market to buy in, compared to say Melbourne or Brisbane or Perth? CL: Well I think in terms of supply, we’re not really addressing the supply issue in Sydney. We haven’t had that and that’s not going to happen quickly, so in terms of housing stock, particularly while vendors sit on the fence and take a wait and see approach, I can’t see that stock levels in Sydney are going to increase. That’s probably going to pin prices, particularly entry-level property. So if you’re looking to invest in Sydney and you’re looking to get into entry-level property, then I think probably yes, if you want to have Sydney as part of your property portfolio, yes, it’s probably as good a time to buy, considering interest rates during 2012 were three to 3.75 per cent and could possibly be lower again this year. LD: So what sections of Sydney would you see moving – would it be the west, the east, the north, the south? CL: I think you’ve got to be a bit cautious when you say, property is going to be ‘moving’. I think very much, with the availability of information, particularly statistical information, you can probably have actual sustainable growth and you can have short-term perceived growth. If you’re looking towards areas, say in the northwest or southwest of Sydney, where you’re having a lot of new housing stock being introduced, statistically,

Podcast Transcript Intro: Welcome to the monthly podcast of Australian Property Investor, Australia’s most trusted and widely-read property investment magazine. For information on how to subscribe to either our print or online magazine, as well as oth...

Podcast Transcript Intro: Welcome to the monthly podcast of Australian Property Investor, Australia's most trusted and widely-read property investment magazine. For information on how to subscribe to either our print or online magazine, as well as oth...

Podcast Transcript Hi listeners and welcome to this month’s podcast. I’m Nicole Navarro, journalist with API, and this month I am speaking with the president of the Real Estate Buyers Agents Association of Australia (REBAA), Jacque Parker. Today we’ll discuss what you, as a buyer should look for when seeking a buyer’s agent to find investment properties for you. Nicole Navarro: Hi Jacque, and welcome… Jacque Parker: Thank you Nicole, and thank you for having me. NN: Now Jacque at a time when some selling agents are wanting to interchange between acting on behalf of the buyer and vendor, particularly to cash in on what is increasingly a buyers’ market right now, is there special licensing or a body that regulates against this type of behaviour? JP: Look, certainly I think firstly it’s important to point out that buyers agents and selling agents actually cannot act for and accept a fee from both parties in the same transaction. It’s actually illegal here in New South Wales under section 48 of the Property, Stock and Business Agents Act. Firstly, I think it’s important when you’re talking about selling agents acting as buyers’ agents, they have a legal obligation under the Act to disclose any relationships with any referrals and they have to actually accept a fee from the buyer to show they’re completely independent. When they’re working for an agency obviously it’s so much more tempting for them to show only listings from their own agency, so that’s why it’s always better to work with an independent buyers agent and not just a vendors’ agent, because there’s a clear conflict of interest there. NN: That’s some good advice there. So should all contracts be the same across the nation, is the legislation the same, or is it different according to different states? JP: Look it’s different according to different states unfortunately, there are changes afoot to make licensing a national process, but that’s still in its infancy stage. With buyers agents and selling agents there are two different types of agreements that clients need to sign and the OFT (Office of Fair Trading) here in New South Wales is obviously responsible for taking an disciplinary action against any agents who breach the Act. Consequences for not acting properly or not disclosing fees this can range from caution through to disqualification in some cases. NN: Is this something that will determine for buyers whether they’re dealing with an ethical buyers’ agent, that this particular buyers’ agent does only have that buyer’s interest at heart and isn’t receiving kickbacks from a developer? Is that going to really give that buyer the understanding? JP: Well I mean all buyers, when they sign up with any agent, agents have to provide them with the information if they are receiving fees or kickbacks as they’re known in the industry from any agent, any developer, any referral source. It’s actually called a section 47 disclosure form, and if they don’t disclose their fees then yes, they’re in big trouble. Any buyers’ agent worth their salt, whether it’s a selling agent trying to act as a buyers’ agent or preferably an independent buyers’ agent, has to disclose any referrals or other sorts of fees to the buyer. NN: Great, so can you provide some tips on what they should be asking or investigating when choosing a buyers’ agent? JP: Sure, firstly it’s important to check whether the buyers’ agent is appropriately licensed, and this can easily be done via a check on the state’s OFT site; you can actually see how long they’ve had their licence as well, as experience is obviously very important. As I said, as far as any referrals go they have to be disclosed to the consumer for whom they’re acting, if not, they’re in breach of the Act, which is a dangerous situation. But I suppose questions to ask any buyers’ agent when considering using their services, the most important one is, ‘how much experience do they have?’,

Podcast Transcript Shannon Molloy: Many things changed in the wake of the global financial crisis. That dramatic wake-up call saw banks reign in their lending practices almost overnight. Lenders adopted a more cautious approach to the sort of person they’d lend money to. And it’s been one of the lasting consequences of the GFC. Does this more conservative climate make it impossible for would-be investors on low incomes to crack into the market? Not necessarily. In this month’s issue of Australian Property Investor magazine, we explore ways to buy on a five-figure salary. Plus we meet five investors who’ve done just that. For more on this topic, we’re joined by Mitchell Watson who’s a senior financial analyst with Canstar. Mitchell, thanks for your time. Is the current lending landscape still pretty conservative, or are banks beginning to ease their expectations? Mitchell Watson: I think if we compare now to four years ago, prior to the GFC, it’s most definitely more conservative. We don’t see 100 per cent or more loans being provided anymore. The most you can generally borrow is around 95 per cent, so it has come back considerably. The expectations, whether they’re more conservative, will vary from lender to lender. Some may be more strict while others won’t make you jump through as many loops. Your credit card, they might require six months worth of statements as opposed to one month worth of statements, so there are little things that will differ. SM: How important is a borrower’s salary when it comes to securing finance for a property? MW: It’s definitely one part of a larger picture but the main focus of that picture. Everything comes out of your salary or income, so the greater buffer you’ve got after taking into account your living costs, the greater chance you have of receiving approval and your borrowing power also increases. The greater your buffer, the more you’ll be able to borrow. SM: Do lenders still want to see evidence of a genuine savings history? MW: Some most definitely will still look to see that you’ve been able to build up that five per cent of genuine savings history. That will vary from lender to lender. Other things they’ll take into account if you’re unable to satisfy that are things such as rental payments or other loan (repayments). The willingness to accept that will once again vary. SM: And what are some of the other characteristics that might come under the microscope? MW: Things such as your employment stability, so how long have you actually been at your current employer and what is your level of employment. Is it part-time, full-time or casual? They’ll also look to see your financial history or how you look financially. That’ll include your credit card – how much is outstanding and also your credit limit. They’ll look at whether you have a car loan. One of the big things is around your living costs, so if you’re a family unit your living expenses will obviously be higher than a couple or a single person, so your borrowing power might not be as high. SM: Serviceability seems to be a key theme here. What should a would-be buyer do to ensure they’re able to meet repayments? MW: I think budgeting is the key thing here. It’s looking at what are your incomings and outgoings, and understanding your own financial situation. It’s also looking at what you can realistically afford after taking into account your living costs. The way to look at it is if your loan repayments take more than 30 per cent of your taxable income then you’re generally classed as in mortgage stress. SM: If someone satisfies the criteria but has a limited budget, what should they do to get across the line? MW: To get it across the line, it’s really about cleaning up your financial situation. If you’ve got credit cards, remove those. Any other debts, clean those up. The less debt you have, the greater capacity you have then to make other repayments.