How profitable is your home

How profitable is your home?

At some stage, your home may well be too small or big for your needs. Or perhaps the size is right, but you want to live in a neighbourhood with better amenities or in a suburb with excellent schools for the kids. If you’re paying off a home loan for a house located in an area experiencing solid capital growth, you may even make a profit when you sell!

According to the most recent RP Data Pain and Gain report, 91 percent of all home re-sales during the second quarter earned a gross profit.

In fact, nearly one in three (30.5 percent) of home sellers at least doubled their purchase amount when re-selling! Referring to this bracket of sales, RP Data elaborated:

“The gross profit on these re-sales was $14.4 billion and the average gross profit per profit making transaction was $225,830.”

Are you living in a hot spot?

RP Data analysed re-sale statistics in states’ capital cities and regional areas. The area with the lowest proportion of re-sales that made a loss was Sydney (2.7 percent), followed by Perth (4.8 percent) and regional Northern Territory (6.4 percent).

In regional Western Australia, 43.4 percent of homes sold during the June quarter made a profit of 100 percent or greater, followed by Perth (40.3 percent), Melbourne (36.8 percent), Darwin (34.5 percent) and regional Northern Territory (33.9 percent).

So if you’re living in any of these locations, there’s a strong chance you could profit when you sell. But what about on a more local scale?

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Burdensome stamp duty costs taxing Australian home buyers

Burdensome stamp duty costs taxing Australian home buyers

Australia’s growing stamp duty tax is taking its toll on Aussie home buyers – leaving them in more debt and eating away at potential retirement funds.

A report by the Housing Industry Association (HIA) has revealed that the average Australian home buyer is forking out upwards of $15,000 in stamp duty alone – and that doesn’t factor in home loan costs, removalists, conveyancing or bank fees.

“In all but two of the eight jurisdictions, stamp duty will set buyers back at least $15,000 on the median-priced home. This form of taxation makes household indebtedness worse by increasing required borrowings,” Shane Garrett, HIA Senior Economist, said.

How much is stamp duty costing buyers?

One of the biggest one-off, upfront costs of buying a property is stamp duty. You are obliged to pay it when buying a home, and new research suggests the costs are remarkably high for some Australians taking out home loans.

Stamp duty costs in Victoria are the greatest of the entire nation — a home buyer in this eastern state will fork out an average $24,100 to meet this tax.

In Western Australia and New South Wales, the average stamp duty bill is $20,000, which is still behind the likes of Victoria but nothing to sneeze at.

“Stamp duty results in total mortgage repayments increasing by $46,400 in Victoria and by $37,100 in NSW. In WA, additional mortgage repayments will total $33,800,” Garrett reported.

Burdensome stamp duty costs taxing Australian home buyers

Stamp duty burns buyers’ wallets

For Australian home buyers, who in some cases are already struggling to save a 20 percent home loan deposit, the added stress of high stamp duty taxes is impacting their long-term financial circumstances.

“The burden of stamp duty is significant in all states and territories. With the exception of Queensland, the tax adds at least three percent to the cost of the dwelling. In Victoria, the typical stamp duty bill comes to some five percent of the dwelling price,” Garrett said.

“A better alternative for stamp duty would be to have it placed in buyers’ superannuation funds,” he suggested.

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Reserve Banks Interest Rate Policy Decision

Reserve Banks Interest Rate Policy Decision

At its meeting yesterday, the Reserve Bank Board decided to leave the cash rate unchanged at 2.5 per cent.

Growth in the global economy is continuing at a moderate pace, helped by firmer conditions in the advanced countries. China’s growth remains generally in line with policymakers’ objectives. Commodity prices in historical terms remain high, but some of those important to Australia have declined this year.

Financial conditions overall remain very accommodative. Long-term interest rates and risk spreads remain very low. Emerging market economies are receiving capital inflows. Volatility in many financial prices is currently unusually low. Markets appear to be attaching a very low probability to any rise in global interest rates, or other adverse event, over the period ahead.

Reserve Banks Interest Rate Policy Decision

In Australia, growth was firmer around the turn of the year, but this resulted mainly from very strong increases in resource exports as new capacity came on line; smaller increases in such exports are likely in coming quarters. Moderate growth has been occurring in consumer demand. A strong expansion in housing construction is now under way. At the same time, resources sector investment spending is starting to decline significantly. Signs of improvement in investment intentions in some other sectors are emerging, but these plans remain tentative as firms wait for more evidence of improved conditions before committing to significant expansion. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend over the year ahead.

Interest rates are very low and for some borrowers have continued to edge lower over recent months. Savers continue to look for higher returns in response to low rates on safe instruments. Credit growth has picked up a little, including most recently to businesses. The increase in dwelling prices has been slower this year than last year, though prices continue to rise. The exchange rate remains high by historical standards, particularly given the declines in key commodity prices, and hence is offering less assistance than it might in achieving balanced growth in the economy.

Home Owners Paying Off Loans Faster

Home Owners Paying Off Loans Faster

Home owners are taking advantage of record low interest rates to pay off their mortgages faster.

The National Australia Bank says new figures show 85 percent of its mortgage customers pay more than their minimum monthly repayments, Fairfax Media reports.

Such NAB customers are ahead by an average of 13 months now, compared with 12 months a year ago — a “meaningful” shift considering the size of the bank’s mortgage book, said Antony Cahill, NAB’s executive general manager of lending and deposits.

Home Owners Paying Off Loans Faster

The bank has about 16 percent of the mortgage market with a home loan book worth $241 billion.

NAB said its customers are also paying off credit card debt faster, with the number of accounts paid in full rising six percent in the past year.

“These are themes that point to the Australian consumer being a little bit more careful, a little bit more prudent in terms of understanding debt and ensuring they keep that under control,” Mr Cahill was quoted as saying.

Last week the major banks cut fixed interest rates to new lows of less than five percent.

Story source:


Reverse mortgages need a rethink if they’re the new age pension

Reverse mortgages need a rethink if they’re the new age pension

The Commission of Audit has recommended including homes above a certain value in the means test that determines who gets the age pension and how much. Under the proposal, homes valued in excess of A$500,000 would be assessable for singles, while for couples the trigger would be A$750,000.

The family home is currently exempt from the assets test but the commission argues this is inequitable because it means high levels of wealth are sheltered. It suggests a more comprehensive means testing regime be put in place by 2027-28.

If this proposal is picked up by the federal government, it would see a sizable group of retirees required to call on the equity in their homes to help fund their retirement.

It would be a brave government that “forced” pensioners to sell their homes to release that equity, which makes reverse mortgages a likely tool for retirees who need to convert their home into cash flow.

Even now, a reverse mortgage can be an alternative to “downsizing” into a smaller and cheaper home to release funds for retirement.

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Employment Worries Keep Mortgage Stress High

Employment Worries Keep Mortgage Stress High

Mortgage stress is on the rise as Australians worry about losing their jobs.

The latest Genworth homebuyer confidence index, which tracks the mood of people who own or are thinking of buying a property, found nearly a quarter of those with a home loan had problems meeting repayments.

The result was up from 18 per cent six months ago, and reflects increasing concerns about unemployment and job security, Genworth chief commercial officer Bridget Sakr says.

“There is uncertainty from a local and global perspective,” she said.

“Unemployment and underemployment is what is driving that concern.”

Ms Sakr said worries about either job losses or reduced hours at work, as well as cost of living pressures, had a bigger impact on borrowers than falling interest rates.

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Home ownership less pie in the sky for Gen Ys

Home ownership less pie in the sky for Gen Ys

A forced savings plan might be the answer for 20-somethings wanting to get an early toehold on the property ladder.

If you don’t want to struggle to pay off a mortgage later in life, the best time to enter the property market is in your early to mid-20s. Securing a house or apartment at a young age not only jump-starts your wealth portfolio, it’s also a good savings strategy thanks to a government scheme that offers extra cash to those saving for a first home.

First home saver accounts (FHSAs) were launched in 2008. Initially, the federal government forecast that 700,000 accounts would be opened, but the Australian Prudential Regulation Authority says just 38,500 FHSAs were operating last September.

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Mortgages at their cheapest in 23 years

Mortgages at their cheapest in 23 years

LENDERS have cut interest rates for the most popular type of fixed-rate mortgage to their lowest levels in more than two decades, amid bets the cash rate will fall to a record low as early as next month.

As Westpac cut its rate on two-year fixed loans below 5 per cent on Thursday, figures from comparison website RateCity showed the average cost of a three-year fixed home loan has fallen to its lowest level in 23 years, at 5.53 per cent.

Mortgages at their cheapest in 23 years

A spokeswoman at RateCity, Michelle Hutchison, said it had become cheaper for the banks to offer these mortgages because of growing market bets the Reserve Bank would cut the cash rate from 3 per cent.

NAB’s three-year fixed loan is 5.29 per cent and ANZ, the Commonwealth Bank and Westpac charge 5.39 per cent, she said.

Story by Clancy Yeates banking reporter; Story source:

Fewer home owners default on mortgage

Fewer home owners default on mortgage

Investors are not as good a bet for banks as ordinary home owners.

Borrowers with investment property loans were 1.5 times more likely to fall into severe delinquency – more than 90 days overdue on repayments – than those with owner-occupier mortgages, the latest Fitch Ratings report on residential mortgages shows.

But fewer Australians overall are now defaulting on mortgage repayments, the result of recent cuts in interest rates and slower growth in house prices.

Official data released on Tuesday shows house prices in Australia’s capital cities rose 1.6 per cent in the December quarter, ending the year on a high.

This compares with a 0.1 per cent fall in the September quarter.

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Australians focus on repaying home loans over retirement savings

Australians focus on repaying home loans over retirement savings: Survey

The message being pushed by mortgage brokers and consumer advocates that borrowers should maintain their current mortgage repayments when interest rates fall and pay off their home loans sooner has well and truly been absorbed by home owners.

Nearly seven out of 10 mortgage holders (68%) surveyed by Nielsen said their number one financial goal was to pay off their home loans, confirming the view that Australians regard owning their home outright as key for their financial future.

This is despite a home not being able to generate any income in retirement apart from when it is sold, meaning future retirees could find themselves debt-free but cash poor.

In a Property Observer webinar on property and wealth-creation, WHK financial adviser Peter Handberg advised investors against investing extra income in paying off their mortgages but to consider putting the money into a balanced income-generating retirement portfolio made up of a mix of shares, property, bonds and cash.

“You can’t sell a bedroom,” says Handberg.

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