2404 April – Monthly Newsletter: Mortgage market update I | Deposit times fall I Freebie offers 4U I Best rates I Stamp duty’s bracket creep

We are now officially into Quarter 2 for 2024 – I don’t know about you, but as I get older, time seems to travel faster and I seem to travel slower 😕

Anyway. we’ve made it to autumn! As the season changes, so does the finance and property landscape. Here are four stories making headlines right now:

  • Why stamp duty keeps rising
  • Deposit times fall
  • Banks getting more cautious
  • Rental market easing

Read more below.

But first…..

*** New feature *** Best rates

If you would like to find out if you can obtain one of these sharp rates – reply to this email or SMS/ring me on 0411 190 474.

A quick note about AI

In March 2023, I first heard about ChatGPT and AI. Terminator, move over.

Just twelve months later and AI for business seems like old news. Everyone is either talking about, using it or doing it. Just last week, a clothing manufacturer I met at my sons’ soccer was talking about how they were integrating THREE DIFFERENT AI programs to develop a targeted marketing strategy! To be frank, I didn’t understand a word they said but the results were undeniable.

Even in this newsletter, I take the standard text I’ve been offered by my aggregator, LMG, and run it through ChatGPT to mix it up a bit before adding my own content. I have a bit of fun changing the tone and adding some Michael Royal humour (Chat is even starting to understand my unique soh better 😍). Sure, you need to review what Chat spits out, but using AI cuts out hours of drudgery, which would otherwise stop work from happening. It’s a bit like using a calculator instead of doing the maths in your head.

And China…

If you read the media, you will be thinking China is about to go to hell in a handbasket. Things are rarely what they seem as reported in the western press.

Courtesy of Property Sharemarket Economics, here are some facts you don’t read about.

  • Yes, its property sector is in a shamble right now with some poor decisions, and, its population is declining and, it has a draconian way of doing things BUT….
  • This year, China is adding USD$400B to its economy – it’s a slow year. This growth is the size of the entire Danish economy.
  • There are 5 Million STEM graduates (Science, Technology, Engineering and Maths) entering the workforce each year. That’s five times the number in the USA.
  • There are 4 Million employees in the Chinese car industry with over 90 different EV brands.
  • In 2022, China produced almost 60% of the world’s EVs – and 25% of its local sales were EVs (22% Europe, 6% US and 3% Japan).
  • Their growth of auto exports in 2022 was 80%—still a long way below the largest exporting countries but with these staggering growth numbers, it will start challenging in the near future.
  • BYD now sells the most EVs in the world (more than Tesla).
  • Their share market’s lows are getting higher in each cycle and the gaps between the highs and the lows of each cycle are getting smaller (I am guessing chartists will know what this all means). See the chart below. 👇

So underestimate the impact of China at your peril.

2024 is the year of the freebie!

Four freebies for you to digest

as you finish off your left over Easter eggs.

#1 ETFs – learn all about it!

Exchange Traded Funds are not new but most of us only have a toe nail of knowledge about them. And with over 8,000 ETFs available in the world, a toe nail of knowledge is not really that useful.

I have uncovered an expert who will show you how you can use ETFs to do what funds managers have typically done but at a fraction of the cost – and, with an ROI significantly higher than most retail funds have achieved for the same or similar stocks and stock weightings.

This expert is Andrew Bonnici – who now goes by the moniker ‘The ETF Guy’.

To give you a taste of what Andrew knows, we will have a series of three FREE 30-minute webinars over May and June. There will be more on this shortly but you can register your interest via the link below 👇

And if you don’t think you have the funds to invest, think again! I will be showing you how you can access the available equity in your home or investment properties so you can invest in this market (or buy another investment property! 👍)

#2 Wishkeeper comes alive!

For avid readers of our newsletter, you might recall that last October, I introduced you to my good friend, Cheryl Lardner and Wishkeeper – the only place you will need to keep all your legal documents, memoirs and instructions for your life and yes, when you join the heavens above 🙏.

Wishkeeper keeps all your legal and personal stuff secure but available to you and those you nominate to have access. And importantly, you control who can see each document (aka no sneaking a quick look in the bottom cabinet is possible!). By having a Wishkeeper, your instructions will be safely available to all your family and professional advisors (even where to find your lovely pets, Alfie and Tabetha, when you impulsively decide to go on that mega 10 week Tibettan hike without telling anyone ‘cos they would worry).

Over the next few weeks, I will introduce you to Wishkeeper and how you can sign up for a FREE account – not just a free trial (because Cheryl and her partner, David, love me – in a professional way 🥰).

#3 Coming up! BIR Finance Property Concierge Service

Suitable for home owners or investors, we have launched a FREE property concierge service.

Trish Moore, a Buyers Advocate and seasoned property investor, is offering you a free one hour consultation so you can pre-qualify what property you should buy. And, if your ideal property is outside her target area of Melbourne, particularly in the western corridor, we will put you in contact with someone who can help you in your preferred geographic area.

We will introduce this to you in more detail over the next few months. Stand by!

#4 Save on your Utilities – an oldie but a goldie

Electricity, Gas, PayTV and Broadband

I use Home Now to save money on my bills and so can you.

All you do is load up your latest bill and the software will do the rest, comparing what you are currently paying to the offerings of 15 major providers – see below 👇. For my electricity and gas, it took me 5 to 10 minutes to shop, compare and start saving. And, when I couldn’t save any money, it told me to stay – which is the answer to that age-old Clash dilemma of should I stay or should I go? 🤣

Let’s talk about a topic that’s been quietly creeping up on us: stamp duty costs. Over the past four decades, these fees have been steadily rising compared to the actual purchase prices.

In Sydney, for example, buyers have seen their stamp duty bill double from 2.0% of the purchase price to 4.0%. Similarly, in Melbourne, the costs have surged from 2.0% to 5.4%, while in Brisbane, they’ve increased from 1.0% to 2.6%. Adelaide has also experienced significant hikes, with stamp duty rising from 2.5% to 4.6%.

Angus Moore, Senior Economist at PropTrack, attributes this phenomenon to ‘bracket creep’. Essentially, as property prices increase, so do the stamp duty rates, resulting in higher expenses for buyers.

Stay informed as we continue to monitor and provide insights into the evolving landscape of property purchasing! 🏡💼

“Each bracket pays stamp duty equal to the amount that a home just below the bracket pays, plus a higher ‘marginal rate’ for every dollar the purchase price exceeds the bracket threshold. These marginal rates get higher with each successive dollar,” he said.

“This structure of higher marginal rates kicking in as the sale price crosses a particular threshold means that average tax rates – the stamp duty paid divided by the purchase price – increase as the price increases.”

Bracket creep wouldn’t happen if state governments kept raising stamp duty tax brackets at the same rate as property prices. But because this hasn’t occurred, stamp duty has become relatively more expensive.

Despite the uptick in the national median property price over the past year, getting a foot onto the property ladder has become slightly more achievable for the average first-time buyer, thanks to higher savings rates and wages.

According to research by Domain, between February 2023 and 2024, the time required to save for a house deposit decreased by two months, now standing at 4 years and 9 months. Similarly, the time needed to save for a unit deposit dipped by one month, now at 3 years and 5 months.

This positive trend indicates improved affordability for first-home buyers, making their dream of homeownership a step closer to reality.

Domain assumed first home buyers:

  • Were a couple aged between 25 and 34 years.
  • Earned an average salary for someone their age.
  • Bought an entry-level property ranked at the 25th percentile in terms of price (with the 1st percentile being the cheapest home and the 100th being the dearest).

If you want to buy your first home, one way to accelerate the process is to use the federal government’s First Home Guarantee or Regional First Home Buyer Guarantee schemes. These let eligible first home buyers purchase a property with just a 5% deposit, without needing to pay lender’s mortgage insurance. However, not all first home buyers are eligible: income caps apply, as do property price caps.

Recent data from APRA, the banking regulator, suggests that banks are taking a stricter stance to ensure borrowers don’t overextend themselves.

In the December quarter of 2023, only 5.6% of new mortgages recorded a debt-to-income (DTI) ratio of 6 or higher. This figure marks a notable decline from 11.0% in December 2022 and a significant drop from 24.3% in December 2021.

This trend indicates that banks are implementing measures to assess borrowers’ financial capabilities more rigorously, fostering responsible lending practices within the industry.

An example of a DTI of 6 would be someone borrowing $600,000 while on a $100,000 salary.

This progressive reduction in high-DTI lending reflects greater conservatism among banks.

Non-performing loans (i.e. those where the borrower has stopped paying) continue to remain at very low levels. The share of non-performing loans was 0.8% in December 2021, 0.7% in December 2022 and 0.9% in December 2023.

APRA said “there is a small, but growing, cohort of stressed borrowers”, but that the typical borrower had “remained resilient despite increases in interest rates”.

APRA also said the banking industry was “well capitalised”, with liquidity and funding levels “well above minimum requirements”.

While the rental market is currently experiencing a record-low percentage of vacant properties, there are signs indicating a potential shift on the horizon.

According to Domain, the national vacancy rate, representing the proportion of vacant rental properties, dropped from 0.8% in January to a mere 0.7% in February. This implies that property investors are having an easy time finding tenants, but for renters, the search for accommodation is becoming increasingly challenging.

However, Domain’s latest findings reveal a noteworthy trend: the average number of views per property listing in February plummeted by 14.2% compared to the previous month and by 18.1% compared to the same period last year.

This downward trend has persisted for several months, as highlighted by Nicola Powell, Domain’s Chief of Research and Economics.

“The number of prospective tenants per rental listing is easing, indicating falling competition between renters. This supports the trend of slowing rental growth, suggesting demand is pulling back,” she said.

“The overall competition between tenants has eased compared to 12 months ago. That should logically feed into a higher vacancy rate, but that will take time. This could be an early indicator of an increase in vacancy rates sometime this year.”