In this blog post, we’ll discuss the nitty-gritty of buying a house in Australia while in the Australian Defence Force (ADF). We’ll include the information you need to take advantage of some loan subsidies and other incentives that are available to you as an ADF member.

Want help choosing the right property? Book a discovery call with Capital Properties today. As investment specialists, it’s our mission to help defence personnel and others attain future financial security.

On the go? Here’s 30 seconds of take outs:

Capital Properties property investment advice experts can help you with these ADF property-buying incentives:

• Home Purchase Assistance Scheme (HPAS) offers eligible ADF members a lump-sum payment of $16,949 before tax.
• Home Purchase or Sale Expenses Allowance (HPSEA) compensates for costs accrued when selling/buying in a new area.
• Defence Home Ownership Assistance Scheme (DHOAS) improves recruitment/retention by helping ADF members and their families own their own houses.

ADF property investment schemes

Purchasing a property is recognised as one of the best ways to take control of your financial future. A well-designed house in the right location will consistently deliver capital growth.

The Australian Defence Force has provided various incentives to make it easier for its members to own a house. There are multiple loans, grants, and subsidies to enable ADF members to become homeowners.

These ADF property investment incentives come in two categories:

• Assistance to purchase (HPAS/HPSEA); and
• Assistance to repay the loan (DHOAS).

Let’s take a closer look.

1. Home Purchase Assistance Scheme (HPAS)

The Home Purchase Assistance Scheme (HPAS) is an ADF property investment assistance scheme designed to help you purchase your home. It comes as a lump-sum payment of $16,949 before tax – not bad!

If you’re considering buying a house while in the defence force, the amount you’re eligible to receive depends on your ownership share. For example, if you’re buying a property with your partner, the amount will be halved.

Criteria for eligibility to receive an HPAS payment include:

• You cannot have received the HPAS payment before. You only get this payment once in your entire period of service.
• The home you want to buy must be in your current (or new) posting location.
• When you sign the purchase contract, you must plan to serve in the post for 12 months after purchase. This means you have to live in the house for the remainder of your tenure at that location.
• If you are categorised as a member with dependants (unaccompanied) [MWD(U)], then you need to remain in that category for the next 12 months.

Find out more about how Capital Properties can help you secure your HPAS.

2. Home Purchase or Sale Expenses Allowance (HPSEA)

The ADF created the Home Purchase or Sale Expenses Allowance (HPSEA) to compensate ADF members for reasonable costs accrued if they’ve had to sell their house due to being posted to a new location. The allowance also covers any expenses that an ADF member might accumulate if they sell in one posting location and buy again in a new one.

For example, imagine you own a house in Victoria but get posted to Sydney, and you decide to buy a home there. You would be eligible to receive HPSEA to cover the sale of your home in Victoria and the purchase costs of your new home in Sydney.

HPSEA also reimburses you for other reasonable costs such as real estate agent commissions, stamp duty, solicitors fees, mortgage costs, etc.

Find out more about how Capital Properties can help you secure your HPSEA and other property investment advice.

3. Defence Home Ownership Assistance Scheme (DHOAS)

The Defence Home Ownership Assistance Scheme (DHOAS) aims to achieve two goals:

• Helps Australian Defence Force members and their families own their own houses and;
• Improves recruitment and retention within the Australian Defence Force.

A DHOAS loan subsidises your home loan and does so for a period of time, correlating to how long you serve.

As of last year (2021), it contributes a monthly amount of between $185 and $370 to your home loan. The amount you receive under DHOAS varies and is based on a three-tier system. This table shows the current subsidy tiers and their details as per the DHOAS government website.

Subsidy tier	Minimum Permanent service	Minimum Reserve service	Subsidised loan amount	Maximum monthly subsidy*
1	4 years	8 years	$310,937	Up to $185
2	8 years	12 years	$466,406	Up to $277
3	12 years	16 years	$621,874	Up to $370

 

*Estimated monthly subsidy values based on the April 2022 median interest rate. These monthly subsidy values fluctuate based on changes in the median interest rate.

To be eligible for DHOAS, you must have been a member of the ADF for at least four years. You also must have served within the last five years, undertaken a qualifying period, and accrued a service credit. There are also occupancy requirements, such as having occupied the premises for at least 12 months. Full eligibility criteria are on the DHOAS government website.

There are three banks approved to provide DHOAS loans for people buying a house with the ADF scheme. These are the Australian Military Bank, the Defence Bank, and the National Australian Bank (NAB).

Find out more about how Capital Properties can help you with the DHOAS.  

Property investment advice

If you’re considering buying a house while in the defence force, Capital Properties can help you navigate home loans.

The decision to purchase or invest in a house is one of the best decisions in any person’s life. And thanks to the ADF property investment scheme, buying a house while in the defence force is easier with access to grants and incentives to help you buy your dream home.

Are you an Australian Army, Royal Australian Air Force or Australian Navy member? Are you looking to gain financial independence by buying property in Australia? Do you want to leverage government loans and grants? Then look no further; we are here for you. We’ll help you walk you through the entire process of buying a house with the ADF scheme and settling in your dream home in Australia.

Ready to get started? Contact us now!

It’s no secret that buying a property is one of the best investment decisions that you can make. Property investment is far more predictable than shares or crypto, for example, which can be massively volatile in unstable economic times. Investing in property allows you to benefit from tax advantages while gaining predictable cash flow and great returns.

The current demand for rental properties is increasing faster than ever, and with a rise in house prices, it’s also more lucrative than ever.  So, if you’re after a tried-and-tested way to invest your money, buying a property should be at the top of your list.

This article will walk you through our top 10 tips to help you buy your first investment property and ensure you get the most out of your investment for future financial security.

Want some help choosing the right property? Book a discovery call with Capital Properties today. As investment specialists, it’s our mission to help Defence personnel and others attain future financial security.

On the go? Here’s 30 seconds of take outs:

Here’s Capital Properties 10 top tips to help you buy your first investment property:

• Choosing the right location is key.
• Check the condition of the property & don’t over-capitalise on improvements.
• Make sure you have time to invest in your property investment or hire an expert to help.
• Stay updated on regulations & property maintenance.
• Research thoroughly before buying your investment property.
• Work out your budget, including projected expenses & profit.
• Refrain from making emotionally charged decisions or let our expert Buyer’s Agent Service team negotiate for you.
• Choose investment partners wisely & clearly assign duties & tasks.
• Be finance ready – seeking pre-approval for a home loan is free, easy & will save you money.

Keep reading >>

What is an investment property?

Let’s start by taking a closer look at what an investment property is. Simply put, an investment property is a residential or commercial property that’s purchased as a financial investment – i.e., it’s an asset that you can make money from through renting or adding value and re-selling. Therefore, it’s not usually your home/primary residence.

Some properties will have more income or investment potential than others, so it’s vital to know what to look for when you go to buy your first investment property.

What you need to know before you buy your first investment property

When you decide to invest in real estate or if it’s time to add to your current portfolio, here are some of our top tips to buying an investment property.

1. Location. Location. Location.

We’ve all heard that location is important, but are you sure you know what to look for in a location for an investment property? Residential tenants require properties that are close to amenities. For most tenants, that includes easy access to public transport or main arterial roads. Families require local schools, shops, medical clinics etc. Singles/young couples want shops, restaurants, bars and safe public spaces. Commercial properties need high foot traffic and/or extensive parking. Remember, a more desirable location will have increased demand and can command a higher rent.

One thing to note is that some up-and-coming areas may have a higher potential to increase in value over time than already popular areas. Although this is true in many cases, bear in mind there’s more risk involved when investing in an unproven location.

2. Condition of the property

Another important consideration when buying an investment property is the condition of the property at the time of purchase. Although taking on a fixer-upper ensures there’s potential to gain more capital, you need to be certain that the cost and effort pays off when it comes to selling.

Carrying out an extensive renovation and over-capitalising is likely to result in less profit. Especially when you consider the time it takes to complete the project, the costs of improvements, including paying skilled trades, building materials, bank fees etc., as well as the ability to recover your investment due to delayed rent collections.

3. Time

As a first-time buyer, negotiating the purchase your first investment property can be time-consuming and stressful. And as your investment portfolio grows, it will place even more demands on your time.

If you have a full-time job, you’re already likely to be juggling many responsibilities. And it’s even more of a burden if you’re deployed away from home or overseas. That’s why the Capital Properties team strongly advises that you consider hiring a property manager to help with the workload and carry the stress! We’ve talked about building a property investment ‘A-team’ before here. You won’t regret it.

4. Regulations

Becoming a landlord is not easy. It’s your responsibility to be aware of current codes and regulations concerning rental properties and the rights of your tenants. For example, there are extensive regulations surrounding repairs and maintenance of the property, including swimming pools, smoke alarms, gas safety and other facilities that may be part of the property.

These laws change often and vary in each state and territory. Falling behind may make you unwittingly liable if you don’t stay informed.

5. Do your research

It goes without saying yet deserves repeating: it’s 100% vital to do thorough research before you buy your first investment property. From location to loan type, regulations, area demand and more, you need to be across every aspect of the property you’re considering investing in.

Capital Properties book “The Property Investment Book for Switched On People” shares expert investment advice and is a must read for first-time investors and anyone looking to expand their property portfolio.

6. Manage your budget

Before you buy your first investment property, it’s fundamental to work out your projected expenses and profit. Capital Properties investment toolkit will help you make sense of the numbers. Our free online calculators, spreadsheets, checklists, and apps will help you make well-informed property investment decisions.

The Capital Properties Budget Planner tool makes budgeting a streamlined process and will ensure you don’t forget anything and end up with potentially costly ‘hidden’ expense. And our Property Investor Planner helps you to generate an accurate annual budget for all of your investments.

7. Be aware of making emotional decisions

Buying a property is always going to be an emotional process. Excitement, worry, pride, joy… it can be a lot! But when it comes to buying your first investment property, it’s important to remain logical.

Think of it as strictly business and try to negotiate as logically as possible to get the best results. If you find it difficult to remain emotionally detached, our expert Buyer’s Agent Service team can help you.

8. Choose your partners well

Investing in a property with a partner can be a fantastic way to spread the financial burden and risk, but it can also go horribly wrong. So, it’s essential to calculate the pros and cons of the partnership before you leap in.

Do you trust this person? How well do you know them? Are you fully aware of their financial status? How will you divvy up the operational responsibilities and financial aspects of the investment expenses and profits? Are you protected if the partnership becomes untenable?

Again, having an investment partner is a great option, but being open, honest, and thorough when assigning duties and tasks is crucial to maintaining a good relationship.

9. Prepare for negotiations

Negotiations are a vital part of every property transaction. Starting with securing finance, to the purchase of the property, to dealing with any maintenance/construction, to finding the right tenants. You need to understand the negotiation process and be prepared before you dive in.

Don’t want to deal with the stress of negotiation? Then let our buyer’s agent services negotiate expertly on your behalf instead. It’ll save you time, stress and money.

10. Be finance ready

Obtaining pre-approval for a home loan is free, easy and will probably end up saving you money. Receiving pre-approval and knowing your budget means you can negotiate from a position of strength and help you secure a great deal.

Our blog post “Why being finance ready pays dividends” is worth a quick read.

Need help with your first investment property?

Your chances of making a profit when you buy your first investment property are significantly increased when you work with experts who understand the investment property industry.

At Capital Properties, our mission is to guide you in your property investment journey and support you to make the best property decision. We’re always available to chat and offer helpful information, so book a free Discovery Session today and let us help you work towards your future financial security.

In the 2022 federal budget, the federal government announced a new Regional Home Guarantee (RHG) scheme to boost construction and help homebuyers get onto the property ladder sooner in regional/rural areas. 

Let’s take a closer look at the Regional Home Guarantee – 5% Deposit Scheme and see what it might mean for you.

Need help navigating government grants and choosing the right property? Book a discovery call with Capital Properties today. As investment specialists, it’s our mission to help Defence personnel and others attain future financial security.

On the go? Here’s 30 seconds of take outs:

• The Regional Home Guarantee (RHG) is an extension of The First Home Guarantee, that gives buyers the ability to purchase a home with a 5% deposit without the need for lenders mortgage insurance (LMI).
• The RHG applies only to new properties in regional areas.
• The RHG comes into effect in October 2022 and will continue until 30th June 2025.
• You must be an Australian citizen or permanent resident aged at least 18 years.
• There are income restrictions, see below for full eligibility criteria.

Keep reading >>

What is the Regional Home Guarantee?

The Regional Home Guarantee (RHG) is an extension of the First Home Guarantee, previously known as the “First Home Loan Deposit Scheme (FHLDS)” which came into effect on 1st January 2020. That scheme allowed eligible buyers to purchase a property with a smaller deposit of only 5% without the need to take out Lenders’ Mortgage Insurance (LMI). 

This new RHG will allow eligible buyers in regional areas to purchase or build a new property with a similarly low deposit without paying the LMI because the government acts as a guarantor on part of the loan, guaranteeing up to 15% of the purchase price. That means the bank/lenders no longer need to take out this insurance and the savings are passed onto the buyer.

The RHG is only available to first-home buyers or people who haven’t owned a home for at least 5 years. The full eligibility criteria are explained below.

How does the Regional Home Guarantee work?

The Regional Home Guarantee now allows potential buyers to purchase a property with a lower than usual deposit, allowing them to get onto the property market sooner. Usually, borrowers with less than a 20% deposit, i.e., borrowing more than 80% of a property’s value, would be required to pay LMI to protect the lender. 

The government predicts that regional buyers will be able to save up to $32,000 in LMI, a significant saving for all first home buyers.

The Federal Government has allocated 10,000 guarantees a year starting from October 2022 until 30 June 2025. This is in addition to the 35,000 guarantees a year promised under the First Home Guarantee/’FHLDS’. 

Who’s eligible for the Regional Home Guarantee – 5% Deposit Scheme?

To be eligible for the Regional Home Guarantee – 5% Deposit Scheme you must meet these criteria:  

• You must purchase a new home in a regional location and have saved a 5% deposit.
• Be a first-time buyer. This includes an investment property, commercial property, land/or a company title interest in land in Australia. 
• You must be at least 18 years of age and an Australian citizen or permanent resident.
• You cannot have an income of greater than $125,000 as a single person, or more than $200,000 for de-facto/married couples in the previous financial year. This income cap is reassessed every year by the National Housing Finance & Investment Corporation (NHFIC).
• Outside of marriage/de-facto couples, joint applicants are not eligible (e.g., parent/child, siblings, friends, etc.).
• You must live in the property within six months of purchase and continue to live there while the home loan is guaranteed under the 5% Deposit Scheme. 

What properties are eligible for the Regional Home Guarantee – 5% Deposit Scheme?

The Regional Home Guarantee is applicable to new homes only. This means that the property must have completed construction on or after 1 January 2020 and cannot have been lived in by anyone previously and/or sold, rented, or leased. 

The exception to this is if the property’s been significantly renovated in place of a demolished property and put on the market in an as-new condition. It doesn’t allow you to buy an old house and do your own renovations.  

Eligible properties include freestanding houses, townhouses or apartments such as:

• Newly built properties
• Off-the-plan properties 
• House and land packages
• Land and a separate contract to build a new home

Property Price Caps for the Regional Home Guarantee

As per the First Home Guarantee, with the Regional Home Guarantee you can only purchase properties within certain price caps:

State or Territory	Build or purchase newly built home
	Capital city & regional centres	Rest of state
NSW	$950,000	$600,000
VIC	$850,000	$550,000
QLD	$650,000	$500,000
WA	$550,000	$400,000
SA	$550,000	$400,000
TAS	$550,000	$400,000
ACT	$600,000	N/A
NT	$550,000	N/A

Source: National Housing Finance & Investment Corporation (NHFIC).

How To Apply the Regional Home Guarantee – 5% Deposit Scheme

Applying for the Regional Home Guarantee – 5% Deposit Scheme is a similar process to the First Home Guarantee. We’ve covered the 5% Deposit Scheme before. Applications must be made directly with one of the 27 participating lenders of the Scheme or via a mortgage broker. 

Capital Properties can put you in touch with a Mortgage Broker to help you with this process. And we know what makes a great Mortgage Broker.

If that’s the good news. What’s the bad news?

While the Regional Home Guarantee – 5% Deposit Scheme is great news for many first home buyers who would otherwise struggle to get on the property ladder, some homebuyers and builders are concerned that the move could mean higher property prices in regional markets.

However, the probability is that it will increase demand for more affordable properties, bringing new life to some less populated areas.

There is also some concern that due to further probable interest rate rises in 2022, even these smaller loans will be more difficult to service. Capital Properties strongly advises that you seek expert advice to help you make the best investment decision for your situation.

If you’re still wondering what the Regional Home Guarantee means for you, then get in touch. As experienced property investors, we can help you navigate the Regional Home Guarantee – 5% Deposit Scheme and any other schemes that can help you invest and work towards your future financial security. 

Book a free Discovery Session today and let’s get started. 

 

We’re all reeling at the price of lettuce and the extra expense at the petrol bowser these days. The news tells us it’s due to inflation. So, what exactly does that mean? What is inflation? What are inflationary pressures? Why is inflation so high right now? Do interest rates rise with inflation? Why does inflation affect interest rates? And how do these affect the skyrocketing cost of living in Australia? Is it all as glum as it seems? In this post, the experts at Capital Properties will answer all these questions and more. 

It’s important to acknowledge that the relationship between inflation and interest rates is complex. In a nutshell, it means that when inflation increases faster than expected, interest rates will rise. Interest rate hikes are used as a response from banks to help curb rapid rises in inflation. 

But if the intricacies of inflation and interest were that straightforward, we wouldn’t need economists! In reality, there are many nuances to consider in order to understand how inflation and interest rates work.

If you’re in the Sydney area and want to know more about how inflation might affect your home loan, then why not book a free discovery session with Capital Properties today? 

We specialise in helping Australian Defence Force members learn about the property investment market. With blog posts like things you should know about buying a house while in the ADF we share tips to help you buy and sell property, and our buyers agent service takes care of all the hard work for you.

On the go? Here’s 30 seconds of take outs:

• We explore the questions everyone’s asking: 

• What is inflation? 

• What are inflationary pressures? 

• Why is inflation so high right now? 

• Do interest rates rise with inflation? 

• Why does inflation affect interest rates? 

• What does it mean for Australians? 

• Inflation can be defined as “the increase in the price of household goods and services which is measured as the rate of change of these items over time”. 
• The Australian Bureau of Statistics (ABS) calculates inflation quarterly based on the average household’s spend on goods & services known as the Consumer Price Index (CPI).
• There are 2 types of inflation, temporary & persistent. Persistent inflation is either ‘demand-pull’, ‘cost-push’ or ‘built-in’ inflation.
• Inflation is the highest it’s been for 20 years due to the war in Ukraine, low unemployment, increased energy prices & low pandemic interest rates.
• The government raises interest rates to curb inflation.
• Capital Properties can help you explore opportunities in the property investment market in these challenging economic times.

Keep reading >>

What is inflation?

We’ve all heard about inflation. We know it’s increasing.  But many people are unsure about what it actually is. So, let’s answer the question on everyone’s lips right now “What is inflation?”.

Given that people have written entire books on the subject, we’re not going to pretend that this is a comprehensive definition, but in essence we define inflation as “the increase in the price of household goods and services which is measured as the rate of change of these items over time”. Simple right? 

Here’s a quick formula to calculate inflation for individual items: 

(Price year 2 – price year 1)
Price year 1 x100

Let’s look at this brief example to help understand it further:

Item	2021 price	2022 price	Inflation %
Bottle of wine	20	22	10%
Phone case	10	15	50%

 

So, interpreting inflation for individual items is pretty straightforward. However, when we examine inflation on a national level it becomes a lot more complicated. 

In order to measure inflation across the whole Australian economy, every quarter the Australian Bureau of Statistics (ABS) collects prices for thousands of goods and services, and groups them into categories. Then the ABS calculates the price changes of these items over that quarter and works out the inflation rate.

Each item for which inflation is calculated is given a weight derived from the average household spend on each item. And every household’s overall spend is referred to as a ‘basket’. These metrics are known as Consumer Price Index (CPI) weights. 

It’s safe to say that governments worldwide track inflation obsessively. But the next question to tackle is why prices are changing all the time? And what actually causes inflation? 

Common inflationary pressures

We call the underlying causes of inflation “inflationary pressures”. Inflationary pressures trigger economic adjustment to changes in supply and demand. There are two primary types of inflation, each with its own causes:

Temporary inflation is caused by issues such as supply interruption. A great example is the increased price of petrol due to the war in Ukraine. Economists don’t usually include temporary inflation when performing their calculations.

Persistent inflation is what people usually refer to when speaking of inflation. It is most often precipitated by increased circulating money due to various factors. These causes are commonly broken down into three main categories: 

1. Demand-pull inflation – when demand for a good or service exceeds production capacity (people can afford things they couldn’t before).
2. Cost-push inflation – when production costs increase prices (people producing goods are getting paid more than they were).
3. Built-in inflation – a circular type of inflation; as wages increase, so too do prices (the steadiest type of inflation).

Now that we’ve answered the question “what is inflation?” and “what causes inflation?”, let’s examine why inflation is so high in Australia right now. 

Why is inflation so high in Australia?

Inflation in Australia is currently at a 20-year high. The causes are numerous and diverse and include: 

• The war in Ukraine, which has led to increases in food and energy costs.
• Low unemployment rates – which means that on average, people have more disposable income.
• Increased energy prices on the east coast of Australia (the East Coast Energy Crisis).
• Record low interest rates during the pandemic, again meaning more disposable income for Australians

All of these factors are leading to a multi-factorial increase in inflation not just in Australia, but across the Organisation for Economic Co-operation and Development (OECD). 

Now, let’s refer to the last point above, interest rates. We’re often asked, “do interest rates rise with inflation”? Well, low interest rates seem to lead to higher inflation, so let’s explore this relationship a little further.

Relationship between inflation and interest rates

Fast rises in inflation are no good for anyone, and curbing inflation is something that governments take very seriously. A hike in interest rates is one of the government’s first lines of defence to slow inflation. 

We know this may sound counter-intuitive and even unfair. Many people will feel stressed that prices are already rising, and then banks raise the amount that must be repaid on top of that.  But this strategy is effective and necessary to keep the economy balanced. A rise in interest rates reduces disposable income meaning people can’t spend as much on goods and services. Ostensibly harsh, but efficient. 

Why is the cost of living so high in Australia?

When inflation is at a sustainable level, the cost of living generally increases in line with wages, but a rapid increase in inflation leads to an increased cost of living. And in Australia, we’ve seen drastic increases in the price of everyday goods and services such as:

• Groceries
• Coffee
• Petrol
• International travel

But it’s not all doom and gloom. Economies constantly go through cycles, with fluctuations in inflation and interest rates happening all the time. Whilst it may seem bad now, we know from experience that the system will balance out eventually.

If you need help understanding how inflation and interest rates might affect your home loan repayments or if you’re looking to get into the housing market but feel overwhelmed with all that’s happening in the world, contact Capital Properties today. We can help you get the best deal when buying a home. 

Book a free Discovery Session to find out more about how we work and what we can do to help you achieve future financial security.

We’re sure you’ll already be aware that the 2022 Australian Federal election brought a change of government in Australia with the Liberal/National coalition ousted, and a majority Labor government sworn in for the first time since 2007. 

This changing of the guard comes during an escalating war in Ukraine, China’s increasing presence in the South Pacific, an urgent need to tackle climate change and the tail end of a global pandemic. All of which will continue to challenge the Australian economy.

So, what does the change of government mean for the Australian property market? In this blog post, our Capital Properties investment experts explain what the change of government means for property investors with this property update.

To discuss how the change of government affects your property investment potential, book a discovery call with Capital Properties today. 

On the go? Here’s 30 seconds of take outs:

• The new Labor Government has promised to get more Australians into their own homes.
• The National Housing Finance & Investment Corporation (NHFIC), has been renamed ‘Housing Australia’ and now incorporates the ‘National Housing Supply & Affordability Council’ and the ‘National Housing & Homelessness Plan’.
• Housing Australia key programs include:

• – Housing Australia Future Fund
• – Help to Buy
• – First home guarantee/ 5% deposit scheme
• – Regional First Home Buyer Support Scheme
• – Restoring Funding for Homeland & Improving Remote Housing

• A “greenslide” of Greens & independent seats makes sustainability a major focus. The “Rewire the Nation” campaign aims to make Australia a “renewable energy superpower”.
• No changes to capital gains taxes and/or negative gearing, though earlier contribution to superannuation is allowed.

Keep reading >>

Property update – current outlook

Globally, it’s been a tough couple of years. In response to this, the Reserve Bank of Australia (RBA) is raising cash rates to help Australia’s recovery from the Covid-19 pandemic emergency borrowing settings. We’ve discussed this in more depth here: “Cash flow property – Counter interest rate raises.”

With inflation predicted to reach approx. 7% by December 2022, some homeowners and first home buyers are understandably nervous about their ability to attain a mortgage and their capacity to service the loan. However, with an unemployment rate at a 50-year low and steady economic growth, economists remain hopeful for a strong financial recovery. 

The government building stimulus packages and the Great Interstate Migrate were both partly responsible for phenomenal increases in house prices across most markets in the last year. As we predicted, these markets have started to calm down, so we’re seeing a more gradual and sustainable growth. 

Although property prices are stabilising, construction costs continue to increase, and demand for housing is still at an all time high. Now, with the re-opening of international borders, both students and skilled migrant workers are once again returning to our shores, thus driving up rental demand in urban areas. 

Change of government – Labor property update

Australia’s new Prime Minister Anthony Albanese won over many voters with his promise to get more Australians into their own homes. And to do so, the Labor Government has committed to expanding the role of the National Housing Finance and Investment Corporation (NHFIC), renaming it ‘Housing Australia’. This incorporates the National Housing Supply and Affordability Council and the National Housing and Homelessness Plan.

Under the National Housing Supply and Affordability Council, the Federal Government will work with state governments to set targets for land supply and collect national data on housing affordability as well as supply and demand.

The National Housing and Homelessness Plan

Developed with key stakeholders including States, Territories, local governments, not for profit and civil society organisations, Real Estate Institute of Australia, Master Builders Australia, and many, many more key organisations, the National Housing and Homelessness Plan will set out key reforms to make it easier for Australians to buy a home, rent, and house homeless Australians.

Housing Australia key programs include:

• Housing Australia Future Fund
• Help to Buy 
• First home guarantee/ 5% deposit scheme
• Regional First Home Buyer Support Scheme
• Restoring Funding for Homeland & Improving Remote Housing

– Housing Australia Future Fund

With the establishment of a National Housing Supply & Affordability Council, the new government aims to increase housing supply and improve housing affordability. A $10 billion fund will help to build 30,000 new social and affordable housing properties in its first five years, creating thousands of jobs for tradespeople.

The annual investment returns will be transferred to the National Housing Finance and Investment Corporation (NHFIC) to further fund:

• 20,000 social housing properties, with an allocation of 4,000 ($100 million) for women & children fleeing domestic & family violence and older women on low incomes who are at risk of homelessness. 
• $200 million for repair, maintenance & improvements of housing in remote Indigenous communities.
• $30 million to build more housing & fund specialist services for veterans who are experiencing homelessness or at-risk homelessness.
• Creating 10,000 affordable homes for frontline workers.
• Resulting in 21,500 full-time jobs across the construction industry with incentives for training new apprentices.

While this additional funding is necessary and long overdue, a report published in November 2021 from Brendan Coates at the Grattan Institute suggests it’s still falling well behind what’s needed. More than two thirds of low-income Australians are still struggling in a private rental market with rents rising at around 9% per year nationally.

– Help to Buy Scheme

The change of government fulfils Labor’s “Help to Buy Scheme” and a promise to cut the cost of buying a home by up to 40% for some lucky Aussies. This means that each year up to 10,000 eligible candidates will require a smaller deposit, a smaller mortgage and will have smaller mortgage repayments. The scheme is restricted to owner-occupiers who don’t currently own a property, providing an affordable entry point to the Australian housing market and allowing better access for key workers to live in more central areas.

Buyers will only need a minimum deposit of 2%, with the Federal Government providing an equity contribution up to 40% of the purchase price of a new home and up 30% of the price of an existing home. For example, a homebuyer in Sydney, buying at the area price cap of $950,000 with 40% equity, would save over $1,600 on their monthly mortgage repayments. In regional Queensland, home buyers purchasing at the price cap of $500,000 with 40% equity, can save $850 on their monthly mortgage repayments. 

Under the scheme, homebuyers can also avoid paying Lenders Mortgage Insurance, potentially saving more than $30,000. It’s also possible to top up with an additional 5% stake in the home, however if their income exceeds the annual income cap ($90k for individuals / $120k for couples) for 2 consecutive years, they’ll have to repay the government’s financial contribution. Also, buyers will still need to pay transactional costs, including bank fees, stamp duty and legal costs. Visit the ALP website for eligibility and further details.

– First Home Guarantee/ 5% Deposit Scheme

Labor has expanded the Coalition’s ‘First Home Loan Deposit Scheme’, renaming it the ‘First Home Guarantee’ and generously adding another 10,000 places annually to allow for 60,000 guarantees per year. We’ve covered this 5% deposit scheme before here.

– Regional First Home Buyer Support Scheme

To address the regional housing crisis, Labor has extended the ‘First Home Guarantee’ to include some rural areas, calling it the ‘Regional Home Guarantee’. This allows buyers to purchase a new home in an eligible regional area with a 5% deposit without the need for lenders mortgage insurance. 

The aim is to enable 10,000 first home buyers a year to buy a home in regional Australia, thus tripling the number of people in these areas that can access a government guarantee scheme. You can read more about the scheme and see full eligibility criteria in our blog post ‘Regional Home Guarantee – 5% Deposit Scheme’. 

– Restoring Funding for Homeland and Improving Remote Housing

In an effort to Close the Gap, Labor intends to deliver an immediate boost of $100 million for housing and essential infrastructure on Northern Territory homelands. This includes improvements to water, power and community facilities, housing upgrades, extensions, as well as new builds. This is in addition to the 30,000 social and affordable homes available through the Housing Australia Future Fund.

Change of government = a new focus on sustainability

As the Greens party and independents won more seats than ever before in the recent election, this “green slide” means that sustainability will also be a major focus of the new government. With its “Rewire the Nation” campaign, the Australian Labor party has made a commitment to developing Australia as a “renewable energy superpower”.

And their initial policies reflect this goal with plans to reduce emission targets, review environmental legislation, implement new sustainable guidelines for businesses as well as establishing a national Environmental Protection Authority (EPA).

Each of these policies will have a knock-on effect on the property market. It’s likely that we’ll see additional sustainable recommendations for new builds and existing properties. We expect to see further incentives for solar and battery power use to allow for electric vehicles and new ways of managing water recycling and use of sustainable materials in new builds.

What the change of government means for property investors

Labor has not indicated any change to laws regarding capital gains taxes and/or negative gearing. With vacancy rates below 1% in some markets in Adelaide, Brisbane, and Perth, and rental yields steadily increasing, it’s a win-win for many investors.

For investors looking to downsize their portfolio, it’s now possible to contribute up to $300,000 from a property sale into superannuation at the age of 55years, a decade earlier than was previously allowed.

It’s important to remember that although these Federal laws will have a national impact, each state and territory may have individual implementation guidelines. And the property market is quite different in each of these regions. 

That’s why we recommend working with Property Investment experts at Capital Properties to evaluate what this change of government means for you. Our expertly researched Australian property updates will help you develop a strategy for successful property investment.

Book your free Discovery Session today to kick off your future financial security.

In its first back-to-back hike in 12 years, the Reserve Bank of Australia (RBA) has raised the cash rate by a total of 85 basis points. Its aim is to ease the country off the emergency borrowing settings that were required to maintain the economy through the Covid-19 pandemic. 

Philip Lowe, RBA Governor said that the Reserve Bank board is committed to making sure that inflation returns to the 2 – 3% target and that households should be prepared for further interest rate raises. In a statement, he negated the possibility of a recession saying “It doesn’t feel like the precursor to a recession and interest rates, while they have gone up, they are still low. The cash rate is still less than 1% at a time when unemployment rate is at a 50-year low.”

Capital Property investment specialists have lived experience dealing with interest rate fluctuations. We can help you counter interest rate raises with cash flow properties. To learn how, book a discovery call with Capital Properties today.

On the go? Here’s 30 seconds of take outs:

• The RBA has predicted further interest rate raises in order to achieve an eventual target of 2 – 3% inflation.
• Inflation is predicted to reach approx. 7% by December 2022.
• Although a concern to some already financially stretched homeowners & new home buyers, this may offer an opportunity for investors.
• Rising interest rates means less competition in the property market & higher rental demand.
• It also allows for substantial depreciation & tax breaks to circumvent inflation.
• To counter interest rate raises, we recommend that you:

– Work out your cash flow position

– Make additional mortgage payments

– Top up your offset account

– Consider refinancing your loan

Keep reading >>

How high will interest rates rise?

The RBA has warned to expect further interest rate increases. This is due to shortages in the labour market, rising petrol prices along with rising retail electricity and gas prices and of course global factors including supply chain disruptions due to Covid-19 and the war in Ukraine. Economists are predicting another 50-basis point rise in July 2022, taking the cash rate to 1.35%, although the forecast is for a cash rate peak of 2.5%, with inflation predicted to surge to almost 7% in the December quarter.

“High inflation damages the economy, reduces the purchasing power of people’s incomes and devalues people’s savings,” Lowe told the American Chamber of Commerce on 21st June 2022.

How do rising Interest rates affect the property market?

Rising interest rates have an obvious effect on buyers and sellers. If the economy shows strong growth, rising mortgage rates won’t affect property value and housing prices hugely. That’s because job and wage growth should compensate for the higher costs.

However, for people who’ve struggled to get on the property market or those whose finances are already stressed by record-high home prices, this may prove detrimental to their home-owning dreams. Property investors must therefore ensure they take proactive steps to counter interest rate raises before they find themselves in a pickle.

Rising interest rates and property investing 

Increasing interest rates/mortgage rates is often an opportunity for real estate investors. Rising interest rates leads to a reduction of buyer demand in the market, leading to reduced property prices and less competition. As less people qualify for mortgages, the rental market swells to meet demand for additional rental properties.  In some Australian capital cities, rents are rising by more than 20%.

The potential for higher rental yields has already driven investor mortgage demand, with the Australian Bureau of Statistics (ABS) reporting 9 consecutive months of investor mortgage growth since June 2021.

Realestate.com.au also reported a steady increase in investor enquiries over the past 3 years, currently sitting at the highest level in years. And as international borders re-open, allowing students and skilled migrant workers to return, demand for urban rentals will continue to build.

Many investors will already have seen phenomenal levels of capital growth and will be prepared to run negatively geared property and cover a cash flow shortfall.

How to counter interest rate rises in a cash flow property

Investing in a cash flow property means you’re investing in a property with a high rental yield, i.e., with a rental income that’s greater than the expenses associated with owning that property.  Those expenses include maintenance, property management fees, insurance, mortgage interest and more. To increase equity and counter-interest rate raises, investors ideally want to pay down the loan on the property with any additional income, so budgeting is vital. Capital Properties Budget Planner can help with this. 

Increasing interest rates could affect cash flow for property investors, however, the effect should be diminished by increasing rental demand and higher rental rates. For example, the growth of populations in regional cities, such as Ballarat, in north-west Melbourne, Victoria and Newcastle in NSW shows no sign of slowing down with strong investor activity in these areas.

Many property investors embrace substantial depreciation and tax breaks to circumvent inflation. With vacancy rates below 1% in some markets in Adelaide, Brisbane, and Perth, investing for cash flow also allows for the excellent potential for capital gains.

How to counter interest rate raises

It’s worth remembering that banks and lenders have allowed buffers when lending to ensure that people won’t find themselves in an untenable situation. However, after enjoying historic low interest rates for years, some people may feel unprepared for the expected increases. 

If you’re wondering what you can do to improve cash flow and counter interest rate raises, here are our top tips:

– Work out your cash flow position

We’ve written about the importance of knowing your cash flow before in ‘Getting to know your cash flow: it’s power to you!’.  At Capital Properties, we’ve developed tools to help you work out how different interest rates, rental income changes and/or paying down some of your borrowings will affect your bottom line. 

These free Capital Properties investment tools and calculators, include a downloadable ‘Property and personal spending budget’ spreadsheet, a rental property calculator and so much more to help you accurately predict the cashflow position for your investment property or complete property portfolio. 

– Make additional mortgage repayments now

To counter interest rate raises, it’s a good idea to make extra repayments into your mortgage before the interest rates escalate further. If you don’t have a fixed loan, you can deposit a lump sum or make more frequent repayments. Or, you can add extra into your ongoing monthly repayments starting as soon as possible.

– Top up your offset account

Making extra payments into your mortgage offset account allows you to build a buffer. Ideally, you’ll only have to pay interest on the difference between the loan amount and the amount in your offset sub-account. This means you can pay the loan off faster and with less interest in the long run.

– Consider refinancing your loan

If you think your current lender’s interest rates are higher than they ought to be, it’s worth looking around and getting comparable quotes. Once you’re armed with that information, you can pick up the phone and ask your lender for a better deal. If you’ve been a good customer, making repayments on time and have built equity in your property, you’ll have a strong position to argue from.

If your current lender refuses to negotiate, then it’s worth considering switching to another lender who’s offering better rate. Some lenders have investor incentives allowing you to package investment loans with home loans.  

The Capital Properties team are property investment experts who are passionate about helping you develop a wealth building strategy. We’ll help you navigate the challenges of property investment so that you’ll always feel empowered to make the right decisions for your financial future.

Book a free Discovery Session today and let’s get started. 

 

When you’re searching for property, finding the ideal house or block of land can feel all consuming. Many of our clients tell us that they spend an exorbitant amount of time on realestate.com.au without ever finding anything suitable. A lot of that time online is fruitless when you don’t know exactly what you’re looking for.

They often come to us with the same questions. What’s the best way to find the ideal property? Then once you’ve found it, what do you need to do to make sure you secure it?

Engaging a Capital Properties buyers agent means we answer these questions and more to ensure you find your perfect property. Our Capital Properties 7-step process allows us to short list suitable property options, and we work with you to ensure you have everything you need to make offers and close the sale. The first step of this process is locking down your requirements and our Capital Properties Buyer Checklist is the perfect place to start.

On the go? Here’s 30 seconds of take outs:

• Online property searches are time consuming and often unsuccessful.
• Capital Properties 7-step process helps you to find suitable property options.
• Asking some essential questions (see below) before your property search will save you time.
• The Capital Properties Buyer Checklist helps to streamline the purchasing decision across these key areas:
• FINANCE: know your budget & secure pre-approval or conditional approval.
• CONTRACT CONDITIONS: be prepared to negotiate conditions of sale, including purchase subject to finance, pest inspections, due diligence etc.
• DEPOSITS: make a small initial deposit.
• SETTLEMENT: figure out your most realistic time frame – 28-days is standard.
• LOCATION: choosing the best location also depends on the type of property you want.
• SIZE: consider land size & use for residential, commercial, industrial or development.
• STYLE: the style will vary according to personal taste, e.g. modern or contemporary.
• FEATURES: what does the property need to have, e.g. air conditioning, solar power etc.

Keep reading >>

ESSENTIAL QUESTIONS

When kicking off this Capital Properties Buyer Checklist you must first ask yourself what specific type of property you’re looking for. For example:

• Is the property primarily an investment? Will you live in it for period of time? Think through the lifetime of the property from purchase to eventual sale.
• What does the property need to offer? We suggest you create a list of the must haves. For example, you might require four bedrooms with ensuite bathrooms, two living areas and a double garage with some room to tinker.
• Are there specific requirements for the area that you need to buy in? For example, do you have certain regions/suburbs in mind? Do you need proximity to infrastructure/amenities such as public transport etc.
• What are you willing to compromise on? Although it’s good to have a wish list, the reality is it’s rare to find a property with everything that you want (within budget). If you’re going to have to make a compromise somewhere, then decide what’s important before you become emotionally invested.

YOUR PROPERTY BUYER CHECKLIST

In this blog post we’ll share some tips to help you choose the best location and speed up your property search. The Capital Properties Buyer Checklist will streamline the process for you to ensure you have a clear picture of what you want and a strategy to get it. Try to be specific as possible when working through this list for the best outcome.

FINANCE

We start with finance, simply because it’s the best place to start. When you know your budget and have finance sorted, you’ll have the confidence to start making offers and be in the best possible position to negotiate on properties.

• Talk with your mortgage broker or banker about getting your finance pre-approval or conditional approval in place.

CONTRACT CONDITIONS

Take time to think about what types of conditions you might want to insert in the contract prior to making offers. Then when your offer is accepted you can communicate those conditions through the vendors agent.

Here are some examples of contract conditions to communicate with your offer:

• Subject to finance
• Subject to approval building pest inspections
• Subject to due diligence
• Subject to the style of another property

As there are some unfortunate schemes that set out to con potential buyers, having a buyers agent to help you negotiate the conditions of sale is wise. For example, your buyers agent can provide title searches to confirm if the seller is the actual owner.

DEPOSITS

As buyer, you can negotiate when deposits are paid. We recommend that you put down a small initial deposit of approximately $1,000. Then the balance deposit will be due once the contract of sale goes unconditional.

SETTLEMENT

The settlement terms are one of the key negotiating contract conditions in purchasing. In ‘hot’ markets vendors prefer shorter time frames, so its advantageous if you can settle quickly. However, you need to be realistic that you can achieve those milestones.

Consider what you’ll need to achieve to meet your ideal settlement timeframe first, and then work out what the pessimistic time frame might be.  The realistic time frame might sit somewhere in between. A 28-day settlement is a pretty standard timeline. Longer settlement periods would apply to properties without a finance cause.

LOCATION

You can’t decide on a location without also considering what type of property you’re looking for. This is where the answers to the first question above will come into play. For example, decide if you’re purchasing a home to live in or buying an investment property? If it’s an investment, are you focused on residential, commercial and/or industrial? Are you considering using the property as holiday home? Is the purchase for your business and/or for development? Each of these different scenarios should strongly influence your decision-making process about where is best place to buy.

To settle on the best location, create a wish list with some broad areas of interest or specific suburbs and concentrate your search there.

SIZE

When considering the size of the property, you must first think about the size of the land. Is the land suitable for residential, commercial, industrial or development? Clarify how many bedrooms/bathrooms/living areas you require. Will open plan or separate living be best? How much off-street parking is required for vehicles?

STYLE

There are many different construction methods, so this comes down to personal taste. For example, do you prefer brick veneer over timber weatherboard? What styles suit your personality? Modern or contemporary? Are you more likely to choose a Queensland colonial style, workers cottage or art deco? Are you looking for an un-renovated project, or a turnkey project?

FEATURES

Consider what property features you want/need? For example, in hotter climates air conditioning is a must. If sustainability is important, then properties with solar power/batteries are worth the investment. If you, or any potential future buyer, is likely to work from home then the property will require access to technology like NBN or 5G mobile phone coverage. If you want to keep animals, you’ll need to consider fencing and water supply. Or you might want a pool and/or views?

This Capital Properties Buyer Checklist should give you a good start in formulating a buying strategy. It will also help you to narrow down and create a short list for your property search. Spending a few moments to consider these points will end up saving you heaps of time and stress and allow you to focus on getting you exactly what you’re after.

As always, our Capital Properties buyers agent service is available to help you source all types of property options. A great place to start is with our Free Discovery Session which will give you a taste of what it’s like to work with us. Then our follow-up Strategy Session will help nail a plan to help you find your perfect property and achieve your goals.