So in today's episode I'm going to discuss a bit of an interest rate update we're going to talk a bit about variable verse fixed and also how p i repayments are affected relative to interest only repayments as a result of the recent rate rises so please subscribe like and share would greatly appreciate it and please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions so today we're going to dive in a little bit further around fixed verse variable rates currently and a little bit around how the actual interest rate changes are affecting people's actual monthly repayments so um basically we've got our little disclaimer here so first i'm going to talk a bit about the spread between fixed and variable that we're seeing at the moment so there has become a big divide in between fixed and variable rates basically now what i'm seeing is the trend of people moving toward variable rates going back a couple of years um you know there was a lot of uh talk about you know people wanting to fix at the lower rates where they were lower than variable um what we're starting to see is that um the majority of people now are opting for variable and i believe that's on the back of you know variable being much cheaper than fixed across the board pretty much at the moment um the concern that i've got is that you know in past years when we had fixed rates lower than variable that you know preempted um you know the down move in rates uh that we saw on variable rates after um and so you know the concerns that i have are that we could see a potential repeat of that where you know the fixed rates are trending upward and maybe the variable rates will follow them over the coming years now there is also the inversion of the yield curve in the us which is where short-term rates in some cases are now longer than long-term bond interest rates this is sort of changing day by day the thing to look at there is the two and ten year yield and basically where you have a situation where short-term rates are paying a higher interest rate than long-term rates this is normally um an indicator of an upcoming recession um and that's because you know people are uh more willing to take the lower rate and more secure rate over the long term uh so yet basically expectation of of rate cuts basically now that is something that's quite fluid but just something to keep note of there um now basically looking at sort of the spreads between it you know these are changing on a weekly basis at the moment but there's generally a difference of one and a half to two and a half percent between the two year fixed rate which is typically the higher versus variable rates at this point in time so the spread between the two is um quite wide at the moment you know in some cases the two-year fixed rate is is virtually double um the variable rate and just a couple of months ago we saw that you know rates were at a very similar level and in some cases you know fixed were still lower or you know they were actually you know virtually identical between the variable and the two year fixed rate um and so i do have some concerns you know around the sustainability of the market you know if they are raising rates materially because it not only affects the cost of lending when you are a mortgage holder but also consumer costs are skyrocketing at the moment you know we're seeing um higher food prices um you know petrol everything like that and so you know jumping up the cost of people's mortgages uh more or less just compounds that problem even further now if we look at principal and interest versus interest only repayments um basically with this um i saw an interesting chat uh in the broker group basically where they were talking about that actually the rate rise differs depending on whether you're on p i or whether you are on interest only and so for example um your rate repayment actually will increase more if you're on io so for example if you're on p is a principal and interest one million dollar loan and let's say you're on a three percent rate right now versus um you know a one million dollar interest only rate again starting on three percent let's say both of those go up by half a percent and so um even though both of them are going up by half percent both of them are the same loan size and the same starting interest rate um the actual repayment increase is not the same uh despite the interest increasing by the same amount because you know one million loan three percent going to three and a half so they're both increasing by a half percent however when it comes to actual repayments so the p i repayment will go from four to one seven a month to four four nine one so 274 a month more versus interest only will actually go from 2500 to 2917 so it's actually 417 dollars higher which is actually substantially higher and i'll just move this to the side so you can see here so basically um 274 versus 417. so whether you're on i or whether you're on p i is actually going to significantly affect how much additionally you're paying so the short thing here is that investors who are the ones that are typically sitting on interest only are typically going to be you know hurt a lot more um than people who are on p i typically just for for their standard home now looking forward um you know trying to pick the direction here is obviously very difficult um you know the old saying is if i knew the answer to that i'd be drinking pina coladas on the beach but um it's clear that you know you need to be in a position of having a bit of liquidity on hand so that you can ride out any potential upcoming storms now we can't be sure how long rates will rise for and for how long but you know it can be potentially devastating if repayments were to say double or you know if they take the cash rate to two two and a half three percent over the next couple of years uh it's going to be an enormous uh increase in repayments for people and i think that that could be um you know very devastating for people uh in terms of you know what their cash flow looks like and then that flows through to businesses and everything like that and you know as there's less demand in business then um you know that's not good for jobs and then again the cycle of recession sort of moves forward and it's important to know that you know while we still have competitive variable rates out there at the moment so a lot of stuff still on the toes um you know the trajectory it's sort of very challenging you know in the us i'm seeing talk of new mortgage rates i think it's actually over six percent i saw now and um and new zealand in the five percent ballpark as well so you know these are other countries that have historically been quite low on interest rates in prior years and uh looks like they're you know trending upward now as well in addition to mortgage repayments increasing rents are also rising in a lot of situations so um this does somewhat offset interest rate costs uh you know this is good as a landlord but obviously terrible if you are renting and saving to buy um and you know this is something that should be considered also uh that you know i saw a media headline recently about choosing your badge so you know do you want to pay a high amount of rent or would you rather pay a big mortgage with an increasing rate so um sort of neither good options but um you know those are i guess the options that are available uh trajectory of the market wanted to just briefly touch on this so um you know we have seen recent data showing sydney and melbourne in particular starting to decrease and it's important to note that you know sentiment is highly important when it comes to asset pricing um consumer confidence and the fear of missing out are real things when it comes to pricing assets i think you need to be very careful of the market softening especially if you have a short-term time horizon if you do have a long-term time horizon and you know ideally you should be in a strong cash flow position as well to service the debt so that way even if rates do increase a lot um you know you'll be in a position to be able to hold and you should aim to build up some liquidity to keep you safe in case things do get extreme because we don't know how high rates can go here and personally i've already started to decrease my discretionary spending and so you know if other people follow suit then you know we will potentially see the economy flow through and potentially deteriorate um you know with the lower rate of spending being done uh the wealth effect which is the concept of people spending you know as they become wealthier you know that is the real thing and so if people see their asset prices um you know very much trending down then that may you know cause them to reduce their discretionary spending now i still believe australia is an attractive jurisdiction you know i believe we are going to see future migration i know there has been some people leaving the country recently but um i do believe you know future migration is you know a real thing um and i believe that you know australia is sort of recognized globally as a fairly stable democracy you know with good weather and so i think over the years you know we are going to see more and more people migrating here and you know so many construction companies are also going under as well so you know that presumably will eventually have some impact on the speed of new supply coming to market and that could be supportive of existing stock as well another thing to note new south wales is also looking to drop stamp duties so it looks like dominic perrault is uh pushing basically to you know polish stamp duty in favor of the annual land tax option i think this is very good news for buyers it significantly reduces the deposit requirements um and previously i thought that this would cause a bit of a jump in prices sentiment is quite weak at the moment so wouldn't quite bet on that at the moment but i think it is going to be supportive of the market and i think that you know it is um a good sort of catalyst here as well um and you know we do have a couple other factors you know we've got like the shared equity scheme and a couple other things coming up so uh you know it's not i guess all doom and gloom i'll be doing further updates on how the market is changing over the coming weeks if you've enjoyed the video please do subscribe like and share and please notice always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions thanks so much for tuning in

So today let's talk about eco cabins and how much cash flow they can actually generate if you'd like to get in touch i'd love to hear from you please send me an email at jp australianpropertypodcast.com or give me a call on 0423 475-336 and please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should take professional advice before making any investment decisions so i wanted to talk a bit about today about an article that was in the financial review about eco cabins and so these are basically off-grid really small houses and they're being rented out for holiday purposes i think primarily sort of being used for romantic sort of getaways by couples uh typically um they are quite small and so i want to firstly mention i've got no affiliation with the company they're called intrepid travel wasn't familiar with them until yesterday um the note in the article is that they are investing 7.85 million to build 70 of these cabins um and i know that's a cost of only about a hundred and twelve thousand per cabin and they have a number of these cabins actually operating successfully already and the occupancy rate is over 85 um so i was doing some quick maths you know on that in my head and i was realizing you know that is actually a lot of cash flow relative to the cost so i basically dug a little bit deeper into that um and i think that you know the key issue is that you didn't tell me to put these so you need a big piece of land ideally you know in a decent place um and on their website it actually indicates they are looking for land owning partners that they can uh put these on um and you know ideally for sites that can house multiple ones these cabins so uh that is i guess clearly identified as one of the biggest challenges behind it um the lens i'm seeing this through however is the opportunity for someone to potentially build a bunch of these uh put did you put them on say like a regional block of land and then you know just rent them out so whether you maybe already own the land or if you've got one in mind um so i think that there is some you know real opportunity here for a lot of cash flow and then you know that's stacked on top of a big piece of land because obviously you're going to need to own um you know quite a bit of land to put one of these on or hopefully a couple of these on and so it seems so far they're based in south australia victoria queensland and um it lists on their site rental amounts and so looking at this here you can see i've actually bought up some of their smaller cabins these ones here are the more entry-level cabins and they're starting at about 229 per night um and you can see i'll sort of scroll through a couple of these here you can see they're relatively um you know quite small generally sort of one to four people um and you can see they're typically you know in quite scenic kind of locations you can see sort of like convenience and that kind of thing in a lot of cases um and if we click on one of these here you'll be able to get a rough idea um in terms of sort of a bit more about the specific property and and how much you're going to pay and that kind of thing as you can see these are really quite basic um it's really not a you know super high-end fit out um and if you look at that you know starting rates from 229 a night and you know in high season they're looking at 349.99 and this is for you know quite a basic cabin now um if we go over to another example they've got this one here which shows another one here and you can see that there's a really beautiful um vineyard in the background there so you can sort of see the appeal of these and um i guess the interesting piece is you know just how cheaply you can build these relative to how much cash flow that they're going to potentially generate and so in addition to those they also do a higher end cabin which is called cabin x and basically here's an example of one this is called the william this one is obviously designed as a higher end of the market um you can see it's the sort of more sophisticated looking uh one here and they've got a sort of bit more kitted out looks like they've got the um the high ends at a barbecue it looks like it might even have a sauna there and then you've got um you've got some other nice things here like the eames chair and that kind of thing so this is the higher end offering this is called cabinets and if you scroll down to here if you look at these rates you are looking between 595 a night and 7.95 at night so um again you know you're gonna need land but you can see here the cash flow potential against the cost price uh can really be something uh so i thought i'd point that out today in case a few people were interested again i'm not affiliated with this company i've not dealt with them i've only just discovered them the other day uh but i like the concept of um you know building these and the the high yields that could be associated with it to talk about financing i think that's probably one of the biggest challenges and we do get a number of inquiries about this kind of uh thing as well what we have over the years um in my opinion realistically you might be able to get a loan for the land you might be able to get up to say 50 lvr maybe on the land and this is going to depend on where you are financing it the challenges that you are likely looking at vacant land perhaps you can get a higher level of financing you know maybe if you buy something that's got an existing house on it with heaps of land that will still allow you to build these on but could be financed in resi or something like that but i'm going to assume that you're going to be looking at commercial zoning here or some uh kind of farming or commercial center zoning somewhere and then with that it's going to be financed as a commercial loan and then you know noting also that it's likely going to be regional acreage that's where you know vacant land regional acreage is not the most loved type of security for a bank to finance and so i think that you know um if you do your rough math on maybe up to 50 on the land that's you know potentially doable um and then uh with cabins you know you're likely gonna need to build them with your own cash so you're likely gonna need to have quite a bit of capital for a project like this but um as you can see here you know you may end up owning a big piece of land with a bunch of cabins on them that are generating you know north of 200 a night up to 800 at night and if you you know stack a bunch of those you can obviously the cash flow opportunity um can really compound uh quite quickly there in terms of how much you can generate and so you can see you know they do pay off pretty quickly uh compared to the construction cost so um you know look i do think there is um going to be a lot of nuance to this you know uh you know you need the right location you need you know to be able to put these on there you need to make sure you know zoning and everything permits but i really do think there is some value here if you look at the cost price versus what people are actually paying and the occupancy um it seems like there is opportunity in this sector i have had a number of inquiries about these over the years as well so i think this is a growing a growing thing um and yeah i just thought i'd talk about it today in case there was someone out there that had a nice piece of land that might think hey this is a great you know way that i can make use of that or potentially you know it might give you a pathway to um you know consider this as a strategy for property investing going forward but please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile i'm a mortgage broker not a financial advisor and so you should seek professional advice before making any investment decisions i really appreciate you tuning in as always thank you so much

So in today's episode I want to discuss how someone can maximize their borrowing capacity by using interest only lending so if you'd like to get in touch i'd love to hear from you please send me an email at jp today you australianpropertypodcast.com give me a call on

0423475336 and please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions so today i wanted to talk a little bit around the scenario of how someone can potentially increase their borrowing capacity by using interest-only lending now a lot of people are probably quite familiar with the concept that traditional banks will actually reduce your borrowing capacity when you're going on interest only and the reason for that is because they're seeing the remaining term after the interest only period um as requiring you know the whole loan to be paid off so for example let's say standard 30 year loan term if you do not have any interest only you're paying off the mortgage steadily across the full 30 years if you have five years of interest only first it means you need to pay off the whole mortgage in the 25 years remaining so typically banks actually benchmark it you know harsher if you're actually um going to basically be on interest only because the remaining term when you're paying principal is going to be shorter now the exception to this scenario is if you're looking at non-bank lending then what happens is some of the non-banks will actually look at other lenders um repayments at the actual repayment or near the actual repayment so for example um in this scenario this is a live one of all very similar to a live one that i've looked at recently so i wanted to actually walk through the exact parameters here so let's say you have um an investor with three properties they're worth 500 000 each and each have a mortgage of 400 000 so basically total debt of 1.2 million total value 1.5 million so sitting at 80 now let's assume all is on principle and interest principle and interest repayments across a full 30-year term on a three percent interest rate basically the repayment on that is 5060 per month and the banks will be testing this on a two percent higher rate so the bank is actually using a repayment rate of 6442 per month that's based on a five percent rate 30-year p i investment now these are loose figures the assessment rates at banks are different and actually typically even potentially higher than this again but for rough figures for today we'll use these numbers so in this example you can actually see here that um the client you know in this example actually had zero borrowing capacity left with traditional banks based on the income level um so the client then came to us we looked at um three existing properties moved to interest only and basically we did that initially with the bank because it could still pass an interest only with a bank and by going with the bank we're able to still keep it uh you know with i guess um more competitive financing on the sort of specific rates and everything like that and so if we assume it all refinanced interest only instead of principle and interest um the former repayment of 5060 a month is going to come down dramatically and that's when it will now become about hundred and one 3501 per month um so you can see there there's quite a big difference so um then what happens is from there now that we have reduced the repayment level on all those existing debts that's when we go to a non-bank lender who's going to take the actual repayments or near the actual repayments um so what the calculation they'll now use is existing repayments of 3501 for the existing debts per month whereas formally it was four hundred forty two per month so you can actually see in the calculation here this opens up a difference of about two thousand nine hundred and forty one dollars cash flow per month now this amount of cash flow per month um in some cases may even be enough to add you know toward a million dollars of borrowing capacity with some lenders um where someone had no capacity left at banks to start with so this is um sort of i guess loosely based on a live scenario that i have worked with i've worked with a number of um people over the years on similar ones and this was actually a strategy um that i learned about uh probably going back more than five years ago now and so this is tried tested and true been around for a long time and there is a lot of capacity to be gained doing this the downside really of the strategy is obviously you are heavily leveraging yourself up you're going to have a huge potential p i cliff when the interest only ends so you know this is all um you know stuff that you need to do your math on there so this is a very high risk approach um a lot of people won't want to do this you're also going to be taking on you know potentially higher financing risk going to the non-bank for the new purchase so this is an extremely high risk strategy but i wanted to just talk through the numbers today because um you know i'm a mortgage broker myself and it is always you know useful to go through real life examples where real numbers are presented on the table and i think that when some people can see sort of how this calculation is actually done it may help them for their future plans so if you'd like to discuss anything further please get in touch and please note as always everything discussed here is done so far entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions really appreciate you tuning in as always thank you so much

So today we saw a rate rise of 25 basis points which i think was to calm down all the inflation talk uh but i really want to elaborate on labor's plan of co-ownership today um so please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions so today i want to talk about the rba rate move and also the labor shared equity ownership scheme um so firstly let's talk about the rate rise so that you went up by 25 basis points um and i personally think that we are going to see a slowdown on the back of this over the coming months not just really because of the rate rise but i think just on the back of weaker consumer confidence across the board um which is going to mean you know less demand and i think that also you know at some point rba is going to potentially start to see these issues as more supply side challenges and thus you know may not see increasing rates as the you know endless solution if you will um but that remains to be seen and um and i think the 0.25 today was really to satisfy a lot of the sort of calls that are happening around particularly in the media at the moment um around you know cost of living and inflation um so that's i guess the big news but what i wanted to talk about really was this um this shared equity scheme by labor so basically the policy is called help to buy and basically this is where the government will contribute up to 40 of the property price for a new property and up to 30 percent for an existing home and then will basically participate in that portion of the capital gain when the property is sold later on so the scheme would be made available not only to first home buyers but also people who've owned a home in the past to buy with a smaller deposit and a smaller mortgage because keeping in mind you know if the government still owns 40 you only have to finance the other 60 percent and um you know pay the mortgage um you know on that and so um even more interestingly i want to actually focus in on some comments uh from mark latham so um you know if you follow politics at all you probably know that he's with one nation these days i try not to get too political on this podcast but i want to mention that i'm an immigrant myself i believe that multiculturalism is one of the best things about this country um and so i am definitely not a one nation um supporter in general um but i wanted to talk about his comments today because i think his comments were very interesting um and he notes that in his words that there is a massive loophole because it is not means tested now basically means tested means whether the government is looking at what are the assets you hold um which can also be income generating assets um so basically what i'm going to do here is i'm going to quote him verbatim because you know we don't do financial advice on this podcast so his um word for word quote is the loophole is you sell your current home put the money in the stock market live on the dividends up to 120 000 a year and then you can buy with a 40 assistance from the government so about a 400 grand government subsidy a 950 000 new home in a place like nelson bay or port stevens so that's literally a word for word verbatim quote um and so yeah i thought that was quite interesting and further to that in an article that i was reading about this on sky news um he said that he had spoken to one of his sons about actually selling his existing home to put that money into the stock market to live on the dividends and then mark latham added again word for word it's pretty good going it's inequitable it's a loophole it's tempting um and so certainly some interesting comments and again verbatim and i just thought look um it's too juicy not to share um and so i guess just to elaborate a bit further on the scheme you know those who are eligible will need at least a two percent deposit and must still qualify for a standard home loan with the participating lender um and i note that this has just been announced so um you know there hasn't been uh any background commentary from banks to brokers on this that i've seen at the time of recording here as yet um so i mean this is all quite new and i'm not quite sure what i personally think of all of this as yet um you know in theory if you are an owner occupier and you don't care about the capital growth um then you know two percent deposit and the government kicking in 40 you know um it sort of you know makes sense in terms of getting a better property than you might have otherwise been able to afford uh so you know from that standpoint it is good um from the sort of property investment standpoint you know i think it is also good for stimulating the demand for housing uh particularly up to the thresholds for the caps so um you know i believe that's area dependent you know so the properties that are under the cap you know are going to have this um i guess boost from the government um and uh another thing that i was thinking about with this is that if the government is 30 or 40 percent of the title so 30 if it's an established property 40 if it's a new one then um you would think that the government is not going to be too keen on prices collapsing because they are you know part of the equity on the property and you know the applicant is only putting in two percent so you know if you're in for two percent and the government's in for 40 um you know the government is really uh a partner with you in that transaction so um you would think that the government would want to support um prices that being said you know the rba's key mandate is not just to support the property market or anything like that they are related to one uh inflation basically uh so certainly some interesting uh news today um and look the idea of you know what he's saying here selling up and you know putting the money in shares i won't and i can't advise on that um you need to look at someone else there there are obviously a lot of podcasts that focus on on that side of investing um and whether this is a good idea or not is you know you need to seek financial advice on that um i've not taken into account your personal circumstances nor your risk profile and i'm not a financial advisor and i'm not an accountant i provide um you know commentary on property market and credit only because i am a mortgage broker but look this article today i just thought was so juicy i thought i had to share it and i hope that some people also found this interesting i really appreciate you tuning in as always thank you so much

So in today's episode I want to talk about the rp data monthly figures for april 2022. the media have had a circus with this one but i feel their articles have given the wrong impression so i wanted to do an episode on it today if you'd like to get in touch i'd love to hear from you please send me an email at jp australianpropertypodcast.com or give me a call on oh four two three four seven five double three six and please note everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions so today we're going to talk about the rp data april monthly figures so if you were to believe the newspapers you would believe that the market is in a full scale freefall but in my opinion the numbers were actually surprisingly strong um so the big news was sydney which was down 0.2 in total and that's based on a fall of zero point one percent for houses and zero point four percent for units um so as you can see it wasn't even a one percent fall and i mean point zero point one for houses is um uh not much of a collapse um and interestingly what i've noticed at least looking at the market and from what i see in my day-to-day is that some of the more expensive areas are in a little bit less demand than they were and then some of the more affordable regions um do tend to be doing a lot better recently than they were comparatively to other markets over the last couple of years so that is one observation i have to go through a couple of the other markets here so in melbourne houses were down 0.2 percent units actually increased to 0.4 uh brisbane including the gold coast is still very strong uh prices were up 1.7 for houses and one and a half percent for units um adelaide has been talked about increasingly lately um i think it's the lower price point uh houses grew 1.9 percent and units 1.6 percent from the month so very strong month over in adelaide uh in perth it was actually up one point two percent for houses and zero point three percent per units canberra had growth of one point three percent for houses one point three four units um hobart actually dropped 0.4 percent for houses but grew 0.6 for units and then in darwin houses increased by 1.3 and units by 0.3 percent so what we can basically see here is that aside from a small dip in sydney and melbourne the numbers are actually holding up quite strongly so far at least all things considered um personally i actually expected the numbers to come in worse than this um and if you look at these figures i mean something like a 0.1 percent uh that's sort of like uh you know statistically not much of a an important figure and so we'll see what further data looks like but my expectation was that it was actually kind of coming worse uh but i think the media has really pounced on it because you know i guess sydney's been so strong for the last couple of years and any sort of sniff that things could potentially go backward um you know they're going to make a story about that so as you can see you know the down moves aren't too savage so far uh even though the media would have you believe otherwise um in terms of some other stuff that i am seeing in my day-to-day so i caught up with my uh my folks the other day who are based in the southern highlands these days um and they noted to me that because they're quite uh interested in property as well that transactions have slowed dramatically in the area down there as well and they've actually been receiving calls from real estate agents asking if they're still interested in the properties they were looking at a couple of months ago um so uh you know that really is quite an interesting um change of dynamic because you know the southern highlands region was one of the real standout performers during covert um you know we saw a lot of the boomers you know take their sort of sydney money and move down there and um and to see that things are slowing there you know maybe a bit of an indication as to sort of a sort of change in trend if you will of the trend that we have seen over the last couple of years or at least a slow down in the trend um and then by contrast um interestingly i received a call within the last two weeks from an agent asking if i'd sell my property in queensland so um you know up there they're struggling for supply looking for properties to sell and they were trying to talk me into selling so um you know we've got a bit of a you know two-speed market here where you know the agents are calling up buyers in sydney or at least southern highlands and you know we're um we've got real estate agents calling sellers or vendors rather uh in brisbane so um you can see i guess that's a good indication of what's happening in the market um and so the other guess i guess the other bit i want to sort of mention here is that you know based on what i'm hearing in the southern highlands it doesn't sound like high-end regional is going to be really insulated um i thought that area was going to be perhaps more resilient being one of the strongest growing areas and you know with the dynamic of the aging population and everything like that but perhaps you know financial gravity maybe had to step in at some point and perhaps that's why uh we are seeing maybe a little bit of a slowdown um you know even in those kind of areas that were really popular you know with the um baby boomer generation you know moving out to the regional areas and you know downsizing from the big um sydney and melbourne family homes so um you know definitely some interesting dynamics at play here um wanted to quickly discuss this today because i don't think that the data looks very bad as yet it looks like we've got an rba move that's imminent if not a couple of moves so there's going to be some potential action on that front and i do intend to do some further videos over the coming days uh potentially around some strategies around increasing capacity borrowing power wise as well so i really appreciate you tuning in as always please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions really appreciate you tuning in as always thank you

So today I want to talk about the latest u.s gdp figures and the australian cpi figures that came out this week so please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions so today i'm going to talk about the u.s gdp data and the australian cpi data and so um there are there there were some i guess big piece of data that came out this week and so we're going to talk first about the australian cpi data um cpi you know is the basic sort of inflation measure that's um used by the rba and basically the cpi over the 12 months to the march 2022 quarter cpi actually rose 5.1 percent um and rba typically targets a band of two to three percent so it is above their targeted band at this moment and that is typically the way that they actually measure whether they should be doing uh rate rises or not so this is quite an important figure that um that came out this week now in terms of the actual underlying uh drivers as to why the cost went up so much was two main items one being owner occupy new dwelling construction costs so you know the cost of tradies materials everything like that increased dramatically um up 5.7 percent and then automotive fuel so obviously with all the um all the stuff happening with uh petrol prices that's that's uh obviously making prices go up uh quite a lot there as well so those are key figures um and basically the cpi um index rose 2.1 for the quarter now the rba uses a more normalized range for this which i believe came in at 3.7 percent but it is still important to note that headline number there and then by comparison if we look at wages um so the q1 data is not out yet but the q4 data is out and wages only rose 0.7 for the quarter and up 2.3 for the year um and both private and public sector were both growth rates of 0.7 so basically there is some wage worth occurring um and they are expecting or at least hoping for there to be further wage growth but you can see there is some discrepancy um here between cpi and the actual wage growth figures and so um you know they now expect that it is gonna you know potentially narrow but um you know that's yet to occur so we'll have to see how that plays out over the coming months and um basically with that if wages don't increase and we have a high level of inflation that's when we can get stagflation and basically a very stuck economy so we very much want to avoid that um now if we look a bit deeper into the cpi data we can see the australian property market has already been calling off a little bit um you've probably noticed you know in a lot of areas the stuff isn't selling on the same day it gets listed and that kind of thing anymore so um you know i think that the cpi part of the calculation based on those owner occupier costs may start to cool off a bit as well so you know as there's a little bit less demand in the housing space then that'll probably calm that part of it down in terms of food and fuel i mean look this is harder to um sort of forecast what's going to happen but i am in the camp that really believes that we are going to see um you know higher food and fuel prices as a new normal um and you know while the rba is core normalized inflation was much lower than the headline figure of 5.1 it was still way above the upper band which is the three percent um so where things are at here it isn't anything like the us's current inflation rate um but there are you know a lot of calls being made about the rba putting rates up and so it seems highly likely we will see some rate rises in the near term say in the next couple of months potentially over the next year they might you know be doing a nubber in a row um and i think this is going to be quite negative for the economy in the short term uh now that's on the home front if we look over at the u.s um the u.s gdp data came out this week so gross domestic product uh came out for q1 and it was um expected that the us was still growing it was expected that there was still going to be a growth rate of approximately one percent for the quarter and the last quarter so q4 2021 was a growth rate of 6.9 percent so this is the us i'm talking about here however the actual data that came out for q1 was gdp already contracted 1.4 percent uh so that is um huge news and very very negative showing that uh even by the end of march the us economy is already you know you know it's significantly contracting already um you know 1.4 percent may not sound that significant but if that turns into three percent five percent you know seven ten percent if your economy is declining at a ten percent rate you don't exist in ten years um so well you know give or take but more or less you can see that um this is something that they won't want to let get out of control uh it can um it can you know be very grim in terms of where it goes so um i think that you know we need to be aware of this and i think this was a bit of a shock to the markets in terms of what the expectation was and we have seen quite a bit of volatility in the financial markets on the back of this news as well and so it is important to note here that you know in the us they are just at the start of their rate tightening cycle as they're speaking of at the moment and you know to already have that negative gdp print um begs the question as to how much they will let the economy contract and for how long they will before they start talking about um you know quantitative easing again so um i don't think um that we've actually seen a real decline in the quality of life for the middle class in sort of the west since world war ii um and you know while the sort of commentary at the moment is that uh the the thought is that a few rate risers will sort things out um you know i personally have a different opinion i think there's gonna be um you know much higher cost of living i think there's going to be protests and riots around the world as we've already started to see in some locations as you know the higher food and fuel costs um are just uh too much for some to to stand and then you know this is going to cause more instability across the world um and so you know while all this sounds very negative it's important to know that you know there was a saying i guess i heard a while ago um there's something along the lines of that a recession is a transfer of wealth from the poor to the rich and so basically like you know at these times this may be where poorer people may be too scared to hold on to their assets or they may not have enough liquidity to be able to hold on and that's when you know potentially the rich will come in and scoop up and buy all these assets um and then you know you can obviously see how you know things play out in time and i think you know which side of the transaction you want to be on i guess the biggest challenge with this kind of thing is that you know we don't know where the bottom is we don't know the perfect time to buy um i was working in finance during the gfc and so i literally lived through and was speaking with clients every day as they went through the the crash back then so i have seen um significant carnage uh before and i believe it is possible again uh but what i learned from that was that you know a lot of people got forced out of assets they owned and then you know fast forward five years um you know they could see the big difference in in valuations there so who knows if we're anywhere near the bottom um some bad prints in terms of uh gdp there are a lot of concerns i guess around rate rises so the the current mood of the market isn't the strongest um and so i think that you know there may be opportunities that present themselves in the coming months or years um and that may you know set us up to make some good investments that'll look good in 10 20 years time so uh difficult times ahead uh and not all optimistic news but um hopefully some of this today was of value um and please note as always everything discussed here is done so for entertainment purposes only of not taking into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions and i really appreciate you tuning in as always thank you so much

So in today's episode I want to talk about borrowing for people who are aged 55 and over and what that looks like when it comes to getting a loan if you'd like to get in touch i'd love to hear from you please give me a call 10423 475 or send me an email at jp australianpropertypodcast.com.u and please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions so what i want to talk a bit about today are the requirements of obtaining a mortgage um basically when you are typically 55 or over now i've picked the number 55 just sort of as a random figure as that is generally around the time that i think lenders start to be more concerned around the loan term and the exit strategy i do want to clarify that personally i don't think 55 is actually old um you know it seems a lot of people are actually in their prime around that time and so look that you know is a whole separate discussion and i hope that banks revisit this um in more detail later but um that's i guess the rationale for using that figure um and so a number of lenders will actually be tighter um you know than this however and even ask for exit strategies for people much younger so even people who are within 30 years of 65 so from as young as 35 lenders you know may be asking about what the exit strategy is but look for today's chat the focus is um the older borrower demographic so um we do see a lot of people who are in the range of say 55 to early 60s who are still working and they want to borrow more to buy a property typically for owner occupied purposes now the challenge is that a lot of lenders consider the standard retirement age to be something in the region of more like 65 to 70 and so when they look at the application you know a lot of lenders would be comfortable with say a 15-year term taking someone from say 55 up to age 70 but the challenge is that most people want a full loan term so they want the full 30 years and that's typically because they want to have more manageable repayments which makes sense and this is where we need to basically get into something with the lender called an exit strategy so basically the exit strategy is how you actually intend to pay off this loan and so basically lenders will basically want to see how you're able to actually pay off this mortgage and then still have enough funds left over to live on in retirement without actually relying on the age pension and that is a critical point even if it is a multi-million dollar house um the banks don't like relying on that age pension as the pure source of income um there may be lenders that will consider it but as a general thing it's it's not loved by lenders um and the other bit here is that banks we'll also look at your overall sort of lifestyle and the judgement call as to you know whether the exit strategy is reasonable or not will sort of be um you know based on that so for example what we um you know a lot of people um their plan is the main sort of strategy in their retirement is they're going to downsize you know potentially from a house um you know maybe they've raised a family maybe it's in a capital city and they're thinking that you know they don't need the space anymore they want to free up some of that equity and so a lot of people will do the traditional downsizer route where they might buy maybe say an apartment when they reach retirement age or maybe they will move to um you know like a coastal area nearby or something like that where it might be more regional and there might be cheaper real estate now um you know this is a common thing you know where people are doing just downsizing and so um an example of something that lenders you know would potentially accept is your sort of standard example maybe it was a one million dollar house um they're gonna sell up and they're gonna buy maybe a two bedroom uh maybe within an hour or two of where the other house uh was a lot of lenders will typically look at that and and consider that reasonable and then in terms of how much money you actually need left over after buying a property there isn't a specific rule but in the past what i've worked off was roughly 400 000 in cash plus the property being owned outright so in this example to use those concrete figures basically you would need an outright property of about 400 grand plus in this example plus 400 000 cash so basically net worth of 800 000 plus some funds to cover stamp duty etc and that would be something that i think you know a lot of lenders would consider as an exit strategy and so you know if you could demonstrate your net worth to say 800k plus uh currently that's where we could look at trying to argue for a full term um and you know basically explain that you'd be downsizing from this future larger purchase back down to say the 400k property later now this is relevant though like it is adjusted depending on you know where you are living now so for example if you're in like a five million dollar house you know it's going to be less realistic that the lenders will believe that you're going to go down to something you know of that lower value so you know they are going to sort of um adjust the lifestyle expectations accordingly um so that will you know depend on i guess what you're looking at but you know having discussed um you know exit strategies for so many people um you know i've been doing this more than six years now and a lot of people actually do plan to move to a different area in retirement you know often slower pace cheaper properties so you know it may um still be viable that you are moving down to a much lower value property if you can sort of explain that you know your retirement plans have you know always been around moving to a specific area and you like it because you've got family there or whatever the reason may be so there's always more to the story but those are some high level numbers now in terms of the assets that are actually taken into consideration for this exit strategy test i'm going to go through a couple of examples so firstly there is the amount of cash that you've got on hand then they're going to look at any financial assets you own you know shares managed funds that kind of thing then they're going to look at the equity that you have available in the property they're going to look at any other investment assets you own maybe you own appreciating gold or art or something like that um and the other thing is also if you are self-employed um the story does get a little bit more uh there's a bit more to it if your business is of a size that could potentially be resold then it could be potentially possible to position this as like an exit strategy to the lenders so this is very case by case but for example let's say you have a company maybe you've got 50 staff or maybe not even anywhere near that number but let's say you've got a number of staff businesses been established for a long period of time and it's you know quite clearly profitable you know it may be viable that you know you could potentially sell it down the line you know maybe it might trade for three four times the their earnings which is um you know quite common for private market businesses and then we could look to potentially explain that you've got that equity in the business that will be realized when you do one retire another thing i have seen for self-employed is if you do have all the management in place the business runs itself then we may not have such an issue with the loan term in terms of uh you know you retiring at 70 because if you've got you know a ceo and other managers in place you know we can make the argument that even if you stop working the business is going to be ongoing and your income is subsequently going to be ongoing as well and you can also accept gifts from family including from your children so gifts can go in reverse as well um you know i guess the typical one that we see is that people get divorced and then they want to sort of buy another place you know on their own and this is a common scenario and um and you know basically it can be done in reverse you know your children can potentially gift you funds uh to go toward your purchase um one thing i do want to mention is that in general lenders don't normally want to rely on future inheritances and that is a question i receive commonly and i guess to surround this out um the big challenge when it comes to these kind of applications is that when someone needs a high loan to value ratio plus you know the full loan term and they don't have any other assets you know the key problem with these is that you know the bank can't see how you're going to pay off the loan and so they won't like it the classic one is you know where we get someone maybe age 60 to 65 they have very little in super and they're wanting to borrow say 90 on a full 30-year term um and these are just very tough to work with because you know the lenders can't see a clear pathway as to how someone you know can potentially pay off like a 90 loan um at that age plus have enough money to um to live in in retirement uh and you know that's where the 90 percent you know starting at like a 90 loan it leaves you very little equity to downsize with so that's the biggest challenge with those ones now the other thing i haven't mentioned here is super super is obviously taken into account here it's basically considered as a liquid asset assuming um you know you are of the age that you can access it so super is a key one uh but you know i'm assuming that you don't have a huge super balance and that's why i've addressed a lot of these other um you know approaches today uh that being said if you've got a lot of money in super that typically can provide the exit strategy to the lenders that they're looking for that you will just basically access that pay off the loan and then you'll draw down you know the rest of your super dependency live on later so that can be potentially accepted by some lenders now whether this obviously is a good idea or not and how you use your super you know that um you should seek a financial advisor's advice on but from a credit perspective i just wanted to talk through some of the things today that lenders are going to look at when it comes to considering you for say a 30-year loan term if you are in the later years of your career so please as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions i'm a licensed mortgage broker only and do not give financial advice really appreciate you tuning in as always thank you so much

So today  I was looking at a graph showing how house prices moved since the rba began tightening cycles in the past so please note as always everything discussed here is done so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions so what i want to talk about today was a graph i was looking at which actually showed how house prices moved against the rba as they completed their tightening cycles and so tightening cycle you know that's defined by where they're putting the rates up so basically uh tightening the monetary policy effectively um you know sort of making it harder for the funds to circulate uh and basically you know the rates being higher effect all that so um we would consider it a tightening cycle when the rate is increasing in an easing cycle when the rate is decreasing and you know when the government may be doing other stimulus as well so this graph that i was looking at today um it's actually got data from the rba and core logic and basically to first describe the graph um there are four time periods that are shown here so first is august 94 second is november 99 third is may o2 and the fourth is november um 2009. uh basically the data shows that the duration and change in house prices um you know from when the cash rate first increased to the period where it was 12 months after the last cash rate increase and that was the duration of the tightening cycle as sort of defined by this graph so for example in the august 94 cycle it lasted approximately 18 months in total duration and while the graph isn't exact it looks like property prices declined about three percent to the bottom and basically the total duration uh looks like about 18 months from the end to end um in terms of the whole tightening cycle so basically a year and a half was the only amount of time the titan four then went back to easing next was the cycle in 99 that might lasted for approximately 20 months so just under two years but prices actually rose during that period by about 15 so um you know the interesting there but that's probably on the back of a strong economy um would need to look back at the data at that time but certainly you know prices appreciating strongly like that in just the 20 months of tightening is um is is very interesting and then if we look at the may 2002 cycle that was by far the longest and so the tightening actually went for nearly 80 months so that's 8-0 and during that time property prices actually rose approximately 50 percent so it was actually a big gain um in terms of prices during that time uh despite the tightening um and i think that this you know historically is consistent with what i always sort of learned growing up um and that was that you know interest rates went up in a strong economy environment and you know a strong economy is often uh i guess the backbone you could say of appreciating housing prices so you know while that might sound crazy the prices actually rose 50 during a tightening cycle um you know it actually does make sense that you know that is uh potentially being accompanied by economic expansion and then lastly the tightening cycle of november 2009 lasted for about 24 months uh prices initially rose then ended up down about one percent so um you can see here that total cycle was only about two years um of tightening there and so you can see actually um overall this all sounds quite optimistic in terms of both the length of the tightening cycles and also by how much property actually moved in value the thing is i guess historically i believe the tightening cycles were more accurately in response to a heated economy and the higher interest rates were designed to sort of slow down demand and you know subsequent price growth with it however you know the current situation i believe is different because i believe a lot of the cost inflation is actually supply side constraints as opposed to excess demand um and so you know through the supply chains or the shipping issues from kovid you know this has been you know exacerbated with a lot of stuff that's going on in the world at the moment and then obviously the rush ukraine situation has um put fuel on the fire in terms of supply chains so i am more of the uh belief that you know this is a supply side that is really driving a lot of the inflation but you know you certainly can make it the argument that there was always going to be some inflation after the amount of you know money printing that happened over the last couple of years um and so basically you know you could argue that we have had some excess demand uh especially in housing in the last year um you know but you know it wasn't the only thing increasing in cost i mean even if you look at used cars people have been buying those that have been appreciating and you know historically used cars were one of the fastest depreciating assets so you know if that's not an example of some of the inflation that we're actually seeing then i'm not sure what is um so you know to be blunt i guess um in a lot of locations i'm not a believer that rates will go up and property prices will go up alongside them this cycle uh like we have seen in a few of the cycles in the past um but i would highlight the very interesting part here is how short the tightening cycles are and when the easing cycles start again that's when you could potentially see the door open to another bull market and a real increase in prices at least in my opinion and so you know aside from the 2002 cycle which was the outlier there you know lasting the 80 months generally these tightening cycles lasted for less than two years so it was typically a relatively short period of tightening before you know the central banks would turn around and go back to potentially easing here so whether that plays out in the future similarly or not um you know it remains to be seen uh unfortunately i don't have a crystal ball um i am of the belief that they will soon put up rates and they'll soon realize that putting up rates is not really uh fixing the fixing the problem and it's actually going to cause more issues than it's um solving and i'm of the belief then that they will turn around and go back to an easing cycle the challenge is that you know we don't know whether that's going to be two years whether it's going to be the 80 months whether it's 800 months you know we just we just don't know these things so um you know if we go back and forth there's generally a cycle of regulation deregulation tightening easing with um you know regulation and and so forth and even in the time that i've been running this show now uh going back say six years um you know we've seen uh tightening and easing in that time so um you know basically you know the conversation changes over time um it was unfathomable to print money you know in in substantial quantity pre-covered and then covet happened and now that's happened now we're looking at a big rate rise cycle um but you never know what's what's right around the corner so um it's important we think long term um you know i don't know what's going to happen with rates that could skyrocket before anything happens and you know it's very hard to know what's going to happen property price wise because if we look you know history a lot of the times prices have actually gone up with rates going up um even though i don't believe that will necessarily be the case in a lot of locations this time around that being said you know there are many markets within a market and so one you know there is obviously always more to the story um and i should you know also mention that you know if we do go uh back to an easing of monetary policy you know that could be really letting inflation rip and if we do let inflation rip then you know that could be uh you know potentially um compounding the cost of everything going forward so there could be a lot more volatility cost of living could increase uh and certainly we are heading into interesting times but today i just wanted to discuss those historical events so that we can look at potentially what may happen in the future and analyze the data that we do have from the past so please note as always everything discussed here is does so for entertainment purposes only i've not taken into account your personal circumstances nor your risk profile so you should seek professional advice before making any investment decisions i really appreciate you tuning in as always thank you