Inspire & Inform Episode 19

In E19 of the Inspire & Inform Show, Colin shared many insights into the property market including interest rates, lending regulations, FHLDS, Early market indicators and more

Please see below for the full transcript of this video

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Colin 0:02
Hello and welcome to Episode 19 of inspire & inform goodness gracious me a lot has happened in the last couple of weeks in a month. And tonight I aim to update all of you on a few key takeaways from some very recent announcements predominantly about interest rates, rollback of lending regulations, a very quick update on the first home loan deposit scheme, and some early market indicators for the month of October in terms of the advertise advertising or listing of properties on the market, and also some mortgage activity which is starting to look quite positive, and maybe some light commentary and highlights of the recent budget of yesterday, and how it’s going to potentially impact the market. Hey, my name is Colin Lee, founder of inspire realty helping clients build better futures together. In this series of inspiring inform, we aim to educate and provide you with the tools necessary for you to make informed decisions about your property investments. Just a quick background I’ve invested in property for over last 10 years. And since then, I’ve experienced a lot of ups and downs in the market. But I’ve successfully built a multimillion dollar property portfolio, diversified across the many states in Australia, as a migrant, I know that if I can do it, if there is a will, there’s a way and I know you can do it, too. So firstly, I just wanted to let you all know for those that have missed it, the Reserve Bank of Australia has decided to leave the cash rate unchanged to 0.25%. And there is some talk at the moment that they could potentially cut it even further by next year down 2.1% or point 01 percent. But it is going down as as some commentary on that as predicted. We’ll see how that goes. But as of recombinase ago, the interest rates remain unchanged. What does it really mean for you? You know, in Australia, essentially, what I think the RBA is committed to doing is keeping funding costs low, and therefore allowing borrowers to get competitive deals on existing and future loans just to be able to kickstart and spur on the community, the the funding and the economy. The other announcement that was made also last week is that people will start to be able to take up mortgages a lot more easily under the federal government plans in terms of how they look at credit loss. As you know, Josh frydenberg announced that they plan to rollback the Responsible Lending regulations that was enacted back in 2009. So it’s been around for 11 years. And it certainly made it quite difficult for quite a number of people to get funding, the responsibility has always been to the bank. So what this change would mean is that you would remove the existing laws and places the responsibility back on the borrower, as opposed to the banks, which means less red tape and and hopefully a smoother process to obtain loans. Whilst boosting the economy. I think we need to get the economy going by, you know, spring on lending and investing.

Colin 3:22
So so by taking on the responsibility for the applicants, essentially, banks would not need as many documentation and materials to determine, you know, your eligibility, which sometimes can result in longer process times. I know, a refinance for a client that I’m working on at the moment has taken up to four months with one of the major banks and pre approvals have really gone from a week to two weeks, sometimes even three weeks to get pre approvals are over the line. So SLA s are being extended, and hopefully this would help stimulate borrowing, which I think is vital. And you know, to remove unnecessary barriers and red tape to allow flow of credit to households and small businesses and other exchange lines last week, I don’t know if you’ve heard it, in case you’ve missed it. The government has announced the first home loan deposit scheme would be extended to help an extra 10,000 people this financial year. And another big change which is a really positive changes that the value of the properties that the first home loan deposit scheme would cover has also increased. So previously in Sydney, the have ever hlds would apply for properties worth up to 700,000. But now it’s increased up to 950,000, which I think is fair in Sydney. It’s very hard to buy a property under $700,000. So it’s been increased up to 950,000. So what that means is you pay 5% And and you borrow the 80% and the 15%. Or sorry, sorry, you’ll be borrowing 95%. But the 15% will essentially be guaranteed by the government. And what that really means is you don’t have to pay Lenders Mortgage Insurance, which can sometimes amount from anywhere from five to 15,000, or more, depending on the size of the loan. In Melbourne, if you’re in Melbourne, the cap has been increased from 650 to 850,000. So there’s a little bit more leeway to find properties that would suit within that price bracket. And, as you know, this is started on the sixth of October. So that’s of yesterday. And it is going to run until the end of next financial year, which is June 30, of 2021. Actually, this financial year, I want to just go through very quickly as well, I just got a report from core logic about early market indicators for the month of October in terms of advertise properties and mortgage activity. So I would like to just kind of show that to you very quickly if I can find that. And I will be sharing my screen.

Colin 6:14
So this is a report that I get from college IQ. And nothing of this is original. But I just think it’s really interesting to look at the newly advertised properties for this year, and how it’s fared over the last 10 months leading up to the seventh of October today. So if you look at the orange line, that is advertised properties for rent. And as you can see, at the peak of COVID, all the properties dropped, and then it started to pick up again. And it’s just, you know, consistently plateauing in the last few months, but we can see already in the month of October that there’s quite a bit of activity that’s increased from the last week. So the sale week on week has been increasing by 3.35%. month on month, from September to October, it’s increased by about 5.97%. The rent has gone down a little bit in terms of the advertised rent. So I think rents are starting to be absorbed and rent month for month in the whole month have increased by 4.3% 4.13%. So it’s really interesting to see that activity and confidence is starting to come back into the market from a rental and from sale perspective. But also mortgage activity and mortgage activity is a really good indicator of you know, particularly for investors, how they’re faring and homebuyers, what what are they doing in terms of lending. So you can see that I’ve got a comparison between 2020 versus 2019, you can see the gray line is 2019 versus the blue line, which is 2020. So really, if you look at it as a whole, you know, 20 2020 has really risen, you know, in terms of the mortgage activity, it’s, it’s really come up around the same as compared to last year, except for the last few weeks, we can see mortgage activity has really picked up. And I’ve certainly experienced that myself, just the last couple of weeks, I’ve been doing a lot of finance workshops with my clients and helping them to either refinance or get pre approvals for properties that they’re looking to purchase. So that’s been a very, very positive news. And I’m seeing a very positive optimistic view on this leading up to the month of December prior to the Christmas holidays. I’m not sure where people will go for the holidays. But hopefully the borders will be open up particularly in Brisbane, because that’s where my in laws are. And I can’t wait to see them and go visit and some friends there as well. So certainly looking forward that to that. I’m just quite optimistic about that. Anyway, so that’s a little bit of the market update. Obviously, with the the budget, I’ve only had a chance to really squeeze and look through it and read it very quickly today. But there are some really, really good changes. And yet to see how this is all going to be implemented. But the biggest change is really as you know, what I’ve read is the tax relief to low and middle income earners for 2021 2020 to 2021. Income year of up to $2,745 relief for individuals and up to $5,490 for Jewish income families, which is, you know, a lot lower compared to the 2017 18 rates and treshold. So just very quickly, you know, I can share my screen again, hopefully this comes up. And it’s big enough for you to see this as well, because obviously it’s the different price brackets would affect it slightly differently. It’s a little bit small, so I probably won’t show this to you. But essentially, like I said, individuals would save about 2000 $3,000 in tax relief, and about 5500 nearly for Julian comm families.

Colin 10:08
Some big changes in terms of income tax as well. The the granny flats are exempted from capital gains tax, there’s a lot of fine prints between in that sort of, please make sure you read that before you go looking at selling your granny flat. There’s Medicare levy thresholds for 2019 and 2020. That’s how a big change as well. But the biggest change I think, is being really largely for business owners and SMEs. There is a research and development tax incentive for small business owners, and also a temporary full expensing to support investment in jobs, temporary loss carry back to support cash flow as well. And clarifying the corporate residency test. So I’m not too sure about that. I haven’t really read too much into that. But there is a covid 19 response package. mainly for Victoria making Victoria’s business support grants, non assessable non exempt income for tax purposes. So it’s really good for Victorians. There’s the fresh fringe benefits tax exemption to support retraining and reskilling, which is great fringe benefit tax reducing the compliance burden of record keeping as well. And also a big changes the increase of small business entity turnover threshold, and boosting in apprenticeships, wage subsidy, this is a big one. Obviously, it’s it’s, you know, to stimulate lower employment, I think it’s sitting at 6%. And the government plans to reduce the unemployment rate in Australia. There’s the job mega hiring, credit, research and development tax incentives and revised start date for tax measures. There’s also some changes in the superannuation, which I’m not going to go too much into, there’s only a few pointers that change Social Security. And h k is certainly something that has been largely covered also in the latest federal budget. Look, it’s just a very quick update. And I hope you’ve taken a few things out of this. And, you know, look at taking some advantage of particularly for first time loan deposit schemes. I think that’s that’s a huge, huge win for first home owners and with the recent tax cuts, hopefully that will stimulate the economy and you got to spend a little bit more money and help small businesses, because it’s very important to help small businesses and and get the economy going again. And, and now with the you know, the easing of lending restrictions, certainly start to talk to your broker or myself about some options that you have about refinancing or getting pre approvals for your first home. If you are an investor, there are certainly quite a lot of good indicators that the market is starting to pick up. Obviously, developers and sellers now are willing to, you know, offer a little bit more incentives to to get into a deal, they’re a little bit more realistic about their margins. And so I’m seeing some really good opportunities in there. If you want to have a chat with myself or one of my team members, to show you some opportunities that we’ve been able to allocate to our team. Please feel free to give us a call or send us a message to have a sit down in a contact with us. Totally non obligation and you know, for you to do anything with us, but just to have a conversation for us to help understand your situation and explore how we can best help you. I would also encourage you to look at our Google reviews. We’ve just got over 110 Google reviews five star Google reviews, worked with a lot of clients in the last couple of months and I hope to be able to assist you in your financing or your property investments and strategies. Thank you so much for your time. If you’re interested in having a chat, feel free to visit our website www dot inspire realty.com My name is Colin signing off. Have a good night. Bye for now.

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