Finance advice
Poverty, empty wallet, struggles for Australians, most expensive places to live in, property prices

Is ‘power poverty’ leading to more struggles for Australians?

By Bianca Dabu

Many people recognise Australia as one of the most expensive places to live in and it’s undeniably getting harder for a lot of its residents to settle down and get by every day, especially as wages fail to increase at the same rate as inflation.

Properties prices are consistently going up and the prices of goods also continue to swell exponentially—all while the average Australian’s wage remains, more or less, at the same level.

“Right now, Aussies are paying way over the odds and there's power poverty and people really struggling,” according to Smart Property Investment’s Phil Tarrant.

Momentum Media’s Aleks Vickovich agreed and said: “I totally understand [that] people are feeling a lot of hate. If you go back to before Paul Caine inflated the dollar, property was cheap in this city.”

“The views [aren’t] any different, the harbour front ... looked as good as it does now, and they were a third of the [current] price,” he added.

Aleks believes that in order to address this issue, the government must push for a reform on the tax regime—a move that could increase wages significantly. Education is also one of the simplest but most effective ways to help avoid the different struggles brought by unequal distribution of power. Sadly, it’s either not taught well or not taught at all in most schools.

Aleks said: “Unless you have some sort of exposure to the business world or to investment personally, I don't think you quite understand how these things work, so there's no doubt people are struggling.”

“I think there's things we could do in the economy to increase those wages naturally,” he added.

Bank policy

Fortunately for borrowers who are paying off their mortgage, money could still be considered cheap, according to Momentum Media’s James Mitchell.

However, problems may arise following several banks’ decision to hike interest-only rates a few times in order to meet the requirements set by the Australian Prudential Regulation Authority (APRA). Property owners and investors alike have recently faced several changes in APRA regulations, which are implemented changes in order to slow down interest-only lending.

According to James: “I think what's interesting to look at now is that, obviously, the majors are sort of reducing PNI a little bit, upping rates for interest-only and trying to rebalance their [mortgage] books. That's basically what they're trying to do [because] they've got too much exposure.”

“Basically, you've got a bank like Westpac, for example, and they've got however many mortgages on their books for however many Australians. 50% of all the mortgages Westpac hold are interest-only—that's probably too big an exposure.

“So, they want to rebalance that and make sure that there's more Australians paying down principal because it's a better thing to do,” he explained further.

The average Australian borrower has most likely shifted his mindset in order to adjust to these new regulations, so as a result, the banks are also moving to tweak their operations.

James said: “They're trying to change customer behaviour in terms of paying down debt rather than just using this interest-only because property keeps on rising, which I think is quite dangerous when the market starts to flatten.”

“The profitability of the Australian Banking Model is being challenged and it's going to look very different in the future to how it has over the last 20 years. It's just not going to be sustainable,” he concluded.

Tune in to Aleks Vickovich and James Mitchell’s episode on The Smart Property Investment Show to know more about the how rising interest rates are affecting the market and where they expect to see rates in the future.

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  ["id"]=>
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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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  string(72) "mortgages-in-a-tighter-lending-economy-and-why-brisbane-is-a-good-option"
  ["introtext"]=>
  string(255) "

Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1203 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

" ["fulltext"]=> string(2323) "

Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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