INVESTMENT DO's & DON'Ts
Question
I am trying to buy my first home. It looks like I can only get a borrowing capacity of $350,000 because I don’t meet the banks servicing, so I won’t be able to get anything near a capital city. It looks like I could buy something in a regional area as an investment for that price, though. What do you think about investing in regional areas?
Answer
There is a bit to unpack in this one.
First of all, I’d be getting a second opinion on your borrowing capacity. In my experience, the difference between $350,000 and $400,000 (which would get you into a capital city) isn’t significant. I always prefer to get that second opinion from a broker because they have access to different lenders with different servicing calculators.
I hear you on getting into the market, rather than sitting out, and regional areas have had a good run in recent times.
It’s not that I’m against regional areas per se, but I think the capital cities offer a more stable and secure investment than the regions.
I think if you choose to buy in a regional area, it’s important to do your research.
Try and go for one with a stable population and diverse job offering. I’ve had friends who have invested in regions before, only for the property value and rent amounts to yo-yo up and down by as much as 50 per cent between the top and bottom of the cycle.
Most importantly, make sure you buy something new or near new, with a strong rental yield (4.5 per cent minimum). That way, even if values move up and down a little, you still have the cash flow to pay your mortgage and tread water until things rebound.
All the best with it!
Question
Should I use realestate.com.au to figure out if I am paying the right amount for my house? Is there a better option?
Answer
Realestate.com.au and Domain are both fantastic resources for getting a handle on what’s for sale in the area.
The best resource for you though, is going to be working out what has sold in the area, more so than what is for sale.
Both of these websites have a ‘sold’ function on them, as do Onthehouse and Pricefinder that can give you an idea of what properties have sold for and when.
A good agent who knows the area should also be able to provide you a list of recent property sales, too.
Happy hunting!
Question
I’m 50 years old and have a couple of investment properties that have done well, but still a fairly high amount of debt in my principal place of residence (PPOR). Should I sell one of my investment properties to pay down my PPOR debt?
Answer
The answer to this one depends on what it is that you’re ultimately looking to achieve.
When do you plan to retire or scale back your income? How much would you need when you did that? How much equity and cash flow does the investment property give you? How much income would you get each year today if you suddenly pulled up stumps?
The answer to those questions will give a better idea of whether selling an investment property and paying down PPOR debt is your best option today.
I’d recommend sharing your full picture with a mentor and getting their opinion.
Having said that, assuming the property is in a good location and isn’t costing you a lot to hold, it’s probably better to hold the investment property and sell it when you get closer to retirement.
The costs of getting in and out of property are so high, that you’re going to be giving a lot of the proceeds of your investment property sale to the tax man and real estate agent.
Not to mention you’ll be selling an asset that will probably increase in value, and reduce your tax, over the next 10-15 years that you potentially have in the work force.
For most people, the better option is going to be using the equity in your investment property to continue growing your property portfolio with properties that will increase in value, and give you tax refunds, which you can then use to pay down your PPOR mortgage.
Question
I am considering refinancing my home loan to another bank and wondered what the pros and cons are for doing so. Is it as simple as trying to get the best rate?
Answer
Thanks for this question and good on you for taking the initiative.
When it comes to refinancing, there’s a few things to consider. The first (and most common) reason you might refinance is, like you mention, the ability to get a better interest rate.
Make sure you also consider the bank’s fees. Most banks charge upfront application fees, as well as annual fees. It’s important to consider interest rates and fees at the same time, because there’s no use paying a lower interest rate if the higher fees leave you in a net worse position.
You could also seek to refinance because another bank has a better servicing calculator which qualifies you to borrow more money from that bank.
The final thing to take into account is the term of the loan. The longer the term, the lower the repayments. Inversely, the shorter the term the higher the repayments (albeit you end up paying less interest over the lifetime of the loan).
For future reference, if it is an investment loan, you might weigh up principal and interest versus interest only repayment terms.
They’re main thing to do is take the emotion out of the decision. Banks are a business at the end of the day, so you have to treat the relationship that way.
Question
What is a sunset clause and what does it mean if you’re the buyer?
Answer
A sunset clause is a contract condition that allows parties to walk away from the contract if something hasn’t been done by a certain date.
In property, a sunset clause is typically used to require the developer to complete construction by a certain date.
In terms of what it can mean for a buyer, that depends entirely on the contract. In most instances, the buyer would have the right to terminate if construction hasn’t been completed in time, getting their deposit back in the process.
However, some contracts can be written in such a way that the buyer or the developer can cancel the contract if construction hasn’t been completed.
That can be a big problem for the buyer when prices have increased, meaning they lose out on benefitting from the value of their asset increasing and then have to try to again buy into a market where prices have increased.
Question
We’re trying to buy our own home and we’re hearing that the market has slowed down a little from last year. Wondering whether you think it’s a good opportunity to try and negotiate with the sellers? I don’t want to risk missing out but also don’t want to overpay!
Answer
In general, every market in Australia has slowed down from the fever pitch we experienced at the back end of last year (most markets growing by two per cent per month!).
It’s hard for me to know exactly how much negotiation you could do on the properties you’re looking at. However, it sounds like you’ve been looking for a while, so I’d say back yourself, in that you’ve probably developed a very good idea for what the market price is.
The only tip I would suggest is to make your offer stronger by signing a contract. I’ve always found that agents and sellers take your offer a little more serious if you’re willing to put it on a contract.
If you’re pre-approved for finance, you could even try and make the terms of settlement attractive in the contract as a little extra sweetener. (Obviously, consult your broker and be careful you don’t overcommit yourself).
All the best with it!
Question
We bought our home at the start of this year in Brisbane and were fortunate to get my mother go guarantor for our 20% deposit. Is further property investment for our financial/equity (or lack thereof) situation currently a pipe dream? Is there something we can do right now to speed up the process other than slugging out loan with extra repayments? Should we change the structure of our loan to something different?
Answer
First of all, congratulations for getting into the market. In terms of whether you can get the equity it’s only a matter of time.
However, you can generally borrow up to 90% of the property’s current value.
I don't know much about the property, but if you bought it early this year you should have seen a bit of growth, and it might surprise you how quickly you are able to see enough growth to be able to pull out equity and go again (you would obviously just have to chat with your mother about how you want to go about clearing their guarantee as that is typically the first port of call for any growth).
In terms of what you can be doing to accelerate the process, I dare say you are already doing as much as you possibly can. It's a great thing that you are putting some extra repayments against your property because the bank will lend you up to 90% of the value, which means your available equity for a deposit will be whatever 90% is, less the amount that you currently owe.
PROPERTY
Question
We are in the market looking for a house in Brisbane. We have pre-approval from the bank and deposit saved but haven’t found anything that suits us. We read that house prices might be going down, and more listings come onto the market later this year so wondered if we’re better off waiting for a few months?
Answer
First of all, there are a third less homes for sale today than the five-year average. In other words, you are not alone in finding it tough to buy a home over the past year or so.
It’s always going to be easier to talk yourself out of doing something, than into doing.
I don’t think house prices will drop. Particularly in the more affordable capital cities like Brisbane and Adelaide where houses cost 50 per cent to 60 per cent of what they cost in Sydney, and yet household incomes in those cities aren’t 50 per cent to 60 per cent of Sydney incomes. That’s why we’re seeing record interstate migration in those cities.
I think you should do what you can, while you can. No one knows what’s around the corner.
We could see it become harder to get loans, meaning you’re able to borrow less in a few months’ time. We could see prices continue to go up, meaning you need more savings for a deposit. The home you were looking for might get listed in the next couple of weeks. You get my point…
If I were you, I’d hang in there and keep persisting in your search. Good luck!
Question
I notice that property gurus like yourself often forget to mention the Perth property market. Just wondering if it's possible to include WA in your comments on the Australian property market.
Answer
In terms of the WA market, I do try and cover it, but I accept your feedback that maybe it doesn’t get enough coverage.
Here are my thoughts anyway.
The median house price is sitting at $560,000 today with about a 2 per cent growth year to date – putting it on track for about 8 per cent growth on a yearly basis.
Where the Perth market has really changed significantly in the past two years for me has been in vacancy rates and rents. The vacancy rate today sits at 0.6 per cent (it was 2 per cent in February 2020) and rents are up 6.7 per cent for the year, which is very impressive.
Personally, whilst I look at the data for WA every month and monitor the numbers, there are a couple of things that are holding me back and making me think that there might be better opportunities elsewhere from an investment perspective:
- Still a massive focus on employment linked to mining, and with Australia’s frosty relationship with China right now, is a bit of a red flag; and
- Very hard to get fixed price contracts on construction and there are, in certain areas, some big lead in times to getting titles on blocks of land.
That’s not to say those points are deal breakers, it’s just that when you weigh that up against other markets where you don’t have red flags in those areas, I think places like South East Queensland and Adelaide offer a little bit more upside.
Having said that, I am watching Perth very closely and keeping an eye on that market, and I certainly wouldn’t be selling anything if I owned property in Perth today.
I hope that helps and I’ll take on that feedback to try and give Perth more of a mention going forward.
Question
How will the floods affect the value of properties in Southeast Queensland and Northern NSW?
Answer
First of all, my thoughts are with anyone affected directly or indirectly by the floods.
In terms of the value of houses that flooded, there’s probably going to be a short-term fall in demand and value.
That’s only going to apply to those houses affected. For example, in my backyard of Southeast Queensland there were roughly 15,000 houses affected by the floods. That’s roughly 1 in 100 of all houses.
Hopefully all those affected houses were covered by insurance and can be restored or rebuilt to be immune to the effects of future flooding. With the passage of time, and some future flood-proofing, I think we’ll see the value of those houses restored.
In terms of the houses in Southeast Queensland and Northern NSW that weren’t directly impacted, I don’t think it will affect their value at all.
The bigger impact for those houses will be on cash flow, because insurance premiums will increase across the board. Even more so for streets and areas directly affected by flooding.
There’s a great website you can use to check whether or not your property – or a property you’re thinking about buying – is affected by floods. Here is the link for those interested.
Question
Do I have to be earning a high income to invest in property?
Answer
You don’t need a high income to invest in property.
While having a higher income makes it easier to invest, I’ve seen people invest on all sorts of incomes, even as little as $50,000 in income per annum to throw a number out there.
Exactly how much you need will depend on your situation – i.e., whether you have a mortgage, kids, your living costs.
What will be important is to grow your income over time because that will make it easier to grow your portfolio from one property into multiple properties.
The other thing to consider is the type of properties you buy if you have got a lower income.
If you don’t have a high income, it will be really important for you to get good cash flow from your first one or two investment properties.
Question
My husband and I have saved nearly $150,000 and we are weighing up whether to buy our own home or whether to put it toward an investment property. Any advice on which would be best? If we bought an investment property, how much would we need to put in from our savings?
Answer
First of all, great job on putting together such a great savings base, I’m sure that took a lot of discipline and hard work!
I’m a big advocate of buying your own home in this environment of low interest rates.
Having said that, the costs of getting in and out are high – roughly 5 per cent on the way in (stamp duty, legal and bank fees) and 5 per cent on the way out (sales, marketing and legal).
Therefore, I think you need to see yourself putting down roots for at least five years to be able to justify the costs of getting in and out.
In terms of the costs of getting in, that’s broken down in chapter 12 of Bulletproof Investing.
The summary is you’re going to need 15 per cent of the purchase price if you’re using a 10 per cent deposit, and 23 per cent of the purchase price if you’re using a 20 per cent deposit.
It might be slightly less if you’re eligible for the first homebuyer grants and concessions.
How much would you need? Depends on the price, but you can get an investment property from around $420,000 which would require about $65,000 if you put down a 10 per cent deposit (plus costs) or about $100,000 if you put down a 20 per cent deposit.
Hope that helps!
Question
How do I get my property re-valued?
Answer
It depends on the reason you are wanting the valuation. However, if the bank is involved, and you’re wanting to get a lower interest rate or to access some of the growth as equity, then it’s going to have to be a bank ordered valuation.
The banks will have a panel of valuers that they use to value your property.
It all starts with ringing your broker, or the bank, and having them order the valuation.
Some banks will charge a small fee for the valuation, which is tax deductible.
It should only take two to three days to get the valuation back to you, depending on how long it takes the valuer to gain access to do the inspection.
Question
I’m researching places to buy right now and wondering how do you find out the population growth of an area?
Answer
Great question and a really important thing to know before you buy.
The best population growth data comes from census data and government projections.
To get historical population growth figures go to ABS Quick Stats, a government website that summarizes historical census data. I tend to look at the ‘SA2 areas’ as the best data source, because it groups suburbs together with similar demographics and gives a bigger sample size (most people are happy to move within a few suburbs).
Then when it comes to population projections, here is a link to where you can find those from the Australian Bureau of Statistics.
In additional to that you can go onto the State Government and Local Government websites and most of them will provide population data based off housing approvals, mail redirections and rates notices.
You can also use those State and Local Government websites to look for infrastructure upgrades which will give you a bit of an idea on where the Government will be spending money and employing people, which will give you an idea of where they feel the population is growing.
Hope that helps!
Question
I’m 28 years old and wanting to buy my first home in Brisbane. My budget will get me either a unit in the suburb I currently rent in now, or a house on a block of land further out from town. I read in your book that I should be buying land, but I live on my own and not sure I can see myself living in the suburbs and enjoying it. Can I get your advice on what to do?
Answer
First of all, congratulations for making the decision to get yourself into the market at such a young age!
I think getting into the market beats sitting out of the market, so either way you’re making the right decision.
While I think you’d do better from an investment perspective to buy land in the suburbs, it’s not purely an investment decision when it comes to your own home.
What’s more, I think Brisbane is a safe place to be buying property, regardless of whether you’re buying land or a unit today.
My advice would be, first of all, success in property requires a long-term perspective; whatever you buy, you should be buying on the basis you’re going to be holding that property for five to 10 years minimum.
Second, when it comes to buying your own home, make sure it’s somewhere you can see yourself living for at least five years. You pay about 3 per cent to 5 per cent on the way in (stamp duty, conveyancing and mortgage insurance) and out (sales, marketing and conveyance fees) of property. Therefore, it’s important you don’t buy and sell too frequently.
Finally, buying your own home is the only way you can make money in Australia and not pay tax. There is no capital gains tax payable on your own home, so it’s necessarily the biggest investment most Australians make, and the place most Australians store their wealth.
If you’re not able to see yourself in the unit for five years, then I’d be opting for the land and house a little further from town and becoming a rentvestor instead – renting where you want to live and investing where you can afford.
Hope that helps!
SAVINGS
Question
We own our home (with a mortgage) and have put together quite a bit of savings which sits in an offset account against our mortgage. We are thinking it’s only making/saving us 2 per cent sitting there, so wonder if we should be investing it into property. What do you think? If we did that, how much cash would we need?
Answer
First of all, you’re clearly good savers which is the best money habit you can have!
I don’t know what your home is worth and how much debt you have, but I would recommend looking at whether you’re eligible for an equity loan in the first instance.
An equity loan is a loan you can take against your property, which can be used for deposit and costs on an investment property in place of using your savings.
That way you can do both; invest and have your savings to continue offsetting your non-deductible home loan debt.
Your bank should lend you up to 80 per cent of your property value.
That would mean, if your property was worth $1 million the bank would lend you up to $800,000.
If you only owed $600,000 then there is up to $200,000 you can access as an equity loan (you’ll just have to be able to demonstrate to the bank that you can ‘service’ the debt).
In terms of how much you need, general rule of thumb is that you’re going to need a 10 per cent to 20 per cent deposit, and 3 per cent (if you use a 20 per cent deposit) to 5 per cent (if you use a 10 per cent deposit) of the property price for your costs.
On a $500,000 property you’re going to need between $75,000 and $115,000 for your deposit and costs.
First port of call should be to sit down with a broker/banker and find out your borrowing capacity. All the best for your journey!
Question
What advice would you give someone who is young and has a large inheritance but low paying job. Is it still possible to buy property? What would be the best strategy or route to becoming a successful investor over time.
Answer
I am sorry to hear of your loss and hope you’re holding up ok.
Good on you for seeking to have a plan and strategy for your inheritance. There is no one size fits all, so the answer to the first part of your question will vary slightly depending on the size of the inheritance and your income. If you don’t have enough cash to buy the property outright, you’re going to need an income of $50,000 minimum to borrow from the bank (depending on your living situation, expenses, etc).
However, if you’ve got a low income, you’re going to be best off putting a big deposit down (maybe even buying in cash) and getting a property that is going to be as cash flow positive as possible. That’s going to be something in an area with a fast-growing population and giving you a 4 per cent or 5 per cent rental yield.
When it comes to becoming a successful investor, you want to buy land in an urban area with a growing population, make sure there is a house on that land that can give you a positive cash flow, and hold the property for as long as you can.
As the property increases over time, try to repeat the process over and over again.
In time, you will become wealthy and give yourself a healthy passive income.
It also helps to have the guidance of an experienced mentor who has done it.
Question
I read there were some changes being made to Queensland land tax laws. Can you tell me what those changes are and answer whether land tax be claimed as a tax deduction? Would love to know your thoughts.
Answer
Thanks for the question and, you’re right, the Queensland State Government is proposing to capture interstate land into land tax calculations.
Land tax is a tax you pay on the land you own.
It is border specific, meaning you only pay land tax on the land you own in that state or territory.
If the Queensland law gets passed, it will be the only State that takes interstate land into its calculation when determining how much land tax you pay.
Most States have a land tax threshold; effectively meaning you don’t pay land tax unless you own more than a certain value of land.
In Queensland, the land tax threshold is $600,000 and your own home isn’t included.
Therefore, you would only pay land tax if the value of the land you own as an investment exceeds $600,000.
What’s more you still only pay land tax on the Queensland land that you own.
For example, if you owned an investment property in Queensland worth $400,000 and an investment property in New South Wales worth $700,000.
Because you now own $1,100,000 worth of land you are above the threshold in Queensland ($600,000).
Land Tax at the Queensland Rate comes to $6,150.
However, you only pay tax on the Queensland portion, and not on the non-Queensland properties.
So your land tax bill comes to $2.236.36, being $6,150 x($400,000 (Qld Property)/$1,100,000 (Total Australian Property)).
The upside is that it is 100 per cent tax deductible, provided the land has a house on it that can be rented, and paying land tax generally means you own a lot of land which is a good thing.
Question
Does it cost money to refinance my home loan?
Answer
The only cost when it comes to refinancing your home loan will be the application fees associated with a new home loan application. That would be a couple of thousand dollars, at most.
If you are on a fixed interest rate, there could be additional costs called ‘break fees’, but in most situations, there is going to be minimal cost involved.
Banks are offering new customers an average of 0.5 per cent per annum discount to the rates their existing customers are paying on the same loan. So, it certainly pays to shop around.
There are nearly 100 banks in Australia and they are changing their products every month at the moment, so I think mortgage brokers are worth their weight in gold right now!
Question
With building costs up by so much in the past year or two, do you think they will come down again? We were planning to build our own home this year but are wondering whether we are better to wait and see if the price could come down.
Answer
Great question. I’m getting similar questions from friends and family. Unfortunately, no one has the answer to that question.
Building cost have gone up quite a lot in the past ten years and never come back down.
I asked my Uncle John the same question as he’s been in the business for 40 years now. He said the same thing; he’s only ever seen them go up, plateau, then go up again over time.
Based on those shared experiences, I can’t imagine that the costs of building will come back down.
I’d therefore be inclined to push on and do what you can now. For the above reasons but also because you never know what’s around the corner. You might not be able to borrow as much money in the future, costs could continue increasing, you could have a change of circumstances in your life that makes it a harder project to take on. The list goes on…
Either way, I can’t see a circumstance where the value of your home will fall.
Question
With building costs increasing, how do we know if we have enough ‘replaceable value’ insured on our home insurance? Also, how do we make sure we’re not paying for more than we need?
Answer
Building costs would have increased by at least 20 per cent over the past 12 months, so you’re right to question whether you have enough cover.
The good news is that your insurer will have a pretty reliable formula for working out how much it’s going to cost to replace your house. Some insurance companies even offer to cover replacement cost, even if it exceeds the replacement value listed. Worth asking that question in the first instance.
It’s important to bear in mind when it comes to home insurance that it’s not as simple as insuring your home for what it would cost to build the home today. You need to factor in the costs to demolish what’s left of the home as well as any waste and rubble disposal, which can pretty quickly add to another $50,000 to $100,000 itself.
Finally, there are some great online tools that can provide an estimate for you, that you can use as a check against what your insurance company advises.
I like this one from the Insurance Council of Australia, too.
If you were looking to save a few bucks, I wouldn’t be playing around with the replacement cost too much. You can increase the excess as a way to reduce your premium, and there can be big variances in the pricing from insurer to insurer so always a good idea to get at least three quotes. That’s a much lower risk way of saving some dollars in my opinion.
INTEREST RATES
Question
Are you worried about interest rates going up? Do you think they will keep going up into 2023?
Answer
I am not worried about interest rates going up.
That doesn’t mean it’s not important for people to manage their expenses and be careful not to overcommit themselves.
However, we are in the process of getting our economy back to normal.
Normal is a Reserve Bank cash rate of 2 per cent to 3 per cent. Today, it’s 2.6 per cent, and the 10 year average has been 2.5 per cent.
We typically pay 2 per cent more than the cash rate on our principal place home loans, and 3 per cent on our investment home loans.
The rate of increase has felt abrupt, and that’s because it has been abrupt.
The Reserve Bank have admitted they kept their interest rates at pandemic record lows for longer than they should have.
So, to get things back under control, they’re having to increase rates abruptly to shock the economy a little bit to get things back under control.
(Remember the days when you could call a tradesperson and get a call back? We’re heading back to there).
No one has a crystal ball on interest rates, but most economists believe they will keep increasing before eventually come back down before settling somewhere in the 2 to 3 per cent range.
That’s a normal cost on a mortgage, and normal is fine. It will be a little bumpy for a few months while we get back to normal, but that’s where we will land.
Like anything when it comes to money and investing, it’s important to take a long term view but with a plan for the short term, too.
Question
Do you think interest rates will keep going up? When do you think they will peak/stop increasing?
Answer
That’s the million-dollar question you’re asking right there.
The truth is no one knows.
There are more than 20 economists employed by all the banks around Australia, and they have nearly 20 different opinions on the matter right now.
The view I think makes the most sense is that of Stephen Halmarick, chief economist at Commonwealth Bank.
His view is that rates will increase another 1 per cent between now and the end of the year, then actually come back down in the first half of next year.
The rationale for their forecast is that there is a lag on data like inflation, wage growth, spending and borrowing. Rates have increased by 1.25 per cent in the past 90 days, and the effect of those rate rises from a data perspective won’t come through until September.
In other words, the CBA view is that there has already been the right amount of slowdown in spending and borrowing, but that the data capturing that won’t come out until September.
By which time rates will be even higher, so they have to lower them again next year.
At the end of the day it’s all a guessing game right now.
We can’t remove the risk of rates going up, we can simply manage that risk.
Interest rates will increase where we have inflation. The good news is that when we have inflation, rents will increase too. Therefore, any increase in interest will at least partially be offset by an increase in rent.
Another failsafe I use is to make sure that even if interest rates rose by 2 per cent, the cost of maintaining my properties would still be less than 10 per cent of my take-home pay. If that’s the case, you’ve managed the risk as best you can. Not being able to cover the additional financial impost, particularly just a short period, in my mind points to a different problem.
Question
I’ve got some loans with variable interest rates and, while those interest rates have increased recently, it’s been nice to have my rents going up at the same time. Do you think it’s possible that rents continue to increase at the rate they currently are?
Answer
Rents have historically increased at 2 per cent above inflation. That’s been the case over the past 10, 20 and 30 years regardless of how high or low inflation has risen.
We are seeing rents increase at a whopping 10 per cent per annum today, which is 3 per cent above inflation.
The reason for that is that there isn’t enough supply. Rental vacancy rates sit at 0.9 per cent in Australia today, which is well under the 2 to 3 per cent considered to be a balanced market.
What’s more, we need to build 200,000 new houses each year to keep up with population growth and the Government is forecasting that we will fall well short of that over the next few years.
With international borders opening, it’s hard to see any reprieve coming for tenants in the short to medium term.
I wouldn’t be surprised if they continue increasing by at least 5 per cent per annum for the foreseeable future.
Having said that, I don’t think that’s something you should rely on. I always encourage people to work out their budgets based on interest rates increasing by 2 per cent to give yourself a buffer. It’s also a good rule of thumb to try and ensure that the cost of holding your properties doesn’t exceed 10 per cent of your after-tax pay.
Question
What do you think interest rates will be this time next year?
Answer
This one might be the hardest question I’ve had to try and answer, thanks for that!
The reality is I have no idea, because a year is a long time when it comes to interest rates. This time last year the Reserve Bank cash rate was 0.1 per cent (versus 2.85 per cent today).
What I will say is that there was encouraging data released this week to round out the year. Inflation looks to be slowing down, meaning the interest rate increases in the back end of 2022 are doing their job.
Inflation came in at 6.9 per cent for the 12 months to October.
Importantly, that number was less than the 7.3 per cent recorded in September, and much less than the 7.6 per cent that was forecast by economists (who don’t have the best record when it comes to forecasting, it must be said).
Inflation on goods like fruit and vegetables, fuel, travel and accommodation and clothing are slowing down.
While we might not have seen the last of the interest rate increases, this data suggests we’re through the worst of it.
I still think the Commonwealth Bank’s forecast looks most likely; CBA is forecasting we will see interest rates increase a little further before coming back down around the middle of next year.
When inflation is back to normal (3 to 4 per cent) we should see the cash rate normalise somewhere between 2 per cent and 2.5 per cent.
GOVERNMENT SCHEMES
Question
I heard that the Government is going to be putting out a new first home owners’ grant where they put in 40 per cent of the house cost. Could I be eligible for this grant if my boyfriend has got the first homeowners’ grant previously?
Answer
First of all, the Federal Government Help to Buy Scheme hasn’t been formally released yet, however is planned to commence 1 July 2023.
As a result, we don’t know the exact criteria for that scheme just yet.
However, it’s probably safe to assume the Federal Government will follow the State Government when it comes to eligibility criteria.
In this respect, a ‘boyfriend’ or ‘girlfriend’ is a bit of a grey area.
Most State Governments have a requirement around ‘spouses’ that reads something like:
You or your spouse must not have previously received a first home owner grant in any state or territory of Australia. If you received a grant that you later paid back, together with any penalty, you may be able to reapply for the grant.
If you don’t live together and aren’t married, then you may still be eligible. But there can be big penalties for not following the rules when it comes to first home owner grants.
So, if I were you, I would contact the Office of State Revenue in whichever state you live, tell them about your situation and have them confirm whether you would be eligible. To be safe, I’d also ask them to send you written confirmation so you have a record.
