The dream of my generation was to pay off a mortgage, the dream of today’s young families is to get one.

The dream of my generation was to pay off a mortgage, and the dream of today’s young families is to get one. This is a one liner I read on a web site and it is almost too true to be funny. Especially where our state governments have been fiddling with the stamp duty concessions and first home buyers schemes at a time when rental affordability is at an all time low, many young families simply can’t find a way to save the deposit required.

In NSW, Qld and in Victoria (subject to legislation passing) the First Home Buyers Grants will only apply to people purchasing a newly constructed home. This is further compounded for NSW where the stamp duty concessions for first home buyers again only receive concessions on newly constructed homes. Some commentators would argue that Australia does not have a housing shortage – but it does have an affordable housing shortage. Funnelling all first home buyers into new constructions is simply pushing up the price on this end of the market, for the benefit of developers. Meanwhile these governments have widely adopted a ‘user pays’ attitude to housing development which has further increased the end cost of housing – in the specific market where it is most needed.

Prior to the GFC lenders offered 100 percent home loans where a first home buyer being fully exempt from stamp duty could use their first home buyers grant to cover establishment costs and effectively borrow the full amount of the property purchase price. This then became a problem with the Federal Stimulus tactics of the GFC offering double home grant and encouraging so many inexperienced young buyers to rush in to get the additional grant. Of course the reality was the rush forced prices up and then when the grants were removed prices adjusted down and the young borrowers are in a position of negative equity ie: they owe more than their homes are worth.

Today the mortgage insurers (LMI) have no appetite for risk and so much stricter requirement on genuine savings are imposed – typically 5 percent of the purchase price saved over a minimum 3 month period with an explanation required on all lump sum payments. For young buyers lucky enough to have wealthy family who can gift them funds then 10 percent deposit will generally mean that no questions asked on genuine savings. There are a few lenders who will accept 12 months timely rent repayments through an agent in lieu of savings however the borrower still needs 5 percent deposit from some source.

Probably the best outcome for struggling young families is a parent being a guarantor for 10 or 20 percent of the purchase price ie: a limited guarantee. This allows your kids to effectively borrow all of the purchase price and even the stamp duty if applicable. Yes there is some risk and parents should seek independent advice but it is an option that can work well.

Should you skip the agent? The perils of buying properties online

There is a new and modern way for property sellers to put their properties on the market as a non-bank lender gets into the real estate market, providing a place where sellers can post what they are selling online.

In an article at, a platform, that is just like that of eBay, named inTouch Real Estate was born on a notion of providing property sellers and buyers greater transparency, plus the incentive of saving a lot of money as they bypass the need of real estate agents.

Paul Ryan, the inTouch founder, shared the inspiration behind the online selling service, “Having been involved in the home loan industry for 20 years I have seen so much anger, frustration and annoyance from borrowers when it comes time to negotiate on a property. The mystery that often surrounds making an offer, the reserve price and how many other buyers there are can make the sales process an incredibly stressful and unhappy experience.”

A LiveOffer system was developed by inTouch allowing vendors control of the property sale process. Vendors will set an amount or a reserve sale price for their property. Buyers will then post their offers, in real time, online.

“The advantage of the LiveOffer platform is that both the buyer and the vendor know exactly where they stand.”…“LiveOffer allows the vendor to see offers from real buyers and buyers know what other buyers are offering. We believe this new level of transparency will appeal to vendors and buyers alike.”

According to Ryan, the need for real estate agents is eliminated thus nothing will ‘cloud’ the negotiation process. Professionals in the property industry quickly aired their comments on the article about inTouch’s new service, questioning the claim of how transacting online is a better service compared to that of dealing with a real estate agent. One shared his concern as to what will happen to the property should it not get any bids. There is a possibility for a seller who is in dire need of money to just give in to an offer due to frustration or fear of his property not selling.

The presence of something accessible to a lot of people could also do more damage to a slowly recovering property market as many would think, basing on what they see, that a property could not be a good asset, dwindling confidence even further. Sam Joseph also shared a good point of the possibility of the seller having to ask people to make falls bids so as to jack up the bidding process. Brenton Wilson also had another idea that maybe the new service main purpose was for getting inTouch more customers.

Although there may be advantages and disadvantages to buying and selling online, both buyers and sellers should still be vigilant and do a lot of research should they decide to lose the agents. Doing transactions online could consume a lot of time and effort and not knowing all the rules and laws about property can put one in trouble. At least if there are real estate agents, they can be put to blame and can be sued in court should any malpractice happen.

Why the Australian Dream is unattainable to so many people

The McKell Institute’s release of their report “Homes for All – The 40 things we can do to improve supply and affordability,” written by Dr. Tim Williams and Sean Macken, has shed some light as to why the Australian dream remained a dream, even a nightmare to some people.

Houses have become very expensive, nine times the median salary,costing more than those in New York and London. While the ages of people owning properties in Sydney are getting older.

Australia’s typical family structure has also changed because of the high prices with people being forced to live with their parents to save on rent, or while they come up with a loan deposit, or worse, not being able to afford rent.

Renting has been the most practical solution for some but even the cost or renting  has driven a lot of people out of the city and into places where jobs are meager. The list of those availing public housing has grown longer as those who have no choice have nowhere to turn to.

The unaffordability of housing is primarily due to the lack of supply. The report also stated that because of the scarcity of supply houses have become, “even more of a commodity, an asset class, an investment, to be leveraged to fund retirement, transfer wealth to children, support consumption and buy second homes.”

It is not that housing has become universally unaffordable, some people with existing properties are said to have no problems staying in the property market and acquiring more properties as they have a secret weapon, negative gearing.

An article in reports  Tim Williams saying, “Home ownership is becoming something that older people do. I remember my head reeling when I discovered how generous negative gearing was. There’s nothing like it in the known world in terms of its generosity and in terms of its middle-class welfare. I just think it’s an astonishing gift to the wealthy and it has perverse effects on the housing market. You are squeezing young people out of home ownership while some people have two, three or four units – the incentives are just wrong.”

Williams is suggesting that negative gearing be phased out or just be used as a targeted incentive.

The report has also been used as a contribution to the debates happening currently in the government. Other aspects like stamp duty and land taxes are also being looked into. The development of new properties is also being hampered by other forces like the NIMBY (Not In My Back Yard).

Selling by tender – pitfalls

As Australia’s auction clearance rates made a dramatic fall in the past 12 months, several real estate agents are going after the tender process. As auctions lose their appeal through low competition and are property reputation is stained with the thoughts of being not marketable, agents opt for the tender process as it only needs one buyer not to mention that the agent still gets paid for selling and advertising.

Rob Miller of Domain Property Advocates shares his view in his blog about the tender process. According to Miller, the tender process from a buyer’s perspective is “like a secret maze, it’s a nightmare.” The reason behind why he thinks of tenders this way is the fact with how most people connect tenders with “government bodies or business organisations who require specific goods and services.” People believe that all tenders have conditions and special terms and that with tenders, the lowest quote is always successful. In the world of real estate however, the highest or the best tender doesn’t matter as there is always an estimated reserve price. Sometimes, when the reserve price has not been disclosed, the agent needs to give out what the estimated selling price is so as to comply with legal guidelines. The problem then lies when the agent’s assessment doesn’t meet with the vendor’s expectations.

The problem with the tender process is the lack of transparency. Tenders are confidential having sealed bids, security measures, locked boxes, closing dates, etc. and the agent is the only one telling the buyer the estimated price. The buyer will never know if what was given is accurate or if it is within the reserve price or if the agent has other interests to the property. It is the confidentiality behind the tender that affects the credibility of the tender process.

Auctions are more reliable as buyers can see who they’re bidding against. These are the reasons why successful tenders tend to be the bid significantly higher than the others. Buyers could lose as much as $100,000 on the fear of not getting the property only to find out in the end that they were played or was the only one who submitted an offer.

It is what happens after the tender process has closed that is most disturbing. What happens to those who bid within the reserve price? What if there’s a highest bidder, does the agent pick him directly and talk to him or does the agent ask everyone else to do another submission of bids making the highest priced bid as basis? These scenarios are likely to happen in a tender process which is a nightmare to buyers.

The difference from a tender process for commercial intents and real estate sale is that the commercial depends on a fairly simplistic commercial outcome while the other is controlled by strict statutory guidelines where the duty of the agent to take care of his buyer is severely compromised by the tender process’ confidential nature. The best thing to do is to conduct business with reliable agents, the ones who will put your needs before their own.

Renovating could be a financial mistake

Property owners who are thinking of renovations as a means to increase the value of their property could be opening the door to having financial problems, this according to an article in’s property section.

Over-capitalizing on one’s property is one of the risks owners are rising every time they add something to their house. People who have sold their renovated property have often been disappointed with the sale outcome.

Patrick Bright, EPS Property Search director and author shared, “Those homeowners who have overcapitalised are being exposed more than ever, leaving many at risk, particularly in areas where the market has softened quite significantly. The number one cost people try to avoid by renovating is stamp duty. Unfortunately, they don’t realise they can tear up just as much, if not more, by overcapitalising on a renovation.”

Activities in the renovation sector have been picking up according to recent government records while new home constructions and prices of real estates have been on the other hand, falling.

An Australian consumer satisfaction ratings company has found that people are following the do-it-yourself approach with renovating.  With the majority of people doing their own house painting.

The falling house prices however seemed to be slowing down, according to data from Rismark and RP Data which showed property prices in capital cities only down 0.2% in September.

Patrick Bright shared a tip on how to know if the owner has overcapitalized on renovations.  “One tell-tale sign that a homeowner has overcapitalised is when you ask the sales agent how the vendor came up with the asking price. The sales agent quotes the amount the owners spent on the renovations and the price the property was worth prior to the renovations, adds the two together and there’s the expectation to sell the property at that price.” Property owners would normally have asking prices 10% more than the property’s true value so as to get back on their cost for renovations.

People who dead set with plans to renovate their property should seek mortgage broker’s advice so as not to go beyond their budget. Renovations could either make or break a property.

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