Buying a used car?

There is no shortage of news around.

This week I picked out three topics that caught my eye.

1. Should you buy new?
2. Are investors really bailing out?
3. Will the US election impact your mortgage?

If you don’t want to read all of them, here are the answers:

1. No

2. No

3. Yes, probably not favourably.

Had enough? See you next week :)

If you would like more, let’s go into them.

Should you buy a new apartment or unit?

With the housing squeeze and necessarily ambitious new home supply targets, there is a continued and growing focus on apartment building.

This was primarily confined to the large capital cities and Gold Coast but is now becoming more common in most cities.

State Governments are really starting to push for these through sometimes controversial planning fast-tracking and concessions such as no stamp duty for off-the-plan (OTP) apartments in Victoria regardless of your purpose, current property ownership, or property price.

We can discuss the concept and risks of OTP later, but before you rush to sign up, here are a few financial considerations.

I consider buying a new apartment akin to buying a new car.

They have a really nice look and feel and make you feel good (until the inevitable first scratch), but as soon as you drive them out, they lose 25% of their value.

Something like this:

With the fixed-price construction signed a few years ago, the price of new units has ballooned.

This chart from #PropTrack covers inner Melbourne, but the same applies anywhere.

It shows that over the last 18 months, established unit prices have remained supine – what you would expect, especially over a short period, in a flat market Melbourne is in.

The purple bars show the premium of new apartments to existing is stable at approx. 15%.

Up until this year as old contracts have been completed and new ones set. That premium is now over 40%.

Add to this the type and quality and likely quality of these, this makes any stamp duty being saved a questionable motivator.

Yes, perhaps there is a change in the "mix" of apartments – more are being built for downsizers and there are more three bedrooms but be wary of what you sign up for.

I’ll stick to my second-hand Mazda…

Are investors really bailing out?

Over the past few months, there has been a lot of commentary about property "investors selling up".

This is seen as particularly the case in Victoria with State government blamed through increased land taxes and rental returns. This from abc.net.au

And a quote or two to fit the story:

"We are seeing a larger share of property investors double-thinking whether or not investment property is going to be their cup of tea in Victoria." Tim Lawless, CoreLogic

"The bleeding obvious thing is the governments severely overreached on the reform agenda," Ben Kingsley, Property Investors Council of Australia.

It all suits the narrative really.

However, recent analysis casts this in doubt.

1. This chart from ANZ, "Blue Notes," June 2024, shows that lending is generally strong.

It is also interesting that Investor lending grew stronger than Owner-occupied in all states except for Victoria – something that government would be happy about.

This lending growth of course is largely due to home price growth.

I found this CoreLogic analysis this  week that breaks down the number of investors  -not $.

It shows there are consistently more investors buying than selling, and this year, the gap has widened further.

Even in much-maligned Victoria, where many prominent "experts" are screaming "investors are bailing out of Victoria", is questioned by the data.

Will the US election impact on your mortgage?

I’m not going to go into all the economic policies proposed by Donald Trump over their election campaign, but I’ll just say given what he has said and the personality, it us unlikely the US is going to be financially disciplined.

This will make every Reserve Bank around the world cringe as if this happens any efforts to contain inflation around the world will be severely challenged.

We know what inflation means = higher interest rates.

He is also well known for his isolationist "Make America Great Again" and has said he will impose tariffs on non-American made goods and services:

"The most beautiful word in the dictionary is tariff," Trump said last week during an on-stage interview at The Economic Club of Chicago. "It’s my favorite word."

This can only push prices up and open trading economies like ours vulnerable to what be done to us but especially to the obvious target: China.

Ironically, this could set our property market alight with a rush for safety and stability.

Let us see.

What is said and what is done can be two different things in politics.

Once again, I’ll go to my economic guru for the fitting quote we can all apply:

"We can’t be sort of setting our policy now on expectations of what we think he might do, because we don’t know." Michele Bullock, RBA Governor 14/11/24.

Either way, enjoy the ride…

Like to talk? Here is the link if you would like to book a time: https://fin4nurses.me/clientmeet

Have a Great Week!!