Own your home sooner

Are you aware that paying $100 extra per month saves $43,000 and almost four years off the life of an average $300,000 loan?

Far too many homeowners are missing out on opportunities to pay off their loans sooner, new research shows.

Which is bizarre, since the same research shows that ‘owning a home’ or ‘paying your home off sooner’ are the top priorities for 57 per cent of the respondents, while having children or getting married rated at 8 per cent and 5 per cent respectively.

The Westpac Home Ownership Report* also found that the majority (77 per cent) of people surveyed believe that ‘home ownership’ is only achieved when their home loan has been paid off in full, as opposed to when they first purchase a property and take out a loan.

Gai McGrath, General Manager of Retail Banking at Westpac, remarked that the research showed that Australians need advice to help them own their home sooner.

“Our research indicates that many features designed to help pay off loans quicker are not fully understood, meaning Australians are missing out on opportunities to pay off their home loan faster”, she said.

Small steps such as setting up a home loan with a 100 per cent offset account, accelerating the frequency of payments to fortnightly rather than monthly or making additional repayments, can reduce both the term of the loan and save thousands in the long-term, Ms McGrath suggested.

“For example, more than one in three (37 per cent) Australians with a home loan have an offset account”, she said.

“However, more than one in three (36 per cent) of those didn’t actually understand how an offset works so I doubt they are using it to their full potential.

“To help our customers Westpac has specially developed an offset calculator which allows Australians to work out how much time they can reduce on their home loan term and money they can save by using an offset account.”

According to (benchmarking firm) Comparator's Quarterly Market Diagnostics for the Home Loans Report representing ten of the nation’s largest home loan lenders, there is around $59 billion in offset balances.

"What is remarkable is if you were to use these figures as a base and then look at the average discounted interest rate across all Banks at 5.35 per cent, those Australians are making an estimated annual savings of $3 billion ($3,131,151,647) on their offset accounts," Ms McGrath observed.

She added that there seems to be a lot of confusion about the types of home loans available in the market.

“One in five (20 per cent) of those intending to buy in the next 12 months had no idea what type of loan structure they should take up when they go to buy and of those who already had a home loan, over one in five (22 per cent) didn’t even understand what a variable rate was”, said Ms McGrath.

While confusion exists, the general sentiment amongst Australians with a home loan is positive; with three quarters (76 per cent) stating they believe now is a good time to be paying above their minimum repayments.

* The survey researched the priorities of Australians who either have a home already or are planning to buy within the next twelve months.

Thinking of buying off the plan?

We are seeing a lot more people buying off the plan in Wollongong. I believe this has come about due to a shortage of up-market units combined with the social shift from the suburbs to central or lifestyle locations. This is a recent article in The Domain.


Thinking about buying off the plan? Here are six items you must cover first.
Off the plan apartments have some great advantages such as locking in a price to safeguard against rising values and tax advantages like claiming depreciation on fittings and fixtures.
However, you still have to carry out your fair share of due diligence on the building complex to ensure you are getting exactly what you pay for.
Brad Porteus from BSP Construction Consultants has listed six essential items to tick off your list before committing to purchase.

1. Have you received a full set of detailed drawing plans for the unit?
The building plans should show the full dimensions (in millimetres) of all rooms including bathrooms, laundry, kitchens, bedrooms; show all door sizes and locations, show all window locations and sizes, show cabinet layouts, wall and floor tiling layouts and the plans should be to scale.
2. Have you received a full building specification and addenda?
You should receive a full building specification and addenda for your unit and the common areas to the building if applicable.
The specifications for your unit should include the cabinet materials and finishes, including robes and linen cabinets, appliance models and makes, wall and floor tiling, tapware models and makes, floor coverings, window makes, doors and door furniture, electrical fittings including switches and outlets, air conditioning unit type/model and maker, door furniture, garage door model and make, alarm systems make and models.
The common area specifications should include the lift make and model (very important), the window and door makers, wall and floor tiling, carpets, light fittings, air conditioning unit type/model and maker, ventilation systems, the car park entry gates both pedestrian and vehicle make and models and security systems including entry doors.
3. Ensure the building plans dimensions and layouts are fixed
The building plans supplied must be fixed and not be open to amendments during construction including window and door sizes and balcony sizes. This must be documented on your sale contract.
4. Has a strata management company been selected?
The strata management company will be very important to the building once completed, to ensure it is maintained and managed efficiently. If the strata company has been selected then you can do some due diligence checks on the company.
5. What are the annual strata fees?
This should be set prior to making your offer to purchase. You do not want this to be a hidden cost once the unit has been purchased.
6. Who is the building company?
This is a very important item to the quality of construction of the building or unit complex. Once the builder has been identified you need to check some of their past projects.
Visit some of their finished sites and even try to talk to some of the owners.
Look at the finished properties for the quality of the building finishes. What you see at their past projects will be what you see at your proposed new building or unit complex.

So...how would I define the real estate market in Wollongong at the moment?

Let me lead into this article with some interesting numbers:

Real estate agents identify market activity with a few metrics:

1.     Auction clearance rates: Sydney has seen an extraordinary rise in clearance rates since November last year. I would regard a sustained clearance rate above 60% as progressing towards an active market. Clearances have been above 80% in Sydney for the last 3 weekends. As a matter of interest, Wollongong has seen a greater number of properties going to the market via auction in the last 12 months and although I don’t have the clearance statistics for our area, you can be very sure the largest real estate market in Australia ‘just up the road’ is having an influence on ours!

2.     Listed properties: this is an influencer on the supply and demand equation. The lower the supply combined with increased activity translates into property demand. There was just over 12% less properties listed January to June 2013 compared to the previous year.

3.      Number of Sales: Generally speaking with an increased sale number comes greater activity. There was a 17.2% increase in sales for the corresponding period year on year.

4.     Days on Market (DOM): This is based on the date the property is listed for sale compared to the date of contract exchange. The lower this number then the greater buying activity appears in the market place. There is an interesting trend here with DOM actually increasing for January to June 2013 compared to the previous year. I believe this is due to older listings selling more readily this year - that is, properties that were on the market for a long time have sold due to reducing stock levels and increased demand bucking the normal statistical trend.

5.     Vendor Discounting: The difference between listed price and exchanged price. Again, the lower the number, the more activity is present. Year on year January to June, seller negotiation difference has reduced by 55%! Anecdotally I have noticed an increase in properties that sell very close to the listed price. We have also been involved in a recent sale that sold over the originally listed price due to demand.

6.     Crane Count: this is my own measure and it’s indicative of the development activity in an area = the confidence investors/developers have to spend their money...and get a return. As little as 3 years ago, Central Wollongong had zero cranes above the building line. There are now 4, down from a peak of 7 cranes earlier this year. I am aware of at least 1 new crane due on the skyline this year.

Statistics Source: EAC Redsquare Data

What does this mean?

The Wollongong real estate market has remained remarkably resilient.

June, July and August 2012 were seen as the bottom of the market with sale numbers down 30% on normal trading. This is when ‘across the board’ First Home Buyers funding ceased, combining with the traditional winter slowdown and the world news dominated by financial issues in Europe. Buyer confidence plummeted. Balanced against longer term statistics, this short term drop then united with a cautious recovery in Spring 2012 when world financial news improved and local interest rates dropped. The Wollongong numbers have generally been on a long slow positive trend since then supported by a strong winter selling season in Sydney (this is atypical in itself).

Stock levels are still down, with sellers waiting for a) Federal Election b) Spring c) End of the Financial Year to put their property on the market. We have also seen over 100 new residential units built in Wollongong/North Wollongong with many now ready to be occupied. Most of the new occupants will have a property to sell. Buyers however are out there now and complaining about a lack of choice.

Longer term prospects appear very positive, with the University of Wollongong thriving, visitor numbers up a staggering 12.4% (and therefore tourism income) from the previous year and investment and projects in the area close to ½ billion dollars either planned or underway. In addition, the NSW Government’s $100 million from the sale of the Port Kembla lease will come on line over the next 12 months.

I have every reason to believe Wollongong is travelling well.