Highlights from this week:

Something that many buyers don’t bother to do that can cost thousands of dollars
Why sellers should do a building inspection
How to sort your finances up front
Negative talk and speculation has a negative impact on the market
Queensland benefits from overpriced Sydney and Melbourne markets
Is there one growth driver that benefits all property markets?
What an agent must tell you about a property before you buy
Avoiding dutch auctions and getting gazumped when buying

 
Transcripts:
Getting your finances sorted - Andrew Crossley
Kevin:  One of the key things you have to do when you’re looking at investing in property is certainly securing your finances. A book I want to tell you about now that’s well worth picking up and reading through before you go down that path. It’s called Property Finance Made Simple, and when you read the book, you’ll see well that’s exactly what it does. It’s written by Andrew Crossley, who is my guest.

Andrew, thank you very much for your time.

Andrew:  Thank you for having me.

Kevin:  Andrew, why did you write this? And tell me about your qualifications to speak on this.

Andrew:  I wrote it because I wanted to help as many people as possible who needed finance to understand how better to get a loan. My first book was more for property investors, and so this time round, I wanted to help upsizers and downsizers and really first-home buyers as well as investors understand how better to improve their chances to get a loan.

Kevin:  One of the things I love about the book, in reading through it quickly, was that you did focus right upfront on housing affordability, which is probably one of the most spoken about terms right now around Australia. Just how affordable is property?

Andrew:  If you look at the national level of things, it is affordable. If you look at purely Sydney, one could say it’s not affordable. Often, too many people are loosely saying there’s an affordability crisis, but using Sydney as a benchmark for the country, which I do think is incorrect. There are many suburbs around Melbourne within 20K… In fact, there are probably 16 suburbs within 20K of Melbourne that are under $600,000.

Kevin:  Just talking about affordability for a moment, there are some alarming reports out in recent times about how many people are probably going to default because interest rates might increase. How do the financiers go about assessing someone’s risk in this area, and what should consumers be doing to make sure that they don’t fall foul of this?

Andrew:  It’s a really good question. Every lender when they take on new debt or give someone a loan, they assess it at a qualifying rate. Normally it is about 7.2% to 8%. So if current rates are 4%, 4.5%, they’ve already determined the borrower can afford the loan if the rates went up to 7.2%.

Of course, the reality could be quite different in a household where someone perhaps could have been a bit liberal with disclosing their living expenses and they may find it tough if rates rise, but lenders have certainly tried to do their job with being compliant in ensuring that if rates do go up at least to 7%, that the person can still afford that debt.

Kevin:  I think there’s a great need here for a lot more education for consumers too to understand that the banks believe it’s important to build the buffer in. While they might do that, they need to explain, I think, to consumers that “Hang on, we have built a buffer in here. We want to make sure that you can afford it at the current rate.” But a lot of consumers go away and think “Oh, this is pretty easy,” then they may over-commit and get up to that level, and then of course, once interest rates do go up, they’re going to be in a lot of strife.

Andrew:  In fact, I’m concerned that over the coming year, there would be a considerable number of people who have over-invested or are over-exposed to the future cost of debt,