What is a Buyer’s Market and a Seller’s Market? and How to Tell the Difference

 

The current property market in Australia is certainly what you would call a rollercoaster ride with lots of up’s and downs and it’s definately making people feel dizzy!

But really it isn’t that unusual for the property market to tip in favour of either the sellers or buyers as the real estate market has its share of cyclical market movements.

What’s a buyer’s market?

When the market is in favour of buyer’s it means properties are at a more affordable price and supply is exceeding demand.

Properties tend to sit on the market for a longer time than usual and sell for less in a buyer’s market. When there are a lot of properties on the market, seller’s need to be competitively priced so they can sell their property within a reasonable timeframe.

What’s a seller’s market?

The seller’s market is vastly different to a buyer’s market. For starters the demand outweighs the supply.

With a small number of properties on the market and lots of people wanting to buy, it generally means the seller has the upper hand and this is when bidding wars and the like can start.

When we’re in a seller’s market it is more important than ever to keep your budget in mind and never pay more than you can realistically afford. It is never worth going into debt for a property that will stretch your finances.

Is there an in-between market?

Yes, there is an in-between market, which is usually where the real estate market sits for most of the time. There is a suitable amount of properties on the market to meet to demand and they are fetching a reasonable price.

The in-between is not necessarily a bad place for the real estate market to be. It allows you to do thorough research into the areas you are considering buying, working out the cost of rates in the area, proximity to work etc.

Final note

It isn’t necessarily worth holding out for the market to drop and become a buyer’s market because whilst prices will drop, they are extremely unlikely to go so far down they’re a steal.

Remember, most people are looking in already established areas within a central location to the city whose prices don’t just drop significantly overnight like a rural property with no public transport options and the closest shops are an hour away.

It is a time though that you might be able to take advantage and pick-up a bargain for the worst house on the best street, and with what you saved on purchase price you can put towards renovations.

Same goes for a seller’s market. Making the decision to sell your home is not an easy one to make and it takes time to get your home prepared with potential maintenance to do, finding a real estate agent to represent you, organise a bridging loan if needed and not to mention, also making sure you have somewhere to move too.

Why Insurance is Important

Insurance is all about protecting you, your family and all that you have in the event of the unexpected happening. It is your assurance that all will be okay and your family will be taken care of.

As you go through the different life stages, your circumstances change and therefore your insurance needs will change.

As a finance broker, insurance is not our area of expertise but we have seen clients go through different life stages – loss of income, loss of a spouse, and we know whilst the loss is great there is insurance there to provide the much- needed financial assistance and ease some of the burden.

Here are some key ways that insurance can help:

Protect yourself and your family

If you or your spouse were to fall ill what would happen to your family? This isn’t something any of us like to think about it but the unexpected can happen.

Being prepared by having the appropriate insurances in place means that if something does happen, your family can access funds that will enable them to continue living comfortably and possibly debt free if you have enough cover in place.

Prepare for the unexpected

Nobody knows what lies around the corner, and whilst we hope it is a soft landing where you get off with a few scratches, it is best to be prepared.  In some cases, you may need extended time off work, or in worse circumstances, cannot return to work.

When you have the appropriate insurances in place for unfortunate events like not being able to work due to illness or injury, you will still be able to maintain a decent level of living and cover the ongoing costs of running a household and raising a family.

Leave behind a legacy

There is insurance like lump sum payments in the unfortunate event of a death which you can leave behind to secure the future of your spouse and your children.

It is important when looking at lump sum payments that you carefully consider the amount in cover you take out to ensure it is sufficient enough to cover paying out all debt and enough left over to be invested for your family’s future – ongoing living expenses, education etc.

Overall

We understand that you don’t want to have to think about worse case scenarios or losing a loved one, but we also know that having insurance in place for the unexpected will give you peace of mind.

Buying a Home with Little or no Deposit

The time may feel right to get your foot on the property ladder, but you haven’t saved enough of a deposit.

Can you still buy a home if you haven’t saved enough of a deposit? There are options available to you if you haven’t saved the required 20% but you need to take into consideration some very important things before you even approach lenders.

Lenders Mortgage Insurance (LMI)

If you have anything less than a 20% deposit for your home purchase the lender will apply LMI.

LMI is essentially a lenders insurance policy that you pay for to cover them if you do not repay your loan in full.

There is also Lender Protection Fees (LPF) which is still a fee but offers a little more flexibility because the lender doesn’t need to seek third-party approval. Learn more about this option in our article here.

95% or higher LVR home loans

Some lenders do offer loan-to-value-ratio loans to enable you to borrow up to 95% or higher of the property purchase price.

Seem too good to be true? In some case’s yes! Whilst a loan like this will work for some borrowers circumstances it won’t work for everyone as there is usually very little to no flexibility in the loan terms – no option to pay interest only repayments and higher interest rates.

LVR is in place so lenders follow the very strict legislative requirements which protect borrowers from financial hardship and to protect themselves from risk.

Whilst the above are options you can explore, they aren’t without risk to you as the borrower.

You may have the capacity to take on the risk and absorb the cost but ultimately, they are a risk and it’s important that you work closely with your Broker to work out if they are worth the risk.

There are other low risk options for you to consider as well which we explain in more detail below.

Making short term savings and gifts of money work for you

Lenders want to see proof of savings and generally they will ask for your account statements to show a three-month period of savings.

You can make this work to your advantage. If your parents have gifted you some funds towards your deposit or you got your tax refund or even a bonus at work. If you can show these lump sums have remained tucked away in your savings account for a three-month period, lenders will be more inclined to consider that as part of your genuine savings.

Of course, it is good to be able to show lenders that you have a consistent track record of saving regular amounts, no matter how small but you can make those larger sums deposited in to your account work in your favour.

Waiting longer before purchasing a property

Now, we understand this is something you might not want to hear but sometimes the best thing to do is to sit tight, continue to build up your savings and wait a little while longer before purchasing a property.

Check out and utilise our articles on how to create a yearly budget and paying down your debt so you can reach your property goals sooner rather than later.

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Realistic Financial Resolutions

The new year is almost here and what better time is there to reflect back on the year that has been and the new year ahead for your finances.

We have put together four things to help you get your finances sorted for the new year.

Set realistic financial goals

Having long-term goals to reach like an investment property portfolio or share portfolio are fantastic goals but to reach them, you need to have shorter-term goals in place to help you reach the long-term goals.

When setting your financial goals, you need to take into consideration your current financial position – income earned from employment and any investments, assets, savings, debts, investments and super balance.

Take stock of your financial position by completing the asset stocktake calculator on ASIC’s Money Smart.

Get real about your finance habits

We all have our little discretionary secrets – buying a coffee or those delicious but overpriced baguettes for lunch every day. There is nothing wrong with treating yourself but if you cut back those purchases by half you’ll be saving yourself a lot of money.

We know you would have heard this time and time again but the best way to keep track of your financial habits is to have a budget. A budget will give you the real picture of where all your money is going.

Fill in our budget calculator to find where your money is going and where you can make improvements.

Track your finances

Budgeting is just the start when it comes to tracking your finances. It might seem tedious, but you have a responsibility to yourself and your family to keep a proper track of all your funds.

Easy ways of doing this include utilising the tools on your Banks internet site or App. More Banks are offering ways for you to easily track your funds with charts showing dollar amounts being spent across the board – electricity, gas, and even how much you spend at cafes on those coffees and delicious baguettes!

You can also track your investments as well as Super balance all through Apps. Just head to the provider site or place a call to them so you can sign-up.

Check in throughout the year

Most importantly the best thing you can do is check in throughout the year. Don’t wait for the clock to strike midnight on New Year’s Eve to get your act together.

Like everything in life, your money and wealth is a balance and it’s important to be disciplined and check in to see where you are spending, where you can cut back, make telephone calls to your household providers for better discounts and if you have any debt see how you can work on reducing it.

Tip: Check out our case study on how refinancing saved one of our clients’ money each month.

Overall

Here at the Financial Network Group, we take pride in providing an all-encompassing holistic approach to our clients’ finances. We want to see you succeed and thrive.

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Trust in Banks

This year has been quite the tumultuous year for the banking industry. The Royal Commission whilst in its final changes has upturned a lot of misconduct within the industry.

Banks have always had the tag ‘big bad wolf’ attached to them but what has come to light during the Royal Commission has been nothing short of astounding.

 

“There are no excuses for the behaviour that has been exposed by the Royal Commission.”

– This comment was from the ABA Chief Executive Anna Bligh.

 

Banking Code of Practice

One change that was identified and included in the Commission’s terms was the inadequacy of industry self-regulation which includes the code of conduct.

In a favourable move, the new Code which was submitted to ASIC in 2017 was given the go ahead in 2018 and all banks in the retail sector will need to be compliant with the new Code by July 2019.

Read more about the new Code here. It is going to set a new higher standard of customer service across all Australian banks.

Building trust with the banks again

After all the bad news that poured out as a result of the Commission you are very right to be sceptical about putting your trust in the banks.

Whilst we were just as shocked as everyone else about what came from the Commission, we believe it had to happen and the shake-up is a good thing.

It should serve as a warning to always read over your bank statement, read those pesky product disclosure statements and always question!

If you read something in your statement or in other information from your bank that you don’t understand, it is your right to ask questions of them until you understand it and you are satisfied you are paying only what you should be in fees and no more.

Banking Executive Accountability Regime (BEAR)

Another key change as a result of the Commission is the Federal Government reform – Banking Executive Accountability Regime (BEAR).

BEAR was created to hold up a mirror to the most senior executives and directors of banks to ensure their behaviour is in line with customer expectations.

There are a few key purposes for BEAR which include a new and more direct way of lodging complaints against banks, improvements to small business lending as well as better protection for whistle-blowers.

Overall

The banks have a long way to go in regaining the trust of their customers. A very long way to go! But there are changes happening and this Commission has served up a very big reminder that we’re ultimately responsible for our finances.

Yes, the banks should be doing the right and you should be able to trust in them to do the right thing and give you the right advice. But, we as customers and as Brokers have to take stock and be responsible, hold banks accountable and always question.

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Broker Versus Comparison Sites: Why it’s Worth Speaking with a Broker

With the rise of comparison websites, it’s easy to believe that with only a few clicks on the keyboard, you will find the perfect home loan. Unfortunately, it isn’t that easy and could be quite dangerous, as they don’t give you the full picture.

Finding a loan to match your needs

When using a comparison site, they will have you plug in basic personal information only, along with the details of what you would like in the structure of the loan – fixed or variable, redraw facilities etc.

With a comparison site, you are basically left to work out yourself if the loan options that come up in their search are suitable for you or not.

Unlike a comparison site when you meet with a Broker we will first and foremost take into consideration your personal needs and then from there we will be able to work through our list of lenders and what loans they have on offer that will match with your requirements.

Qualifying for a loan

When using a comparison site, you will only be asked a limited number of questions, so it is virtually impossible for the site to narrow down loans you may actually qualify for.

An experienced and qualified Broker will have taken your entire financial history, as well as your financial future, into consideration before making a shortlist of facilities for you to choose from. In addition, Broker’s also know the requirements of each lender and will then be able to match you with both the right facility, and the right lender.

Loan information may not be unbiased

When you visit a comparison site you could be forgiven for thinking that you are getting unbiased information, but it pays to check that the comparison site isn’t owned by a company that displays its own loans on the site.

When you meet with a Broker like us here at Financial Network Group we are completely independent, and we work for you. We’re here for you only, as doing the right thing by you and your families, is what keeps us in a job, not the banks.

Overall

When you start the process of searching for a home loan you want to start off on the right foot. You want to know what your best options are, and you want to have the confidence in knowing that you are receiving the absolute best advice available.  There is absolutely no problem in starting off looking at comparison sites, but always be vigilant and get the advice of an experienced and trusted broker to ensure you make the best decision for you.

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