Sydney Median House Price Falls Below $1 Million

Well, it has finally happened, Sydney house prices have come off the boil and have begun to cool.

With the announcement by the Domain Group, that Sydney’s median house price has fallen below $1 million after recording a second consecutive quarterly drop for the first time in five years, new data shows.

Over the March quarter, the harbour city’s median house price dropped 1.5 per cent to $995,804, with apartments slipping 0.7 per cent to $656,166, according to Domain Group’s March House Price Report released on Thursday.

This is a strong indicator that the Australian property boom has peaked and those who have recently purchased a property had probably wished they had waited just a little longer before committing to the deal. In fact the real problem with a falling market like this is not so much the stable home buyer but the speculator who had hoped the binge was going to go on for a bit longer.

With added pressure from lending institutions further falls are likely. Some banks are now imposing a 70% LVR, which is forcing the hands of the willing bidders of just a month or two back to remain in their pockets. If banks are forced to tighten their policies and pull in over extended borrowers, we could be seeing a dramatic decline in housing prices in over heated markets like Sydney and Melbourne.

Some home owners who have recently sold are hoping that the prices will continue in the downward trend, as they put their funds on ice and wait for the market to bottom out. Expecting to receive a windfall bargain, could be quite realistic as those in a position who are forced to sell, when there are few buyers around, are really at the mercy of the buyer.

Andrew Wilson of the Domain Group believes we are headed for a sustained period of negative growth in housing prices in Sydney but the fall should not be dramatic, due to the decamping of investors.

Melbourne Property Prices Forecast to Rise by Up to 13% in 2016


Last Modified: 01/1102/16

First-time home buyers looking to purchase property in Melbourne can finally sigh in relief because time, for the first time ever, is on their side. For years, people looking to purchase property have had to run around chasing the elusive dream of owning a home because they were outgunned by the cashed-up investors who drove property prices high.

In 2016, it is predicted that while the prices of property could rise by as much as 13%, the fact that several investment banks foresee the market peaking means that lower prices are likely. This is the best news for first-time homeowners but not-so-good news for investors because it means there will be less investor activity.

The unexpected increase in of interest rates by some of Australia’s major banks in October came just as analysts predicted that peaking of Melbourne’s property Property insurancemarket in early March of 2016 according to American economist Harry Dent Jr. Melbourne’s property price growth is expected to eclipse Sydney’s in March 2016 or thereabouts. Brisbane properties on the other hand are undervalued and set to rise, with the possibility of even better returns.

Australia’s two largest property markets are expected to see a ranking change against a backdrop of dropping price growth witnessed all over the country. However, while Melbourne’s property market will overshadow Sydney’s, according to SQM Research, the values will grow at the slowest rate recorded since 2012.

In its report “2016 Housing Boom and Bust Report”, SQM Research says that Melbourne’s properties will grow at the rate of between 8% and 13% compared to Sydney’s 4% to 9%. The good news, however, is that there will only be a slowdown in the property investment market, partly contributed by October’s hike in interest rates, not a complete market crash like that witnessed in the US in 2008.

Good news for investors

For property investors waiting for the market to peak, there may be good news after all as dwelling prices will rise by as much as 13%. SQM’s Louis Christopher warns doomsayers waiting for the Sydney market to crash not to bet on it because even the worst estimates give the city’s dwellings market at least a 3% growth rate through 2016. The bottom line is that any growth is better than a decline, and neither the Melbourne nor the Sydney markets will decline.

On average, national property prices in Australia rose by an average 9.8% over the past year. In the year to June, the harbour city grew by an astounding 18.9%, a figure that greatly uplifted the national average for the year. Christopher says that the rising Melbourne prices will pick up later in the year, although investors shouldn’t expect it to grow throughout the year. He says that SQM forecasts the Australian national residential housing market will record a slowed growth from around March, largely as an impact of Sydney’s declining market and of course, the banks’ increase of interest rates. The market, however, will not record a drop in prices for the year 2016.

There are already warning signs that Sydney has passed the property market drop baton to Melbourne. In September, right before banks increased their interest rates, prices in Melbourne rose by about 2.4%, a sharp contrast to the prices in the Sydney market which recorded no growth in the same month.

The Aussie economy is slowing

If predictions by SQM are correct, then the prices growth recorded in Melbourne in September will take over completely in 2016. The estimated figure of 13% raises serious concerns about the city’s off-plan property market at a time when Sydney sweats to find answers to questions regarding its potential housing bubble this year. If the report by SQM is anything to go by, then the 2016 house prices will not be as good as 2015 was.

It is now a fact that the Australian economy is slowing. With the banking regulations that target investors, and more recently owner occupiers, in full swing, there is a lot of pressure on housing demand. The growth in population, a key factor to housing and property demand, is slowing too, contributing to the demand’s pressure that will be felt by property investors the most.

This, however, does not necessarily indicate that a bubble burst is in the horizon. Christopher says that the weakening dollar, expected drop in banks’ interest rates, and Melbourne’s growth will keep the market growth steady and afloat. It is important to note that all these will depend on other variables remaining favourable to the property market.

The Three scenarios affecting house prices in 2016

After crunching their numbers, SQM have determined that the three conditions will determine the property market growth and housing prices in Melbourne in 2016 are: interest rates, the dollar, and the economy. The several ranges of forecasts they have come up show the possible outcomes and position of the market at throughout and at the end of 2016.

reserve bank of australiaScenario 1: Assuming that by March 2016, the RBA will have cut interest rates by 0.25%. The economy will be stable, but the dollar may fall to US$0.60. In this scenario, SQM forecasts that the Sydney dwelling prices will rise by 4% to 9%, a satisfactory figure for a market that did not record any growth in September.

When it comes to Melbourne, SQM forecasts a growth of between 8% and 13% under the scenario.

Scenario 2: This scenario is almost like the first, except that it is worse. Assuming that the RBA cut interest rates by 0.5% before June 2016 to account for a struggling economy, the dollar will rest at US$0.55. In this case, SQM predicts Melbourne dwelling prices to boom by 10% to 15%. The 0.5% cut of interest rates would leave the bank rates at 1.5%, and this would boost home loan demand. Under this scenario, the Sydney market wouldn’t change much with a 5% to 9% forecast.

Scenario 3: The third scenario may be termed as “overly optimistic” and has the least chances of panning out. It assumes that there will be no rate cuts, the Aussie dollar to stabilise at US$0.80, and a turnaround of the economy. In such a case, there would be consistency in the growth of the housing market and the prices would boom at 4% to 7% for Melbourne and 3% and 7% for Sydney.

There is one denominator across all these three scenarios: The Melbourne property market. As signs show, the Sydney market is stalling already, and Melbourne is positioning itself as the driver of national house and property price growth.


Investment Property Tips For Beginners


Last Modified: 22/09/15

Buying investment properties is an exciting and rewarding venture for many looking to build a well-rounded financial portfolio. For those who are just starting out investing in real estate, or who have questions, read the Q&A below to learn more.

Am I ready to buy investment property?

There are many different ways to invest your money, and one of them is in property. While the idea of owning several other residential buildings and renting them out to tenants may initially appeal to you, it is essential to understand that real estate is simply not for everyone.

It is not a get rich quick scheme and requires careful planning and some time. You will need to decide if you are hiring a landlord or if you will manage the properties yourself. Additionally, you need to ensure that you have all of your legal areas covered and understand all of the possible ramifications that can occur should renters not pay, or if there is damage or injuries in your building. Speaking with your lawyer or financial advisor will give you a good understanding of the potential hazards and will also help you get a better grasp on whether you are ready to invest in real estate or not.

Why buy first home or investment property?

The decision to buy investment properties is definitely a difficult one, especially in today’s uncertain market. Many people may fear investing in properties simply because of the recent drops in real estate, however setting up rental properties is a surprisingly lucrative business.

Purchasing a property in a growing neighborhood or in an area near schools and city centers can easily generate hundreds of extra dollars each month in revenue. While there is an initial set up cost for buying an investment property, once you have a property that people want to rent, and a landlord capable of tending to the tenants, then you can sit back and collect a steady stream of revenue on a regular basis.

How do I buy an investment property?

If you are wondering how to buy your first investment property, then you’re not alone. Many novice buyers are overwhelmed and can often make critical mistakes. This is why it is crucial for you to take your time and understand that buying your first investment property is something that is not done overnight.

First, you need to make sure that you have enough of a down payment for the property, and that you can secure a mortgage at a feasible rate. Next, you should begin scoping out properties. Before choosing any particular property you will need to perform a myriad of checks on them. These checks include checking the age of the house, the type of insulation, having an inspector go around and look for water damage or potential pests, and also ensuring that all of the electrical, heating, and plumbing systems are up to par. Once you’ve got a property that meets all of your requirements, you can then begin bidding on the property and go from there.

Where to buy investment property?

Buying an investment property in Australia, or anywhere in the world for that matter, is a huge step in building long term wealth. After assessing your finances and determining that you can now consider buying the first investment property in your portfolio, you need to now look at where to buy an investment property.

The key features that will ensure a very successful investment property is finding it in a location that is close to public transportation, near good school systems, and is in a decent area that is sought after by residents. While you may pay a bit more to get a property in one of the “hot” locations in town, you will find that there is almost a never ending supply of tenants willing to rent your property.

What mistakes should I avoid making when buying investment properties?

Aside from learning how to buy investment property, it is crucial to learn how “not” to buy investment property. Novice investors can make mistakes that can end up costing them tens of thousands of dollars in legal fees and property losses. Here are three big mistakes that real estate investors commonly make;

1. Not enough research – this is key to ensuring that the property is in a good location, will not have any problems, and has no permit issues that can become an issue later on.

2. Not hiring others when needed – getting an investment property is hard work and requires you to hire others for additional resources. Getting experts in to help set up the property, as well as lawyers to look over contracts and papers is essential to preventing major problems down the road.

3. Poor financing – getting a good and reliable loan is essential because the amount you end up paying in interest on a more exotic loan can mean you actually are paying thousands upon thousands more!

Can I use my current equity to fund buying investment property?

If you have owned your current home for several years, then you likely have a significant amount of equity built up into it that can be tapped as a potential financial resource. Using your current equity can be a way to avoid any out of pocket expenses for the investment property and still allow you to secure a loan at a great interest rate. Contact your mortgage company to see about adding in an additional loan and you may be surprised at the great rates that can be offered!

How do I secure a good loan for my investment property?

Securing a good loan at a great rate is essential, especially for first time investors. Unfortunately, unlike with normal mortgage rates on primary homes, investment properties tend to incur rates that are slightly higher. This is why many first time investors initially start out using their current home equity as a way to help lower the rates on the investment property.

Securing a good loan will take a bit of time and research. You may find that the best rates are with your current mortgage lender, or you may find that you find better rates with a different bank. The key is to do some research, understand the qualifying standards that are set in place, and make sure that you provide ample support to show your current income, your equity, and research to help get a better rate!

Is The Australian Property Market In A Bubble?


With some Australian real estate property markets experiencing 15% and more over the past year, in these post GFC economic times, the question has to be asked, “Are we in a bubble” and if so, “When will the bubble burst?” Before we dive into the answers, it is best we get a definition of exactly what determines a real estate market bubble.

What Defines A Real Estate Market Bubble?

Most commentators would define a market bubble, as something identified only after it does the proverbial bursting. Many would argue that just because a market, in this case the Melbourne and Sydney real estate markets, have experienced above average growth over the past two years, and that these prices represent clearly inflated values, that this in itself is not sufficient to define a bubble.

I know you are probably thinking that, that sort of growth can’t possibly continue indefinitely, and you would be correct. There will reach a point when the bubble will burst, the market (crash) correct itself and prices will be more realistic to their true values. Then again, some would argue that the “bubble” will not burst, that the growth curve will flatten or recede but this will not produce any dramatic drop in the actual values of properties.

Why Are Sydney And Melbourne Real Estate Markets So High?

It comes down to a question of supply and demand. When demand exceeds supply, you have market pressure forcing prices higher. In both Sydney and Melbourne, there are limitations on property availability in several suburbs that have profiles of high desirability. Properties situated close to schools, hospitals, shops, parks, the CBD, transport, cinemas and entertainment areas traditionally attract high demand for the obvious reasons.

Now if you add in the capital gains from such market growth, then you have the added pressure from investors fueling the fire even further. It is a bit like bee’s being attracted to the honey pot. Well, actually there is a oft misquoted phrase, because bee’s make honey doesn’t mean they are attracted to it. Ants on the other hand…

So these ants that are attracted to the honey pot, investors, actually heat up the market according to their numbers. This creates a feeding frenzy and this in turn makes the impression of the bubble.

Why Aren’t Other Areas Of The Market Experiencing Such Growth?

Other parts of Australian, are not experiencing similar growth to be either Sydney or Melbourne, simply because they are not experiencing such growth. I know that sounds like a circular argument but it is true. Everybody wants to go where the action is and this is what pushes markets even higher. Forget the fact that Joe average can’t afford to play the game if he is just starting out as a first home buyer. He doesn’t figure in this rapid growth equation. I know this creates a socioeconomic problem of affordability versus occupancy, as values rise, rates of rental return need to keep step, otherwise the market will not be sustainable.

Simply put if rents are too high, then no one is going to be filling the investors properties and without that, the property values will fall.

Areas outside of the property hotspots, have remained at steady rates of growth that is more sustainable, simply because the investors are fueling the fires elsewhere. Speaking of investors where are they coming from?

Foreign Investors Fueling The Sydney And Melbourne Real Estate Bubble

In the Sydney Morning Herald today, Mark Mulligan explains that the recent trouble with the Chinese economy has brought about reforms that will increase the pressure on Australian Assets, including property, as China frees up the flow of money in and out of their economy. It is related to the equity, bond and currency markets, that will lead to inflated prices of assets across the world.

Foreign ownership of land is something that the authorities have lamely attempted to curb, all the while rubbing their collective hands together as their coffers are bursting at the seams. In NSW for instance, John Bairds government has reaped an enormous budget surplus out of the property boom, by way of collecting stamp duties. In just the first two months of this year, the Baird government netted a massive $1 billion in stamp duty as figures released from the NSW Office of State Revenue reveal.

What Might Trigger The Bubble To Burst?

If a real estate bubble does exist in these two markets, what might be the trigger of it bursting? Good question and to find an answer we can look at the sub-prime real estate bubble bursting in the US which lead to the worldwide economic meltdown we know as the GFC. In this situation we had a whole range of low interest loans coming out of the honeymoon phase, with an over represented proportion of home owners unable to pay the higher repayments suddenly either selling or going into foreclosure. This sent a chill through the market and the prices began to tumble.

It comes down to supply and demand, coupled with market reaction.

If there exists a very good reason to exit the market as a cashed up investor pulling out their gains, with the belief that the market has topped out is brought about by the sustainability factor capping prices, then this could accelerate to the point of everyone wanting to get out at the same time before the market falls too far.

Once this happens  and the speculative investors are out and only the long term buy and hold investors remain, those who bought at over inflated prices, who now face lower returns and a dropping value also decide to get out and so the bubble bursts in a spectacular fashion.

What Are The Experts Saying?

According to this article published on the SMH the 25 leading economic forecasters polled by the Fairfax paper, most believe that the Sydney market will experience growth of 10.4 per cent and Melbourne to grow by 6.4 per cent this year. If this is true, then this puts pressure on the federal reserve to act in a way to stimulate an otherwise lagging economy.

Well maybe they are right and there is no bubble and it won’t burst anytime soon. And then again, what would happen if another major worldwide economic shift came into play? The destabilisation of the EU with Greece’s recent troubles might not be the trigger but what is happening in China as demand for the worlds commodities comes off the boil could well be something to watch, according to Harry Dent.


Melbourne and Sydney Hot Property Markets 2016


Last Modified: 01/02/16

Investment Property For The Cost Of A Cup Of Coffee?

How expensive is it to own your an investment property? According to John Faulkner from Home Port Property, it can be as little as just $4 a week. Round about the cost of a cup of coffee. To see how John explains that the average person can afford to do this, by looking at a real life example of an off the plan Brisbane development, just visit this page to view the free webinar replay and find out exactly how you can do this too. Now back to Melbourne vs Sydney…

The property prices in Melbourne are either impossibly high or dwindling and the answer depends on who you ask. Some suburbs are booming while others show stagnation from being oversupplied. High end suburbs like Kew and Brighton are booming while in the inner circle, there is a glut that is causing price stagnation. The good thing though is that the Victorian capital contains some good prospects which, unlike Sydney, have not reached the unaffordable level.

So long as you are ready to venture outside the typical inner circles of Melbourne, there are some well-priced but attractive prospects in Melbourne. Most of these suburbs have excellent transport connections as well as growing job prospects.


So what are the investment hotspots in Melbourne?

melbourne_hotspot_investment_2015Opportunities on the Peninsula

One affordable option found in the Bayside region is Frankston. This is a coastal suburb that has parks and gardens as well as several young families. Also, it has rail connections to Melbourne’s CBD and a good road connection in addition to Peninsula Link.
Property rates here are growing by roughly 7% annually, and the median house price stands at about $330,000 according to the figures coming from RP Data. The same figures show the median unit price to be $260,000.

Experts see Frankston as being on the verge of a big socio-economic transformation. It is a hub that is regionally significant between the Mornington Peninsula and Southern Metro area of Melbourne. The area has been estimated to have a population of over 470,000 by 2026. Employment opportunities in this area are also set to be improved by the local council.

The inviting northwest

Another area experiencing an unusual wave of popularity is Sunbury, located some 40 km northwest of the CBD. Many buyers see the place as offering cheaper housing despite being in an area that is well-linked to the city.
Observers see this area as one of the Melbourne’s principal growth corridors given that it offers cheaper housing that is sure to drive investors looking for sustainable growth and good yields.

501Beware the CBD

Many investors usually find it impossible to resist the CBD because this is where most of the new buildings are, the best jobs are found and also the most vibrant dining and entertainment is to be found.

But the flip-side is that there is an oversupply of houses given that too many units are being developed in this area. This has really slowed price growth, which ultimately hurts rental yields. This should discourage many prospective investors.

According to Cameron Kusher, a senior research analyst at RP Data, the RBA was concerned by this and that is why they warned investors of risks involved with buying inner-city as well as outer fringe Melbourne markets earlier this year.
Kusher further notes that Melbourne has the smallest growth rental yields at 4.4% for units and 3.6% for houses.

What are the top 5 property investment hot spots of Sydney?

There are many factors that come into play for a suburb to be made a growth area. These include improved roads, new infrastructure, and access to local amenities and public transport. Investors also consider why a community would want to live in a specific area, as this is what makes a suburb popular with renters. Based on these factors, let’s look at the hottest property markets in Sydney.

• Lakemba

What makes Lakemba a terrific property investment destination is because of the cultural connection that people usually have with Lakemba Mosque. This means that the area is likely to always attract renters as well as offer a decent rental return.

• Surry Hills

This still remains a solid buying area which will forever be rentable. You could also get a great terrace at a bargain price.sydney_hotspot_investment_2015

• Botany

This is absolutely a cracker area. Although many people are of the view that this area is falls in the flight path, the truth is that it’s not. In terms of price, the area is hugely undervalued given that it also has Eastern Distributor’s which makes it a lot easy accessing the area. There are lots of opportunities that you can renovate in this place.

• Woolloomooloo

Have some of the best priced terraces with some still requiring renovations. The place is also quite popular with the renters.

• Pyrmont

available soon sydney investment propertiesThis area has terraces that are hugely undervalued since they are lumped in one category as units which happen to be in oversupply. What makes this area terrific is the cultural lifestyles that it offers and also its closeness with the Harbour which has made it one of the best Sydney hotspots.

Affordability or growth?

Although Melbourne might appear affordable in some areas, there has not been a lot of investor movement and this is with a reason.
Kusher says that both Sydney and Perth had a 5-year stretch which was characterized by flat-lining and this allowed for affordability in the two cities to improve. It is for this reason that in Sydney, for instance, low rates of interest have been catalytic lately for property investment.

Conversely, Melbourne did not have a long period for market correction, and although it has lots of affordable offerings, the current values stand at 4.4% lower as compared to their October 2010 peak.

The reason the Melbourne property market does not respond with similar level of dynamism as the Sydney and Perth markets is basically because of affordability, according to Kusher.

investment property melbourneMelbourne market however is expected to continue to realize moderately rising values with mortgage rates being so low. However, there are risks of further value falls if mortgage rates start to rise and also if the unemployment rises as has been forecast.

In meantime though, a handful of Melbourne suburbs have enjoyed a dramatic growth, and these include East Melbourne, Eaglemont, Elwood, Malvern East and Warrandyte. In these suburbs, house values shot up by over 20% in the year ending July.

In suburbs like Eaglemont, values are obviously at the higher end but owing to the spaciousness as well as the beauty in majority of these homes, there seems to be an increasing appetite of living there.
As for units, Albion, Murrumbeena, and South Kingsville increased in value by over 23% in the run up to July. The suburbs are also well connected to public transport and are close to Melbourne City Centre.

How To Use Property Investment For A Comfortable Retirement


Last Modified: 13/10/15

In simple words, property investment refers to investing in home properties (real estate). This method of investing has become much more popular during recent years because of the great investment opportunities it holds, and because it is a great way to accumulate savings and extra income. The price of real estate is constantly fluctuating, and properties that are on the rise can earn an investor a lot of extra money that can be saved and then used down the road.

How does property investment work?

At first, an investor will buy a property and then will allow someone to rent it (commonly referred to as a tenant). The person who owns the property is known as the landlord, and they will normally charge the tenant whatever amount of money will allow them to cover all of the mortgage costs, taxes, and other costs that it takes to maintain the property.

Landlords can profit from this in a number of ways. Some make extra money by charging a small amount more for monthly rent, which allows them to profit frequently while the tenant is living on the property. Another way the profit, but which requires more patience, is waiting until the mortgage has been paid off. At this time, the majority of rent will become profit, and there is also a chance that the property will have increased in value, meaning a great deal of profit.

Investing in real estate can sometimes cause problems and more harm than good, however, if you put in the time and effort that it requires, then you will be successful and can find yourself putting a lot of money in your pocket for down the road.

How much time and effort does property investment require?

There are different kinds of investments and the time it takes to properly invest in them varies. For example, investing in a stock is very simple and doesn’t require nearly as much attention as property investment. The stock sits in your brokerage account and, if you’re lucky enough or have enough knowledge of the stock market, it will increase in value. Investing in a rental property is much different; you will need to put a great deal of time and effort into maintaining the home, making sure that the tenants take care of it and avoid any property damages, etc. This can be a very demanding investment and is definitely not recommended for everyone, however the benefits to getting involved in property investment are definitely leaning in its favor.

How can property investment help you when you retire?

Anything that helps you invest your money and accumulate more will aid you when you finally settle down for retirement. It is definitely ideal that you retire with sufficient funds to enjoy the last years of your life and live comfortably. Having a good amount of funds will allow you to travel, treat your children and grandchildren, and whatever else you feel like doing. Even if you are just going to relax after retirement, it is definitely important to have enough money, and investing is something that a great deal of people do throughout their working years so that they can have this benefit once they retire.
Using property investment for retirement has become a more common method of investing and more people than ever are retiring from their careers with a great deal of savings in their banks.

It has been proven that rental properties can allow a person to accumulate around $200 to $1,000 per month in savings, depending on the property and its location. It is essential for a property to have a good location, and this amount can also go up if the property increases in value. If a person invests in a property at the time their 30 years old, then this means around $72,000 (at the least) in retirement savings by the time that person is 60 years old. Adding this money into an RRSP will mean even more savings!

People can even continue to invest in a property after they are retired. This means they will have a steady flow of money coming into them each month, giving a sense of security. This is an amazing opportunity for those individuals who don’t mind putting a bit of focus and care into maintaining the property, even once they have retired from their job or career.

What do the experts have to say?

Andrew McLean, author of the two books Making Money in Foreclosures and Investing in Real Estate, is also a landlord with a great deal of experience in property investments. He had provided the world with invaluable advice and has quite a few positive things to say about investing in properties:

“Rents are always going to go up; the value of your property is almost always going to go up and most of your costs are going to stay the same, particularly if you assume a fixed mortgage rate.”
“Eventually, even if you’re only making a little in the beginning, you will watch your income climb over the years.”

This is an amazing opportunity and using property investment for retirement is definitely a great option for anyone who is looking to invest in something that will provide them with extra income and savings. If the property is in a good location and they make sure that the tenant is responsible, this is a great way to accumulate money over the years and make a great amount of savings for retirement. Living comfortably after retirement is very important and is something to think about during your working years. It is definitely something to consider and to find out more about. It might provide you with a couple vacations or the chance to pay for your grandchildren’s education years down the road. Investing in a property can also continue after retirement and will provide the individual with a steady income that they can rely on. Although there are some risks (such as not picking a good property or having an irresponsible tenant), with a little bit of work and effort, property investment can be a highly useful tool for you to build your savings through the years.

Frequently Asked Questions About Retirement

We live in a time and age where working has taken a different turn. Most people opt to retire early. In the current generation, retirement is no longer about age but it involves having ones budget and liabilities on hold, understanding what resources one has and how to manage them. Here are answers to some of the frequently asked questions about retirement.

1. How much super do I need to retire?

Make sure you can afford. Retire when you are emotionally fit to quit your jobs, when you feel the need to be your own boss and being in control, when you have health complications, you are financially stable and when you age.

2. How much should I save to retire?

The amount of money you need to have depends on the age that you want to retire at. This is made possible through the use of a calculator. The calculator takes into consideration various factors including: One’s current age, Retirement age, The investment pattern whether it is low, risk or high risk, Life expectancy, estimated average inflation rate, returns from investments and portfolio size. It however does not include securities held. A retirement calculator or a financial adviser will help you calculate this.

3. When should I start saving for retirement?

Start saving upon realization that you need to retire early. Keep saving having in mind that saving rewards. It doesn’t mean that you have to start big to save, start small increasing the savings with time. Come up with a saving strategy and stick to it having set goals. Analyze your retirement needs and the estimated amount. One needs a minimum of 70% of the pre-retirement earnings for the lower earners while 90% or more is required once one stops working to maintain living standards.

4. How do I start saving for my retirement?

Contributing to one’s employer savings plan is a noble idea which would mean lower taxes. Learn about your employer’s pension plan and inquire whether you are covered by it or not. Request an individual statement to analyze the benefits you will gain. You can also find out whether you are included in your spouse’s savings plan. Factors such as Inflation and investment type play a role in determining the savings at retirement. All this is aimed at reducing risks and improving returns. A good saving plan entails restricting from using the money otherwise one bears the risk of penalties or losing tax benefits. In case one needs to change the job one can roll the savings over to the new employers saving plan or invest in an Individual Retirement Plan (IRA)-either traditional IRA or Roth IRA, which provides better tax advantages.

5. How much do I need to save so I can retire financially secure?

How much money one should be saving depends on their paycheck. This is better done by analyzing ones expenditure and allocating a certain percentage for saving every month. A rough estimate of 15% of the gross earning is advised to be allocated to retirement for a good retirement scheme. If you are not saving, you can opt to contribute to your employers saving scheme then develop a personal plan later. The use of a retirement fund is another option. Getting a financial planner will help you budget and know the savings. Savings should especially be done during early years to see higher savings.

6. What is the Age Pension and how do I apply for it?

Social security is a system or the Age Pension, that offers pay out if you invested in it while working. It works by using money paid via tax deductions and sending it out to those enrolled. You can apply for Social Security retirement benefits around the age of 62 years and 72 years. However it only works if you have reached the retirement age which depends on the year of birth. Applications can be made through the phone or the Social Security Offices.

7. What are the advantages of the Age Pension?

In Australia the present situation exists to support people from their retirement age, via the Age Pension. The advantages of this are The purpose of any retirement plan is to provide income after retirement. An employer can offer his/her employees a supplement pension that serves as a token of appreciation thus improving the business by attracting and keeping competent employees.

8. When do I receive the benefits of Social Security?

You can access the retirement benefits in case need arises mostly from as early as 62 but the total amount one will receive at the end will be less than the expected amount. For example , If your retirement age is 66-the reduction age at 62 years is 25% and at 64 it is about 13.3% this shows a decreased rate as one nears their retirement age.

9. What are the types of retirement plans available?

Two main categories are: Defined contribution and Defined benefit

Defined contribution plan-It entails an allocation formula that specifies a certain percentage of compensation to be contributed by a participant by allocating a certain percentage of their salary before taxation and allocating it to the retirement plan.

Defined benefit plan-It allocates a preferred level of benefits to be paid on retirement. It uses a fixed monthly payment or a percentage of compensation; the employer then contributes to this plan yearly ensuring the benefits are always available upon need. Annual contributions depend on factors like salary, age, interest rates and inflation rates.

10. Which is the best retirement plan?

You should opt for a plan that provides lower taxes and higher income. An eligible candidate can have a traditional IRA(Individual Retirement Account) and a Roth IRA. The choice depends on:

Investment choices available-Large companies and corporations limit their investments choices to bonds and mutual funds which also applies to smaller companies but the difference is that they give more options to choose from.

Investment charges: the fees charged to the investment plan

Client’s accessibility-A good retirement plan puts into consideration the need to access the savings before the expected time. Individual Retirement Account can be accessed any time however the amount withdrawn cannot be paid back to the IRA.

Availability and Professional Investment Management Cost-A client who is unable to properly device an investment plan should consider services offered by a professional.

Other factors to consider include: Age and retirement pattern, the purpose of funding the retirement account among others.

Will You Retire Comfortbly or Not?

The topic of retirement starts to loom large when the number of work years starts to grow slim. For many the thought of retirement is only just a dream, for the simple reason that we are constantly bombarded with negativity in the media about how retirement is something only previous generations could look forward to.

It is true, with Australia’s aging population set to soar with the baby boomer generation now moving into that space, the burden placed on the social system, the pension, is truly going to come under an impossible strain. The baby boomer generation is the period of 1946 to 1964, gathering it’s title from the post World War Two period of a population explosion experienced around the globe. As this demographic move into the retirement phase of life and the number of income producing folk begin to decline, the strain placed on the public purse is going to increase exponentially.

The labour force participation rate is being artificially stimulated, to keep people working longer than they would have expected, in order to keep propping up the coffers and straining more blood from a stone, on people who are not able to be financially independent and retire comfortably. The federal government is slowly increasing the minimum retirement age to 70 years of age. The time to retire and collect the public pension is like a mirage that will be forever moving further and further down the road to become something of an impossible dream.

One article about the hard working middle class on the The Age, focuses on the plight of many who are not prepared for the financial demands placed on the elderly once the money source has dried up.

A recent TVC produced by a financial services company highlighted this fact and fear, with a futuristic setting inside a museum. The scene depicts a young boy looking through the glass of the museum display, watching a carefree elderly couple driving a red sports car with wind in their hair and not a care in the world. With this young boy is a man in a business suit, grey haired and looking rather sad. As the boy looks up and asks, “What are they doing granpa?” the sad old gentleman, aged about 75 years old, replies, “They are in retirement. Something people used to do when I was a boy”. The youngst replies, “What do they do in retirement?” – “Whatever they wanted” replies the sad old gent.

The point is made very clearly and for those approaching this time in life, it is frightening indeed.

To think that you will not be able to stop working, (that is assuming you will still have a job or be able to get some sort of work) is a very dim prospect for those in such a position. You have worked hard all your life, put your kids through school, paid off the house and have put aside what little superannuation you could afford, and yet you are faced with an ever lengthening of time to rest and relax with the hardship of working for a living. Just how many Australian’s are in this position is a very good question.

In a recent survey published in the Sydney Morning Herald, “Hard Times For Baby Boomers“, only half of the over 50’s surveyed were looking forward to retirement. When you note the statistics, that 25% had less than $500k in retirement funding, plus a further 12% with having between $50k and $100k in super, you can see why.

So if you are in the predicament of having too little super set aside, and let’s face it not many of the Baby Boomers have been covered by the compulsory superannuation contributions of later generations, the only option is going to be the government pension. With such a strain on the public purse, the money is going to run out and then what?

With the right financial planning even with a small amount in super, given a short amount of time, for example around 7 years, someone with $300k to invest in the US real estate market, could amass a property portfolio, fully paid off and valued at around $2 million dollars. With property management fees and taxes taken out, an individual or couple would be left with around $9k per month to live on. The way this is done, is by sourcing the right properties in the best locations that offer a positive yield (cash flow positive), as against cash flow negative, that essentially pay themselves off over the approximate seven year period.

Trying to find cash flow positive investment properties in Australia right now, with the current overheated property market, is like trying to find hens teeth. Sydney and Melbourne, are at an all time high and investing in these areas is not going to produce the cash flow positive yield that a soon to retire Baby Boomer might be looking for. If you are nowhere near retirement and these two cities are your prime target right now, then you may wish to visit this site for more information.

If any of this is touching a nerve then, now is the time to act. Relying on the public purse may make you feel like the dog who hungry for a bone, relied on the old lady who found the cupboard bare.

Should You Sell Your Own Home Or Use A Real Estate Agent?

Have you ever attempted to market your own property? If you have then you are in no doubt as to the challenges that “going it alone” can bring to the equation when it comes to selling a property.

The major hurdles that may break your spirit are as follows:

  1. You will struggle to know how to market your property in a professional manner.
  2. You will find the open for inspections difficult to manage without help.
  3. When it comes to negotiating with buyers, you are tempted to get emotional.
  4. Without the knowledge and professionalism to sell your property quickly, your home may begin to “stink” in the eyes of the buying public.
  5. You may not know as many potential buyers as a professional real estate agent will.

Here is an info graphic we have come up with for you to consider the benefits of using a professional real estate agent.

Feel free to use this on your blog, website or post to Facebook.


Courtesy of: Investment Property Melbourne Experts – Homeport Property

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