2055: What's the future for Australian property?

Australia's demographic changes and your finances

The Intergenerational Report released last month has already made significant waves around the country, outlining the demographic changes that Australia is likely to see over the next 40 years. Commentators have been falling over each other to explain the implications these shifts will have for their chosen industries. 

While these developments can sound monumental and significant in the abstract, it can be difficult to grasp how such trends affect the ordinary consumer in tangible ways. What’s the connection between a bigger population and your savings account?

In fact, if the Intergenerational Report is correct, its predictions could have a marked impact on your financial situation. We’ll try help you make sense of it all.

More housing, lower prices

There are a number of reasons why house prices seem so huge right now: Plenty of investor activity, issues with the availability of land and the affordability of home loans spurred on by low interest rates, just to name a few. Another is a widely reported undersupply of homes — 228,000, according to the Australian Housing and Urban Research Institute. With Australia’s population growing, this means more buyers clamouring for less property, driving up prices.

With this in mind, the Intergenerational Report’s prediction of a 39.7 million-strong population by 2054/55 would seem to be more bad news. However, it may have the opposite effect if it ends up spurring on housing construction. Numerous housing industry bodies used the report’s release to call for more homes to be built, such as Master Builders Australia CEO Wilhelm Harnisch and the Housing Industry Association’s (HIA) Chief Executive of  Industry Policy and Media Graham Wolfe.

This growing pressure to add more housing supply is likely to increased construction activity, and an increase in stock could well bring prices down to a level easier on the home loan calculator. As HIA Senior Economist Shane Garrett said in an April 1 statement: “A steady pipeline of new homes represents the most effective solution to alleviating housing affordability pressures.”

Get used to living longer

Of course, it’s not all mortgages and home deposits. Your superannuation and savings are also likely to be impacted by future demographic changes, with Australians expected to continue living longer than ever. For those born in 2054-55, life expectancy is predicted to be 95.1 years for men and 96.6 years for women. 

While this is not the average for those who are alive today, it does indicate that life expectancies are generally growing, which means your retirement savings are likely to become increasingly stretched. This is particularly the case if living costs continue to rise. Since last quarter, the Association of Superannuation Funds of Australia’s (ASFA) retirement standard — the income needed for retirement — slightly increased.

Some Australians are already looking beyond super to fund their retirement. ING Direct found in a recent survey that Australians believe super will contribute to only 35.8 percent of their nest egg, and are looking toward their inheritance or property to make up the rest. In order to have a secure retirement down the track, it may be time to start thinking about an investment fund now.

A precarious age distribution

The consequence — at least partly — of this longer life expectancy is a larger proportion of older Australians. According to the Intergenerational Report there will be approximately 40,000 people aged over 100 in 40 years, and 2 million Australians aged 85 or over. To put that into perspective, 40 years prior to today, there were 122 Australians aged over 100 and 80,000 aged 85 or over. 

Experts have long been warning that a higher ratio of elderly to younger Australians will put an increasing strain on public services, which could have one of two outcomes:

The working population is taxed more in order to continue funding public services such as the Age Pension.
The services are reduced or cut, in order to alleviate funding pressures

Whatever, the case it points to the importance of taking out a savings account calculator and creating a workable budget for your retirement goals now, rather than leaving it to the last minute. Pauline Vamos, ASFA CEO, said as much. 

“[The report] shows how important it is to accumulate as much superannuation and private savings as you can,” she said. 

“Government finances will continue to be under pressure over the coming decades, and the best way to protect yourself against future policy changes is to start saving now for the retirement you want.”

With planning and discipline, you can set yourself up to be ready for any demographic shifts, whether good or bad.

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Why should I get an ING home loan pre-approval?

When you apply for an ING home loan pre-approval, you might be required to provide proof of employment and income, savings, as well as details on any on-going debts. The lender could also make a credit enquiry against your name. If you’re pre-approved, you will know how much money ING is willing to lend you. 

Please note, however, that a pre-approval is nothing more than an idea of your ability to borrow funds and is not the final approval. You should receive the home loan approval  only after finalising the property and submitting a formal loan application to the lender, ING. Additionally, a pre-approval does not stay valid indefinitely, since your financial circumstances and the home loan market could change overnight.

 

 

Can I get a NAB home loan on casual employment?

While many lenders consider casual employees as high-risk borrowers because of their fluctuating incomes, there are a few specialist lenders, such as NAB, which may provide home loans to individuals employed on a casual basis. A NAB home loan for casual employment is essentially a low doc home loan specifically designed to help casually employed individuals who may be unable to provide standard financial documents. However, since such loans are deemed high risk compared to regular home loans, you could be charged higher rates and receive lower maximum LVRs (Loan to Value Ratio, which is the loan amount you can borrow against the value of the property).

While applying for a home loan as a casual employee, you will likely be asked to demonstrate that you've been working steadily and might need to provide group certificates for the last two years. It is at the lender’s discretion to pick either of the two group certificates and consider that to be your income. If you’ve not had the same job for several years, providing proof of income could be a bit of a challenge for you. In this scenario, some lenders may rely on your year to date (YTD) income, and instead calculate your yearly income from that.

Can I apply for an ANZ non-resident home loan? 

You may be eligible to apply for an ANZ non-resident home loan only if you meet the following two conditions:

  1. You hold a Temporary Skill Shortage (TSS) visa or its predecessor, the Temporary Skilled Work (subclass 457) visa.
  2. Your job is included in the Australian government’s Medium and Long Term Strategic Skills List. 

However, non-resident home loan applications may need Foreign Investment Review Board (FIRB) approval in addition to meeting ANZ’s Mortgage Credit Requirements. Also, they may not be eligible for loans that require paying for Lender’s Mortgage Insurance (LMI). As a result, you may not be able to borrow more than 80 per cent of your home’s value. However, you can apply as a co-borrower with your spouse if they are a citizen of either Australia or New Zealand, or are a permanent resident.

How long does Bankwest take to approve home loans?

Full approval for a home loan usually involves a property valuation, which, Bankwest suggests, can take “a week or two”. As a result, getting your home loan approved may take longer. However, you may get full approval within this time if you applied for and received conditional approval, sometimes called a pre-approval, from Bankwest before finalising the home you want to buy.  

Another way of speeding up approvals can be by completing, signing, and submitting your home loan application digitally. Essentially, you give the bank or your mortgage broker a copy of your home’s sale contract and then complete the rest of the steps online. Bankwest has claimed this cuts the approval time to less than four days, although this may only happen if your income and credit history can be verified easily, or if your home’s valuation doesn’t take time.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

How long should I have my mortgage for?

The standard length of a mortgage is between 25-30 years however they can be as long as 40 years and as few as one. There is a benefit to having a shorter mortgage as the faster you pay off the amount you owe, the less you’ll pay your bank in interest.

Of course, shorter mortgages will require higher monthly payments so plug the numbers into a mortgage calculator to find out how many years you can potentially shave off your budget.

For example monthly repayments on a $500,000 over 25 years with an interest rate of 5% are $2923. On the same loan with the same interest rate over 30 years repayments would be $2684 a month. At first blush, the 30 year mortgage sounds great with significantly lower monthly repayments but remember, stretching your loan out by an extra five years will see you hand over $89,396 in interest repayments to your bank.

Are bad credit home loans dangerous?

Bad credit home loans can be dangerous if the borrower signs up for a loan they’ll struggle to repay. This might occur if the borrower takes out a mortgage at the limit of their financial capacity, especially if they have some combination of a low income, an insecure job and poor savings habits.

Bad credit home loans can also be dangerous if the borrower buys a home in a stagnant or falling market – because if the home has to be sold, they might be left with ‘negative equity’ (where the home is worth less than the mortgage).

That said, bad credit home loans can work out well if the borrower is able to repay the mortgage – for example, if they borrow conservatively, have a decent income, a secure job and good savings habits. Another good sign is if the borrower buys a property in a market that is likely to rise over the long term.

How much money can I borrow for a home loan?

Tip: You can use RateCity how much can I borrow calculator to get a quick answer.

How much money you can borrow for a home loan will depend on a number of factors including your employment status, your income (and your partner’s income if you are taking out a joint loan), the size of your deposit, your living expenses and any other debt you might hold, including credit cards. 

A good place to start is to work out how much you can afford to make in monthly repayments, factoring in a buffer of at least 2 – 3 per cent to allow for interest rate rises along the way. You’ll also need to factor in additional costs that come with purchasing a property such as stamp duty, legal fees, building inspections, strata or council fees.

If you are planning on renting the property, you can factor in the expected rental income to help offset the mortgage, but again it’s prudent to add a significant buffer to allow for rental management fees, maintenance costs and short periods of no rental income when tenants move out. It’s also wise to factor in changes in personal circumstances – the typical home loan lasts for around 30 years and a lot can happen between now and then.

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

If I don't like my new lender after I refinance, can I go back to my previous lender?

If you wish to return to your previous lender after refinancing, you will have to go through the refinancing process again and pay a second set of discharge and upfront fees. 

Therefore, before you refinance, it’s important to weigh up the new prospective lender against your current lender in a number of areas, including fees, flexibility, customer service and interest rate.

Can I refinance if I have other products bundled with my home loan?

If your home loan was part of a package deal that included access to credit cards, transaction accounts or term deposits from the same lender, switching all of these over to a new lender can seem daunting. However, some lenders offer to manage part of this process for you as an incentive to refinance with them – contact your lender to learn more about what they offer.