February 2015

All you need to know about buying at auction

Bidding for a property at auction can be stressful but you can reduce the stress involved. Before you consider bidding use our tips to make sure you’re prepared and know what to expect.

Step 1: Work out the costs

Working out how much you can afford to repay on a home loan plus all the associated costs of buying a property—like stamp duty―is the first step.
Of course, buying at auction means the final purchase price remains unknown until the hammer falls. But a defined financial limit means you’ll know when to stop bidding.
Use a home loan calculator and speak to a financial planner to understand all the costs of buying a property.

Step 2: Arrange finance

Make sure you’re ready to bid. That means knowing exactly how much you can borrow comfortably because your lender has assessed your situation and approved a specific amount.
Visit your lender before you start looking for a property and arrange pre-approval so you’re set to go. With an approved home loan you can benefit from competitive interest rates and terms, plus the convenience of pre-approval.

Step 3: Do your research

It can take time to find the right house. Researching the area will give you an idea of prices for similar properties.
Attend auctions in the area so you understand the strategies agents use and what to expect.
Before buying at auction, make sure the property is solid—arrange building and pest inspections. And read the contract, certificate of title and section statement so you understand what you’d be buying. If possible, ask a solicitor to look over the paperwork with you.

Step 4: Ready, set… auction!

Before the auction, decide who’ll bid for the property―speak with the real estate agent. You can ask someone to bid on your behalf; they may need to sign a proxy form.
If the reserve price―the minimum the seller will accept―is reached and you’re the winning bidder you’ll have to sign a contract of sale and pay 10% deposit immediately after auction. Ask the agent how you’ll need to provide the deposit. Will you need a personal cheque book?
If the reserve price isn’t reached but you are the highest bidder, the agent may negotiate with you and the seller afterwards.

Step 5: Be prepared to walk away

If your heart’s set on a particular property, it can be difficult watching someone outbid you. But it’s better to walk away without a property than with a debt larger than you can repay.
Remember your financial limits and stick to them. You’ll avoid paying more than you can afford―or than a property may be worth―and stay out of the emotional charge an auction can create.
Making the decision to buy or not to buy can be complex, so it’s important to talk to your financial adviser before you take the plunge.

 

Important note: © AMP Life Limited. This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Is it time to stop playing the property waiting game?

What advice would you give first home buyers playing the waiting game with the property market? Is it a case of 'What goes up must come down'?

We’re constantly hearing speculation in the media about a crash in Australian house prices. But major falls have only really occurred on a few occasions, like the 1930s. The more recent falls during the GFC and 2011-12 were pretty modest—on average around 8%1.  
More substantial falls can happen in the higher end suburbs around Australia and in individual properties, but otherwise, there have tended to be relatively modest falls in other areas – for example, in Western Sydney, where house prices fell 10% or so after the surge in 2003-042.
It’s very difficult to time the property market. While prices could come down, I don’t see a collapse on the horizon and any fall back could come from higher levels. So while it’s tempting to hold off, there are also many reasons to buy a place.

  • You may be able to take advantage of incentives like the first home buyers grant (in some states), negative gearing if you go in first as an investor. That’s how I got into the housing market—I bought my first house using negative gearing and rented somewhere cheap in order to get my mortgage down.

  • You can take advantage of today’s record low interest rates. You may be able to lock in a rate of around 4.7% for five years at the moment. The Reserve Bank will probably wait until next year before raising rates, despite the recent decline in the value of the Aussie dollar.

  • You’re buying a ready-made savings plan. Renters often end up financially worse off than owners because they don’t save as much.

But what about waiting for a change in the legislative landscape to make the market more favourable for first home buyers?

At the end of last year there was a lot of media focus on the Financial System Inquiry.
This report, by former Commonwealth CEO David Murray, highlighted a number of ways the government could take the heat out of the property market by removing certain tax breaks.

Let’s turn to Shane on this. 

  • Self managed super funds investing in property. It’s worth noting that SMSFs can gear into property while regular super funds typically can’t. If SMSFs continue to grow in number this could possibly create distortions in the market. So the government may come to the view there’s a case to reform this to create a level playing field.

  • Capital gains concession for investments held beyond 12 months. This concession has some merit, as it discourages short-term speculation. But it does perhaps encourage individuals to focus more on attaining capital gain than on income. So the government may look at removing it.

  • Negative gearing. The ability to write off the costs of investing seems perfectly reasonable. Despite what you might read, it’s not the reason why we have expensive property in Australia—that’s more to do with a lack of supply. And if you remove it or restrict it for property, what about other investments?  In any case, there would be a political outcry if negative gearing were removed so I think this is in the too hard basket.

But remember, these are suggestions only at this stage. If implemented, the Murray Report could take some of the heat out but there’s no guarantee if and when this will happen.

And some final words from Shane about getting on the property ladder…

It’s tempting to get discouraged when you’re trying to get on the property ladder and start seeing things in terms of ‘insiders’ and ‘outsiders’. But that’s not a very helpful way to view the property market.

I would focus on other things like:

  • Are you buying in the right area?

  • How can you use the current tax concessions and grants to your advantage?

  • How secure is your job? If you’re worried about losing your job and not being able to service the loan, then this could be a reason not to buy right now. But you can take out income protection insurance against that happening.

Overall, provided you have a regular and secure income, you could lock in a pretty low interest rate and offset any potential savings you might make by waiting in the hope of lower prices.

 

1. On AMP Capital estimates.
2. On AMP Capital estimates.

What you need to know
This document was prepared by AMP Capital Investors Limited (ABN 59 001 777 591, AFSL No 232497). This document, unless otherwise specified, is current at Wednesday 4 February 2015 and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after that date. While every care has been taken in the preparation of this document, AMP Capital Investors Limited makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. ipac asset management limited (ABN 22 003 257 225, AFSL 234655) (ipac) is the responsible entity of the AMP Capital Income Generator Fund (Fund) and the issuer of the units in the Fund. To invest in the Fund, investors will need to obtain the current Product Disclosure Statement (PDS) from AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232 497) (AMP Capital). The PDS contains important information about investing in the Fund and it is important that investors read the PDS before making a decision about whether to acquire, or continue to hold or dispose of units in the Fund. Neither AMP Capital, ipac nor any other company in the AMP Group guarantees the repayment of capital or the performance of any product or any particular rate of return referred to in this document. This document is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

 

 

 

 

Tips for success in a competitive job market

If you’re finding it hard to get started in your chosen career—or your kids are doing it tough—you’re not alone. Many other young Australians are in the same boat, with a high proportion of young people working in part-time hospitality and retail jobs, even when they have uni degrees.

The latest AMP.NATSEM1 report  shows that demographic, structural and technological change has resulted in an uncertain labour market. There’s more competition for good jobs and even traditional casual jobs are proving harder to find.

 “It’s a tough environment for many young people looking to get their foot on the career ladder” Paul Sainsbury, AMP Chief Customer Officer.


But don’t let that put you off! In getting through school or uni you’ve already demonstrated determination, drive and resilience. Now it’s time to take the next step and market your skills to get your dream job. Or if you’re lucky enough to be working for your dream company, it’s time to step up and secure the perfect role.

Here are 8 ways to start taking control of your future.

  1. Read the latest AMP.NATSEM report, which gives you a genuine picture of life as young jobseeker in 21st century Australia.

  2. Consider unpaid work like internships – Try combining work experience in your chosen field with part-time work in an area like hospitality to pay the bills.

  3. Try, try and try again – Perseverance pays dividends. And it helps if your chosen career matches your passion. Enthusiasm can carry you a long way with prospective employers.

  4. Start your own business – If you have a great business idea and the passion to make it work, why not give yourself a job?

  5. Be flexible – It might be a good job, but far away from home. If getting your foot in the door involves a move interstate for a year or two, it’s worth considering. Once you’ve got some experience, it will be much easier to get a role nearer home.

  6. Keep networking – Remember, it’s not just what you know, it’s also who you know! Jobs aren’t always advertised so cultivate your network and look for useful mentors.

  7. Make your resume stand out – Make it relevant! And don’t forget to use the power of social media— make sure your LinkedIn profile is well crafted and up to date.

  8. Get skilled up – Make sure your qualifications match your career aspirations.

In a competitive world, there are plenty of ways to stand out from the crowd and secure the perfect role. Good luck!

 

1. AMP NATSEM 36: Australia’s Changing Workforce http://media.amp.com.au/phoenix.zhtml?c=219073&p=irol-natsem36

Important note: © AMP Life Limited. This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.