Summer 23
ISSN 1836-9871
Summer loving + home truths
HAVEN MONEY
P U T I ADD
How much will your home really cost? Sitting down? Good. We all know we pay interest on home loans, but looking at the total paid out over the life of a loan can be like looking into the sun. Brace yourself, because Canstar have put on their sunnies and crunched the numbers to calculate home buyers taking out an average owner-occupier loan in Australia today – $584,907 – will repay $1.38m over the course of a 30-year loan. That’s a slightly stomach-churning $799,060 in interest1. While shocking, looking at these long-term figures can actually help underline the big impact small strategies can have over the life of a loan to substantially cut that interest bill. For instance, Canstar also calculated that just switching to fortnightly rather than monthly payments could shave almost $200,000 and six years off the same 30-year loan.
Silver linings And there’s more positive news. A shorter-term analysis found that during the past 10 years, rising property values have outstripped the total cost of interest payments on the average home in most Australian States, putting buyers ahead. However, the key word here is most. While, on the whole, people who climbed onto the property ladder in 2013 were in the black, notable exceptions were buyers in Western Australia and the Northern Territory. 1 C anstar analysis is based on the Reserve Bank of Australia’s reported average standard variable interest rate over the past 30 years of 6.88 per.
02
I
In WA, relatively modest price growth of 1.6 per cent a year over the past decade has left more recent borrowers in negative territory. Based on the average home price in 2013 of $572,700, borrowers who bought with a 20 per cent deposit would have paid $191,258 in interest over the decade to 2023. During the same period, their property only rose in value by $98,519, leaving a $92,739 shortfall between loan costs and valuation gains. That on-paper loss was even greater in the NT, where an overall fall in valuations added to interest payments to leave the average buyer $193,122 worse off over 10 years (see table). It was a very different story in chart-topping New South Wales. Back in 2013 the average property price in NSW was almost level-pegging with WA’s, at $580,000. But while values in the west languished, over the decade east-coast properties rocketed up by $508,740 to almost $1.1m, leaving average homeowners with gains of $315,044 after deducting interest costs. It’s worth noting the recent sluggish performances of WA and the NT may be linked to over-performing in the preceding decade. From 2002-2012, Perth and Darwin posted the sharpest rise in house prices across the country, and were the only two capitals to post price growth of more than 100 per cent, according to CoreLogic’s Home Values Index 2.
2 L awless T, The long game … 30 years of housing values, CoreLogic Property Pulse, 29 August 2022.
2013
Over the past 10 years
Average property price
Loan amount (80%LVR)
NSW
$580,000
VIC
Loan
Overall outcome (valuation change minus interest costs)
Property value
Interest costs
Average annual change
Change in value
$464,000
$193,696
+6.50%
+$508,740
+$315,044
$511,400
$409,120
$170,787
+5.30%
+$345,726
+$174,939
QLD
$431,000
$344,800
$143,936
+5.00%
+$271,054
+$127,118
SA
$379,400
$303,520
$126,704
+5.70%
+$281,061
+$154,357
WA
$572,700
$458,160
$191,258
+1.60%
+$98,519
-$92,739
TAS
$297,600
$238,080
$99,386
+6.60%
+$266,304
+$166,918
NT
$492,200
$393,760
$164,375
-0.60%
-$28,747
-$193,122
ACT
$564,500
$451,600
$188,520
+5.10%
+$363,806
+$175,286
National
$508,100
$406,480
$169,685
+5.30%
+$343,495
+$173,810 Source: Canstar, September 2023
Small change, big savings Although it can be confronting to look at how costs add up over the lifetime of a loan, flipping your viewpoint to look at how saving can also accumulate can be motivating. There are three simple but very effective strategies to cut thousands from your loan bill:
Easily the biggest saving hack is the switch to fortnightly payments. Instead of paying monthly, borrowers divide their monthly payments in half (rounding up or down) and pay fortnightly. Because there are 26 fortnights each year, you effectively end up making the equivalent of 13 monthly payments each year without noticing the extra month. Over an average 30-year loan, that can shave off more than $192,000 and six years (see table). Download a mortgage calculator and play around with different repayment options. You might be surprised at the impact of even the tiniest change. Raising fortnightly payments by just $5 can save thousands.
• Switching from monthly to fortnightly payments. • Utilising offset accounts. • Refinancing to a lower interest rate.
Home Loan Saving Strategies (based on an average loan size of $584,907) Scenario
Rate
Repayment
Annual repayment
Total interest costs
Repayment time
Base case
6.88%
$3,844
$46,128
$799,069
30 years
Fortnightly payments
6.88
$1,920
$49,920
$607,002
23 years 11 months
+$4156
- $192,067
-6 years & 1 month
$46,128
$735,193
28 years & 5 months
-$63,876
-1 year & 7 months
difference $10k offset balance difference
6.88%
$3,814
Source: Canstar October 2023
03
HAVEN FOOD
HAVEN MONEY
A mouthful of summer It’s true that the simple things in life are best. Make the most of summer produce by pairing the sweetness of watermelon with the spicy tang of basil and saltiness of feta. Load up a platter of these easy bites on Christmas Day for an irresistible snack. 1kg of seedless watermelon 250g feta cheese Small fresh basil leaves Toothpicks Cut the watermelon and feta into cubes. Place the watermelon cubes on a platter, topping each with a cube of feta and a single basil leaf. Gently push a toothpick through each stack.
Super-sized summer GET SET FOR FIRE AND STORM SEASON Weather experts are warning a super El Niño may be on the way, bringing intense summer temperatures. It might seem a case of same but different for homeowners pounded by three years of La Nina’s flood chaos, as concern now shifts to heatwaves and bushfires. Neither of the Spanish siblings are particularly pleasant visitors. While La Niña brings above-average rainfall and lower temperatures, El Niño brings drier weather and higher-than-average temperatures. Australia’s Bureau of Meteorology declared an El Niño pattern in September and shortly after, forecasters in the US1 said modelling indicated it may develop into a scorching super El Niño.
HAVEN WIN
But that doesn’t mean there will be any reprieve from the looming summer storm season. Meteorologists have warned that while El Niño weather patterns produce lower overall rainfall and fewer cyclones, they have minimal impact on severe storms. So homeowners have been told to brace for everything this summer – heatwaves, bushfires and storms. It’s a lot. Try to keep from feeling overwhelmed by focussing on some key points.
Check insurance
Stranger things Have you ever had an unforgettable moment of connection with a complete stranger whom you never saw again? Tell us your story of a memorable interaction to be in the running to win $1,000. How: in 350 words or fewer, send your story to havencompetitions@afgonline.com.au placing ‘Memorable connection’ in the subject line. Include: your name, address, email, phone number and the name of your mortgage broker. Dates: opens on November 10 and closes on January 12. Winner: will be decided on January 15 and notified by telephone after this time. Terms and conditions: visit http://bit.ly/HavenWin
04
I
Always make sure you understand exactly what your policy covers in the event of storms, flooding and fire. Definitions can be narrower than you think. If you’re in a bushfire-prone area check what your insurer regards as fire damage. Some may only include losses caused directly by flames, while others will cover property ruined by heat, ash, soot and smoke from bushfires up to 100m away. Stringent new building codes in fire zones have also pushed up the cost of rebuilding in recent years, so consult a professional about whether your level of cover is enough to prevent you being caught short. It’s also important to understand you won’t be fully covered if your insurer considers inadequate home maintenance has contributed to losses. For example, if a cracked tile or blocked downpipe allowed water to leak into your roof, or your roof was covered in flammable leaves and debris when fire spread. Take updated photographs of your property in case you ever need to establish its condition prior to any damage.
1 Snider, L., NCAR experimental prediction system calls for a Super El Niño this winter, 26 September 2023, NCAR & UCAR News, www.news.ucar.edu.
HAVEN LIKES
Understand your risk level If you’re in or near a bushfire zone, sign up to local alerts and follow your State’s fire service on social media. Make sure your house number is clearly visible from the street. Clear or trim vegetation around your home and keep roofs and gutters free of leaves and twigs. Run regular checks on any generators or pumps on the property that you may need in an emergency and have an evacuation plan and trigger.
Stay ahead of the cool crew Get in before the rush if you want to install ceiling fans or air-conditioners. But with electricity bills heading north, make it a priority to look for passive ways to keep your cool. Homeowners can: • Add adhesive window films. These substantially reduce heat gain and are a costeffective upgrade. Low-E (low emissivity) film will also reduce heat loss in winter. • Install cellular window shades. These use an internal honeycomb system of air pockets to cut heat gain by as much as 60 per cent in summer and heat loss by 40 per cent in winter. • Check insulation in walls and ceilings. This is obviously an expensive proposition but even insulating one external wall that’s exposed to a lot of sun can make a big difference to internal temperatures. This is particularly effective in older timber homes which often don’t have any wall insulation.
Check your electrics If your home wiring isn’t up to current safety standards, you may not be covered if a fault causes a fire. With extreme temperatures and expected high loads on home circuits, it’s worth getting an electrician to give your home the once over.
Go with the flow As El Niño will not have a major impact on the number of tropical summer storms rolling through, homeowners should keep up regular checks on drainage systems, from gutters and downpipes to stormwater drains. Downpipes and stormwater, in particular, will need more than just a visual check for blockages.
For 50 years, Melbourne’s Alan Adler ran the iconic Flinders Street Station photo booth, capturing black-and-white memories for sweethearts, tourists and friends hitting the town, long before selfies were a thing. In 2018, a young couple on their first date jumped into Alan’s booth, capturing their first photo together, unaware that their spontaneous photo would end up saving a piece of Melbourne history. Chris Sutherland and Jessie Norman noticed a handwritten note on the booth wall announcing that its days were numbered due to renovations to Flinders Street Station. Unhappy that this piece of history was to be lost, the couple tracked down owner Alan, helping him save the booth thanks to a story of its impending demise going viral, and ultimately forming a fast friendship. Last year, not long after Alan’s wife Lorraine passed away, he fell ill. While Alan convalesced, Chris and Jessie kept the booth running for him. Now aged 91, Alan decided the time was right to sell, and Chris and Jessie became the booth’s proud new owners. The couple now post customersubmitted photos to their Instagram @flindersphotobooth. And thanks to its reach, the booth’s photo strips from the past 50 years are now being archived, with people sharing their booth photos from across the decades. Many of the shared photos document stories of enduring partnerships, with accompanying captions such as: “Taken in 1974, we’re still together!” Since meeting Mr Adler, Chris and Jessie have been filming him to capture his story. They are producing a documentary and planning an exhibition about the man who over five decades helped document the lives of Melburnians and those passing through.
05
HAVEN MONEY
Congratulations to Christy who wins $1,000 for her Golden Hour photo. We received a skyful of stunning sunset shots, but this silhouetted family portrait against a Titian sky, rolling hills and rippling shoreline was a dead-set winner. Thank you for the great accompanying story too Christy, indeed a story of our time! “T his photo was taken of my family at Eurimbulah Creek Campground in Queensland. We had just been to a wedding in Bundaberg and then 12 adults and 12 kids headed off camping for a week. One of the campers was my brother who was the MC at the wedding. His constant complaints of feeling really sick were put down to a hangover. Until we realised he had COVID, meaning that everyone who gave a speech at the wedding now also had COVID, meaning that their families now also had it. So, after one amazing night camping and taking this incredible photo, we jammed everything back in the cars (of course it rained, so it was the worst pack-up ever!), bundled up all the sick campers and headed back. It’s funny now, but it was not fun at the time! Side note: I was one of the lucky four of 24 that didn’t get it. I still hold that multiple glasses of wine kill off the germs.”
Nothing to declare … really? It was once a case of buyer beware, but new laws are forcing sellers to ‘fess up to everything from termites to crime scenes. What would be a deal breaker for you? Flooding? Asbestos? A meth lab? They’re all on a growing list of issues homeowners must now declare before selling a property in most Australian States. Queensland is the latest region to formalise protections for buyers with new property laws before Parliament now. Once upon a time it was up to buyers to sniff out potential issues – searching title deeds, flood maps and planning records to find out if their dream home could actually turn out to be a bit of a nightmare. But in recent years as property prices escalated, so have expectations that home buyers should be afforded more protections than someone popping out to buy a toaster. DON’T ASK, DON’T TELL While Australian Consumer Law dictates agents and vendors must not lie or mislead, what they are required to disclose voluntarily has often been a grey area. And as more cases cropped up of buyers getting burned by lessthan-forthcoming sellers, State Governments moved to introduce their own mandatory disclosure rules. These required owners and vendors not to conceal material facts that could affect buying decisions. But there was still debate about whether only structural and habitation issues were relevant. One controversial test case in New South Wales concerned a Taiwanese family that unknowingly bought a house that was the scene of an infamous triple murder in 2001. When they found out the family tried to cancel the contract, but the real estate agents refused to refund their $80,000 deposit. The agents argued consumer law did not require they disclose the house’s disturbing history, merely that they not conceal it. And the buyers simply never asked, they said. The agents lost a court battle and were fined more than $20,000. The NSW Government later amended Fair Trading legislation to specify agents must declare, among other things, if a property has been the site of a murder within the past five years.
06
I
While a dark past may not be a deal breaker for all potential buyers, it will affect sale price, which is why some investors actually target so-called stigmatised properties that can go for 10 per cent less than market value. Duty to declare In the past three years, many States have beefed up regulations in an effort to shift the onus away from buyers to discover problems, and on to sellers to declare them. In 2020, NSW formally amended the wording of regulations governing property sales from stating there must not be any concealment of material facts, to there must not be any failure to disclose them. Despite growing protections, legal experts say nothing beats asking a lot of detailed questions – in writing. Vendors are required to answer honestly.
• A building conveyancing inquiry (includes drainage plan and building approvals) and a lease conveyancing inquiry (includes any heritage listings, contaminated land issues and development applications affecting the property). South Australia Sellers are required to complete a 90-page Form 1 document that sets out the cooling-off rights of the buyer and discloses: • • • • • •
Any encumbrances on the land. Development plans and building approvals. Zoning or heritage restrictions. Contamination issues. Sewerage plans. It does not include a general building condition report, or cover building compliance, which buyers are expected to tick off as part of their own due diligence.
Here’s a brief overview of the state of play around the country.
Tasmania, WA and NT
NSW
Although there are no mandatory disclosure schemes in these States, there is still an expectation under Australian Consumer Law that agents will not mislead buyers about:
Sellers must provide title and zoning documents, a drainage plan and certifications for any pools or spas. They must also disclose all material facts about the property including whether it: • Has been subject to flooding or bush fire in the past five years. • Is subject to significant health and safety risks or is listed as containing loose-fill asbestos insulation. • Was the scene of a murder or manslaughter in the past five years. • Was used for the manufacture, cultivation or supply of illegal drugs in the past two years. • Has combustible cladding or is undergoing a building work rectification order. Victoria Sellers must provide a vendor’s statement, commonly called a Section 32 document, that outlines material facts. Consumer Affairs Victoria specifies these include but are not limited to: • • • • •
Structural defects, infestations and contaminations. Previous flood or bushfire impact. Non-compliant building work. Significant development proposals nearby. If the property has been the scene of a serious violent crime, or used for the manufacture of substances such as methamphetamine.
ACT Vendor disclosure statements in the ACT are the most exhaustive in the country and require the provision of: • A recent building and compliance report (which covers approvals and structural defects), pest report, asbestos assessment, and an energy efficiency rating statement. • Zoning and title documents, including any encumbrances on the land.
• Known structural defects. • Asbestos. • Whether the house has been the scene of a serious crime or drug contamination. • Whether there are any unapproved renovations or known building encroachments. • The presence of any easements (including for sewer pipes and electrical cables) or zoning restrictions. Last year in WA, a couple were found to have made reckless fraudulent misrepresentations and breached the contract of sale on their Perth unit after failing to disclose details of an unruly neighbour who lived directly above the unit they were selling, and who often hammered on the floor/ceiling between the units. Queensland The Sunshine State has a proposed mandatory seller disclosure scheme before Parliament. The Property Law Bill 2023 is expected to pass before the end of the year, with changes coming into force in 2024. The proposed scheme would require sellers to sign a declaration: • That no building work has been carried out by an unlicensed person in the past six years. • That there are no tree orders or applications under the Neighbourhood Disputes Act (Dividing Fences and Trees) 2011 affecting the property. • That there are no known development proposals that impact the property and no known easements or encumbrances. No warranty of structural soundness is mandated, although the seller is expected to produce proof of title and zoning, and compliance certificates for any pool on the property.
07
