Sydney’s Mortgage Market: Profit Strategies For Homebuyers

Sydney’s Mortgage Market: Profit Strategies For Homebuyers – There’s a lot of talk about mortgage stress and the risk of borrowing, but a recent study shows that some outer suburbs are twice as likely to be in arrears.

According to a new S&P Global Ratings report, homeowners in south-west Sydney, north-west Perth and north-west Melbourne are the most financially stressed across the country, with the majority of households defaulting on their mortgages. behind.

Sydney’s Mortgage Market: Profit Strategies For Homebuyers

Suburbs in those areas are more than twice as likely to be more than a month behind on their mortgage payments, the data shows.

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The figures show mortgages more than 30 days past due are highest in south-west Sydney, some with arrears of up to 2.5%, followed by west -north of Perth, north-west of Melbourne, and then the Blue Mountains in NSW. .

High risk areas are also where property prices and incomes are at their lowest, meaning they have a high concentration of first home buyers who take advantage.

Conversely, the areas with the lowest mortgage arrears are suburbs with the highest incomes and house prices, such as Sydney’s affluent suburbs.

The Reserve Bank has previously warned that the pressure on borrowers is “disproportionate”, with banks setting lending limits in some suburbs, the AFR reported.

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S&P analyst Erin Kitson explained that banks need to analyze the data while setting lending policies such as requiring higher deposits for real estate purchases in certain high-risk areas.

“While unemployment remains low, and total arrears remain below pre-emergence levels, we see a difference when we look at major cities where borrowers are slow to pay.”

But Fitch Ratings analyst Jack Doe said the type of borrowers was more important to consider than their location, adding that he saw no major areas of concern.

“They grew a bit in the second half, but there isn’t much difference between the regions. It’s not about geographic trends, but tracking high-risk customers,” he told AFR.

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Banks will look at the characteristics of borrowers, such as those who bought a home in the last two years, and those who borrowed at high debt-to-income ratios with low deposits, Fitch said.

“The more flags you tick, the higher the borrower’s risk profile. These are the borrowers the bank is trying to approach to manage the risk,” he said.

It is important to remember that these suburbs have one thing in common – they all have residents from similar socio-economic groups.

Key populations for mortgage stress include low to moderate socioeconomic areas, regional areas and small households that have borrowed or refinanced more than they did before the pandemic.

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Many of these households will be stress tested for rate increases of up to 3%, and now that rates have risen above that level, they may struggle to continue to meet to repayments.

At the same time, many of these families are younger Australians or first home buyers who have not held their property long enough to accumulate equity.

In contrast, most of our inner and middle suburbs are populated by people who are long-term homeowners who have paid off most of their mortgages. ​​​​or paid off entirely.

After all, it’s not just a real estate market in Sydney or Melbourne but a market within a market – houses, apartments, townhouses and villa units located in the outer suburbs, sub- inner circle cities, inner suburbs and CBD.

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Because, as I mentioned above, the cost of living rises differently in each socio-economic and demographic sector across the city.

Inflation, higher rents and higher mortgage costs at a time when wages are not growing at the same rate will either prevent first home buyers from entering the market or limit their ability to borrow .

Many first home buyers are borrowing at capacity and will struggle to make future repayments at ever-increasing rates which will hamper capital growth at the lower end of the market the buildings.

Then there are the more affluent suburbs where wealthier homeowners have invested with higher disposable incomes and have little risk of defaulting on the their mortgages despite low rates or even rising.

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Residents in these locations typically have higher disposable incomes and are likely to pay a premium​​​​to live in a property in one of these locations.

So it is the suburbs that can withstand fluctuations in the real estate market and rising interest rates.

Homes and townhouses in this area usually offer good investment opportunities, but more importantly, you need to make sure that you invest in investment grade properties … because although any property is considered an investment Indeed , not all of them make financial sense.

What makes a good investment property for me may not be what suits your investment needs.

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You must make sure to invest only in areas where real estate holds its value in the long term.

But before you find the right place, make sure you have a strategic property plan to guide you through the challenging times our real estate market will face.

In addition to remembering that you should focus your efforts on investment-grade properties and locations, you should also remember that real estate investing is a process, not an event.

This means that things have to be done in the right order – and choosing the right location and building in that location comes at the end of the process.

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About Alastair Leas Alastair Leas is a real estate strategist with over 20 years of experience helping his clients achieve their wealth goals. He is a passionate real estate investor who enjoys helping his clients build wealth through real estate investing using a strategic Metropole approach. Value investing is an investment strategy that involves selecting stocks that appear to be trading below their intrinsic or book value. Value investors actively remove stocks that they think are undervalued by the stock market. They believe that the market overextends both good and bad news, resulting in stock price movements that are inconsistent with the company’s long-term fundamentals. Overaction provides a profit opportunity by buying stocks at a discount.

Warren Buffett is probably the most famous value investor today, but Benjamin Graham (Buffett’s professor and mentor), David Dodd, Charlie Munger (Buffett’s business partner), Christopher Brown (another Graham student), and many others, including the value of a billionaire There are others. . -Fund Manager, Seth Klarman.

The basic concept behind daily value investing is simple: if you know the exact price of something, you can save a lot of money when you buy it. Most people would agree that whether you buy a new TV on sale, or at full price, you will get the same TV with the same screen size and picture quality.

Stock prices work the same way, meaning that a company’s stock price can change even if the company’s valuation is the same. This means, strictly speaking, that there is no real, or intrinsic, value in a particular company’s stock. But there are comparable values.

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Market participants can buy or sell shares without being tied to a fixed price figure. Therefore, stocks, like televisions, go through periods of high and low demand that cause prices to fluctuate. If the fundamentals of the company are the same, and the future expectations have not changed, the value of the stock is more or less the same even if the price is different.

Value investing was developed from a concept by Columbia Business School professors Benjamin Graham and David Dodd in 1934 and popularized in Graham’s 1949 book, The Intelligent Investor.

Just as savvy buyers argue that it doesn’t make sense to pay full price for a TV because TV comes on several times a year, value investors believe that stocks work in the same way. Of course, unlike TV, stocks will not be sold at expected times of the year like Black Friday, and the sale price will not be advertised.

Value investing is the process of spotting these secret sales on stocks and buying them at a discount to their market value. In return for buying and holding these value stocks over the long term, investors can be handsomely rewarded.

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In the stock market, cheap or discounted stock is the same as when the stock is undervalued. Value investors hope to profit from stocks that they see as deeply discounted.

Investors use various metrics to try to find a stock’s value or intrinsic value. Intrinsic valuation is a combination of using financial analysis, such as examining a company’s financial performance, revenue, earnings, cash flow, profitability and fundamentals. This includes the company’s brand, business model, target market and competitive advantage. Some of the metrics used to value a company’s stock include:

Free cash flow is the money left over after expenses have been paid, including operating expenses and major purchases called capital expenditures, which are asset purchases such as equipment upgrades or manufacturing plants. If a company is generating free cash flow, it has more money to invest in the future of the business, pay off debt, pay dividends, or

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