In its latest survey, the Organization for Economic Cooperation and Development (OECD) surfaced some critical information that cannot be overseen by Australians. The Paris based organization claims that our economy could be going down with the property market.
The OECD pointed to the possibility of a significant correction in the housing market that might result in financial institution insolvency. "Australia's housing market is a source of vulnerabilities due to elevated prices and related household debt," the OECD warned. "If house prices collapse, consumer spending could suffer via negative impact on wealth including exposure to bank shares which would encourage deleveraging."
The OECD has its reasons for such assertions. With Australian household debt sitting at 120% to our GDP and the average Aussie leveraged with 190% debt to income, this screams for a de-leveraging. However, Australians are set to face even more problems. The RBA has left the cash rate at 1.5% for a long 18 months now. Normally a deleverage would mean zero interest to have people borrowing and stimulating the economy, however that card seems to be unavailable in this present time.
There has also been some speculation that interest rates need to rise for the country to regain some wealth back, but this will only suffocate consumers. Australian government debt only sits at around 40% of GDP, where as household (consumer) debt is up past 120% to GDP.
But what does all this mean?
Think of “GDP” as Australia’s yearly income, now in comparison when America had their 07/08 financial crises, they only had a total stack of 94% Debt to GDP. Australia is currently sitting beyond 120% just in Mortgages, 40% in Government and a further 80% in private loans… crikey.
That totals 240% against GDP, $2.5trillion in consumer and $400 billion in government. Ladies and gentlemen, we are officially one of, if not, the highest debt leveraged nation in the world. What now?
Investors are currently full of questions such as how to save money and how to self-manage property. The answer is simple – cut out the middle men. Yep that’s right. DIY everything. Thanks to technology we have been saving on shopping, travelling, buying and selling our cars, and much more. Landlords can now officially save too.
In Sydney, the median property return is about a 5% yield on investment. So a $1m property returns 50k p/a which is roughly $950 per week. Well that’s before the management, letting and advertising fees the friendly agents slap us with to take on the role of a property manager.
In hindsight, that radically reduces the investors 5% yield down to about 3.5%. This is a very low-balling figure for someone who has just emptied out a $200k deposit and taken on a 30-year commitment on a $1m asset.
THIS IS DEFINITELY NOT GOOD ENOUGH!
Which is why we are pro no agent properties.
Without crunching all these numbers and understanding the depth of an investment property within the current environment, excitement is swiftly turns into anxiety. However, it’s not all bad news, now that you’re here we would like to take the time to introduce the holy grail of property investors, Instarent: the property management app.
Instarent is completely FREE, meaning investors can maximize their yield while taking full control of their biggest asset. Turn that anxiety back into excitement today, remember the reason you bought your property - to have control of your future and watch your investment grow.
Instarent boasts a wide range of options like tenancy agreements, rental ledgers, push notifications and much more. The savvy app is proudly hosted by Amazon, meeting all ISO security standards and comes with PayPal integration. There is no reason we shouldn’t trust a brand that’s already being picked up by SkyNews, NewsCorp and all the other big names we turn to for understanding our environment.
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