Not Just Another Budget Update…
You’d be hard-pressed not to know that the federal government handed down its budget this week. Suddenly, your inbox is full of updates on what it means—though this time, not much has changed.
There are a couple of headline items that might seem significant for housing, but in reality, they won’t move the needle:
Raising the price cap for Sydney homes under the "Help to Buy" scheme from $950,000 to $1,300,000.
However, to qualify, a couple’s combined income must be under $160,000.
Here’s the catch: with that income, banks will lend you around $830,000, meaning you’d need about $500,000 in savings to cover the gap and stamp duty.
If you have $500,000 saved, do you really need the "Help to Buy" scheme?
Reducing student debt by 20%.
In theory, this should allow borrowers with student loans to access more credit. However, earlier this year, the government directed banks to exclude student debt from mortgage serviceability calculations—so this change will have little real impact.
But I promised this wasn’t just a budget update.
Here’s a key tip for succeeding at auction. Buyers typically decide how much they’re willing to spend in one of two ways:
Their absolute maximum budget. Even if they wanted to spend more, they simply can’t.
Their perceived property value. They’ve determined what the property is "worth" and, even if they can afford more, they choose not to exceed that amount.
In many ways, being in the first category is easier—the decision is made for you.
The second category is riskier. You find a property you love. It ticks 9 out of 10 boxes.
Come auction day, someone else wants it just as much as you do. After being swayed by the auctioneer and sales agent, you decide it’s not worth exceeding your limit and bow out. You have the money but don’t believe it’s justified. The other buyer wins, paying just $5,000 or $10,000 more than your perceived value.
This is where buyers often go wrong. That 9/10 property now sets a new price benchmark.
The next 9/10 property will likely cost more than the one you walked away from. Alternatively, a few months later, you may find yourself settling for an 8/10 property.
I see this happen all the time.
