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Melbourne real estate: Couple mocked for impulse buying $1.5m terrace

Melbourne real estate: Couple mocked for impulse buying $1.5m terrace

A young Melbourne couple have been roasted online after “impulse buying” a $1.5 million East Brunswick terrace at auction.

But the agent who sold the property has now spoken out, saying the backlash from “keyboard warriors” is unfair and that the sale has been misrepresented.

Property website Domain published an article on Saturday about the young buyers of 110 Barkly Street, which sold under the hammer after the couple pipped another bidder for just $500.

Darcy and Tessa, who declined to give their last names, ultimately paid $1,500,500 for the deceased estate, which went to auction with a price guide of $1.3 million to $1.43 million.

“To be honest we weren’t really looking, we were just looking casually and this one popped up,” Tessa told Domain.

Darcy added, “There’s a bit of concern around with what housing prices are doing but this one really stood out to us, and it turned out we got it.”

The couple said they planned to fix up the terrace and rent it out in the short term before moving in later and doing further renovation.

Darcy said while interest rate rises were “certainly something to consider”, the couple were “in a good position with renting it out at this point”.

“From our point of view we can pass that on to the rental market,” he said.

The article went viral on Reddit after a user on the Melbourne forum posted a screenshot of the headline.

“I guess I don’t feel so bad about impulse buying a Snickers at the Coles checkout now,” they wrote.

“I mean we’ve all been there, right? Just wandering down the street to get coffee or something, you’ve got $1.5 million burning a hole in your pocket and you stumble across an auction – damn it! Did I really just buy a house again? Man my wife is going to give me a hard time about this when I get back.”

One person replied, “I genuinely know two people who have done this. One whilst driving past on the way to visit a friend (investment property in Footscray), and the other whose husband came home and announced he’d bought a new family home. WTF.”

Another wrote, “Joke’s on them, be at least $500,000 less in about six months.”

Ray White Glenroy auctioneer Stefan Stella told news.com.au on Monday he felt the reaction from “keyboard warriors” online had been “pretty harsh”.

“As much as it said they weren’t really looking, they did see it on the first open, came multiple times – they were there three times,” he said.

“In my opinion they were probably always going to get it. The underbidder only saw it in the last week. I think what they may have meant was they weren’t actively looking and religiously out there every Saturday, that’s potentially the message they were trying to get across.”

It comes after the Reserve Bank hiked interest rates for the fourth month in a row last week.

The 50 basis-point increase at the central bank’s August meeting brings the official cash rate to 1.85 per cent, up from the record low 0.1 per cent it was up until May.

Already, the rise in interest rates has pushed house prices down in most major cities as borrowers stare down the barrel of higher monthly payments.

PropTrack’s Home Price Index shows a national decline of 1.66 per cent in prices since March, but some regions have seen much sharper falls.

“As repayments become more expensive with rising interest rates, housing affordability will decline, prices pushing further down,” PropTrack senior economist Eleanor Creagh said.

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Inflation: Why you could soon be back earning what you did back in 2008

Inflation: Why you could soon be back earning what you did back in 2008

It’s the grim graph that suggests Australian workers face a horror “back the future” scenario on wages.

Real wages – workers’ income that has been adjusted to reflect the rising cost of living – are going backwards.

Perhaps, that’s no surprise to anyone who has tried to buy fresh fruit and vegetables at the supermarket lately amid rising prices and massive interest rate hikes.

But Dr Greg Jericho, the Center for Future Work’s Policy Director has some bad news.

It’s even worse than it sounds.

As households struggle with the rising cost of essentials, real disposable household income is set to fall for months to come sending workers back to what they were earning in real terms over a decade ago.

“The latest Reserve Bank Statement on Monetary Policy estimates that real wages will continue to fall until the end of next year, at which point they will be back to 2008 levels,” he said.

Dr Jericho describes the graph as “horrific”.

“In real terms, prices and wages since 2008 will have gone up by exactly the same amount. So there’s no improvement,” Dr Jericho said.

“Your wages might have gone up 20 per cent. But prices have gone up by 30 per cent.

“It’s horrible. Normally it goes up. Before the pandemic, it was rising, perhaps a bit slower than it was during the mining boom, for example, but it still keeps going up. It’s pretty drastic.”

For three years, the RBA predicts wages are going backwards.

The RBA now estimates that real wages will fall fourteen consecutive quarters from the Sept 2020 quarter through to the Dec 2023 quarter.

The situation won’t improve until 2024 according to the Reserve Bank’s latest monetary policy update released on Friday.

“It’s most pronounced for low income people because what we’re seeing with inflation at the moment is that the prices of what we call non-discretionary items or essential items are rising faster than sort of discretionary luxury items,” Dr Jericho said.

“So the prices of things that you can avoid paying like food, like energy, bills, rent are rising faster than the things you can decide not to buy, like a holiday.

The big drivers of inflation are the war in Ukraine and the supply chain disruptions caused by Covid.

“Higher prices, especially for food and fuel, are likely to impact low-income households in particular (which tend to spend a larger share of their income on these necessary items),” the RBA said.

“While household balance sheets are generally strong and many households should be able to absorb these price increases, others have limited savings buffers and may have to reduce spending elsewhere.

“For some of these more vulnerable households, the impact of price rises will be mitigated to some extent by the indexation of social assistance payments twice per year, though price rises will reduce recipients’ real incomes in the near term.”

But the RBA’s grim predictions also raises fresh questions about Labor’s pledge to address cost of living.

Labor’s election campaign was based around the slogan that “everything is going up except your wages.”

This data suggests that’s not going to improve for months to come.

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Mark Bouris reveals five tips to safeguarding money as inflation soars

Mark Bouris reveals five tips to safeguarding money as inflation soars

Inflation will very likely hit 7 per cent by the end of 2022, which means there’s more than a fair chance there will be further interest rate hikes passed on to you the borrower before the end of the year, as the RBA attempts to rein spending in order to keep inflation in check.

This is not good news, but there’s no way the Reserve Bank could sit back and do nothing.

We’ve all benefited from cash rate lows of 0.1 per cent. But with it now at 1.35 per cent, a jump that has happened in just three months, you can bet that there’s more to come.

As that rate is passed on to anyone who’s borrowed money and doesn’t have a fixed rate, what can you do to safeguard your investments and where should you place your cash?

1. Think long-term, not short-term

If you have a thoughtful, long-term investment strategy, there’s no need to “chop and change” it just because interest rates are going up.

The worst mistake you can make as an investor is selling when the market has bottomed out or make rash decisions that could result in you missing out on potential returns. A lot of Australians who took the opportunity to withdraw money from their super funds when Covid first hit, missed out on one of the best years for super returns.

If you’re looking to invest for the next 10 to 20 years, it’s best to ride out the interest rate hikes that are coming our way.

That said, if you have a shorter-term “investment horizon”, maybe close to retiring, it may make sense to be more cautious and reduce your exposure to “riskier” assets such as shares.

2. Build up your cash savings

Holding cash deposits in the bank as interest rates rise could be a safe option that will generate some income.

Having six to 12-month Term Deposits are a safe option for those with available funds, with some saving accounts offering higher rates if funds are deposited into them on a regular basis.

Be sure to shop around for the best deal as returns vary wildly between institutions. And before committing to a term deposit, it’s wise to consider your other investment objectives during the time the money will be locked away.

3. Property

Although property is more vulnerable to rising interest rates, some of these investments could benefit.

Rising inflation could be good news for property investors as it could lead to higher rents, which in turn could generate large enough returns to offset the negative effect of higher interest rates. Tight leasing markets and the prospect of higher yields and long-term capital gains should sustain interest in investment properties, despite rising interest rates.

With vacancy rates at an all-time low, now could be a good time to offset interest rate rises by buying more investment properties that will yield great cash flow.

As borders have opened up, we’ve seen an increase and influence of expatriates returning home. Add to this a drop in construction approvals and the government ramping up migration to assist the economy post-Covid – rents will continue to increase significantly in many locations over the next few years, helping to reduce the impact of the rate rises.

It pays to speak to a professional mortgage broker who can help make an assessment of your options with regards to repayments and future lending.

4. The Share Market

Always a riskier proposition but potentially some of the highest returns.

Keep in mind that past performance is not a reliable indicator of future performance and great care is needed when making share selections.

Many people seek the assistance of an experienced investment adviser to do this for them.

5. Bonds

Fixed income assets, such as government and corporate bonds are often seen as providing a relatively stable and reliable return.

When purchasing a government bond, you are essentially lending money to the government which they will pay you back with interest. The interest is paid to you in regular facilities throughout the length of the bond.

Fixed income assets could be considered boring by some investors but having them as part of your investment portfolio can help to offset ant losses you may have had from the share market – hence their classification as a “defensive” asset.

…and a thin red line

All the things I’ve mentioned above are food for thought at one end of your balance sheet, but don’t forget what’s going out at the other end.

My mum used to say, “Take care of your pennies and the pounds will take care of themselves.” Like most motherhood statements, this one is true and makes for good practice right now.

I’m making a list of those ongoing subscriptions I’ve picked up over the last few years and unnecessary money I’m spending in the cloud. It’s a leaner time now and I’m drawing a red line through those that I don’t need or can do without. I suggest you do the same. Make it a habit, not just something to do when times get tough.

There’s a famous Rudyard Kipling poem called If that begins with the words, “If you can keep your head when all about you are losing theirs…” Right now, it’s time to hear those words. Don’t lose your head, keep it sane, simple, straightforward and you’ll come out the other side of this.

Mark Bouris is the Executive Chairman of Yellow Brick Home Loans, for more information on getting the best home loan, refinancing and some of the industry’s leading experts tips visit the Y Home Loans website

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