Superannuation Discussion + market volatility

[SYD]

It’s not the same percent. Stamp duty taxes are progressive, meaning that you pay a higher percentage as the value of your home increases.

Yes, it always was but either way it’s still an insidious tax.

In the 18 years I have been in my current home the value has increased by 2.5 times. Stamp duty at the new value is 4.2 times higher than what I paid

It should currently work a bit like marginal tax rate brackets. Either way, still an insidious tax.

Property stamp duty was supposed to be removed when GST was introduced but the Democrats negotiated(?) the removal of GST on food which left a gapping hole.

If the Government wants to do something about housing affordability, they could take on the SD issue - especially for those who want to “downsize”.

 

[mrsterryn]

Have to say the stamp duty does take away a bit of the enthusiasm for moving into a single level place
We have a reasonable sized townhouse but a set of stairs to get into front door and then stairs within the place. The expectation is Mr Terry will need an inclinator for the stairs within the next decade or so . Sell ? Stamp duty ? Renovate ?

 

[MARTINE]

Have to say the stamp duty does take away a bit of the enthusiasm for moving into a single level place
We have a reasonable sized townhouse but a set of stairs to get into front door and then stairs within the place. The expectation is Mr Terry will need an inclinator for the stairs within the next decade or so . Sell ? Stamp duty ? Renovate ?

My view is if everything about your house (other than stairs) will see you into dotage (downstairs bathroom) + enough space if carers come + close to amenities … then retrofit to make it work

If not - I would move

 

[cove]

We put in a lift so our 1991 home purchase still works well. No point paying selling and buying costs if you can avoid it as this would raid your retirement funding.

 

[SYD]

My view is if everything about your house (other than stairs) will see you into dotage (downstairs bathroom) + enough space if carers come + close to amenities … then retrofit to make it work

If not - I would move

and move before it’s too late. Often older people get to an age where it’s just too hard to move.

We put in a lift so our 1991 home purchase still works well. No point paying selling and buying costs if you can avoid it as this would raid your retirement funding.

Apart from say a reverse mortgage, downsizing and releasing the capital potential of the family home is an excellent way to top up retirement funding. Just be aware that moving from a house to a strata development comes with regular ongoing costs that have pros and cons. Elevators, pools and car stackers are expensive to maintain…

 

[Pushka]

and move before it’s too late. Often older people get to an age where it’s just too hard to move.

Apart from say a reverse mortgage, downsizing and releasing the capital potential of the family home is an excellent way to top up retirement funding. Just be aware that moving from a house to a strata development comes with regular ongoing costs that have pros and cons. Elevators, pools and car stackers are expensive to maintain…

We sold down our huge house in November, just before Covid hit. We thought at the time we'd dodged a bullet, but now, it's worth hundreds of thousands of dollars more. It's in one of those Adelaide suburbs that boomed. We already owned an apartment as an investment, so we moved into that. I was much more ready to downsize than husband was, but this was pre Covid and he was travelling interstate pretty much every week, and I was rattling home alone. Of course, Covid, and we got kind of wedged into working from home, in a small apartment. We can't predict the future. What might seem a great idea at the time might not turn out that way. But we were able to top up our super and we did get the price for the house that we expected. Any loan on the apartment is 100% balanced by offset account and it will be paid out when we can be bothered but better now to keep it as a loan.

 

[Cossie]

Or have way too much cough that would need to be moved as well, not including Cars and associated spare parts………….

Definitely want to get out of Canberra before the white elephant that is the tram bankrupts the place, hate to think how much our rates will increase in the next 10 years, not to mention leaving the cold behind.

As others have said, costs of moving make it difficult. Granted, our place has increased in value over the years, but everywhere I look at moving to, prices there have increased more!

 

[Pushka]

Or have way too much cough that would need to be moved as well, not including Cars and associated spare parts………….

Definitely want to get out of Canberra before the white elephant that is the tram bankrupts the place, hate to think how much our rates will increase in the next 10 years, not to mention leaving the cold behind.

As others have said, costs of moving make it difficult. Granted, our place has increased in value over the years, but everywhere I look at moving to, prices there have increased more!

Well we are downsized in Adelaide but sold another property near the Murray Mouth the year after we sold family home (2 years ago). And then bought another shack style place closer to apartment that we, umm, seem to be accumulating stuff in. Boats canoes and fun stuff. And apartment living demonstrated that someone needs to mow lawns and potter in the garden. Which while not large is looking fabulous. Weirdly we sold the shack for more than what we paid for new shack but the new shack is fabulous. When we left old shack after sale it looked awful as we’d prettied it up for sale. Just furnishings.

I laughed at the spare car parts. Son was living in the apartment before we moved in. The storage cage was filled with tyres but worse he’d also left car parts in his room at the family place. As for cough, so much of it at the Murray mouth shack. Two lawnmowers for gods sake neither of which worked. Someone in the family doesn’t throw out anything. And it ain’t me.

To those thinking of downsizing to an apartment. Maybe test run and rent for a couple of months. The style of living is very different. We like it now but I think only because we have a bigger place to escape too. But has benefits of lift, gym, security and close door and leave.

 

[mrsterryn]

My view is if everything about your house (other than stairs) will see you into dotage (downstairs bathroom) + enough space if carers come + close to amenities … then retrofit to make it work

If not - I would move

Where we live is perfect in regards to amenities etc. In regards to market issues I think my only concern is the increase in various costs .
We have the bathroom facilities both levels , the bathroom he uses we are going to make accessible
.
Wasn't there a discussion with government at some stage to have some form of encouragement for Boomers etc to downsize?
In regards to Centrelink the rules changes this year in having a longer period in which the funds where exempt from asset tested and all the funds (that will be used for a new property) were assessed on the lowest amount of current deeming rates

 

[Pushka]

Where we live is perfect in regards to amenities etc. In regards to market issues I think my only concern is the increase in various costs .
We have the bathroom facilities both levels , the bathroom he uses we are going to make accessible
.
Wasn't there a discussion with government at some stage to have some form of encouragement for Boomers etc to downsize?
In regards to Centrelink the rules changes this year in having a longer period in which the funds where exempt from asset tested and all the funds (that will be used for a new property) were assessed on the lowest amount of current deeming rates

There is encouragement. For boomers to put the proceeds into superannuation. Of course that assumes that the sale price of what you sell is more than the cost price of what you buy. Factoring in stamp duty costs.

 

[VPS]

I made the decision to sell and move into an apartment just before Covid hit and rented for a while until I found the right place in the middle of Covid. Lot's of people told me that I should wait until after Covid because prices would definitely drop. Yeah nah. I did spend about $50K on a few things including solar but estimate it's gone up at least 25% in the last 3 years but it's moot because I'm not going anywhere.

Best decision ever - no garden to worry about and lock up and leave. Only on first level so fine is lift is out and apartment all on one level.

 

[Pushka]

I made the decision to sell and move into an apartment just before Covid hit and rented for a while until I found the right place in the middle of Covid. Lot's of people told me that I should wait until after Covid because prices would definitely drop. Yeah nah. I did spend about $50K on a few things including solar but estimate it's gone up at least 25% in the last 3 years but it's moot because I'm not going anywhere.

Best decision ever - no garden to worry about and lock up and leave. Only on first level so fine is lift is out and apartment all on one level.

That was our thought too, prices would fall. Never expected even Adelaide, or maybe, especially Adelaide prices to lift by up to 50% in some areas. Insane. I never understood why Covid did this, where all the demand came from given reduced or even non immigration in place. Where were these people living before?

 

[SYD]

I actually have a few retired/semi-retired professional friends who have effectively upsized! Sold their $2 to $3mil inner city apartments, bought a smaller city pad and a house in the country! (Orange, Southern Highlands, Central Coast etc).

Not something I’d do, but I guess some of them haven’t had a garden or outside area to speak of in the past.

Some of them managed to do it just before Covid, so had a country bolt hole during the worst if it.

 

[exceladdict]

Not sure this is the right thread for it but reading this article made me wonder if another big short is coming and what the best way to position oneself for it would be:

'A perfect storm': New figures reveal extent of mortgage stress ahead of interest rates decision

With the RBA due to meet next week, a growing number of Australians are defaulting on their home loans as those borrowers at risk of mortgage stress peak at levels not seen since the global financial crisis.

www.abc.net.au

If unemployment is the key, then whether or not China stimulates its property sector - and the knock on effect that would have for AU miners and employment here might be the key factor to watch.

 

[CaptJCool]

Not sure this is the right thread for it but reading this article made me wonder if another big short is coming and what the best way to position oneself for it would be:

If unemployment is the key, then whether or not China stimulates its property sector - and the knock on effect that would have for AU miners and employment here might be the key factor to watch.

the housing market in Australia tends to be solid as it doesn't have the same excesses of the USA system where banks can buy and sell mortgages - the majority of housing loans are with the CBA and the delinquency rate on owner occupiers is terribly low. in ANY event the Lenders Mortgage Insurance protects the banking system from losses (noting during Covid that at least one of them had zero claims) lots is done to extend loan terms, shift to/from interest only, and repayment pauses.

However, we are not immune from overseas losses.
Noting since 2000, the worse annual losses in most superannuation funds were around 15% which were recovered within a year or two. Unfortunately, the more aggressive super funds had losses in 2008 closer to 40-50% - this is Risk and Reward operating as they do - high risk. high reward and high loss

Investment Risk
the issue is being able to keep the investment going to recoup the losses. if you need the money in a year or two, you don't have time to recover. if you need the money in a decade, plenty of time to recover

Private sector super is likely to be affected in both accumulation and pension phases as a standard arrangement is share investment at the "mercy of the market" yet remember its also tax-free subject to the Transfer Balance cap on investment income

Tax Risk
Public sector super is not affected as the investment risk extinguishes upon taking up the superannuation, and there's some particular taxing arrangements that see at least some of their cash income taxed because of the age-based rules and the untaxed fund nature then an additional bump up of income tax when it collides with the Transfer Balance cap.

 

[Happy Dude]

That was our thought too, prices would fall. Never expected even Adelaide, or maybe, especially Adelaide prices to lift by up to 50% in some areas. Insane. I never understood why Covid did this, where all the demand came from given reduced or even non immigration in place. Where were these people living before?

They mentioned on the radio yesterday that people used Covid and lockdowns as an excuse to move out of share homes, back with family etc. Plus very low interest rates with the fact that many people were simply not affected by Covid at all, other than socially, meant that many had plenty of cash to throw around.

 

[Gremlin]

I'm a little bit skeptical about just how 'protected' the banks are going to be by Lenders Mortgage Insurance in the event of a major home loan default event. As an example, Helia (one of the two 'big' LMI insurers) has net assets of $1.4b, according to its latest annual report. CBA alone, in its latest annual report, is currently showing loan impairment provisions of $5.4b and that's a figure that's not unusual year on year.

How can these itty bitty little insurance companies offer financial protection to our banking behemoths who are roughly 100 times larger than themselves?

 

[exceladdict]

I'm a little bit skeptical about just how 'protected' the banks are going to be by Lenders Mortgage Insurance in the event of a major home loan default event. As an example, Helia (one of the two 'big' LMI insurers) has net assets of $1.4b, according to its latest annual report. CBA alone, in its latest annual report, is currently showing loan impairment provisions of $5.4b and that's a figure that's not unusual year on year.

How can these itty bitty little insurance companies offer financial protection to our banking behemoths who are roughly 100 times larger than themselves?

One writer suggested that the only out would be for LMI insurers to be nationalised in such an event.

 

[Gremlin]

...which is you and I and other taxpayers 'protecting' the profits of the banks, not the LMIs...

 

[burmans]

I'm a little bit skeptical about just how 'protected' the banks are going to be by Lenders Mortgage Insurance in the event of a major home loan default event. As an example, Helia (one of the two 'big' LMI insurers) has net assets of $1.4b, according to its latest annual report. CBA alone, in its latest annual report, is currently showing loan impairment provisions of $5.4b and that's a figure that's not unusual year on year.

How can these itty bitty little insurance companies offer financial protection to our banking behemoths who are roughly 100 times larger than themselves?

I think you are overstating the risk somewhat.

1) Not all loans have LMI
2) The LMI Insurer is not responsible for all the debt, only what cannot be recovered by sale, (even then they can still come after the borrower last time I heard)
3) You are assuming that LMI insurers are totally stupid, i.e. are totally unaware this is a risk and haven't put risk mitigations in place, e.g reinsurance of a significant part of their portfolio to reduce risk

Not suggesting there is no risk, just that it's not quite of the magnitude you suggest. A full on market debacle like the GFC sure, but I'm more confident than you they could ride out the current market stress.