Shifting to Commercial Property
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What is the main topic discussed in this episode?
It's the Real Estate Podcast brought to you by Ray White, the largest real estate and property group in Australasia.
And welcome to another episode of the Real Estate Podcast available on iHeartRadio and Spotify and Apple Podcasts or wherever you get your podcast from. And welcome to your Thursday morning. A short week makes our weekend that much closer. for June the 9th for 2022. And coming up, we've got Scott O'Neill back talking commercial property and also reflecting on the rate rise from Tuesday.
What does the RBA rate rise mean for mortgage stress now?
Well, mortgage stress is estimated to be around 40% of households struggling and that is right now. Much more pain, unfortunately, is coming down the track which you just can't sugarcoat any way you look at it. But let's see if we can sugarcoat your weather. around Australia.
It's the main centre forecast with propertybuyer.com.au.
And looking at Sydney, expecting fine. Gee, isn't that nice to see in the forecast? Fine and sunny and a high of 17 degrees. Unfortunately, Melbourne, a ditto day from yesterday, expecting showers and your high just 13. Brisbane, fine and sunny with 18. And in Perth, expecting rain and your high is 22 degrees. If you're celebrating a birthday today for June the 9th, you're in good company. Natalie Portman is turning 41 and Johnny Depp is in his last year of his 50s. Johnny Depp turning 59.
Enjoy your morning coffee. Wake up every morning to The Real Estate Podcast.
Canberra's auction clearance rate for May, it sits at its lowest point since the beginning of the pandemic. That's according to new domain data. The domain auction report revealed that Canberra's clearance rate fell to 67.9%. Now, this is the lowest monthly clearance rate since May of 2020.
Who is Scott O'Neill and why focus on commercial property?
However, there is a caveat for Canberra. and that is that it continues to perform better than other capitals, recording the best clearance rate in May. In Sydney, the clearance rate was 55.9% and in Melbourne, 59.1%. And the only city that matched Canberra's auction performance was Adelaide. And good morning to you, where you sat at 67.8% for the month of May.
Informing you on real estate. Let's Talk Commercial, a podcast series with Scott O'Neill.
Well, the rate rises come as hard and fast with the mortgage rate rise.
How do interest rate hikes change cash flow on a $1.5M commercial purchase?
It's been described as a shock and awe move by the RBA. And I said yesterday that we knew it was coming, but when you actually look at the numbers and the extra mortgage repayments that people have to make, which is going to hurt those the most who have just scraped enough money to buy when the market was red hot. So it really is on a knife's edge. It is a Thursday morning and it's time to bring in Scott O'Neill from Rethink Investing. Good morning, Scott. Welcome back. G'day, Craig. Good to be back. Well, it is one of those things that, you know, it's a real talking point right now is those mortgage rate hikes. But let's look on the other side of the coin and flip to the commercial space.
It can be a bit of a shock because it's been about 10, 11 years since the last rate increase has hit. So there's a whole generation of investors that have never dealt with this side of property at the moment. So it's going to make for some interesting reading online. When it comes to commercial, it's a different side of the story because, and I'll use some numbers to break this down for you because I think that's the best way to always put things in perspective. Look at the numbers and say like a $1.5 million purchase. I'm just going to use a quick case study because this is sort of what we deal with clients every day of the week. And that case study is a $1.5 million commercial purchase. Now, assuming the yield is a 6.6% net, your mortgage rate is going to be 3% currently.
That means you're going to clear after mortgage, after all costs, $68,000 positively geared income. now let's apply those interest hikes so add the 0.75 percent to it that turns that 68 000 income down to a 58 000 income it doesn't sound that bad but this is the key difference with commercial to residential there's a lot of those people like you mentioned craig that have probably leveraged up taken a negatively geared position on a property and now that negatively geared position has got worse so instead of being negative 10 grand they might be negative 15.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:02–0:38
2
What does the RBA rate rise mean for mortgage stress now?
0:38–2:08
3
Who is Scott O'Neill and why focus on commercial property?
2:08–2:51
4
How do interest rate hikes change cash flow on a $1.5M commercial purchase?
2:51–5:09
5
Why are lower-yield commercial assets more vulnerable after rate rises?
5:09–7:01
6
Which types of commercial properties will attract the most buyer demand?
7:01–9:58
7
How are residential investors shifting into commercial for better yields?
9:58–11:48
8
What role does serviceability and equity play in investors moving to commercial?
11:48–12:04
Speakers
3 identifiedMore from Aussie Real Estate Podcast
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Australia Housing Market Stability: Low Mortgage Arrears and Minimal Negative Equity Explained
Australia Property Prices Rising: Construction Costs, Materials and Fuel Driving the Market