Higher deposits, stretched LVRs & more borrowers needing mortgage insurance
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Higher deposits, stretched LVRs & more borrowers needing mortgage insurance

New report shows the challenges involved in buying a home are getting tougher

By Bronwyn Allen
Thu, Nov 30, 2023 10:35amGrey Clock 2 min

The amount of money required for a home deposit is rising and more than half of home buyers had to pay lenders’ mortgage insurance in FY23, according to a new report released by PEXA.

NSW recorded the highest median deposit in FY23 at just below $120,000, up 3.9 percent on FY22. In Victoria, the median deposit was $84,723, down 0.5 percent, and in Queensland it was $78,143, up 8.5 percent.

The time it takes to save these deposits is on the rise. Based on the median family income in each state and a 15 percent savings rate, PEXA found NSW buyers now need an average of almost eight years to save their deposit. This is up a whopping 83 percent since 2020. It takes Victorian buyers a little over five years to save their deposit, up 64 percent since 2020. It takes Queensland buyers just under five years, up 37 percent over two years.

Average deposit-to-value ratios (DVRs) increased to about 20 percent across the three major eastern states as a result of lenders tightening their credit criteria in FY23. The DVR is the amount of cash a buyer contributes to a purchase. The average DVRs in FY23 were 20.4percent in NSW, up 1 percent on FY22; 19.5 percent in Victoria, up 0.8 percent and 19.8percent in Queensland, up 1.5 percent.

The PEXA data shows most borrowers are taking out the maximum possible LVR (loan to value ratio) to fund their purchases. The average LVRs among borrowers in FY23 were 79.6 percent in NSW, 80.5 percent in Victoria and 80.2 percent in Queensland. The research shows the major banks averaged higher LVRs, suggesting they are more open to lower deposit borrowers, due to their visibility of borrower’s income and expenditure via existing banking relationshipsThis also meant more major bank customers had to pay lenders’ mortgage insurance (LMI).

Most lenders will not lend more than 80 percent of a property’s value without forcing the borrower to pay LMI. This insurance protects the bank from default and can be very expensive. Over half of new borrowers had to pay LMI in FY23. The rate was highest in Victoria, where 56.5 percent of new borrowers had to take out LMI.

The PEXA report said rising property prices meant buyers needed higher deposits, making it tougher to buy a home and making the “generational wealth gap more apparent”.

As a result, younger buyers are increasingly tapping the Bank of Mum and Dad to help them achieve the required deposit, as well as taking advantage of government support through various programs.



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The Rise of Million-Dollar Companies With Just One Employee

Artificial intelligence is making it easier than ever to build a business without building a team. As AI takes over coding, customer support, marketing, administration, and other day-to-day tasks, a growing number of solo founders are scaling startups to millions in revenue with few—or even no—employees. While the trend is lowering barriers to entrepreneurship, it is also reshaping hiring, raising questions about the future of work and how businesses will grow in the AI era.

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Ben Broca launched a company last December that offers AI tools to entrepreneurs. He’s already added 10,000 paying customers and is on track to bring in $10 million in revenue this year.

One thing he hasn’t added: any other employees.

The 40-year-old is part of a class of entrepreneurs who are launching, and then often running, new companies on their own. Artificial intelligence tools answer Broca’s emails, help write and debug code, field requests from customers, sign up new subscribers and grant refunds when issues arise.

Broca relishes his ability to make whatever decisions he wants on his own, often from his sun-drenched Sausalito, Calif., living room. “I think compromises make lukewarm results,” he said.

Once upon a time, running a business of a certain size required a team. AI is turning that assumption upside down, and more aspiring entrepreneurs are going it alone.

Ben Broca sitting in his home office.
Tech has seen an explosion of solo founders in the past year. Broca said he likes being able to work at his own speed, unencumbered by a team. Jonah Reenders for WSJ

An analysis by the payments company Stripe shows there are thousands of solo operators on the company’s platform that are generating over $1 million in revenue, with their ranks doubling between 2023 and 2025. The number of solo operators crossing the $10 million threshold nearly tripled in that same span.

In the past, people without business contacts or particular savvy might not have known how to get their ideas off the ground, said Ernie Tedeschi, Stripe’s chief economist. “Now, AI can be a built-in business partner,” he said.

AI’s ability to handle various administrative tasks makes it potentially useful for launching solo businesses in many fields. But the technology’s ability to also handle key tasks in tech, like coding, make that field a particular hot spot.

Analyzing Census Bureau data, Bank of America Institute economist Taylor Bowley found that among all industries, new business applications in the information sector have seen the biggest percentage increase—nearly 45%—over the past year. At the same time, the rate of information-sector applicants saying they plan to hire workers has experienced the sharpest decline of any measured industry.

This Census dataset doesn’t track solo-operated businesses. But the numbers broadly show—in tech and beyond—that applications are flat among businesses likely to hire workers, but generally rising elsewhere. Economists say that’s a strong sign that solo operators are on the upswing.

“The bar for getting started has never been lower,” said Julian Weisser, who runs a San Francisco-based accelerator for solo founders working in tech. The accelerator—which offers founders seed money and mentorship in exchange for an equity stake—attracted 4,500 applicants for 10 slots made available in its most recent cycle, nearly five times the number it drew when it launched last May.

Going it alone with AI can still be surprisingly expensive. Broca said he was losing money on many customers’ accounts while paying to access Anthropic’s Claude to run his clients’ requests—that AI company, as well as others, charges based on usage. He has since switched to free open-source AI models from China.

Broca said he has raised $30 million from investors and, at the same time, has saved millions in salary since he hasn’t needed a team of software engineers.

Another risk: If it’s easy for one entrepreneur to launch an AI-assisted business, copying them can be easy, too. This creates anxiety for founders like Troy Johnston, who runs an AI-assisted business alone in Orlando, Fla.

“Everybody has the sword and we all have the ability to unsheathe Excalibur now,” said Johnston, 40, who used AI to code an app that helps people get the most out of credit card benefits. The company makes around $3,000 a month in profit, with no employees, and is continuing to grow.

Headshot of Troy Johnston.
Troy Johnston said AI’s power and ease of use is an incredible boon for entrepreneurs like him—and also a double-edged sword. Luann Koerper

What one-person businesses will mean for the labor market remains to be seen. Polling has shown Americans are worried that AI will replace jobs, and top economists are wrestling with that possibility, too. But AI is also creating lots of new jobs, and the go-it-alone entrepreneurs show how the technology can both open doors and limit employment opportunities.

“If everyone’s hiring less, but you get four times more firms, what does that do to head count?” said Rembrand Koning, an associate professor at Harvard Business School who studies entrepreneurship. He co-authored a recent study that found that among 50,000 startups the researchers examined, those focused on AI tended to operate with 25% fewer employees.

Koning also believes a soft hiring environment that’s left some people mired in long job searches has encouraged more to try their hand at launching businesses.

Some founders cite different motives. “It’s a perfect storm of post-pandemic burnout and a re-evaluation of one’s priorities, and also booming AI and a sense of what’s possible,” said Samir Ahmad, 39, who lives in Breinigsville, Pa.

Two years ago, Ahmad decided to leave the corporate job he had worked at Verizon for almost two decades to start a solo coaching and consulting business. He had been seeing social-media posts touting the ease and virtues of AI, which he used to chart a business plan and help with marketing. “It was like my chief of staff, a second in command,” he said.

The business ultimately petered out within months, though, and Ahmad is now back to a full-time corporate role with a utility company.

For Claire Vo, 41, AI helped her turn a passing impulse into a business. She was working full-time as a tech executive when she tapped AI in late 2023 to help code an app that would help her manage documentation and design for new products, with customers ranging from financial services to healthcare firms.

“I was copying and pasting from ChatGPT,” said Vo, who lives in San Francisco.

Claire Vo smiling into the camera while recording a podcast.
Claire Vo used AI to code an app that’s on track to make seven figures in profit this year. Claire Vo

She put the app online for $1 a month, and within weeks people downloaded it thousands of times. Nearly three years later, Vo’s company—which she ran solo for nine months before hiring an engineer—now has 100,000 users and is on track to make seven figures in profit this year. AI handles the company’s marketing, sales and customer support.

While AI is a shortcut, Vo said her network and credibility in the industry were key. “I think people over-index on how easy AI is and under-index on how much I did to get to this point,” she said.

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