Wow! What a difference a month can make in the property industry!
As some of you may be aware our Eastern States property investors have been achieving great results in the way of capital gains over the last 12 months. In particular the outperforming states have been Sydney and Melbourne.
Due to this growth, which is clearly unsustainable, the RBA is trying to slow down any further future growth. Obviously if growth continues at this rate we are going to have issues with affordability and there may potentially be a property bubble.
So in their wisdom the RBA has put pressure on the financial institutions to increase the interest rates on investment loans. Most Financial institutions have increased their rates by .27% in the hope of slowing the inclining market.
Some banks have also changed their policy on developments. We are seeing more and more clients come in to visit us who are saying they had pre-approval for a construction loan to build some units and/or homes as a built strata development, however the financial institutions are now saying that they can’t complete a build strata development. Instead they must now do the subdivision first to create the new title and equity, then they can apply for a construction loan. This has added potentially 9 months to some of our client’s developments. As you can appreciate the extra time spent in an investment is also money!
LVR levels have also increased, with many banks now insisting on an 80% lend as it’s maximum position on a purchase.
So where to from here? And how is this going to impact on your investment or future property purchases?
Well I believe that although some investors are hindered by these decisions, there are also positives in these changes. Basically if there are less investors in the market it means that we can negotiate a lot better with our purchases, as there will be less competition. This will in turn slow down construction and reduce new product to hit the market. If there is less stock then prices increase. Rental prices also increase as existing stock is soaked up.
Obviously there is always a lag between implementing new policies and seeing the affect. However as I have always said- there is always opportunity and as the market changes you just need to be a little bit more creative in your acquisitions.
Happy Property Hunting!
If you would like to find out how Subpro Realty are finding investment properties in this current market contact us at firstname.lastname@example.org or come along to one of our seminars.