Newsletter - Inner Circle September 2017
Welcome to the latest news from the Property Mavens team.
Unless you’ve been overseas on holiday, you will no doubt have heard that Melbourne was recently crowned the world’s most liveable city again, making it a record of seven consecutive years with the title. That’s right, no other city has ever held the title for as long!
Our city scored a total of 97.5 out of 100 on the Economist Intelligence Unit’s Liveability Report 2017, just beating the Austrian capital of Vienna and receiving a perfect score of 100 in healthcare, education and infrastructure.
The news comes as Melbourne’s property price growth and auction clearance rates continue to lead the way nationally. According to CoreLogic, our city’s dwelling values grew by more than double Sydney’s over July, with ongoing population and jobs growth and the market’s relative affordability among the factors credited.
A likely retreat of Chinese developers from Australia due to Chinese government rule changes on overseas real estate investment is also likely to lead to more growth, as this will cause supply to reduce.
As prices continue to grow in Melbourne the spotlight really turns to location – with all eyes on the locations where growth will be the strongest.
A recently-released list by the REIV of the most expensive metropolitan Melbourne suburbs by square metre shows buyers value location more than property size, with the inner bayside suburb of Albert Park coming in at the most expensive, at $12,947/sq m, followed by Middle Park ($11,924/sq m) and South Melbourne ($10,946/sq m). These suburbs beat out traditional blue-chip suburbs such as Toorak and Brighton, which are a little further from the city, less cosmopolitan and have typically larger land blocks.
Be acutely aware of changing lending restrictions
Lender policy and rates are literally changing daily, and investors need to be mindful of the direct impact it can have on them.
As I explained last month, lending restrictions are tightening due to the APRA crackdown, with interest-only (IO) loans becoming harder to obtain and IO rates rising.
The reduction of IO loans available in the market will limit the borrowing capacity of investors due to a reduced servicing ability (as they will now need to service a principal and interest loan), which will in turn reduce the amount they can spend.
Banks also use a loaded rate called an “assessment rate” (stress test) when assessing applications for new lending . These assessment rates can be as high as 7.45%, which will also limit the borrowing capacity of investors due to a reduced servicing ability.
In other words, time is of the essence, so buy as soon as possible once lending is approved. We have seen investors who qualify for loans suddenly no longer qualify as a direct result of these changes, especially in the SMSF space.
For advice on how to balance your portfolio, contact us for an obligation-free discussion.
As the REIV data shows, buying property is still all about ‘location, location, location’, as the old saying goes. It’s not only crucial to buy in the right suburb to generate the strongest return on your money, but where the property is located within the suburb and what’s surrounding it is just as important, and this is where buyers’ agents can help.
As buyers’ agents, it’s not just the properties that we buy for our clients, but the properties that we reject that sets us apart from our competition.
Recently this Sunshine West cutie was on our radar and earmarked as a potential property for one of our time-poor clients… until we did further due diligence that knocked it out of contention.
While it met much of the criteria that we use to assess and determine a properties worthiness to purchase, the one concern that caused us to reject it was its very close proximity to high voltage power lines.
The advice we sought and received from one of the friendly licensed valuers on our team was to never buy within 100 metres of high voltage power lines, as it has a substantial impact on any future resale price and capacity to sell easily, particularly in a weaker property market.
There are also varying opinions relating to the potential health implications for any tenants or residents to consider too!
Given this property was within 65 metres of the high voltage power lines, it was immediately rejected and a much better property was sourced for our client.
Alarmingly, another buyers agency bought it for their client …
We often come across clients with a very specific cash flow strategy or a limited budget.
In this case, our SMSF buyers Mark and Mary had a targeted cash flow strategy so we purchased them this fantastic art deco house in an upmarket suburb in Ballarat in 2013, for $310,000 which was $10,000 below the vendors asking price.
Not only has this property been delivering a high yield from day one, it has grown in value by over 30% since their purchase and is currently in high demand should they want to sell (although we advise they keep holding it for the long term).