Newsletter - Inner Circle March 2018
Buyers are optimistic, but they must buy right
The Melbourne property market has softened, due to both the APRA effect (the reduction in buyers caused by a tightening of lending restrictions and reduced availability of interest-only loans) and caution being exercised by buyers in case the market starts to fall.
With fewer buyers around, auction attendance is down and more properties are passing in. This means vendors are having to manage their expectations - we’re coming off a hot market so many still want top dollar, but conditions have cooled. A recent survey by auction streaming service Gavl actually found managing vendors’ expectations was the biggest challenge identified by real estate agents this year.
In this market buyers also need to rethink what they need to pay for a property, and specifically avoid overpaying. A-grade properties in high demand will always attract competition and buyers will need to stretch, but B and C-grade properties may allow more flexibility with budget.
While conditions are good for buyers at this point in time, rather than just jumping into the market, buyers should carefully consider their position and firstly ensure they can obtain finance. The time to buy is when lenders will give you money, and these days they’re not giving it out too freely. Remember, no loan, no property, no capital growth!
If you’ve determined you have the means to buy, you’ll need to think carefully about what you are going to buy. When there are too many properties to choose from, it can be hard to make the right choice. In this situation an independent and unbiased buyers’ agent such as Property Mavens can help – we can assist with asset selection, analysis and negotiation. We also make sure you pay no more than market value.
If you want advice about where and what to buy, and how much to pay, contact us today.
Interest only (IO) loan conversions to principal and interest (P&I) will soon impact the market
You may have seen the 7.30 Report a few weeks ago, where I was interviewed talking about the fallout from the APRA crackdown on IO lending. In a nutshell, it’s starting to take hold, and will have a big impact on some borrowers and in turn, the market. Many borrowers – including owner-occupiers and investors – will be forced to switch from IO to P&I when their initial fixed term ends, and this increase in repayments will see some struggle, especially if interest rates rise. It’s a risky situation labelled as ‘repayment shock’ by APRA chairman Wayne Byrnes, that could be made worse if property prices in some areas soften.
So what impact could this have on the Victorian or Melbourne property market? It could result in a lot of stock hitting the market, especially in 2019 and 2020. The type and volume of stock will depend on an investor’s gearing levels; some may be forced to sell if they can’t refinance or secure further IO lending.
It is urgent that anyone with loans converting to P&I assess now if they can afford to keep them and if not, seek independent qualified advice as to which property in their portfolio may be under-performing so they can divest sooner rather than later, and before the market cools off too much. Property Mavens can help with this, as we offer a property portfolio review service. Contact us today for an obligation-free discussion.
We recently bought this Ballarat house – situated in a highly sought after suburb within the city - for our investor client. It has four bedrooms, two bathrooms and uniquely, a four-car brick garage.
We were able to inspect the property following the first open for inspection, and crush an earlier offer by presenting an on-the-spot offer, due to all the due diligence we did before our inspection. Our offer (under the top of the vendor’s range of $365,000 to $375,000), was accepted within hours, shutting down three more private inspections later that afternoon.
The result was that our client secured an investment grade property, saving them time and money in the process.
If you would like help with purchasing an investment-grade property like this one, click here to book a time with us to discuss your requirements. It’s 100% obligation free.
St Kilda West
We have purchased five properties for one of our clients, Miranda, over the several years. While they have all performed well, we wanted to share the success of the second purchase with you – a property that is her owner-occupied residence - as it has performed well above the market average.
The property was bought off-market six years ago for $50,000 under the bank valuation and with a $20,000 rebate secured at settlement (due to necessary repairs we detected during due diligence and strict contract clauses we inserted, as well as negotiations). In that time it has fared very well, growing at 6.7% above the market average, in the highly sought after suburb of West St Kilda. The property has grown in value by $500,000, representing a total capital growth rate of 62.5% in six years.
If you want similar results, click here to book a time with us to discuss your requirements. It’s 100% obligation free.