09 Oct 2015
We hope you are out and about looking at properties in the fantastic spring weather! Yes, the busy spring property season is well underway – and there’s plenty of great housing stock available. If you’re in the market to buy right now, the good news is that APRA’s recent tightening of controls on investment lending seems to be having a positive effect on home price rises!
At its October meeting, the Reserve Bank of Australia (RBA) decided to keep the official cash rate on hold at the record low rate of 2.0 per cent for the fifth month in a row. Market analysts are undecided about the RBA’s next rate move, with some predicting a further rate cut in 2015 and others speculating that there will be no more rate changes until late 2016 – both of which mean, of course, that buying conditions will remain good for quite some time for first home buyers, refinancers and property investors alike!
APRA’s new controls have had some effect on interest rates, both for Owner Occupier loans and Property Investment loans. If you’re in the market to buy your first home, upgrade or refinance, you can now access some of the lowest interest rates ever on record as lenders continue to adjust rates downwards to encourage business growth in this area. For property investors, some home loan interest rates have risen slightly, but still remain excellent value and easily accessible to those with an adequate deposit and good financials.
Auction numbers were down recently, because of various public holidays and major sporting events. Additionally, with market conditions starting to favour buyers a bit more, private treaty sales are becoming more popular and are reducing auction numbers in some states. Buyers are definitely out and about, however competition at auctions is not as fierce as it was during the autumn selling season – which was unusually busy because of very high interest from investors, particularly Chinese investors.
The table below shows the relevant auction numbers for each state and corresponding clearance rates, for the week ending Sunday 4 October 2015:
State Number of auctions Clearance rate Victoria 90 68% New South Wales 567 71% Queensland 118 64% South Australia 32 71% Western Australia 10 75% Northern Territory 4 33% ACT 20 54% Tasmania 4 50%
As mentioned earlier, there has recently been indications that home value growth is starting to slow down – which will come as a big relief if you are in the market to buy a property, particularly in Sydney. In most markets, home value price movements were very marginal this month, with only Melbourne showing a significant increase of 2.42% over last month and 14.22% over the last year.
Sydney showed a marked change in home value price growth, only increasing by a very marginal 0.06% this month, but still showing a rise of 16.72% over last year. Brisbane/Gold Coast home values rose by 0.83% last month and 4.88% over the previous year. Adelaide home values went down by 1.17% last month and 0.30% over last year. Perth was up by 0.50% last month but is still showing a fall in home values of 0.90% over the same time last year. Darwin is also showing declines in home values – down by 0.31% this month and 3.92% since last year. Hobart’s home values fell by 1.93% last month and 0.59% since last year. On the bright side, the Canberra market is starting to pick up again, showing a 1.00% increase over last month and a 0.59% increase since this time last year.
With interest rates on the move and becoming more competitive, now is a great time to talk with us about a home loan health check to ensure you’re getting a competitive rate in today’s environment. We’re also very pleased to offer our assistance to those of you looking to build wealth for the future by investing in property. Remember, we’re here to help you with your financing needs according to your personal financial circumstances and goals, so please don’t hesitate to give us a call for a chat today.
The information provided in this newsletter is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs. Information sources: Auction results: www.realestate.com.au. Home values:www.corelogic.com.au
Sincerely , Element Finance
30 Sep 2015
Spring is here and we’re all looking forward to the busiest time of year in property markets around the country! If you’re planning on getting in on the action, we’re ready to find you a great deal on your financing – so whether you’re looking at refinancing your existing mortgage, buying a new home or planning to invest give us a call!
There has been a lot happening in our financial markets this month, with volatility in our share markets and interest rates on the move even though the Reserve Bank of Australia decided to keep the official cash rate on hold at 2.0 per cent during its September meeting.
APRA’s increased supervision on investment lending has caused a general rate adjustment for both owner-occupier home loans and property investment loans. While some lenders are raising the interest rates on their property investment loans by 20 – 50 basis points in line with APRA’s restrictions, they are simultaneously reducing their interest rates on owner-occupier loans by a similar margin.
This is great news if you’re a first home-buyer looking to get into the market this spring. It’s also great news if you’ve been considering refinancing an existing loan – you can now access some of the lowest rates on record and you could potentially save a lot of money on repayments. If you’re looking to invest, or refinance a property investment, we have identified lenders who are offering some great rates, so please give us a call.
Melbourne and Sydney property markets have remained hot throughout winter, whilst most other markets succumbed to the usual winter slow period. Things are now starting to pick up again with auction numbers starting to increase for the week ending August 30.
In Victoria there were 1185 scheduled auctions with a 78% clearance rate, while in NSW there were 1083 scheduled auctions with a 78% clearance rate. These auction figures really outstrip activity in other states. (However it should be noted that in areas outside our two major capital cities, many vendors prefer private sale over auctions).
In Queensland there was 159 auctions with a 58% clearance rate, South Australia offered 100 auctions with a 65% clearance rate, Western Australia 34 auctions with a 67% clearance rate, and Canberra had 47 auctions with a 68% clearance rate. Tasmania scheduled only 8 auctions and recorded a clearance rate of 75% and Northern Territory held just six auctions with no results.
Since last month, changes in home values have been marginal around the country. Sydney showed an increase in home values of 1.14% over last month and 17.55% over this time last year. Melbourne showed a marginal decrease over last month of 0.03% but was still up by 10.59% over this time last year. Brisbane and Gold Coast was up by 0.34% this month and 4.29% over this time last year.
Adelaide was up by 0.67% this month and 1.79% since last year, Perth is showing declines – 1.26% since last month and 1.79% over this time last year. Darwin was up marginally by 0.34% this month but is down by 4.57% over this time last year. Canberra seems to be trending downwards with a 1.69% decrease in home values this month and a decrease of 0.86% year on year. Hobart showed a fall in home prices of 1.13% this month, but was up 1.5% over this time last year.
If you’re excited about the property opportunities coming up this spring, and you should be, then we’d love to chat about your plans. We’re here to help you organise the most beneficial financing arrangements for your property purchasing needs according to your personal financial situation and goals. So please don’t hesitate to give us a call today.
Information sources: Auction results: www.realestate.com.au/auction-results
Home values: www.corelogic.com.au/research/monthly-indices.html
Sincerely, Element Finance
23 Sep 2015
Over the past few months, there has been a lot of chatter in the media about APRA tightening controls on lending for investment property purchases. And as property investment is one of Australia’s most popular ways to build wealth for the future, it has understandably raised a lot of questions from our clients about how this will change the game for those currently looking to invest. But what is APRA actually doing and why? How will it affect your capacity to get an investment property loan if you’re looking to buy this spring?
What is APRA?
First of all, we should explain APRA and the role it plays in the finance industry. APRA is the Australian Prudential Regulatory Authority and it acts as Australia’s finance industry watchdog. Their role is to regulate the behaviour of lenders, banks, credit unions, building societies, general insurance companies, private health insurance agencies and the superannuation industry. Their mission is to establish and enforce standards and practices to ensure that our financial industry remains stable, efficient and competitive.
APRA is concerned that the property market is becoming overheated, particularly in Sydney. This follows home price growth of over 18% in the Sydney market over the past year. APRA is concerned that an overheated market may be subject to rapid price adjustments and this could not only destabilize our entire financial industry, but prove to be extremely risky for the average residential property owner or investor.
What restrictions has APRA imposed?
APRA is primarily concerned about the rate at which the big four banks have been issuing property investment loans. In order to cut it back, they have done two things:
- Increased the capital reserves the big banks are required to hold for their exposure to residential property mortgages; and
- Enforced their requirement that the bank’s investment lending does not grow by more than 10% annually.
The result is that the big four banks have raised interest rates on property investment loans. They have also tightened their lending criteria, so that property investors may now require a larger deposit and must be in a financial position to meet their repayments in the event of significant interest rate rises in future. They are also discouraging interest only property investment loans as these are considered more risky in a property market that may be subject to rapid declines in home values.
How will this affect you if you’re looking to invest now?
First of all, let’s look at interest rates on property investment loans. While it’s true that some banks have raised interest rates on property investment loans, these rate rises only represent a 20 – 50 basis point rise, meaning that the increased interest rate on property investment loans is only a half a percent or so higher on average than most owner-occupier loans. When you take into consideration that interest rates were down to all-time historical lows anyway, this will not prove to be much of a deterrent to those of you looking to invest in property this spring.
Additionally, not all of the lenders are at risk of exceeding APRA’s requirement that investment lending does not grow by more than 10% annually. This means that many of the smaller lenders have not raised their interest rates on property investment loans very much – in fact, some of them have not raised their rates at all.
This is where it really pays to have a good mortgage broker on your team. If you are planning to purchase an investment property this spring then talk to us and we will shop around to find you the most advantageous rate!
What about the tighter lending criteria – how will this affect you?
If you are about to purchase an investment property, then the bank’s tightening of lending criteria may have some effect. It is likely that the amount you can borrow has recently been reduced by 10-15% for the same level of income. Additionally, the big four banks will most likely require a 20% deposit, whereas in the past they would have accepted 10%. (Some smaller lenders are still approving investment property loans with a 10% deposit, so if necessary ask us to shop around.)
The result is that your purchasing power may be reduced and if you want to invest this spring, you may have to look at purchasing a less expensive property. For most property investors, this will prove to be only a minor stumbling block – after all a 15% reduction in your buying power isn’t very much. You may have to work a little bit harder to find a suitable investment, but at the end of the day you will most likely be able to find something that suits your budget.
Good advice is now more valuable than ever
The fact is, it’s more important than ever to be able to get good advice about your loan structuring and a mortgage broker who is able to shop around amongst a wider variety of lenders to get you the best rate the market has to offer.
We’re happy to say that’s our job! Since the APRA restrictions have come into play, we have been able to help several clients find great financing options for their investment property purchases and lower rates for those looking to refinance. We’re confident that we can help you too. If you’re in the market to purchase a property this spring, then give us a call. We’re here to help.
17 Sep 2015
Spring is finally here. But if you’re anything like us, you can’t wait for summer to arrive so that you can hit the beaches with family and friends for some swimming, surfing, boating and even sailing! To give you a taste of what’s in store, we’ll refresh your memory about some of Australia’s favourite beaches so you can start planning your escape!
Byron Bay, NSW
One of the most truly amazing beach destinations in NSW would have to be Byron Bay. It was once an undiscovered hippy community but these days, has blossomed into a hot tourist destination. Byron sports a series of beautiful, long stretches of typically uncrowded beach where you can surf, lie in the sand, snorkel or swim in absolute peace. There’s the nearby picturesque Byron Bay lighthouse to enjoy, plus some great eateries and cafés in the town itself. It makes a great get-away year round.
There are literally so many gorgeous beaches in Queensland that it’s hard to choose just one or two. Noosa is the obvious choice, giving us a showcase of everything the spectacular Sunshine Coast has to offer. Nestled in a fantastic beachside resort, Noosa Main Beach is a patrolled beach that makes it perfect for families, swimming, sailing, and more. Right off the beach you can often see pods of dolphins and whales migrating up and down the coast. And on the shores, you can see Koalas and other wildlife easily accessible to passers by. Just a short walk away, Noosa Park headland is home to the Noosa Festival of Surfing every March.
Cottesloe Beach, WA
Located between the Perth central business district and the port of Fremantle in Perth’s western suburbs, this fantastic city beach is only 15 minutes from the city center and has to rival Bondi as one of our most popular city beaches. Offering clear sparkling waters and amazingly bright white sands, Cottesloe is the perfect place to watch the sun set over the Indian Ocean. It also has a reputation for some of the best seafood in the country… yum!
Wineglass Bay, TAS
One of Australia’s most beautiful beaches is the spectacular Wineglass Bay, which is located in Tassie’s amazing Freycinet National Park about three hour’s drive from Hobart. Considered one of the top ten beaches in the world, Wineglass Bay is a simply gorgeous curving stretch of sand that is contrasted against pink granite cliffs and sparkling turquoise waters. Fishing, sailing, sea kayaking and rock-climbing are all popular past times in Wineglass Bay, but we want to go there to just soak up the sun and spectacular scenery.
Casuarina Beach, NT
Darwin offers a host of lovely beachside destinations to choose from – which is a good thing in place with such hot and humid weather. Casuarina Beach is a popular choice, located on the doorstep of the northern suburbs, it’s just a short stroll to your choice of nature reserve and mangroves, or the City Mall where you can find ice cream, coffee shops and the wave pool. Another popular beachside destination is the Mindil Beach Market which kicks into life every year between May and October.
Apollo Bay, VIC
Surprisingly enough, Victoria has quite a few gorgeous beaches to choose from, but we’re picking Apollo Bay because it’s at located along the Great Ocean Road, a truly spectacular 90 minute drive from Melbourne. Apollo Bay beach itself is a lovely stretch of sand, but other attractions in the area will have you up and about, rather than lazing in the sun. Just up the road is the Twelve Apostles, a set of spectacular limestone pillars that rise up out of the Southern Ocean against the backdrop of the Port Campbell National Park – a sight not to be missed!
Glenelg Beach, SA
Glenelg is not just one of Australia’s best city beaches, it’s also a spectacular tourist destination offering fantastic shops, restaurants and bars at its gorgeous marina and jetty precinct. In fact, there’s an amazing choice of beaches just minutes from Adelaide’s city centre including Brighton Beach, West Beach, Henley Beach and more. Walk just 20 minutes north from Henley jetty and you’ll discover the Grange, complete with romantic coastal dunes and an historic jetty.
Getting ready to enjoy the spring and summer months may include an investment in a sailboat, speed boat or even a caravan to get you and the family out and about enjoying the spectacular lifestyle our fantastic country has to offer. Don’t forget that we’re here to help if you require financing for any personal assets – we do more than just home loans. It you want to make a purchase to help you make the most of our upcoming summer months, just give us a call!
Some of you may have heard that APRA has cracked down on investment lending, influencing many lending institutions to review their investment lending policies.
But we imagine for the majority of you, it’s a case of “APRA, who?”.
In short, APRA are making some changes to investment loans, and we thought you would like to know if and how these changes impact you. In this article, we take a look at APRA and what they’re doing to keep borrowing conditions stable for you as an investor.
What is APRA?
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the Australian financial services industry. Their role is to regulate the behaviour of lenders, banks, credit unions, building societies, general insurance companies, private health insurance agencies, and the superannuation industry.
APRA plays a critical role in protecting you, and the financial well-being of the Australian community, by upholding standards of trade in the financial industry. Their mission is to establish and enforce standards and practices designed to ensure that under all reasonable circumstances, financial promises made by institutions are met and that our financial industry remains stable, efficient and competitive. As a consumer, APRA’s activities ensure that you have a reliable, fair financial industry and you can go about your day to day transactions and investments with confidence.
What are APRA’s new measures regarding property investment lending?
In December 2014, APRA wrote to all deposit-taking institutions (such as banks and other lenders) setting out sound lending standards, particularly for investment lending, that included a benchmark for the 10% maximum growth of residential investment mortgages. This occurred because of concerns over the number of people entering the property investment market and the stability of lending for this market considering current economic conditions.
Their particular focus is on restricting high loan-to-value and high loan-to-income lending, which may be risky for consumers if there should be a rapid or sudden decline in housing values or the property market in general. They also perceive the rapid growth in property investment lending as risky insofar as Australian consumers may be ‘placing all their eggs in one basket’ and they would prefer to encourage investment diversity amongst consumers.
By taking these measures, APRA is looking to make property market conditions safer for you as a consumer. By slowing down investment lending, APRA is also looking to slow down the rapid growth in property prices, particularly in Melbourne and Sydney where property prices are considered to be overheated by many property market analysts.
What does this mean for property investment borrowing?
Many lenders and financial institutions are changing their criteria for property investment lending in order to meet APRA’s requirements. Most major banks have announced that they will be cutting the discounts available on investment loans, which means that interest rates on new investment loans could be slightly higher than interest rates on owner-occupied home loans.
Additionally, most lenders have tightened up their criteria for investment borrowing. Many are focusing on loan-to-value ratios, meaning you may require a larger deposit than previously and may find it more difficult to leverage properties or access equity to invest further if you are already an investor.
Can I still get a property investment loan?
As your professional mortgage broker, your financial well-being has always been our number one concern. One of our primary responsibilities has always been to assess your personal financial situation and goals, and ensure that any loan we offer to you suits you, your financial goals, and your expenses.
Before applying for a loan for you, we always take into consideration whether or not you would be able to service your loan in the event that interest rates should rise and recommend insurance products such as mortgage protection insurance and income protection insurance to mitigate the risk of you not being able to meet your loan repayments if faced with a hardship situation.
Plenty of lenders are still offering property investment loans to borrowers who qualify under their new property investment lending criteria. It is likely that you will still be eligible for a loan and if you are looking to use property investment as a means to build wealth for your future, you should talk to us about your plans and investment goals sooner rather than later.
We’re here to help you work out if property investment is right for you. We have access to a wide variety of lenders and we’ll shop around amongst them to find you the most favourable loan considering your personal financial circumstances and investment goals. Call us today.
For more information on APRA, please visit their website, or speak to us.