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Friday, August 21 2015
Banks are putting the brakes on lending to property investors but owner-occupiers are being offered some of the sharpest deals in the market. Owner-occupiers who make prinipale and interest repayments are being targeted with lower advertised interest rates and cash-back offers, and as we have found there can be abaility to negotiate bigger discounts - but only for occupied lending. Banks are also offering "cash back" offers targeted at owner-occupiers. We are seeing the same in the fixed rate market with different pricing between owner-occupied lending. The reason is recent pressure applied to the banks by both APRA and ASIC to cool investment lending which has primarily built up in the Sydney market. But rather than take a targeted approach to the Sydney market APRA in particular has a dopted a broad brush approach. My own view? The actions by APRA in particular are a bit late in the game. APRA have sat back for the last 2 years and let the Sydney market run riot and have only brought changes in at a time when Sydney is already showing signs of cooling. But no doubt they will pat themselves on the back for a job well done. While their can be some good deals on offer chasing the cheapest rate can have plenty of pitfalls. There's a fair bit of change in the market at present and what looks like a good deal today might not be that great tomorrow. So it makes sense to get a proper review of your full situation to determine what is going to be the most appropriate structure for you and what the actual costs are. Contact us to arrange a FREE finance review Tuesday, August 11 2015
 First home buyers in Australia's growth areas are the next target of Commonwealth Bank of Australia's belt-tightening under a bank plan to curb loans on greenfield housing developments. A CBA presentation to mortgage brokers, has outlined a plan to effectively delay the approval of finance for buyers of lots until the land is development-ready, with all preliminary work such as roads completed. Developers said the change will limit land development, putting further pressure on the ability to increase housing supply. This move will restrict presales. Many developers have to secure presales of up to 50 per cent of all lots on a planned site before banks will lend funds for bulk earthworks and the installation of water, sewerage and electricity services that make it developable. The move, expected to become CBA policy in the next few weeks, will increase the pressure on developers already hamstrung by slow land release and title processes. It will slash development and send prices surging, developers said.
"If it's adopted by all banks, it will make it more difficult for all developers to fund construction of land for first home buyers and second home buyers," said David Payes, the managing director of developer Intrapac Projects and president of lobby group Urban Development Institute of Australia, Victoria. "We need to supply land to keep housing at affordable prices." Under the new policy it will only accept valuations on lots – a crucial step in the mortgage approval process – after an external valuer has physically examined the site. "We believe a more accurate measurement in getting a valuation on unregistered land at an appropriate time should instead be based on the valuer having access to the estate and being able to physically identify the allotment," it said in the presentation. "This action directly targets the production of new housing stock; jobs, supply, prices and therefore the broader economy will feel the effects of the bank's action," UDIA Victoria chief executive Danni Addison said.
"It is simply neither justifiable nor understandable and could very well lead to a significant contraction in supply and a reduction in new housing options for buyers and renters." Tuesday, August 11 2015
 McGrath Real Estate chief executive John McGrath has declared the Sydney property market "close to peak". "I'd be concerned if Sydney sees another double-digit growth. I'm predicting 3 to 5 per cent more and then I think it's going to be plateauing. Melbourne is probably about the same," he said in Melbourne on Monday. "The rest of Australia … much of it is preparing for its next growth cycle. South-east Queensland is going to be the hottest market for the next three years. Perth is just totally depending on resources. Mirvac boss Susan Lloyd-Hurwitz said: "We certainly are pedalling as hard as we can right now. But it is cyclical, so we do recognise that there are cycles and certainly the Sydney market has to be towards the top of its cycle by any measure that you would care to look at." Friday, August 07 2015
There may be situations where not all your expenses are deductible and you need to work out the deductible portion. To do this you subtract any non-deductible expenses from the total amount you have for each category of expense; what remains is your deductible expense. Situations where you will need to apportion your expenses include: - your property is available for rent for only part of the year - only part of your property is used to earn rent, or - you rent your property at non-commercial rates. Property available for part-year rental If you use your property for both private and assessable income-producing purposes, you cannot claim a deduction for the portion of any expenditure that relates to your private use. Holidays homes and time share units are common examples. In cases such as these you cannot claim a deduction for any expenditure incurred for those periods when the home or unit was used by you, your relatives or your friends for private purposes. In some circumstances, it may be easy to decide which expenditure is private in nature. For example, council rates paid for a full year would need to be apportioned on a time basis according to private use and assessable income producing use where a property is used for both purposes during the year. In other circumstances, where you are not able to specifically identify the direct cost, your expenses will need to be apportioned on a reasonable basis. Only part of your property is used to earn rent If only part of your property is used to earn rent, you can claim only that part of the expenses that relates to the rental income. As a general guide, apportionment should be made on a floor area basis - that is, by reference to the floor area of that part of the residence solely occupied by the tenant, together with a reasonable figure for tenant access to the general living areas, including garage and outdoor areas. Apportionment of travel expenses Where travel related to your rental property is combined with a holiday or other private activities, you may need to apportion the expenses. If you travel to inspect your rental property and combine this with a holiday, you need to take into account the reasons for your trip. If the main purpose of your trip is to have a holiday and the inspection of the property is incidental to that main purpose, you cannot claim a deduction for the cost of the travel. However, you may be able to claim local expenses directly related to the property inspection and a proportion of accommodation expenses.
Contact us for an initial discussion. What are the secrets you need to know before you start investing? Friday, August 07 2015
The landscape for investment lending is changing and like most things there will ultimately be winners and losers. The key to coming out on the right side of the equation is to seek advice and get a solid understanding of your options. Contact us for an obligation free asessment. If you adopt the she'll be right approach and stick your head in the sand then you could find yourself in trouble. The changes occuring are as significant as those during the GFC. Some of the key changes we have seen so far are as follows:
As we have mentioned previously those most at risk are off the plan unit purchasers, partcularly those with small deposits or little in the way of equity. But of course changing conditions also present opportunities both in terms of opportunities to imrpove your finance structure and opportunities to invest. We expect improved interest rate pricing for home lending and some opportunities to imrprove overall pricing with the correct structure. Contact us for an obligation free assessment. and how to structure your finance Friday, August 07 2015
While there are changes afoot with investor lending the flip side of this is lenders will be keener than ever to chase owner occupied business. This means we are likely to see some pretty sharp offers in the coming months. There are already some excellent offers out there that can strip thousands of dollars a year off repayments. If it has been a few years since you have review your home loan now is a good time to contact us for a review of your options. Even with investment lending there are savings to be had if things are structured the right way. Contact us now for an initial review Friday, August 07 2015
If you are an off the plan unit buyer Contact us to discuss your finance options (SOURCE: AFR) Property investors caught with off-the-plan apartments delivering lower rents and capital growth than predicted at purchase need to shop around for the best rates to meet bigger repayments. Real estate agents and developers are warning that many investors with off-the-plan apartments coming up to completion could face shortfalls of more than 20 per cent in both rental income and valuations. "The investment lending landscape is rapidly changing," says Chris Foster-Ramsay, managing director of Capital Home Loans. "The banks are capping loan-to-value ratios to 80 per cent, increasing interest rates for investment lending and/or interest-only loans by up to 25 basis points [and some are] completely pulling out of the investment lending market." The good news is that competition for the owner-occupier market is expected to intensify, particularly principal and interest loans. "Those who make additional principal and interest repayments over and above the minimum required by the bank and can present a history to their lender will benefit by potentially being able to negotiate better discounts, essentially because they are lower risk," adds Foster-Ramsay. Mortgage brokers estimate there are 90,000 apartments being constructed in Australia that have been sold off the plan but not yet settled. The purchasers of about 20 per cent of these, or 18,000, have paid a deposit of just 10 per cent of the full purchase price, according to analysis of investor statistics from CoreLogic. As little as 10 per cent of the purchase price has been required to secure an apartment and buyers typically arrange finance ahead of settlement as the apartment nears completion – often years later. HOT WATERA real-life example has been provided by Beller, a diversified property group with offices in Australia and China. The owner's name and address of the property have been withheld. An off-the-plan apartment was purchased for $485,000 on a 10 per cent deposit ($48,500), which meant 90 per cent, or $400,000, equity was required. The bank valuation at completion of the apartment was $400,000, a 17.5 per cent discount on the purchase price. In addition, bank borrowing has been reduced to 80 per cent of the valuation, which is 80 per cent of $400,000 ($320,000). That means the purchaser has to come up with an extra $116,500. The expected rent for the apartment at the time of sale was $460 a week, which is a net gross rental return of about 5 per cent on the original $485,000 purchase price. The actual rent is $360 a week – that's a return of 3.85, which is 21 per cent discount on the original estimates. National Australia Bank and Australia and New Zealand Banking Group have capped their loan-to-value ratios at 90 per cent. Westpac has announced investors will be required to have a minimum of 20 per cent deposit for investment loans.
Decisions by ING and AMP to tighten, or even cease, new lending reflects their concerns about being swamped by borrowers turned away by major banks. Barry Marshall, principal of Barry Marshall Real Estate, a boutique Melbourne-based agency, says thousands of investors who have purchased off-the-plan apartments on higher loan-to-value ratios and lower interest rates than currently on offer from the major lenders will be seeking alternatives. "Investors have to get the money from somewhere," Marshall adds. SMSF HURDLESInvestors facing a funding squeeze on an off-the-plan property in their self-managed superannuation fund need to clear several more hurdles created by contribution caps and legal restrictions on their trust. A super fund trustee has entered a legal contract with the seller that is fully enforceable. A trustee cannot walk away from the agreement without serious legal repercussions. "You can top up any shortfalls with super contributions to your concessional cap or non-concessional caps," says Aaron Dunn, managing director of The SMSF Academy. But if the concessional contributions cap are exceeded these amounts may be subject to excess contributions tax or refunded and reassessed by the Australian Taxation Office to include the amount within your personal tax returns, along with an interest charge, he says. Some lawyers suggest a new contract outside of the fund. "I have seen circumstances where the vendor will allow for a new contract to be drawn up," says Dunn. "In such an instance, you would expect the original deposit to refunded and the new purchaser pay a deposit the new deal," he says. Those considering this need expert legal and tax guidance to ensure it does not create contract and tax problems. Other options might be to seek a top-up loan for the shortfall from a related party, such as another member of the fund. "This can create potential problems in the ranking of the mortgage if there is a default or bankruptcy," says Dunn. "The related party will rank behind the bank in the event of default." There will also be additional costs in drawing up a related-party loan agreement. Monday, July 27 2015
As I flagged back in my article in May there is a major problem looming for off the plan unit buyers. An article in the Fin Review this week also highlighted the issue A number of major lenders have just pulled the rug out from under the feet of unit buyers and potentially left them high and dry. "This is causing alarm across the industry," said Tim Brown, chief executive of the Mortgage and Financing Association told the Australian Financial Review. "Many of these are first-time buyers who will not be able to fulfil their finance obligation under the contract and will lose their deposit as many of the banks will not finance any investment loan over 80% and in some cases will not lend on investment at all," Tim Brown said. Having put down a 10% deposit, apartment buyers typically arrange finance for the rest as the apartment nears completion - now set to find that finance has become both more expensive and harder to secure. Many lenders will no longer accept a 10% deposit and now require minimum 20% purchaser funding. The tests for loan servicing have now also substantially changed meaning people may now qualify for significantly less than at the time they signed a contract. Some lenders have also basically said they will not honour previous approvals. So buyers who thought they had their lending locked in may also be in for a rude shock. With people not being able to settle this could have a substantial negative impact on unit prices as contracts fall over. If you have bought a unit off the plan you need to have your situation reviewd as a matter of urgency to assess your options. Contact us today for an assessment. Thursday, July 23 2015
The headline consumer price index came in at a lower than expected 0.7 per cent from the March quarter for a 1.5 per cent rise from a year earlier. So-called trimmed mean inflation, which strips out volatile price changes, was 0.6 per cent in the second quarter and 2.2 per cent from a year earlier. Economists had tipped gains of 0.6 per cent and 2.1 per cent. Core inflation remains firmly within the bottom half of the Reserve Bank of Australia's 2-to-3 per cent target range, preserving its ability to cut the official cash rate again if needed. "With sub-trend growth in the economy, low wages and a global environment characterised by low inflation and strong competitive pressure, the inflation outlook is not a constraint should a weaker than expected demand outlook put the RBA in a position of needing to act on its easing bias," said ANZ Bank analysts Jo Masters and Katie Hill. Prices that were under upward pressure included medical and hospital services, which gained 4.5 per cent, the ABS said. Domestic holiday travel and accommodation fell 5.4 per cent. Josh Williamson, an economist at Citigroup, said if either growth or inflation fail to show signs of strengthening later this year the Reserve Bank will cut the official cash rate by 0.25 of a percentage point to a record-low 1.75 per cent in November. "Moderate inflation – in the lower half of the 2-to-3-per-cent target band in underlying terms – buys the RBA more time to leave the already accommodative stance of monetary policy unchanged," said David de Garis, a senior economist at NAB Bank. Tuesday, July 21 2015
(SOURC: THE PROPERTY OBSERVER) News Ltd columnist Alan Kohler says it will take nothing short of a recession to bring Australian house prices down. Australian house prices were not in a bubble, but instead, in a "new normal" and are not going to come down on their own, the columnist said. But he noted Deloitte Access Economics’ latest economic outlook where director Chris Richardson said: “The chance of a recession is higher now than it’s been for quite some time. China’s economy is the key.” Alan Kohler referenced the RBA's recent comments: “…there are no examples internationally of large falls in nominal housing prices that have occurred other than through significant reduction in capacity to pay (e.g. recession and high unemployment).” And: “There is no mechanism to get a large and sustained level shift down in prices while a substantial fraction of the population can -- safely and sustainably -- service the obligations involved in paying the higher price.” Finally: “…there is no example in Australia or internationally where supply expansion on its own generated housing price declines of a similar order of magnitude to the increases in prices seen in some Australian cities in recent years.” Noting what’s happening in China, Alan Kohler suggested there is no chance of interest rates going up, so serviceability is only likely to improve. "In fact, rates are more likely to come down further to try to prevent a recession here." Kohler concluded the one bright spot was the big increase in the supply of apartments, which has resulted in smaller price rises among apartments than house, especially in Melbourne. "Those who own a house already are winners; those who don’t will have to buy a flat."   |
