APRA Sounds Warning to Banks

Melbourne Auction Results 12th of February 2017
81% Clearance Rate 444 Reported Auctions	Sold at Auction:	294
	Passed in:	30
	Sold Before:	83
	Sold After:	0

Source:REIV

 

Melbourne Market Wrap February 12th, 2017

A clearance rate of 81 per cent was recorded this week compared to 78 per cent last week and 74 per cent this week last year. There were 444 auctions reported to the REIV, with 361 selling and 83 being passed in, 30 of those on a vendor bid. Melbourne’s outer suburbs – including Epping and Hoppers Crossing – have experienced solid auction volumes in the past fortnight, as the 2017 auction market gets underway. (REIV)

There are some seriously worrying signs in the market at the moment and what appears to be a return to the days of property spruiker Henry Kay.

As property prices have risen over the past 3 years, those sitting on the sidelines have come to realise that there is no property bust coming. At the same time there are a number of spruikers charging naive consumers upwards of $5,000 telling people they can make truckloads of money by renovating, buying property in regional areas and the outer suburbs and or buying a property to subdivide.

The common thread in all this is why do these spruikers waste their time on these seminars if it was that easy to make money? The answer is that’s it is that seminars are a cash cow in a booming market!

All the above are signs of a speculative market. Property is not liquid like shares and can be very difficult to sell in a down turning market. Caution needs to be excersised in today’s market which has already seen significant growth in median property prices. Some experts’ predicting we are at the top of the cycle. This doesn’t mean you shouldn’t buy property it just means you need to exerscise caution.

If you are thinking of buying a property for investment purposes look at the following

 

Determine why you wish to invest in property and what is your end goal

Speak to your accountant and ask their opinion

Understand your tax position and structures

Speak to a financial planner and pay for a Statement of Advice

Enlist the help of a good mortgage broker/banker to understand your borrowing capacity

Plan for a worst case scenario

Conduct your due diligence on the property and do not overpay

 

My personal view is that there will be pain in the property market but this won’t be uniform.

Should there be a slow down or a down turn in the property market quality property bought at or below market value will hold its own or fall marginally. B Grade or poor performing assets will come under significant pressure and see significant price corrections. I expect the new aprtment market, regional areas, outer suburbs with new developments, highly concentrated investor estates or suburbs, blue collar and $3mil – $5mil plus properties to come under pressure.

 

Source: PIXABAY

 

The Reserve Bank Surprises with Upbeat Forecast for 2017

What should have made news last week was not so much the Reserve Bank’s decision to leave the cash rate on hold at 1.5% but more importantly Governor Philip Lowe’s upbeat forecast of our economy. This was somewhat surprising and needs to be noted.

The Reserve Bank was buoyed but higher commodity prices and a more positive outlook for the global economy, saying these factors are likely to place upward pressure on inflation and increase the possibility of interest rate hikes.

With the US Federal Reserve expected to lift rates this year, the Reserve Bank Governor no longer believes there will be a need for further monetary easing in other major economies. In fact the Reserve Bank warned that global interest rates were at the bottom of the cycle and on the cusp of turning after eight years of cuts.

The bank’s economic forecasters expect GDP growth to rebound to 3 per cent over the next few years, and described the September quarter’s surprise contraction as being caused by a perfect storm of temporary factors.

A key warning sounded by the RBA though was aimed at the property market, in particular the significant rise in speculative investing. There is a common theme throughout thgis article.

This warning was followed up last week by APRA’s public announcement to banks  that they will be punished for breaching the 10% speed limit on lending to property investors.

Coincidentally Bank West then CBA, the nations’ biggest lender revealed it had cut off lending to some new property investors.

The ramifications are starting to filter through. There are reports where banks have reduced their lending LVR’s to certain investors looking for more funds or to refinance. Property in certain areas being used by investors as choleteral has been scrutinised and in some cases and where the quality of the asset is not “A Grade” there have been requests for more equity in the form of cash or to take out mortgage insurance.

Despite new global reforms yet to be announced by the Basel Committee, APRA in the coming months will unveil how it will implement a need for our banks to have “unquestionably strong” capital ratios. Limiting the type of economic disaster witnessed in the GFC of 2008.

 

Street Advocate – Property Results a Mixed Bag

Last week was a busy week for when we manged to secure two properties for our buyers, saving them each $100,000.

One property was a single front cottage located in the prime area of Richmond Hill and with a tenant paying over 600 per week!

The other was a beuatifully presented home in the North Eastern suburbs purchased for my client’s who were upgrading.

 

Feel free to call me if you have a property question on 0418 740 606 or 9863 7514

 

Street Advocate Client Reviews

Peter,

Just a short note to thank you once again for your help in selling the property.

Dealing with you Peter was a pleasant experience, you were very professional with all aspects of the sale including:

·         Your knowledge of the real estate industry

·         Negotiating down the agents fee.

·         You understanding what marketing campaign was needed and directed the agent accordingly

·         Keeping me up to date by communicating via phone, text , email and weekly meetings

Not only will I use you in the future but I would have no problem recommending other vendors to you.

Thanks once again, Arnie Nuzzo

6 Highett Rd, Hampton

 

Thinking of buying or selling a home?

Visit our Street Advocate website or send an enquiry below or just call

Peter Sarmas on 0418 740 606.