Maria Papa columnist

Many economists have predicted property prices to continue to fall this year and not bounce back until 2020 or 2021. However, the latest data from Core Logic shows that 5 out of 8 capital cities showed a slight increase in housing price in July. This supports the case that the turnaround has begun and this may be a good time for both first home buyers and investors to get into the market.  

“Historic low mortgage rates, improved access to credit, a boost in housing market confidence following the federal election and recent tax cuts are likely the primary drivers contributing to improved housing market conditions,” according to Tim Lawless of Core Logic.

REA Group’s Chief Economist Nerida Conisbee made five predictions for the market over the next five years. (https://www.realestate.com.au/news/what-will-australias-property-market-look-like-in-five-years/)

  • Interest rates will remain low, but are going to creep up over the next 5 years.
  • We’ve hit the bottom of the market and house prices will see another surge.
  • Australian property will still be amongst the least affordable in the world.
  • Asian buyers are unlikely to return to investing in Australian property to the same extent.
  • An increase in migrants arriving from the UK, US and Hong-kong. 

Even with improved market conditions and housing sentiments, there are a few things that investors should be wary of. First is to avoid high-rise apartments. There are recent concerns about building quality and defects. Apartments such as the Mascot Towers in Sydney was recently evacuated after residents spotted cracks forming in the brick wall. A similar incident also happened at the Opal Towers six months ago where design and construction issues have been found. Another reason to avoid high-block apartments is the increased supply and low demand of these units. Several off the plan apartments bought in 2017 and completing this year are experiencing low property valuations. Homebuyers of these apartments are having problems settling them today as they need to cough up the difference between when they bought it two years ago and its current value. Apartment oversupply also means low rental income for landlords.

Housing credit policies remain tough with continued scrutiny into borrower’s spending behaviours and expenses. With the introduction of the Comprehensive Credit Reporting in July, lenders now have access to a borrower’s debt profile. This provides lenders with the ability to assess the credit worthiness of the borrower in more detail. 

With the historically low 1% RBA cash rate, banks have started offering competitive rates both for homeowners and investors. We are now seeing fixed rates of 2.99% for owner occupiers. Taking advantage of these rates means big savings for the homeowners and a chance for them to get ahead. Review your bank statement and if you’re not getting a rate at the low 3%, then it’s time to speak to your bank to negotiate your rates. In the investment space, a few lenders have started offering interest only loans for up to 10 years to investor clients and at loan to value ratios up to 90%.

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs.  We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product.  It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. 

Photo credit: Tom Rumble on Unsplash

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