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Lending changes not all bad news

By Jack Needham and James Mitchell
32

The head of a property investment group has heralded recent lending changes as carrying hidden opportunities for savvy investors.

Tightened lending conditions will enable well-positioned investors to secure purchases for less as the market stabilises and competition reduces, according to Neil Smoli, managing director of Aviate Group.

Mr Smoli believes that investors should be viewing the recently tightened borrowing conditions as a blessing in disguise, likely to strengthen the long-term prospects of an investment by bringing the spotlight back onto fundamentals, rather than buyer activity.

“With less stringent conditions from lenders for investors, come pitfalls that simple aren’t good for anyone and certainly not the marketplace at large,” Mr Smoli explained.

“For a time, investors were becoming accustomed to LVR rates well below 90 per cent, but as we are seeing now, more and more lenders are bringing their LVR requirements for investors back to the 90 per cent mark.”

Mr Smoli believes that far from abandoning purchase decisions based on talk of Sydney as a “post-boom market”, investors who can meet the new lending requirements should instead seize on reduced auction competition to capitalise on interest-rates that remain at record-low levels.

“Not only is it possible that you might get your investment property for less than expected, meaning you may even be able to borrow less, but you’re also likely to benefit from interest rates that are widely tipped to stay the same or drop even further in 2016, not to mention come up against far less competition on auction day,” he said.

Last week, award-winning mortgage broker Andrew Harrison, of KeyInvest Lending Services, warned investors contemplating a purchase in 2016 to buy now, before lending conditions toughen further.

“It would be prudent if you wish to purchase an investment property in 2016 and you think you may struggle to meet a higher deposit and/or you would rely upon the rental income to service your investment loan that sooner rather than later would be a good time to buy that investment property,” he said.

Mr Harrison was responding to the news that the Basel Committee on Banking Supervision – an international committee that encourages shared standards in lending – had proposed substantially higher capital requirements on investment loans, which could see lending conditions become even more stringent if implemented by APRA.

Mr Harrison, who is based in South Australia, was named the winner of last year’s inaugural Investors Choice Award for mortgage broking.

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