Julian Lancey has worked to maintain his six-property portfolio for 18 months, staying away from purchasing any new asset due to different factors, most pressing of which is the recent changes in lending restrictions.
The property investor admits that he has not been able to add properties to his portfolio because the banks and brokers have made it quite impossible for him to do so.
He shared: “I haven't bought anything, [even though] I've wanted to. I've actually had one loan approved, but it was the only one I could get approved was with a Mickey Mouse bank that nobody knows and nobody's heard of … [with] really high rates, so it wasn't worth it.”
“I've refinanced, which is good, so I pulled a bit of equity out, [but the] bad news is that I haven't been able to buy a place.
“It’s frustrating because there's been plenty of people who buy them,” Julian added.
The good news
A lot of property investors intentionally go through cycles without buying anything because, like Smart Property Investment’s Phil Tarrant, they know that the right properties naturally go up in value over time.
Most of Julian’s properties are in the city, which is usually considered a good location for investment, and he has fortunately seen some growth over the past year despite not having bought any new asset.
“I just turned 40 a couple of weeks ago and if I sold all my properties, I'd be a millionaire," he said.
“That's a wonderful feeling: To know that in my life I've never been given anything when it comes to handouts, when it comes to family or government or stuff like that, [and] to turn 40 and think, ‘Oh wow, I've hit a million bucks’.”
He could have easily retired and enjoyed life with his family, but Julian chose to continue working and ultimately create more wealth.
The bad news
Like all property investors in the beginning of their journey, Julian started as a hungry and passionate man, eager to learn and ins and outs of the property investment landscape and make his way towards success.
A year and six properties later, he still has the same drive to achieve big goals. Unfortunately, he has hit a wall in terms of serviceability.
“I would buy if I could buy, [but] I can't, so what can I do? I've done different things—I've renovated, I've fixed this [and] that, I've refinanced … I just can't get another one,” he said.
According to Phil, many property investors are admittedly having a hard time securing financing especially now that banks have elevated their serviceability requirements.
Phil explained: “They're looking at people's ability to repay debt at 7 plus percent."
“Banks have been more reluctant to give money to investors because they have caps on how quickly they can grow their investor loan books.
“These are all mechanisms that have been put in place … by APRA, the Prudential Regulation Authority, to try and slow down investor lending ... I think by doing that, they're going to slow down the property market and make property more attainable for all Australians.”
While it’s relatively easier for first home buyers to purchase a property because they get lower rates, more seasoned investors tend to hit walls and postpone their acquisition because of these strict lending rules. Hopefully, according to Julian, these walls don’t last forever.
Hopefully, according to Julian, these walls don’t last forever.
A hope for the future
Luckily for property investors, the markets are designed so they move in cycles. Moreover, regulations are put in place to give everyone a fair chance in the business of creating wealth through property.
Phil said: “What has happened: The dynamics in the marketplace is in response to perceived—and some would say actual—unsustainable rampant increases in property values.”
“And you know what? They're probably right. There have been a lot of people in the market buying property who, perhaps, shouldn't be buying property, who are redlining it.
“[But] things move in cycles as well. There will be a point in time when the banks are able to take the handbrake off some of the ways in which they lend [because], let's be honest, banks want to lend money—that's how they make money.”
Despite the challenges he is facing now, Julian still believes that there is no better investment than property. As he continues his journey, working to improve the $1 million equity he currently holds, the property investor hopes to create financial security and stability both for himself and his family.
“I've got the equity. That's not the problem. The problem is them saying, ‘Yes, we'll give you the serviceability...’ I hope … in a couple of years, I can say to you I've got a couple more places because I don't want to lose that desire. Buying property has been one of the best things in my life. I love it,” Julian concluded.
Tune in to Julian Lancey’s episode on The Smart Property Investment Show to know more about the challenges of the market dynamics that he faced, how he tried to overcome the restrictions placed on him by renovations and refinancing, and why he thinks “property is the best”.