Finance advice

Special report: APRA changes to meet with mixed success

By Jack Needham
Maths formular

The jury is out on whether APRA-instigated changes to investor lending will influence market values, but if they do, Smart Property Investment’s panel of property experts warn investors to expect mixed results.

Property professionals predict that new apartment stock and house-and-land packages are set to be the hardest hit by changes to lender borrowing, but existing houses in established suburbs are unlikely to be affected.

Rachel Mangalon, director of Ace Lending Solutions, is sceptical of the lending changes’ ability to cool the market.

“The market is definitely heated and something has to be done to slow it down, but I don’t know whether getting involved with percentages and LVRs and stuff like that is going to be enough of a slowdown."

Assessing the effectiveness of any changes will also largely depend upon the method of analysis used, she said, citing the nature of lending enquiries her office has fielded in 2015.

“I think it’s going to depend on where the statistics are taken from – if it’s based purely on sales versus lending then maybe not.

“I think that’s a simple solution, statistically the majority of the lending that we’ve done this year has been refinancing and top-ups, not new property purchases so I don’t know whether the heat in the lending market as such is from property purchases – whether that’s the main driver,” she added.

It’s a sentiment echoed by Jason Back, managing director at the Australian Lending and Investment Centre.

He believes that for any pricing impact to be felt, market intervention will need to stem far beyond investor lending.

“I don’t necessarily see prices being impacted by the prudential overlays they’re putting in place at the moment. So that’s one of the challenges.

“Lending is only one part of that equation, there are still a number of investors out there using equity and cash to purchase property so if this pricing of housing is to be reduced, it’s not just going to be solved by this prudential overlay,” he said.

He did, however, predict that house-and-land packages, which are already struggling to meet buyer expectations, will take a further dip following the changes.

“We’re certainly concerned about the oversupply in that area and the quality of the underlying asset. Some of the house-and-land packages at the moment, I think, are starting to struggle when it comes to valuations.

“I think what you’ll find is there has been increased prices on these properties so they’re selling for high prices but there’s no ... increased value. So a lot of the house-and-land packages are now coming in under-value when they’ve been heading towards settlement so that you’ve got to keep a close eye on that market,” he said.

Cate Bakos, director of Cate Bakos Property, believes that apartment stock in all capital cities will take a major hit to values following the changes.

“Obviously it will minimise the number of investors will have a knock on effect in the investment grade stock, namely apartments, and I think that will have an impact in all of our major capital cities where we'll have more stock to choose from because there'll be less movement and less buyers.

“It could have an impact on price in terms of not necessarily adversely affecting unit prices but it will adversely affect the rates of growth that units have been experiencing so maybe the differential between house prices and unit prices will become quite a lot more noticeable, even more so that it already is,” she said. 

Ross Le Quesne, owner of Aussie Parramatta, also believes that the changes will have a clear impact on market values.

“I definitely think that it will have the desired effect and I think they will continue to implement changes until they see it flow off.

“I don’t have a crystal ball, I definitely don’t think we’re in a bubble and I don’t think it’s going to burst, but I wouldn’t be surprised if the market came off 5 to 10 per cent of its peak at the time when it happens,” he predicted.

Momentum Wealth managing director Damian Collins believes that while Sydney and Melbourne will likely take a hit following the changes, an undersupply of established property in Sydney means the impact of the changes will be vary in severity.

“I think again it will have the biggest impact where investors were most active and that was in Sydney first and Melbourne second. It will have a smaller effect on prices in Brisbane in the medium level, in PerthPerth, TAS Perth, WA and Darwin it will have a moderate impact but investors weren’t that much in the market anyway.

“There’s still a shortage of homes in Sydney so that will probably chug along okay particularly if there’s owner occupiers competing for those as well, but anything particularly targeted to investors in Sydney I’m expecting will see a pretty reasonable drop off over the next 6 months in terms of investor demand,” he said.

APRA Special Report:

Special report: APRA tries to take the heat out of the market

Special report: first-time investors hit the hardest 

Special report: pain and gain for existing investors  

Special report: investors unfazed by lending changes

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1204 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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