RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attemp...
If you want to succeed in the world of property investment, editor Phil Tarrant’s buyer’s agent says there is one key ingredient that investors need.
Speaking to Smart Property Investment, Steve Waters of Right Property Group said the key ingredient for investing at the moment is all around finance and dealing with changing over loans.
“The availability of money is crucial because obviously it enables us to either purchase or not,” Mr Waters said.
Elaborating further, he shared the investors and home owners who are going to be rolling off interest-only loans into principal and interest loans, which he described as having a heavy effect on household budgets and disposable income.
“We might start to see some of these oversaturated areas, especially around the house and land package zones … into that P&I,” Mr Waters said.
He said there may be a little stress, but it will come down to the lending criteria of the banks and serviceability whether investors can roll over the loans from investment-only (IO) to principle and interest (P&I).
Looking at the worst case scenario, Mr Waters said the loan roll over, combined with possibly higher funding costs of second- and third-tier lenders which use money from overseas could result in a “double whammy of higher interest rates” and a P&I component that will put pressure on the market.
“But having said that, … not all investors and home owners are so flippant, and I’d like to think most have their finances under control and their household budget’s under control and they're well vested in making sure in making sure that that all the Ts are crossed and the Is are dotted,” Mr Waters added.
Other key ingredients investors need to look out for include decreasing vacancy rates, lowering days on market and improving local customer sentiment.
“Usually, [they are] some pretty good telltale signs as to whether a market is going to perhaps continue to perpetuate or fall flat on its face, and often people tend to ignore the most obvious,” Mr Waters said previously.
Interest is the amount of money charged by a lender or financial institution for a loan, which is calculated as the percentage of the principal amount paid over the loan term.
A principal is a term used in Australia that refers to a client or proprietor in contracts, as well as a licensed estate agent responsible for an agency’s legislative compliance activities.