Calla Property experts help you to get into the property market through education and strategy and we can even help find you a property -at no cost to you. We are investment property specialists. We believe that property investment is a great way to reach your investment goals and retire well.
When investing in property, one of the most important details to look at is the property location. The right location has a host of benefits such as more demand and quicker value growth and capital gains over time. It will also be a key factor in determining resale value and can make the property more attractive to tenants if you're considering a rental property.
However, choosing the right location can be challenging and confusing. There are many factors to think about, from crime statistics and proximity to public services to housing market stats and trends in that particular area. Here, we discuss what you should look out for when picking the right location for your investment property.
Access to Public Services and Amenities
Easy access to transportation, public services, and amenities will drive up property values. In urban areas, every metre closer a property is to transport terminals can increase the property price. Many big cities are also seeing fewer cars every year; Melbourne may be entirely car-free by 2030, for example. People tend to favour locations with easy access to transportation services such as trains and buses as this gives them another option for travelling to and from their workplaces or businesses.
Another thing to look out for is proximity to public services such as hospitals, fire stations, and police stations. Having easy access to these facilities results in more convenience for the property buyer or renter and tells them that, in the event of an emergency, they are closer to help. This is another advantage that can increase demand and the likelihood of a sale or rental contract.
Appearance and Safety
The overall safety and appearance of an area is another crucial factor in picking the right location for your property. A location that looks generally run-down or dirty might not get the same positive attention as an area that looks cleaner and well-maintained. The same goes for a location that has higher crime rates. Understandably, people will want to live where they feel safer. As such, it’s important to know that renters and home buyers look at crime statistics, too. Having a location that has lower crime rates is another selling point you can use to gain more attention for your property.
Know What’s in Demand
Single-family homes, luxury condos, townhouses—understanding what type of property is preferred by more people in the location you’re eyeing is important. This will affect your strategy as well as your decision on what kind of property you should buy in that area. For example, if you’re looking for quicker returns on your investment, purchasing a single-family home in an area where condos are more in demand probably won’t pan out to be a good investment, at least in the short-term.
This is one of the many areas where our research-driven methodology, Calla Property Insights, can be of great help. We’ll do the research for you to ensure that you get the right property in the right location for your investment needs.
Favourable Property Market Trends
It’s also important to consider certain property market factors such as housing prices and vacancy rates. Knowing the current property prices and how much they have increased or dropped in previous months or years gives you an idea of a particular location’s performance when it comes expected ROI. This will also tell you how much financing you’ll need.
Meanwhile, vacancy rates are an indicator of the percentage of unoccupied rental properties in an area. The lower the figure, the better since this shows strong rental demand. In most capital cities, vacancy rates have stayed roughly the same this year compared to the previous year, a good sign that the housing market is holding steady, or may be set to improve. Having lower vacancy rates also means less days that your property is losing money because of a lack of tenants.
Business and Employment Opportunities
Aside from convenient access to public services and transportation, you should also consider the local business and employment market. If the location is experiencing a rise in business and employment opportunities, it will likely see more demand as more workers or entrepreneurs settle in. Employment is always a key consideration for many people planning to relocate. As such, it’s important to avoid locations with higher unemployment rates.
You could also do a little research and see if there are many ongoing or planned infrastructure developments in an area in the next few years. More infrastructure projects could mean more jobs in the pipeline or better facilities for residents—two more factors that can increase property demand in an area and improve its property market potential.
The location or type of property you purchase can make or break your investment strategy. Therefore, it’s always wise to seek expert help when in doubt. At Calla Property, we specialise in selecting the best property, at the right time and the right value, for your investment needs. Our team of research-dependent investment property specialists will do the work for you, so you don’t have to worry about the stress of choosing the right property. This is a free service we offer to our clients. Get in touch with us today and fill out this form so we can start helping you reach your property investment goals.
Disclaimer: No part of the information or calculations here are intended as advice. This is for general information purposes only.
Investing in property can be a fantastic way to build wealth over time. Property investors can create a property investment portfolio that continuously generates income, and can also be passed along to their children. This also shows that investing in property can be a great way to have a financially secure future for you and your family.
However, achieving property investment success can be challenging if you’re careless or ill-informed. As with other major financial commitments, it’s always smart to do your research, consider your options, and educate yourself so you can avoid committing crucial mistakes that will prevent you from reaching your property investment goals, such as the ones below.
Don’t Fall for the First Property that You Like
Investors often feel many emotions when they look at the first property in their search. They may be excited about the beginning of their journey towards investment success, for example, or concerned about making the wrong choice. Casual advice often tells people to “go with their gut” or “let their heart guide their choice,” but research shows that this advice can be misguided.
When decisions are made based solely on emotion, they are generally irrational. An investor might forget all the careful research they did and pick the first property that they like because it “feels right,” even if doing so can lead to problems such as dealing with hidden structural defects or the property not having good ROI potential.
It’s possible that the first property you see is the right property. However, to help ensure you’re making the right decision, we recommend consulting with experts and getting more property investment education insights when in doubt. At Calla Property, our team of experienced property investment specialists can help. Through our award-winning research methodology Calla Property Insights, we’ll select the property that best fits your investment aims.
Being Financially Unprepared
Purchasing the property itself is just the first step towards having an investment that is successful over the long term. However, many investors forget that the purchase price or the monthly mortgage is not the only financial cost they have to prepare for. Other costs associated with buying property can include inspection and conveyancing fees, transfer duty, and council rates.
Prepare to shell out even more if you’re planning to renovate the property you purchased—the cost of renovating a single family home in Australia can be more than $33,000, and the cost of renovating a multi-family investment property will be much higher. If you’re aiming for rental property, you will need to include in your budget the salary of a property manager, which is around $49,000 on average in Australia.
If you aren't financially ready to purchase a property, you may end up without enough cash to make your payments. This can push your property into foreclosure, which will be a tremendous blow to your credit and to your investment portfolio.
Not Considering Location
In the urban areas of Australia, residents are much less likely to own a car than their suburban and rural counterparts. In Melbourne, for example, 76% of residents don’t have a car; in Sydney’s CBD, that figure is at 59%. In Adelaide and Brisbane, the numbers are slightly lower but still significant enough to affect your location decision. Therefore, in urban areas, it makes sense to look for investment properties that are closer to transportation hubs as this can entice more people in terms of convenience.
Transportation is just one factor when choosing a location. People also value being nearer to amenities. For example, research shows that living close to high-end grocery stores or excellent schools can significantly boost property values. Failing to consider your investment property’s location can lead to a property that may look nice but doesn’t attract enough demand for it to be financially successful.
Expecting to Get Rich Quick
Property is a fantastic, reliable investment—as long as the investor is willing to wait. Property values tend to increase over time, but in the short term, they can fluctuate rapidly. Some people can build successful incomes by flipping homes (buying a single family home, renovating it, and then reselling it). Australia has seen a decline in this practice, however, possibly due to the increasing transaction costs associated with buying and selling property.
Economists suggest that a property should gain about 1% of its value each year. The longer an investor holds onto a property, the higher the potential value of their investment. If they are gaining passive income from the property, particularly through rent, holding that property becomes even more valuable.
In other words, if you’re looking to get rich in a snap of a finger, you may want to look for other options. However, if you’re committed and do things right, property investment can indeed be financially lucrative in the long run. Research also shows that in Australia, property located in a capital city will double in value, on average, every 11 years, and in regional areas, every 15 years. This indicates that compound interest is indeed the eighth wonder of the world, as Warren Buffet asserts.
Investing Without A Plan
When investors come into the market to buy a property simply because they heard it was a good investment, they may struggle to succeed. Having a plan is crucial; you also need to clarify your goals and assess your current situation. For example, investors who buy a property at 25 because it will be a step towards a retirement fund in their twilight years might look for different properties compared to those in their 30s or 40s who are hoping to gain additional passive income.
These are good reasons to invest in property, but each requires a different investment strategy. Not having a plan or a clear definition of what you want to achieve can lead to problems such as being a stuck with a property you can’t afford or one that doesn’t really suit your investment needs.
Property investment is an excellent way to have a financially rewarding future. However, it does need careful thought and consideration, and getting help from experts can go a long way. At Calla Property, we understand the goals you’re trying to achieve, and we’ll help you build your future by selecting the best property for reaching them. This is a free service—if you have any questions, don’t hesitate to contact us and fill out this form and we’ll be in touch.
Disclaimer: No part of the information here is intended as advice. This is for general information purposes only.
Property investment is big business in Australia. It accounts for 60% of the banking system’s assets, and over half of Australians’ wealth is held in residential concerns. That works out as $6.6 trillion over 9.6 million homes, or a respectable three times the total value of superannuation funds.
After over 25 years of economic growth, Australia’s booming property market has created revenue generation opportunities that make it attractive to become a property investor. These opportunities involve the purchase of a house or unit (or several) with the aim to improve that property and either leasing or selling it outright to gain a healthy return on investment.
With adequate planning and the right strategy, property investment can be a solid ticket to securing your future financially. Before you start however, it’s smart to know the best practices for being a property investor to have a clearer path towards success.
Personal Financial Fitness
Start with yourself.
Almost everybody will have their own property investment tips, but the first step is to assess your actual investment viability based on your own financial circumstances. Being financially fit means you possess the excess personal funds to cover your own needs for at least 6-12 months, or that your financial history is reputable enough through having good credit and a low debt rate. If you have additional assets, you can also borrow against them. With these criteria met, you will, of course, have access to more preferable rates from lending institutions.
Do your homework and be honest with yourself. Stick to a monthly budget and adequately map out ahead of investment time by creating a business financial plan. This strategy will help you benchmark your progress, so you know your essential costs are covered, giving you room to focus on your investments.
Don’t Jump the Gun
Approach things with a stable attitude, and don’t jump at the most unbelievable opportunities. Bear in mind, most successful investors start small with saved money, then gradually scale up their acquisitions to develop a solid portfolio. Research indicates the most desired feature in residential investment projects is an experienced manager, one who delivered stable returns with low debt on a diversified portfolio.
If you’re serious about a full-time career in property investment, plan for the long-term. We also encourage you to consult with experts who can help you make the right decisions in your property investment strategy. For example, when searching for property, it’s important to know which one best fits your investment strategy. At Calla Property, we’ll help you find the right one for your needs through our research methodology Calla Property Insights.
The Australian housing sector is in growth mode. In 2015 alone, 236,900 dwellings were greenlit for construction, and this means you need to apply the ‘location, location, value’ rationale to your property search. Focus on emerging areas that cater to locally robust employment centres and always follow the jobs and money that will underpin solid residential demand.
The value quotient comes by searching for specific properties in these locations that show certain aesthetic qualities that could use a light renovation. The aim here is to find workable properties that only require minor cash input yet are priced competitively. Also, consider that land appreciates, and buildings depreciate as a working rule of thumb, so anywhere with high land content has a good chance of increasing in value over time. Land also offers future reuse opportunities; you can sell it to be redeveloped if needed.
This doesn’t mean though that apartments aren’t a good choice. Those located within CBDs will always be in demand given the constant supply of work and business opportunities. Apartments also offer several benefits, such as easier maintenance and relatively lower purchase costs compared to houses. Choosing which one is right for you depends on your strategy, so give it careful thought and consideration.
Being geared, neutrally geared, or negatively geared sounds confusing. Simply put, gearing means borrowing money to invest. This strategy can help you speed up your ability to make money by increasing your available investment funds. If the after-tax income and capital gains return of the geared property investment exceeds the after-tax cost of actually funding that investment, then the strategy works.
If you make savvy investments in sound properties, your long-term gains will be more than your borrowing costs. Be aware though, if your investments are losing cash, then a gearing strategy could increase your net losses. When the interest you owe exceeds your investment income, you’re negatively gearing. Since this is losing money, you can likely only sustain this strategy if you’re already accruing a high income elsewhere. If not, structure your investments to run positively.
Compound and Diversify
If you’re building a portfolio, you need to work the numbers in your favour. The first purchase may often be the most difficult but compounding and leveraging your accrued value will make the next acquisitions simpler. Again, this may require years, but you’re in this for the long-term.
Once you do own a portfolio, the risk increases because catastrophic events can wipe out all your holdings. Think fire, flood, and negligence. Diversifying means separating your acquisitions so that, if the worst happens, a consistent income stream survives. Plan adequately with risk insurance on your investments so you can stay in control of your business.
A Sensible Approach
Best practices mean applying common sense, logic, and strategy when structuring your approach to developing your property investment career on your own terms. Do what works, within defined planning, and follow the resilient growth opportunities that may let you upgrade cheaply to make larger initial returns.
As with other major financial decisions, research and planning is crucial part of property investment. This is what we at Calla Property specialise in. Through our holistic, research-driven approach on building an investment portfolio, we’ll find and select for you the property that works best with your strategy, at the right time and at the right value. This is a free service, so we encourage you to get in touch with us and fill out this form so we can start working together.
Disclaimer: This article is compiled for information purposes only. No part of any information or data given here is intended as advice.
Buying your first investment property may seem daunting—it’s a major financial commitment after all. However, if done right, it can be the start of a property investment journey towards a more financially secure future.
Lending policies may be getting tighter, but house prices are also set to pick up. According to Business Insider, home prices in Australia fell faster and in more locations during the month of July. CoreLogic’s Hedonic Home Value Index reveals that the median home price fell 0.6% in June, which was the largest percentage decrease in nearly seven years. While this may not appear lucrative for those looking to experience fast financial gain, it could still be profitable in relation to long-term investment success.
Though lending restrictions have become tighter, there are three good reasons to buy investment property now.
Population numbers are surging in the east coast capitals, which in turn, is driving the market. The growth rates of Sydney and Brisbane are at 2%, and Melbourne’s is at 2.7%.
The Reserve bank of Australia is expected to keep interest rates low at least until 2020.
If you do proper research, you’ll discover that there are areas which show strong capital growth potential, such as these suburbs within capital cities. We at Calla Property will pinpoint these locations for you, based on our research-driven Calla Property Insights. Our team researches 550 markets all across the country to help you find the best location for your investment strategy.
So, if you’re convinced that property investment is for you, consider these helpful tips before beginning the search for your first investment property.
Devise a Plan
One of the most important investment tips you can follow is to devise a plan before acquiring your first investment property. You can establish it by answering some important questions. What is your goal with the investment property? Are you planning to renovate and resell, or will you rent to tenants? Also, what is your reason for investing?
Clearly defining your goals will enable you to design your property investment strategy and have a better idea of what you need to do, especially in terms of picking a location and targeting a specific market.
Do Your Research
Research is essential to the future of your investment. The type and location of your property can determine its profitability. You need to know what’s in demand. A property located in a desirable area could require less upkeep and can mean a higher profit for the investor in the long-term. The key is to buy a sought-after investment that will provide good revenue while showing capital growth.
While the high rental yield strategy is centred around presently generating positive cash flows, a strong capital growth strategy nets you profit in the future once the property is eventually sold. When looking at both strategies, consider how much risk you’re willing or able to take, then make a decision based on your objectives as a property investor.
Consider the Location
Location is an important factor when buying an investment property. Easy access to necessities such as public transportation, schools, public services, and recreational facilities will attract more renters. However, access to amenities isn’t the only thing you should look for. Having a property in a location that generally looks good and not run-down with lower criminality rates can increase demand.
An area with a nearby university, business or employment opportunities, and training facilities can offer a steady flow of tenants, placing your investment property in frequent demand. You could also look for areas where there are many ongoing and planned infrastructure projects as this shows that there will be demand not just today but also in the near future.
Factor in Loan and Purchase Costs
In addition to the purchase price of your property, you’ll be responsible for other related costs. These can include: loan establishment costs, loan mortgage insurance, conveyancing and inspections fees, and ongoing costs such as landlord building insurance. You may also have to pay council rates, property management fees, and repair/renovation expenses.
Keeping these costs in mind makes for better budget planning when it comes to buying an investment property. Doing so also gives you a more accurate idea of the cashflow you can expect, helping you arrive at a better choice when choosing a property.
Check Comparable Properties
Knowing what comparable properties in the area you are considering have recently sold for will help you determine the future success of your investment. Also, check out the rental income of similar properties to get an idea of what you should charge. When searching for investment properties, think not with you in mind but in terms of potential tenants or buyers. In other words, choose a property you think people in the area would want to live in.
Following these tips for buying your first investment property will help simplify the process, and lead to a successful investment venture. If you need expert help in finding the best property for your investment goals, we at Calla Property are here for you. Using our proven research methodology, our team of investment property specialists will guide you towards finding the right property at the right time and at the right value for your investment needs. What we offer is a free service, so don’t hesitate to contact us today—just fill out the contact form and let’s get started.
Disclaimer: No part of the information or calculations here are intended as advice. This is for general information purposes only.
Investment properties can be a great way to qualify for major tax breaks. But there's a caveat to this: timing is everything.
Investing in a property prior to the End of the Financial Year (EoFY) makes you, as a property investor, eligible for certain tax deductions.
Settling prior to 30th June, if you can, makes you eligible for a tax return immediately, as of 1st July. Otherwise, you'll still be eligible, of course, but you'll only see those savings next tax year.
The trick is to time your purchase in a way that will set you up for maximum tax savings and to help you get the most value out of your purchase. You'll want to time your transaction, not only prior to the EoFY but also with a period at the bottom of the property cycle, if possible. This would be when prices have “bottomed out,” rather than when they're over-inflated.
What Tax Deductions Do I Qualify For?
You can qualify for several kinds of tax deductions on investment properties including:
Interest claimed on a loan for an investment property
Depreciation of fittings likes lights or windows (rates can range anywhere from 2.5% to 4% of the price paid)—as long as it is a newly-constructed property
Holding costs: the expenses you'll be paying to hold on to the property before you can actually rent it out (particularly on new builds or constructing on vacant land)
Crunching the Numbers
So, how much, precisely, would you stand to gain? The numbers are variable so let's take a look at a mock scenario.
We already know that if you, the property investor, had invested in a property after the EoFY, you would only be eligible for tax deductions in the next year.
Prior to 1st July, even as late as 30th June, you could be eligible for the following savings:
Let's say you're looking at a property in Brisbane. Through our holistic and detailed research methodology, Calla Property Insights, we’ve found out that Brisbane continues to be one of the best performing property markets in the country. The migration many are making to more affordable homes means that Brisbane will have strong growth potential, and the right properties in these locations could be profitable long-term investments.
In this example, let's say you have an annual income of $120,000 and you're interested in a property worth $400,000 in Brisbane, QLD. So, you get a loan for $425,000 because you'll be paying conveyancing, stamp duty, and other associated fees.
The total amount you'd be eligible for is: $34,683
Now, factor in your rental income, estimated at roughly $24,000 per year (which is $2,000 x 12 monthly rental payment). Your rental income should be about the same as your mortgage payments. Since your mortgage payments, in this case, work out to $2,101, your rental income should also be around this amount.
The annual rent counts as taxable income so add it to your salary: $120,000 + $24,000. Before your deductions, this is a taxable amount of $144,000.
$144,000 (total taxable income) less $34,683 (total amount of deductions from expenses) = $109,317 (new total taxable amount).
Without tax deductions and your investment property, you'd be paying taxes on $120,000, which would be $32,032. With your new investment property deductions, you're paying taxes on $109,317, which works out to $28,079,
That's $3,953 in savings!
Gaining a Tax Variation
If you invested in a property after the EoFY, is all lost?
Actually, property investors can apply for a tax variation, which allows them to benefit from a property tax refund paid out into your pay packet, rather than waiting a year for a refund.
On a property that costs you $40,000 per year to keep up and gives you a rental income of $37,000, you can claim the loss of $3,000 on your tax return. You can also claim the depreciation deduction. Let's say it was $5,000 in this case. That would make your claim a total of $8,000.
To keep our numbers round, let's say you pay tax of around 45% + 2% of Medicare levy on the income.
($37,000 x 45%) + ($37,000 x 2%) = $17,390
Then, deduct the amount of the claim: $17,390 less $8,000. You would be eligible for $9,390 back at tax time.
That's additional funds you could put towards paying the mortgage or making a bill payment!
These are the kinds of insights our team at Calla Property is known for. Through our free service, we act as a bridge for our clients who are interested in building their dreams and personal wealth via property investment. Our expertise, experience, and research-driven methodology enable us to identify the right property, in the right place, and at the right time for your investment needs. Book a no-obligation Discovery Session with us today to know how we can help.
Disclaimer: No part of the information or calculations here are intended as advice. This is for general information purposes only.
Interest-only loans are where you merely pay back the interest of a loan to the lender. So if you borrowed $500,000 and made repayments for five years, your balance would still be $500,000. They are designed predominantly for investors for cash flow and tax deductibility purposes.
In March 2017, the Australian Prudential Regulation Authority (APRA) put a restriction of 30% of all new residential interest-only loans accepted by the banks. The cap was placed to prevent borrowers over-leveraging themselves along with being prudent in a volatile property market Australia-wide.
In order to control the demand for interest-only lending, banks applied two levers: Interest rates and Loan to Value Ratios (LVR).
Interest-only lending is now anywhere from 0.25% to 1.00% higher in interest than Principal and Interest rates. This can be quite significant on larger loans (i.e. 0.50% on a $500,000 30-year term loan is approximately $150 per month more expensive).
Banks also now have maximum LVRs in place for interest-only lending (i.e. some lenders will only give interest-only loans below LVRs of 80%). Interest-only loans for owner-occupiers are scarce and borrowers would need a good reason for approval (i.e. going on maternity leave, renovations, etc.). However even in these circumstances, interest-only loans will only be given for a short term of, say, 1-2 years.
What to look out for
Due to these changes, borrowers need to keep a close eye on what rate their bank is charging as there could be a significant difference between what they are paying, what their bank can offer, and what is on the market.
Interest-only loans are generally only available for five years and then will revert to principal and interest. This can be a significant difference in repayments (i.e. repayments on $500,000 over a 25-year loan term are just under $1,000 per month, which can be a financial burden if not accounted for). RBA figures show that there will be approximately $120 billion of interest-only loans reverting back to principal and interest over the next three years!
Borrowers on interest-only need to check with their lender and confirm how long they have before the loan is reverted back to principal and interest in order to allow for the difference in payments. For an investment loan, if your bank refuses to extend the interest-only period, other banks may be able to accept for a further five years, however you as a borrower need to be very mindful that whilst on interest-only, you are not reducing any of the debt and will need another exit strategy.
With banks continuing to tighten their lending criteria, trying to refinance could also pose a potential issue, so looking at your options sooner rather than later could save potential future cash flow problems.
If your mortgage provider does not help with your requirements, get in touch with your local mortgage professional who has access to a suite of lenders to see what other options you may have.
Here are recent home loan market developments to keep you updated.
Self Managed Super Fund lending update
Another one bites the dust with the Westpac group announcing that they will stop lending in the SMSF space. The bank advised that SMSF lending will be no longer available from 31st July 2018 to the Westpac brand which also includes St. George, Bank SA, and Bank of Melbourne.
An SMSF is a private superannuation fund which you have full control of when it comes to how the funds are invested. Many investors use their SMSF in order to purchase investment properties both residential and commercial.
The removal of SMSF lending is to "streamline and simplify" the banks' product offering, advised the group. Westpac was the last of the big four offering lending within the SMSF space. This will further add to the reduction in investor lending, which is is the lowest it has been in seven years. The group will, however, continue on servicing existing SMSF clients.
"Heavy lifting" largely done says APRA
In a speech to the Australian Business Economists, Wayne Byres, the Chairman of the Australian Prudential Regulation Authority (APRA), advised “while there is more good ‘housekeeping’ to do, the heavy lifting on lending standards has largely been done”.
The scrutiny of the mortgage market has been evident since 2014 with separating owner occupied and investment lending, distinguishing between interest-only and principal and interest, reducing interest-only and investment lending volumes, increasing rates for investment and interest-only and more recently delving into customers' living expenses.
All the above has changed the lending environment and now more than ever borrowers need a mortgage professional who can navigate through such a minefield. A mortgage professional with access to a panel of lenders will not only get a competitive deal for your clients but also make sure the borrowers requirements are met.
Fortunately for our referral partners, you still have access to lenders who still offer SMSF products via the TomorrowFinance program.
TomorrowFinance is constantly looking for unique ways to navigate through a tightening mortgage market and have held SMSF seminars which have been really well received. If you have clients who will benefit from such seminars, please get in touch with your dedicated partnership manager, account manager, or email email@example.com.
The end of the financial year is the best time to take a look at your finances and make solid plans for the future. If you’re disappointed by the amount of tax you’ve just had to pay, investing could be a great option. Thanks to government incentives and tax break schemes, if you had earned $90K and invested in a $470,000 property through Calla Property, you would have net an annual cash gain of $705 for the year. In other words, the government would be giving you $705 to invest in the property!
Based on a 30-year investment and 6% compound interest, this property would net $1,915,179 in retirement upon sale. This clearly indicates the power of investing in property as a significant part of your wealth creation strategy, especially if your primary goal is security in retirement. Building portfolios for our clients is one of our specialties and we can help do the same for you. Get in touch to discuss how.
*this does not constitute advice and your specific circumstances and goals need to be taken into account when deciding on property investment.
In past years, the Federal Budget’s focus has been on improving housing affordability but 2018 saw the biggest drop in house prices since 2015, it appears the government have slowed down their pursuit.
The recently released budget has little to no impact on investors, a welcome change after last year’s aim to make it harder for people to invest and easier for first home buyers to enter the market.
The lack of negative impact on investors appears to come down to the significant tax benefits the government receives through the stamp duty, land tax and capital gains tax paid by investors. The current state of negative gearing has gone unaltered in order to keep the balance of affordable housing and easing costs to the government for social housing.
One of the most notable changes is the increased infrastructure spending that will inevitably impact the value of properties in these developing areas. That’s where Calla Property excels. Our expert team uses our proven research-driven methodology to determine the areas that make great investments and advise on the impact the infrastructure spending will have on property prices.
The Australian Prudential Regulation Authority (APRA) has recently announced its plans to eliminate the 10 percent growth restriction on investor loan growth. APRA believes that the restriction’s purpose has been served, and that it is now time to abolish.
Taking affect from 1st July 2018, lenders that have been operating under the 10 percent investor loan growth benchmark will no longer have to do so. The benchmark, introduced in December 2014, was established to improve lending standards. APRA’s chairman Wayne Byres had said in a letter announcing the changes; “Since the benchmark was applied in 2014, however, the ADI (Authorised Deposit-taking Institution) industry has taken steps to improve the quality of lending and increase balance sheet resilience”. He continued; “There has been a clear reduction in higher risk lending, with investor loan growth moderating, interest-only lending declining and high loan-to-valuation lending also markedly lower”. He also drew attention to the improvements in lending policies, increasing the thoroughness of serviceability assessments for new borrowers, as well as “an uplift in capital resilience, as the industry makes progress towards the ‘unquestionably strong’ targets announced by APRA in mid-2017”. Furthermore, the investor loan growth has “served its purpose”.
APRA will continue to monitor the property market and ensure the removal of the benchmark does not raise systematic concerns by resulting in rapid investor loan growth. Mr. Byres warned that “Such an environment could lead APRA to consider, for example, the need to apply the counter-cyclical capital buffer or some other industry-wide measure”.