It’s really starting to look like the market has turned.
It seems like banks are starting to ease up on investors.
Anyone tried to get finance recently? What’s been your experience?
Back in the middle of 2015, APRA split the property market in two. It was investors bad, owners good, and the banks were forced to tighten up the finance they were willing to offer investors – with higher interest rates, lower LVRs and tighter serviceability calculations.
And for a while there, it seemed to be putting the brakes on the market, bringing growth in Sydney and Melbourne back down from double-digits.
But now competition for investor loans is hotting up again, and banks are cutting chalk-board interest rates.
From The Age:
Banks are being forced to cut the interest rate premium they are charging new property investors, as lenders compete more fiercely in the investor mortgage market once again.
The mortgage market was split in two last year, after banks resumed charging property investors interest rates that were about 0.25 percentage points higher than owner-occupiers, something that had not occurred since the 1990s.
Now, however, the interest rate gap is narrowing, with several banks recently lowering what they are charging new landlord borrowers.
…Dutch lender ING Direct on Friday was the latest to announce a cut-price mortgage deal for investors, offering new investors with a deposit of more than 20 per cent an interest rate of 3.99 per cent.
…AMP, which was forced to briefly stop writing new loans last year after growing too quickly, is also charging property investors 3.99 per cent if they borrow more than $750,000. That is about 0.1 percentage points higher than its owner-occupier rate promoted to mortgage brokers.
…Macquarie Group cut its fixed rates for investors earlier this month, with a three-year rate of 4.09 per cent.
Mortgage brokers say the trend is gathering pace, and the Reserve Bank observed the bout of competition in its Financial Stability Review on Friday. It played down the risks from banks targeting property investor lending, which it has previously seen as a “speculative” influence on the housing market.
These are small-fry banks, and a lot of the growth is coming from CBA and Westpac.
And what that all means is that investor lending has turned. It fell distinctly after the APRA limits came into effect, but you can now see the first signs of reversal in the charts.
You’d have to think that without further APRA limits, investor lending is going to continue to pick up.
The APRA limits were artificial in a sense, and as their effect passes, the market will return to its previous direction – which was solid growth.
At the same time, average loan size is growing again.
Again, we’re not back at levels we saw before the APRA limits came in, but we’re definitely on the way.
So it’s not hard to see what all this means. More investors in the market, taking out larger loans – it’s a rock-solid recipe for higher prices.
And so it’s little wonder that we’re starting to see the market heating up.
Take a look at the Auction Clearance rates for example. Right now they’re suggesting that we’re back on track towards double-digit growth!
Just quietly, I’m a little disappointed. I was hoping the APRA restrictions would take more wind out of the sails. I was looking forward to a ‘correction’ or ‘consolidation’ or ‘minor downturn’.
I had a war-chest ready and was all set to grab me some bargains.
Now, I’m looking at that war-chest and I’m having second thoughts.
It’s early days, but right now, it’s not looking like the market is slowing down.
So if you’re a first home buyer or an investor waiting in the wings, I don’t have any good news for you. You can rule out a correction in prices this year. And realistically, the way the market moves, I think you can lock in accelerating growth from here through to at least the middle of the next year.
After that, we’ll be seeing what else is shaking the market.
Maybe it’ll be the unwind of the apartment boom, or some bleed from the downturn in Perth.
That might give some buyers some relief.
But the APRA restrictions have done their dash. They slowed the market a little, but the market brushed off the tackle, a couple of quick goose steps, and it’s on its way again.
Is it too early to call a turn? Remember, you heard it here first.
Have mortgage conditions eased? Has the market turned?
Joseph Petranovic says
Yep i agree 2017 will be revelationary …. oversupply and demand challenges in units
World economic debt pressures will crack several banks and countries causing a knockon effect ….interesying times ahead ?
KiwiAl says
I can’t comment on the Australian situation as I’m not familiar with your current government’s attitude towards a hot property market, but over here in Kiwiland, the “National” (i.e. Capitalist) government has bowed to public pressure to slow down the (mainly Auckland) property market – which was becoming seriously “unaffordable” to the first home buyer.
Soooo, they imposed a 40% LVR rule on investors (through the Banks). Now it’s “unaffordable” to us. That has really taken the heat out of the market. Now, we have a lot of difficulty trying to roll increased equity into our next deal. We need that war-chest of yours! Many (most) investors have abandoned the market, for the moment anyway. First home buyers can still get up to 95% (which allows a bit of a loophole), but it’s all being watched fairly closely.
Whereas I never heard from Real Estate Agents during the boom and always had to chase them, now my Inbox (e-mail and Txt messages!) is crammed with news of properties for sale. The market (turnover) has nose-dived, but the prices are currently holding relatively steady, so far as I can see. That has also killed a lot of interest, especially from the locals. Immigrant investors may still be busy, but I can’t say. We could see retrenchment over here. Of course, there will be bargains available, but only to quick, rich investors!
Your Gov’t could do something similar. Interesting times ahead, as Joseph said.
KiwiAl says
CORRECTION / Clarification:
That should be 60% LVR => minimum deposit/equity = 40%
Jon Giaan says
interesting stuff al, thanks for the heads up.
KiwiAl says
Hi Jon,
On another topic, how’s the methamphetamine situation your side? It’s a big problem here.
At the moment, landlords are being maltreated by the powers that be, and have had to carry the can (pay for) careless or reckless damage by tenants who can’t be charged for it, it seems,
Worse, there are no concrete standards for meth contamination. Just having it detectable in your property could put you in line for compensation (to tenants), fines and expensive renovation costs. Not to mention the loss of rent while all that drags on.
It’s ridiculous. Just having a tenant smoking it (not even baking) in your house is probably enough to get flagged.
Hate to think how it might go if we are unlucky enough to get a Labour government in next time.