Farewell Footy!...

We have our looming new public holiday to look forward to... as finals fade into the distance and a new team carries the flag, our property market conditions will show a subtle change. Spring listings will continue to increase, opportunities will arise, and home auctions will continue to attract crowds.

... but the APRA instigated changes are still filtering through. How are they impacting our market, and what are we doing to mitigate risk for our investor clients?

We are conscious that our low interest rate environment, combined with easy borrowing constraints, strong inner-ring suburb incomes and higher proportions of white-collar employment in the inner ring areas are all conspiring to drive up HOME prices. However it’s a different story for investors. APRA changes have clamped down on lenders’ capacity to carry higher numbers of investors on their books and their knee-jerk reaction has been to increase rates, but more dramatically, decrease LVRs (Loan to Value Ratios) to considerably lower levels; in most cases, 80%. The impact for investors is that they have to provision for a deposit of 20% plus stamps and legal fees in order to make a purchase. This is particularly tough for new investors and completely tough for new investors who don’t own a PPOR (Principle Place of Residence).
 
To compound this problem, there are currently many new developments currently being built, being settled and passing through planning stages. Buyers are ever-so-cautious about the implications of buying off the plan now in this difficult economic climate, and typical investor-style properties such as new apartments are falling out of favour. This issue doesn’t apply to our clients, as we don’t buy new off-the-plan or high density dwellings. The impact for some existing apartments could spread in the suburbs where apartments represent a higher percentage of dwellings, because as demand falls, as losses are crystallised and as valuers adjust their risk ratings and reflected comparable sales prices, these assets could be impacted.
 
Our mitigant is not only to avoid the higher density properties, but also to advoid buying in newer development locations (in particular the inner south/east, any city and surrounds areas), on high streets and in locations where elevated, multi-level complexes are setting precedents.
 
Our solution when formulating a strata-property strategy is to target lower density, older properties where a defined parcel of land, or at the least, a good balcony or outdoor area is on title. More than ever before, we need to search with Owner-Occupier appeal in mind, as it is the Owner-Occupiers who are driving our market growth now, not the investors. Stepping into the minds of passionate, emotional, cashed up Owner-Occupiers will remain our focus, particularly throughout this challenging time for investors. Cate's recent article for Smart Property highlighted the importance of this focus.
 
Focusing on high Land to Asset Ratio is vital during this time too, as diminishing building values for new builds will add to the havoc for those who have bought brand new or off the plan with futuristic sunset dates and uncertain funding.

This month Cate was interviewed by YIP on the recently revealed suburb data released by the REIV. She shed light on how some apparent opportunities need more careful consideration.

And in response to recent buyer questions around auction bidding and whether a professional bidder can add any real edge, Cate wrote this article to share with readers some techniques that they could employ to increase their own changes at auction.

Finally, Cate's two recent radio interviews with Kevin Turner touched on appraising a property with a bit more help than usual, and preparing to shop in spring.

To our fantastic hosts for this month's events; thank you for the opportunity to present at the recent Meet-Up for Property Investors, and we look forward to next week's Home Buyer Seminar with Compton Green, held at the Yarraville Club on October 8th at 6pm. Register to attend... event is free.

Some of our favourite acquisitions for September are captured below...