|
Evolution Home Loans PO Box 1132
While you are busy looking for a property, Evolution Home Loans can analyse and compare the home loan market on your behalf. We offer a range of home loans with access to 25+ lenders through the Australian Finance Group (AFG). With fantastic software capabilities we are able to quickly and accurately determine which banks may best suit your lending requirements. Our service to you is complimentary and may save you time, effort and money. We are available to see you during the day or evening, even on weekends, because we work "your" hours not bank hours. 
The Mortgage and Finance Association of Australia (MFAA) has over 10,000 members including all the major banks and lenders, plus mortgage brokers. The membership application process has strict requirements for experience, education, industry sponsorship, and probity checks. All members must join the independent dispute resolution service, the Credit Ombudsman Service Limited (COSL), or a recognised equivalent. Australian Finance Group (AFG) is an independently owned, Australian company specialising in arranging loans for almost any purpose, in most cases at no charge to the customer. AFG is the largest third party wholesaler introducer of mortgages in Australia processing on average 6000+ residential mortgages per month, with market share in excess of 20% of the Australian broker market. |
Hello, This month's two feature articles relate to property drivers and investment property purchasing. We can help you with information in relation to both areas! Via our association with the Peard Real Estate Group we can assist when it comes to selecting a property, and our own team of Finance Consultants can help you understand your purchasing capacity when assessing the financial requirements of a purchase. We are only a phone call away and ready to help you at your convenience. What Drives Property Prices?
Here we take a look at some factors that will influence the future. There are some well-recognised factors that will drive the property market. Seasoned property buyers, both home-owners and investors, need to know what these are and how they will affect an area’s property market. Demand and supplyPopulation change is the key driver of demand. When an area becomes popular more people want to live there which means there are more people for the same supply of properties. This can be due to immigration quotas, changes in infrastructure and changes to employment (eg the resources sector is driving high price growth in local areas). Of course the opposite is also true. The factors influencing the supply side, that is how many homes are available, includes the availability of land for new buildings, the options for subdivision and building of higher density units. Affordability and availability of moneyAffordability is the relationship between housing prices, interest rates and wages. It really means the cost to the owner or investor to hold a property. Affordability is an issue for some parts of the population (eg first home buyers), particularly in some of the capital cities and larger towns. This will cause a downward pressure on property prices for owner-occupiers, but conversely can increase prices for typical rental properties as demand for these properties increases. It is worth noting that, even in a period of high demand, certain areas are not good for property investors as tenants often seek convenience of transport and lifestyle facilities. Availability of money to borrow can also be an issue. This is certainly true at the moment, where the issues in the sub-prime market are causing many lenders to become more cautious in their lending practices. InfrastructureInfrastructure is key to successful property buying. Freeways, rail links, ports, utilities (power, water, etc) supply, hospitals, schools and retail facilities are important factors to consider. These types of infrastructure can improve the convenience and facilities in a given area that will then contribute positively to demand for housing. This can be a two way factor, though. Sometimes governments will open up new suburbs without the necessary infrastructure being in place. This can mean that property purchases may experience a lag in price growth until the new suburb becomes established and a larger part of the potential purchaser or rental market is prepared to live there. Population changesTrends such as sea-changers and tree-changers, where significant numbers of people are moving out of the cities to live in coastal or more rural areas, can have a dramatic effect on prices in the welcoming areas. Also, over the next five to ten years most “Baby Boomers” are expected to retire from the workforce. This represents a sizeable portion of the population. This group will then be looking for alternative locations or style of property in which to live. It will also mean that they will be seeking to make residential and even commercial property investments from the superannuation monies that can be released on or close to retirement age. ConclusionTo understand what drives property prices you need to be aware of a range of factors. Once you have this understanding you can put these factors together and have a good insight into what drives price growth. Obstacles to Investing in Property
So what’s stopping you from investing? According to the Real Estate Institute of Australia, the peak body represent real estate agents, vacancy rates in rental properties remain at historically low rates. Interestingly, of all the capital cities it is Darwin that has the tightest rental market with a vacancy rate of only 0.5%. Because demand is exceeding supply, it is no surprise that rents are increasing across all capital cities, in particular for three bedroom houses and two bedroom units. Rents have increased by between 5% and 8% in the last three months alone. In this climate many people are thinking about property investment. Rising rents and high occupancy rates make the investment look more attractive, particularly when compared to the somewhat volatile share market. But despite the attractions, many people will not follow through and become an investor. So what are the typical obstacles, and how can they be overcome? 1. I can’t afford to investMany people are unaware of the amount of equity in their own home. This equity can be used to secure finance for an investment property. The loan repayments themselves can be offset by the rental payments and tax offsets for such items as building depreciation. This can mean that your net payment for holding an investment property is minimal. Indeed, some financial advisers advocate only purchasing properties with a positive cash flow. Whilst hard to find, these properties will pay you money from day one. To help overcome this obstacle you should ask these questions. If I don’t invest in quality assets such as property and hold them for the medium to long term, then how will I fund a comfortable lifestyle in retirement? Will super and/or the old age pension be sufficient? 2. Property is so unaffordable these daysYou don’t need to get a cheap property in order for it to be an affordable investment. If the return on the investment is strong enough, and you have access to the funds for that property, then it’s affordable for you. In other words it’s about the net costs to you, not simply the gross costs of the home loan repayments. 3. Property can’t go up anymoreLooking back over the past 40 to 50 years can reveal that property, like shares, consistently increases in price. In Australia we know that we have a long term policy of increasing our population through immigration, and everyone needs somewhere to live. The key to overcoming this obstacle is to look for well-located property as this will always be in demand. Asking questions such as these will help. Is the property close to good transport? Are there good schools nearby? Is the area up and coming, or is it in decline? 4. Property is too difficult to sell quicklyThis obstacle is often borne of the fear that if “things go wrong” it’s difficult to sell up quickly and get your money back plus pay back the home loan. It is true that property takes longer to sell than shares, which can be readily sold within a day. But with this flexibility comes a greater tendency for price fluctuations in the short term, as we have witnessed recently. The key to overcoming this obstacle is to be prepared. Do you have an emergency fund that you can call up on if, for example, the property retains untenanted for a period? If you don't, what alternative arrangements can you put in place? For example, you can have a line of credit or redraw facility on standby. Also, there are landlord insurance policies that can cover some risks (eg if a tenant leaves without paying the outstanding rent). 5. I don’t know how to pick propertiesThis obstacle can be overcome through research. Reading property magazines and independent reports is a start point, as well as property investment books. Attending seminars by professional experts (not property spruikers!) is another good source of information, as is looking through property listings papers and supplements of local papers, and using specialist property data websites. Once you’ve narrowed down a few likely areas, then you should talk to the local real estate agents, and then actually go and inspect some properties. There really is no better way than doing the groundwork yourself. No-one will care as much about your investment as you do, so it is important to put in the time to become more confident in your ability. Next StepsThe key thing is take the first step, however small, towards your goal. Then, once you’ve made a start, you can face each of the obstacles and work out a strategy to overcome them. |
How can you forecast what the property market will be doing in the future? What factors are likely to change that forecast?
It’s an interesting time in the investment property market. Rental properties in many areas are enjoying strong demand with record lows in vacancies.