The post Melbourne property prices reach new peak again in Feb 2016 appeared first on Oak Laurel.

Melbourne property prices reach new peak again in Feb 2016

Melbourne property prices index has reached a new peak again in Feb 2016. Melbourne property prices hit new peaks in four consecutive days 24 to 27 Feb 2016. These new all time highs come after Melbourne hit new highs earlier in the month according to data from Corelogic daily property price index.

These price gains come despite prominent media stories by so called ‘experts’ that property prices in Melbourne are slowing or ‘set for price correction’, with no mention of the new peaks in prices that are being observed. Anyone can make a guess on where property prices will go but it would be nice if firstly they were backed by credible evidence and secondly they have a track record of getting it right. However, in the 24/7 news cycle I guess that it is the sensationalised headline that matters to sell papers, subscriptions or airtime.

Auction clearance rates as reported by domain.com.au still remain relativly high at 75% clearance in Melbourne on Saturday the 27th February 2016. High clearance rates at auction also suggest that demand is strong and that future property prices will rise, at least in the short term.

“I still believe that Melbourne property has a good outlook for 2016. It is such a livable city and people want to live there and own a home there” said Dr Nigel Abery (Ph.D.) Principal at Oak Laurel.

“Unlike the wild ups and downs of Australia’s other cities, Melbourne property prices have a relatively reliable and consistent upward trend without the wild swings” said Dr Abery.

“Selecting the right suburb, street and individual property is always important but Melbourne is a good starting point” said Dr Abery.

 

 

Looking to invest in the Melbourne property market?

Your investment property loan can make a big difference in the cost and ultimately profitability of your investment. Oak Laurel mortgage brokers can help you to compare investment property loans. Find out more about investment property loans:

Investment property loan comparison

Need a Melbourne based mortgage and finance broker

Oak Laurel's Melbourne mortgage brokers can help you to compare your home loan or investment loan options. Make sure that you are not paying too much on your loan, contact one of our mortgage professionals today:

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Commercial construction Finance

The success of a construction project often depends primarily on obtaining optimal construction finance terms meet the needs of the developer and the development.

Oak Laurel has a wide range of lenders, construction loans and development finance to assist you to build and/or develop property.  Oak Laurel can assist you to finance the purchase of vacant residential, commercial or Industrial land, and finance its development. This includes the construction of residential property, retail / shops, commercial property and or industrial property. We have funders that can finance a wide range of development and construction types.

Oak Laurel also has access to funders that can help with the short term funding. This can be of benefit in the initial stages prior to the development approval being granted and in some cases to complete the final stages of a development in the event of a funding shortfall.

Residential construction loans are generally provided on an interest only basis at a variable rate during the construction period. At the end of the construction period the construction loan will revert to a standard home loan or investment loan that has been pre-agreed by you and your lender. If you have development finance for a large scale development the fished property will either be sold at the end of the construction or refinanced from the development finance into and ongoing loan.

Because construction finance typically operates on a draw down basis, that is funds are provided on an as needs basis to pay the builder for the completion of milestones, the borrower will only need to pay interest on the funds that have been ‘drawn down’ (paid to the builder).

Commercial construction financing, for larger scale property development, is typically provided on a variable interest rate basis. However, fixed interest rate loans can be provided in some circumstances such as where the land is acquired and the development is not ready to begin for a certain period of time.

Mezzanine debt / or second tier debt can be provided for some development projects where additional funding is required above the amount / loan to value ratio provided by traditional banks and lenders. Mezzanine finance is typically provided when the developer’s equity is insufficient to make up the difference between the first tier funds and the development costs. Mezzanine debt is typically provided at an interest rate but because the amount is relatively small the total cost to the project is relatively small.

Construction Progress Payments

Construction Progress Payments: Information about construction loans

What is a construction progress payment?

A construction loan progress payment is a payment made by the bank or lender on completion of a building stage according to the agreed schedule. This is often called a draw down payment.

Typically builders request five progress payments. One at the completion of each major stage of construction. A progress payment is where your lender pays your builder directly for this progress made on your construction.

The lender will not pay the construction progress payment immediately. It can take up to 10 working days to process the first and last progress payments and five working days to process other progress payments. It is a good idea to call your lender after you send progress payment request to ensure that they are aware of it and are acting the payment.

Usually residential property construction projects are split into five stages and with a progression payment due at the end of each stage. The fixed price contract agreed to by you and your builder will state how many payments, how much for each payment and when the payments are due. Your lender will make the payments according to the schedule in your building contract.

Payment should only be made to the person or company whose name appears on the building contract and at the times nominated in your building contract.

How do I get a progress payment made?

The first progress payment

To have the first progress payment paid you will need to provide the following documents to the lender:

·         The first progress payment request.

·         Approved Council plans.

·         Fixed price building contract Signed buy you and your builder.

·         Building permit (VIC) or Construction certificate (NSW) or Decision notice (QLD).

·         Builders Insurance (certificate of currency).

·         Builders Indemnity / Public Risk Insurance to a level acceptable to your lender.

Allow sufficient time for your lender to receive and process the documents prior to expecting the progress payment to be paid.

Subsequent progress payments

Send to your bank or lender the following documents:

A signed progress payment request form (available from your lender) OR a signed letter from you authorising payment.

A copy of the invoice from the builder. Some lender will require you to sign the builder’s invoice.

You and your builder may need to allow a representative from your bank or lender to access the building site to inspect the progress and check that the construction is to an acceptable level of workmanship. Some lenders will charge you a fee for each inspection. You may also be charged a drawdown fee to cover your bank or lender’s cost of dispersing the funds.

Requesting you final progress payment

Your bank or lender will usually send a valuer to inspect your finished property to confirm that it has been completed according to the plans and specifications of the building contract. Payment will be withheld if all of the contracted works have not be completed.

You may need to provide additional documents to the lender prior to the final payment. Contact your lender to confirm what these will be. Typically these will be:

A Certificate of Occupancy, also called Occupancy Permit, Final Occupation Certificate or Certificate of Classification. This is to show that the building is up to the relevant standards and is safe to be lived in.

A copy of your building insurance with enough cover to replace the building. This copy must also include your bank or lender’s name on the policy;

A signed progress payment request form (available from your lender) OR a signed letter from you authorising payment; and

A copy of the invoice from the builder. Some lender will require you to sign the builder’s invoice.

Want to know more about the construction loans? Find out about the construction loan process.

Fixed or variable home loan in 2016?

The post Fixed or variable home loan in 2016? appeared first on Oak Laurel.

Is it better to have a fixed or variable home loan in 2016?

A common question clients ask when taking out a home loan or looking to refinance their home loan is: Should I fix my home loan? or Is it better to have a fixed or variable home loan in 2016?

Sometimes what the client really wants to know is: Will interest rates increase in 2016 or the next few years?

 Nigel Abery (PhD), Principal Mortgage Broker at Oak Laurel.

What influences interest rates?

It is not really possible to know with any amount of certainty if interest rates will increase, remain the same or decrease in the short and medium term. There are many factors that can influence both the Reserve Bank of Australia’s cash rate and the bank or lender mortgage rates.

The factors that the Reserve Bank of Australia board consider when setting the cash rate are contained in the RBA Governor Glenn Stevens’ statement that is provided after each meeting. Some of the reasons for these changes are stated with some commentary about the RBA decisions in other articles on this site. The RBA decisions mainly revolve around global and domestic economic conditions and inflation (including house prices).

The bank and lender interest rate are influenced by the RBA cash rate, other cost of obtaining and providing finance, Government regulation (banks and lenders change their interest rates in order to encourage or discourage certain types of borrowers) and the risk of lending (this can be risk of lending to a certain type of borrower or due to other conditions such as higher risk locations or property types). Banks and lenders can also manage these types of risks by increasing the deposit or equity required.

Why fix you mortgage interest rate?

There are a few main reasons that you may want to fix your mortgage interest rate:

1. If the fixed rate loan has a lower rate than the variable interest rate alternatives.
2. If you want to be sure that your payments will remain at the fixed rate level for a certain period of time.
3. If you think that interest rates will increase and you will be paying less by fixing your interest rate.

Why have a variable mortgage interest rate?

There are a few main reasons that you may want to have a variable mortgage interest rate:

1. If the variable interest rate is lower than the alternative fixed rate (similar to the above but in reverse).
2. If you want flexibility to make extra payments or repay or refinance the loan without paying a break fee penalty. Note that some fixed rate mortgages allow substantial amounts of extra repayments.
3. If you think that interest rates will go down and you will be paying less by having a variable interest rate.

Which is better, a fixed or variable rate loan in 2016?

Assuming that you don’t need the flexibility to make extra payments or the certainty your payments will not increase, the question really becomes do you think that bank or lender mortgage interest rates will increase in 2016.

Though it is difficult to predict, I suggest that we may be at or near the lowest interest rates that we will see in the short to medium term. This is because of a number of reasons:

1. The RBA has stopped indicating that they may cut and now have made more undecided statements that the cash rate could go either way.
2. Lenders, mostly banks have had extra regulatory burden placed on them and are becoming more risk averse and are pricing more risk into their rates.
3. Interest rates are already very low and the RBA can only cut so much without being cornered without even being able to threaten a cut. The RBA often talks about cutting the cash rate in an attempt to stimulate spending and the economy without the need to actually cut rates, this is called jawboning.
4. I am an optimist and believe that the economy will improve.

Disclaimer: nobody can predict with certainty what will happen to interest rates. This is not considered as financial advice!

 

Thinking of getting a better interest rate?

If you want to fix your rate or just refinance to a better variable rate, contact one of our mortgage brokers to have your home loan reviewed. You may be surprised on how much you can save over the medium and long term!

Talk to a mortgage broker

 

 

Oak Laurel Finance Brokers – Finance made easy!

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RBA cash rate update Feb 2016

RBA cash rate update Feb 2016. The Reserve Bank of Australia left the cash rate on hold at 2% today the 2 February 2016.

 

In the Statement by Glenn Stevens, Governor on the Interest Rate Decision, the reasons given for leaving the cash rate unchanged included:

• mixed economic conditions around the globe;
• declining commodity prices, especially oil prices, and the continuing decline in Australia’s terms of trade;
• volatility in financial markets;
• non-mining parts of Australia’s economy strengthening during 2015;
• improving and above average business conditions;
• employment growth and decreasing unemployment rate;
• increasing lending to businesses; and
• constrained inflation, CPI rising by 1.7 per cent over 2015, with underlying inflation at about 2 per cent & growth in labour costs subdued.

The Governor of the Reserve Bank of Bank did not give any guidance of where interest rates may head in the future with the following statements.

 

At today’s meeting, the Board judged that there were reasonable prospects for continued growth in the economy, with inflation close to target. The Board therefore decided that the current setting of monetary policy remained appropriate. Over the period ahead, new information should allow the Board to judge whether the recent improvement in labour market conditions is continuing and whether the recent financial turbulence portends weaker global and domestic demand. Continued low inflation may provide scope for easier policy, should that be appropriate to lend support to demand.Glenn Stevens, Governor of the Reserve Bank of Australia

 

Commentary

The mixed signals in the global and local (Australian) economy appear to have the Reserve Bank Board uncertain what the future may hold and therefore deciding to keep rates on hold. Regardless of what may happen in the future the current improving employment data and low interest rates are good for borrowers.

 

By Dr Nigel Abery (Ph.D.)

Hoping for a cut to the cash rate to reduce your mortgage payments?

A cut to the cash rate may have reduced your mortgage repayments, if your bank passed it on! Why not see what else is available from the lenders out there?

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Oak Laurel Finance Brokers – Finance made easy!

 

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Melbourne property prices reach peak Feb 2016

The post Melbourne property prices reach peak Feb 2016 appeared first on Oak Laurel.

Melbourne property prices reach a new high in February 2016

Melbourne property prices reached a new high in February 2016 according to property price data from Corelogic.

Melbourne’s property price rises are ahead of all of Australia’s other capital cities, including Sydney which has seen a decrease in property prices in recent months.

Melbourne’s property price rise trend has been a steady upward trajectory after dipping after the previous maximum in November 2015.

The auction clearance rates in Melbourne also show signs that the market is heating up again with good clearance rates according to Domain.com.au data.

Though the Melbourne property prices have hit a new high, the price rises are slower and steadier than the gains in the recent past that worried Government policy makers. So don’t expect Government banking regulator to require banks and lenders to carry out any further restrictions on investment lending. There is also indication that the participation of property investors is not the main driver in Melbourne’s property price gains.

The restriction of property price gains to the Melbourne market and the cooling of the Sydney property market, where bubble fears were greatest, should still leave the door open for the Reserve Bank of Australia to cut interest rates if needed.

“The Melbourne property market has a good outlook for 2016, probably better than any other property market in Australia.” said Dr Nigel Abery (Ph.D.) Principal at Oak Laurel.

“Melbourne’s property market has good fundamentals, with more people choosing Melbourne to settle in that any other city in Australia” said Dr Abery.

“Melbourne is a great city to live in and that is why thousands of people are moving from other cities around Australia and overseas to live in Melbourne” said Dr Abery.

“Not all suburbs are the same so don’t expect that you will get average gains if you buy in a bad location. I would avoid inner city large high-rise apartments unless you investment horizon is super long term. Alternatively, if you buy a quality property in a good location you may expect to outperform the average price gains.” said Dr Abery.

“Look for suburbs where people high incomes and above average capacity to pay want to live. Convenient locations with good access to transport and amenities such as good schools are likely to continue to attract buyers willing to pay top prices” said Dr Abery.

Looking to invest in the Melbourne property market?

Your investment property loan can make a big difference in the success or failure of your investment. Oak Laurel mortgage brokers can help you to compare investment property loans. Find out more about investment property loans:

Investment property loan comparison

Talk to one of our Melbourne mortgage brokers?

Oak Laurel's Melbourne mortgage brokers can help you to compare your home loan or investment loan options. Make sure that you are not paying too much on your loan, contact one of our mortgage professionals today:

Finance brokers Melbourne

 

Oak Laurel Mortgage Brokers – Loans made easy!

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