Low Aussie Dollar to Increase Australian Property Prices

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The Low Australian Dollar is Likely to Further Increase Australian Property Prices

The Australian dollar has now decreased to new lows against the US dollar, Great Britain Pound, Chinese Yuan and a host of other currencies. The Australian dollar has not been this low since the Global Financial Crisis (GFC) also know in some circles as Good For Chinese (GFC) because they kept buying when other were worries and held back.

What does the low Aussies dollar mean for Australian property prices?

Well, nothing is certain but it would appear that the low Australian dollar will further increase demand from overseas buyers for Australian property. The low Australian dollar makes our exports comparatively cheaper, it also makes our real estate comparatively cheaper for foreigners. Hey, who does not like a bargain.

Are there other factors at play that may impact on the property market?

Yes, there is lot going on that can influence the property market in Australia. For example:

• recent capital gains in the property markets on Sydney and Melbourne;
• the Government regulator (Australian Prudential Regulatory Authority – APRA) crack down on investment loans resulting in the major banks having differential pricing for investor loans and owner occupier loans;
• a crash in the Chinese stock market, economic contraction in the Chinese economy and devaluation of the Chinese currency;
• instability in the stock markets around the world;
• below trend growth in the Australian economy.

Some of these factors could contribute to the slowdown in the price gains in the Australian property market other may contribute to further increases in property prices.

Recent capital gains in Sydney and Melbourne property

The recent capital gains in Sydney and Melbourne can act in two ways.

1. encourage more investors into the market and raise prices expectations for buyers and sellers regardless of if they are investors or not; or
2. where prices rise to very high levels, they can impact on affordability where buyers simply cannot afford to purchase or fail to see value in such high prices.

Government crackdown on investor loans

The Government Banking Regulator’s crackdown on investment lending is likely to to reduce investor demand for properties in Australia. However, only if they borrowing to buy. Rich investors especially those who do not need to borrow will not be deterred by the changes to investment loans. If they are from overseas even if they do need to borrow to invest the low Aussie dollar has just made Australian property and any loan repayments a lot cheaper. This may mean that locals (especially investors) are at a competitive disadvantage (due to the low Australian dollar) to foreigners or people with foreign incomes.

Crash in the Chinese stock market and economic slowdown in the Chinese economy

This is likely to make Chinese investors shy away from stocks and head to asset classes that are considered as lower risk. Property and Australian property is seen as a safe asset class and it is likely that there will be more interest in Australian property from foreign Chinese investors and local permanent residents that have income and assets back in China.

Instability in the stock markets around the world

Similar to the issue of the Chinese stock market crash, the instability in stock markets around the world makes people wary to invest in these assets. Some stock market speculators will continue to play the market and perhaps even make more money if they know what they are doing. The average mom and pop investor is less likely to invest but will not necessarily opt to change to property investment.

Below trend growth in the Australian economy

There appears to be an overstatement about the economy. It is not going as great as it was during the mining boom but in the great scheme the situation is not bad. Had the economy been really in trouble the Reserve Bank of Australia would have cut interest rates and there would have been another response from the Government e.g. stimulus package. We did not see this happen infact the less than trend growth in the economy is likely to keep interest rates low and the property prices heading up.

Who are the winners?

Australian expatriates (Aussie Expats) who have foreign income and find that now Australian property is comparatively cheaper.
Foreign investors that due to the currency find that Australian property is “ON SALE” at discounted prices.

Aussie expat home loan

Are you an Australian expatriate? Aussie expats can still borrow to buy property in Australia. With a low Australian dollar now may be the right time to buy. Find out more about Aussie expat home loans.

Aussie expat mortgages

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Investment Loan Rate Increased? Investment Loan Review

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Has your investment loan interest rate increased? Don’t be ripped off, get an investment loan review

If your investment loan rate has recently increased or it has been a while since you had it reviewed you may want to get an investment loan review to check if there are any better options available.

What is going on with investment loans?

If you have been ignoring the chatter in the media about property prices and investment lending you may not be aware that the Government Banking Regulator (Australian Prudential Regulatory Authority or APRA) has been putting pressure on the banks to curb their investment lending if they have their investment loan books growth above 10%.
The offending banks and even some banks that were not above APRA’s 10% investment loan growth limit have responded in a number of ways:

1. Raising their investment loan interest rates including for existing variable rate investor loans;
2. Changing their borrowing power calculations to make it harder for property investors to qualify for a loan;
3. Limiting investment loan to value ratios to lower levels; and
4. Decreasing their interest rates for owner occupied loans to encourage more owner occupier borrowers and even out their loan books.

Not all offending banks are doing all of the above.

Are there still good investment loan interest rates available?

Yes,there are still good investment loan interest rates available! Not all lenders have exceeded APRA’s 10% investment loan growth limit and some lenders are still actively competing to get your investment loan. These other lenders are still offering competitive investment property interest rate, fee and feature packages.
As property investors we know how important it is to have a competitive interest rate on your investment loan. If you are paying more interest than the rental income, negative gearing may make up some of the difference but even with negative gearing you are still paying money out of your own pocket. This can impact on your ability to make further investments and or your lifestyle. Lets face it no one want to pay more than they need to on their loan, least of all property investors who are investing to make money.

Are higher loan to value ratio investment loans still available?

Yes, higher loan to value ratio investment loans are still available! Some lenders are also still offering higher loan to value ratio loans 90% or up to 95% LVR exclusive of lenders mortgage insurance for investment properties.

Find out more about higher LVR investment loans

With the recent lending changes some banks have stopped offering higher loan to value ratio loans for property investors. Other lenders are still happy to lend at higher LVRs up to 90% or 95%.

High LVR investment loans

Investment loan review – Free

If your investment loan rate recently went up then you should get your investment loans reviewed by one of our finance professionals that understand investment loans. Oak Laurel has mortgage brokers that know which lenders have the good investment loan rates now. Or brokers can assist you to switch your investment loan portfolio to where there is a better loan package from another lender. If you have one investment property or many investment properties, our investment loans specialists will review your loan portfolio to identify if they can get you a better loan or loans. If you also have an owner occupied home loan(s) our finance professionals can check to see if there is something better available for that also.
We will not charge you for the review. If we cannot find any better options then there is no loss to you. However, you can be confident that you are not being ripped off. If we can find you better options then it could save you a lot of money.

Contact an Oak Laurel about an investment loan review!

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Construction Costs in Australia Decreasing

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Construction cost in Australia are among the most expensive in the world but are coming down according to an international report.

A report by Turner & Townsend a multinational professional services company ranked Sydney at 10th, Perth at 16th, Melbourne at 19th and Brisbane at 20th most expensive cities in the world for construction costs.
The study analysed 35 residential and commercial projects in different markets around the world and found that New York is the most expensive place to undertake construction activities.

Markets analysed and the report’s predicted construction market in next 12 months included:

Cooler	Staying the same	Warmer
Australia – Perth	Australia – Melbourne	Australia – Sydney
Brazil	Canada	Doha
China	Chile	Hong Kong
Kazakhstan	Germany	Ireland
Malaysia	India	Kenya
Russia	Japan	Netherlands
Singpore	Poland	UAE
Uganda	South Africa	UK – Central
–	South Korea	UK – London
–	Vietnam	UK – North
–	–	UK – Northern Ireland
–	–	UK – Scottland
–	–	UK – South
–	–	USA – Houston
–	–	USA – New York City
–	–	USA – Seattle

Construction market in Australia

According to Sourceable Senior economist Gary Emmett from Turner & Townsend said Australia is becoming a relatively cheaper place to build, due to low interest rates and a falling Australian dollar.

“The 2015 report shows that compared to 2011, it would cost overseas investors paying in US dollars 13 per cent less to construct buildings in Australia, which is a significant reduction,” he said.

Mr Emmett said that with the exception of Sydney’s apartment market, the cost of construction is stable and the outlook moderate for the medium term.
“Overall, it is a great time to build. Construction costs should remain fairly stable although some residential construction trades may become increasingly difficult to source, adding pressure to costs,” he said.
“Foreign investors are expected to seek more opportunities here to capitalise on the favourable conditions to build projects.”

Construction cost per square meter in Australian cities

The Turner & Townsend report estimated construction costs of detached houses, townhouses, low rise apartments and high rise apartments in the Australian cities Brisbane, Melbourne, Perth and Sydney.

Detached house construction costs per square meter in Australian cities

The construction cost of building a detached house is $1,600 per square metre in Melbourne, $1,650 in Brisbane and Perth, and $1,750 in Sydney.

Building a prestige detached house costs $2,700 per square metre in Melbourne, $2,850 in Sydney, and $3,000 in Brisbane and Perth.

Townhouse construction costs per square meter in Australian cities

Townhouses construction cost $1,700 per square metre in Brisbane, $1,750 in Melbourne, $1,850 in Perth and $1,900 in Sydney.

Low-rise building costs per square meter in Australian cities

Construction costs to build low-rise apartments are $1,800 per square metre in Brisbane, $1,900 in Perth, $1,960 in Melbourne and $2,100 in Sydney.

High-rise construction costs per square meter in Australian cities

High-rise apartments building cost $2,500 per square metre in Brisbane, $2,700 in Melbourne and Sydney, and $2,900 in Perth.

Borrowing to build your dream home or a small development project?

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SMSF loans will not be banned says assistant treasurer

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Self Managed Super Fund loans will not be banned but may face tougher regulation says assistant treasurer

Whilst speaking at the Tax Institute annual superannuation conference in Sydney on Friday 21 Aug 2015, Josh Frydenberg the assistant treasurer stated that the Government has no plans to ban SMSF loans, that is limited recourse borrowing arrangements (LRBAs) through SMSFs to purchase real estate according to Fairfax.
David Murray’s Financial System Inquiry, released in December 2014, warned that SMSF borrowing for property increased speculative investment which could pose a risk to the financial system over time and called for a ban on LRBAs,
“I want to emphasise that we have been considering this recommendation very carefully but flag that we want to make sure the approach we take is proportionate to the risks that have been identified,” Frydenberg said.
“To put it in context only 0.07%, perhaps 6,500 properties, were held in an SMSF through a limited recourse borrowing arrangement in 2013.
“David Murray highlighted the risks associated with increased leverage in the financial system. Increased leverage always represents a risk and we recognise that. The government also recognises that most SMSFs do the right thing.”
When asked whether there were any plans for increased regulation of SMSF loans – instead of completely prohibiting it – Fairfax reports that the assistant treasurer said it was “under consideration”.
This appears to be good news for those taking control of their Superannuation through SMSFs. Though clearly not for everyone, borrowing to investing in property through your SMSF remains an option. It is suggested that you seek advice from a qualified professional before making any investment choices though your self managed super fund. If you are considering borrowing to invest in your SMSF we can provide you with Limited Recourse Borrowing Arrangements for your SMSF.

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Ask an Oak Laurel mortgage broker about your Self Managed Super Fund loan options.

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Is Melbourne overtaking Sydney as the hottest property market? Aug 2015

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Property price growth data shows that in the last Quarter, Melbourne property has out paced Sydney’s to become Australia’s hottest property market as at Aug 2015

Property price growth in Melbourne and Sydney

Latest property price data from PRData shows that in the last quarter Melbourne property price grew 7.85% out pacing Sydney price growth at 6.66%. Month on month price data also shows a similar trend, Melbourne price growth outpacing Sydney’s, overall and for houses. Though Sydney’s unit prices grew faster than Melbourne the difference was only 0.06% between the two or in practical terms they were the same.
In recent years Melbourne has shown some reasonable price growth but until the last quarter have been outpacing Melbourne’s by a large amount. With Sydney’s property prices now so high many believe that they are unaffordable. There have also been reports that property investors looking to buy in Sydney have been turned off by the high prices and are now turning to Melbourne where prices have been rising at steady pace. Now that Melbourne’s price growth appears to have overtaken Sydney’s investors chasing capital gains may also be more attracted to Melbourne.
Melbourne property has not had the attention from property investors that Sydney has had with a larger proportion of owner occupiers. However, if investors now find Sydney too expensive or decide to target Melbourne which has in the last quarter become the hottest property market, this may be the start of a flood of investors to Melbourne property.

Auction clearance rates in Melbourne and Sydney

Recent auction clearance rates show a similar trend to the property price growth in Melbourne and Sydney. Over previous five weeks Melbourne’s auction clearance rates have shown a steady building increase from 74% five week ago to 75%, 76% , 77% to 80%.  Sydney’s auction clearance rate though having 80% last week have showed a decreasing rate previously from 78% five weeks ago to 76%, 76%, 73% before last weeks jump back to 80%.

Is Melbourne a good place to invest in property?

Invest where people want to live, especially where people who have wealth want to live as this is the demand side of what drives up property prices. People want to live in Melbourne. Melbourne has been named the world’s most liveable city for the fifth year in a row, achieving a near perfect score on the Economist Intelligence Unit’s (EIU) liveability survey of 140 cities. Each year thousands more people move from NSW, mostly Sydney to Victoria, mostly Melbourne than go the other way. Melbourne has the greatest number of people immigrating to it than any other Australian city. The ABS forecasts that given current levels of migration and fertility rates, Melbourne will overtake Sydney as Australia’s biggest city by 2053.
It is not all Melbourne’s way though. Vacancy rates in Melbourne at 2.3% are however, slightly above that in Sydney at 1.8% as of July 2015, according to SQM research data. However, both cities have lower than the national average vacancy rate at 2.4%.
Latest data also shows that rental yields are also slightly lower in Melbourne than in Sydney.

Conclusion

This data does not mean that Sydney’s property prices will not continue to grow, there is every indication that the it will continue to grow into the future. The data does suggest that Melbourne is now the hottest property market and may catch up to Sydney over the coming years.
Only time will tell if Melbourne will continue to be Australia’s hottest property market!

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Good investment loans easy to find in Australia

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Whoever said that it was hard or expensive to get an investment loan must have been looking for one in their own navel. Many lenders are still actively competing for investors as they have not exceeded the Government Banking Regulator’s 10% investment lending growth ‘speed limit’.

Many lenders are still offering loans to investors at higher loan to value ratios and competitive interest rates. The major banks who have exceeded the Government Regulator’s investor growth limit are getting out of investment loans and some are now spruiking that the investment market is dead.  This smacks of If I can’t play I will close my eyes and shout that the property market over. But with so much demand for property in Australia’s two largest cities, Sydney and Melbourne, no one wants to hesitate only to have to pay thousands more for a comparable property next week. Anyone who has attended an Auction in Sydney or Melbourne recently knows that the demand is stronger than ever as are prices.

Here is the tip to getting a good investment loan. Don’t bother going into a bank branch. Don’t bother going to a mortgage broker that is owned by a bank. These places don’t give you a lot of choice even if you are not an investor. Go to an independently owned mortgage broker who has access to a wide range of lenders including non-bank lenders. You will find out that there is plenty on offer for property investors with competitive loan packages to boot. Find more info about what kinds of investment loans are still available here: investment loans

Now that the big banks are out of investment lending they have started talking down the property market prospects, it does not even matter that the data says the opposite. There may be an affordability issue in Sydney but the Melbourne market median house prices are around $200,000 cheaper than Sydney and are just starting to really take off. The most recent property price growth data shows that Melbourne has overtaking Sydney as the fastest price growth city and prices are growing even faster than before. The big banks may be disappointed that they can’t lend to investors in this growing market but this will just give the lesser known lender a chance to show off their investor loans expand their investor market share. These new Government Regulator measure are levelling the playing field for lenders and introducing more competition that is long overdue.


 By Dr Nigel Abery (PhD) 

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