APRA have told the banks not to increase their loan portfolio to investors by more than 10% per annum and property prices went up 11% last year, effectively creating a decrease in available funds to investors.We are seeing this on the ground with some banks calculating loan repayments on all debts at 7.5% principal + interest, irrespective of whether you are locked in at 5% and interest only.One client bought in Sydney and used his own bank to finance because he got a special rate of 3.98% - interest fixed for 3 years. His Custodian Sydney property has increased by $200,000 and he wanted to use the equity to take advantage of more growth while the cycle still heats up in other capitals. That's when the bank told him their new LVR is 65%!!! One wrong move in finance literally can take you out of the cycle. My view: I would bite the bullet, pay the break costs and refinance. Yes it may cost $15,000 but that's one month’s growth in Melbourne last quarter, and gets you back in the game otherwise you are on the sidelines for the rest of the cycle.The markets are getting super-hot. Last quarter, Melbourne houses jumped a massive 8.3%, Sydney 7% and Brisbane 2.7%. Perth went backward 1.8% as the mining boom falters. Finance is tough but doable and well worth persevering. Many of our clients from Perth bought in Sydney in 2011/12, using the growth in their properties. That strategy is paying huge dividends for them now as that market is challenged, and many of them are now able to buy in Melbourne and Brisbane using equity from Sydney or even Perth.House prices on the East Coast are going to continue to go up, and continue to go down on the West Coast.
How do I know? One fundamental reason: supply/demand. It's that simple.Listings are down 4.7% in Melbourne, 2.8% in Brisbane and 0.5% in Sydney on a year ago with a higher sales volume. Listings are up 17.9% in Perth.
My advice to Perth clients - in fact any client - is “use your equity while you can”, particularly with the fixed rate so low and price trend so strong: it's a gift.
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