Low interest rates, below par property prices and a glut of
available stock are promising signs for savvy property
investors, according to Australia's largest
independently-operated mortgage broker, Mortgage Choice that
writes almost one in every 20 approved home loans.
Already this year the property market has seen an increase in
investor activity as many hone in on the opportunities
available. The latest ABS hosing finance figures show that
the value of investment housing loans rose by 4.4% in
February 2012 to $6.9 billion, seasonally adjusted. This is a
6.6% increase on the same month last year and is noticeably
above the yearly average of $6.6 billion.
Mortgage Choice spokesperson, Belinda Williamson said,
"Investors who have their finances in order, and who
have conducted thorough research, may find windows of
opportunity in today's property market."
"The latest figures from RP Data show that in January
there were over 287,000 residential properties for sale in
Australia, which is approximately 30% higher than the same
time last year. The glut of available properties in some
states could provide investors with prime pickings,
particularly if prices have also fallen in the region.
According to the same research, property values fell over the
three months to December 2011 in all capital cities except
Sydney and Hobart, which moderately rose by 0.7% and 1%
respectively.
"Other encouraging signs for investors include
relatively low interest rates, and in some areas, rental
price growth and low rental vacancy rates. The latter is
influenced by Australia's housing undersupply issue. The
latest ABS building approval figures show a fall in February,
the fifteenth consecutive monthly drop. With fewer new
properties being built, vacancy rates should remain tight and
we are bound to see further pick up in rental price growth.
Already, RP Data's latest research shows capital city
rents over the past 12 months have increased by 7.1% for
houses and 4.2% for units.
"Rental yields are also showing positive signs of
improvement. Gross rental yields over the 12 months to
December 2011 have improved, with yields for houses rising to
4.4% from 4.0% and units increasing to 5.1% from 4.7%.
"When choosing what type of property and where to buy,
it is a good strategy to invest in a dwelling that is well
located, highly regarded by renters and priced appropriately.
Ideally, the property will be in close proximity to
amenities, shops, public transport and have appealing
features, such as off-street parking.
"Of course, there are tax and legal ramifications
associated with property investment, and it is always a good
idea to get professional advice from an accountant or
solicitor before settling on a strategy.
"Prospective investors should be aware that lenders
generally limit their loan to value ratios - LVRs - to 90% of
the purchase price. However, some lenders may consider a
higher LVR, depending on the individual borrower so it pays
to shop around. Keep in mind, when the LVR is 85% or above, a
genuine savings deposit of 10% is required, which can be
savings held over a period of at least three months, equity
in an existing property, etc. Borrowers should investigate
the finance side of any purchase early on to ensure they
satisfy their chosen lender's requirements."
Mortgage Choice provides the following five tips for
potential property investors:
1. Research your property options - Conduct thorough research
before settling a property investment strategy. If you are
not confident in your ability to find a suitable investment
property, seek assistance from a buyers' agent. Before
committing to any property purchase, it is a good idea to
discuss your plans with an accountant and/or financial
planner.
2. Pre-approve your property loan - Talk to a professional
mortgage broker about getting a home loan pre-approval. This
gives you an understanding of what you can comfortably repay
and afford to buy. It allows you to shop with greater
confidence, whether you are bidding at auction or negotiating
a purchase.
3. Look into LMI - If you decide to access the equity in your
existing property to purchase another and you borrow more
than 80% of the property's value, you will probably need
to pay lenders' mortgage insurance (LMI). This can be
quite costly, ranging from hundreds of dollars to tens of
thousands. A professional mortgage broker can provide
up-to-the-minute information.
4. Choose a suitable loan structure - There are a number of
factors to consider when deciding on the type of loan
structure to suit your investment strategy. This could
include how to tie in any existing loans, what loan features
will help you achieve your financial goals (eg. offset
account, redraw facility), which loan suit your needs (ie.
interest only loan or principal and interest, fixing part or
all of your loan, etc).
5. Build a financial buffer - Be prepared for the longer-term
peaks and troughs of the property cycle by building a
financial buffer of at least 1-2% to cope with additional
expenses including lenders' interest rate rises, property
maintenance and repairs, and/or the loss of a tenant or rent
arrears. Remember that regular income from any investment is
not a certainty and capital gains do not appear
overnight.
Call Mortgage Choice customer service on 13 MORTGAGE. Or,
visit www.mortgagechoice.com.au,
www.facebook.com/MortgageChoice
or http://twitter.com/MortgageChoice.
For further information or to arrange an interview, please contact:
Belinda Williamson
Mortgage Choice
(02) 8907 0472 / 0407 416 124
belinda.williamson@mortgagechoice.com.au
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