Way back in 2014, Australian investors were hit with a housing investor loan cap. This was designed to reduce risky investment lending by banks and other financial institutions. Dubbed the housing investor ‘speed limit’, its intention was to limit growth in investor lending to no more than ten percent.
Seemingly having achieved its intended goal, the APRA (Australian Prudential Regulation Authority) will be removing the strictures as of 1 July 2018 and replacing them with longer term, sustainable measures to control investment lending.
The underlying intention is to concentrate on banks and other lending institutions, obeying responsible lending laws to protect all parties involved.
Flow On Effects
With the current tempting combination of low-interest rates, more favourable lending conditions and softer house prices, the expected result is a dramatic return to the market for investors – with Melbourne being the most likely benefactor.
Further improving conditions for investors are the recent laws limiting foreign investment in residential property. Traditionally strong in the ‘buy to rent’ market, overseas investment restrictions and tariffs have seen a dramatic drop-off of investment. The result can only mean an increasingly tight rental market and stronger yields for local investors.
If you are looking for a long-term investment in the Melbourne Property Market, its much-maligned apartment sector may finally be worth a second look. With reports indicating that people are ‘fleeing’ Sydney (possibly a little melodramatic!) in droves, Melbourne is seeing a regular stream of new arrivals each year – particularly from other states.
With substantial infrastructure improvements in the pipeline, including airport rail links and major overhauls to roads and freeways, it stands to reason Melbourne will become increasingly attractive to buyers. This is in contrast to Sydney, where inflated house prices and access to the CBD have combined to make a less appealing investment prospect.
With a much touted ‘oversupply’ in Melbourne’s apartment sector and substantially reduced overseas interest, it stands to reason there may be some bargain buying to be had.
2018 – 2019
The main question on everybody’s lips at the moment is “how far will prices fall and how long will the decline last?”.
Reason dictates that, with a healthy economy and low-interest rates, most prospective vendors will be in a position to sit tight and wait for a market upswing, before selling. This, in turn, will result in less stock for sale which should equalise the market and stabilise prices.
The main determinant will be interest rates. Without the demand of foreign buyers, a substantial rate increase will push some sellers who bought prior to the 2014 cap, to sell – flooding the housing market with stock to a reduced range of buyers.
The good news is that forecasters expect interest rate hikes to be shelved, at least for the foreseeable future.
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