Posted Friday, 07 August 2015 at 00:27 by Shape Home Loans
Tagged: Loan for investment | APRA lending laws | Loan for owners occupier | Loan for investor | Investors | Home Buyer | First home buyer | home loans | property investing | Hint/Tip | Off the plan
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Banks are reducing the number of development loans they are going to approve due to strict APRA lending laws and the nature of the property market, as most property developers sell their stock at a higher "future" price, which is risky business especially if the property prices start to slow down.
APRA tightening on investors loan = Market will slow down, prices shouldn't go backwards but won't skyrocket = in 12-24+ month time the the "market price" may not reach the predicted more pricier OTP prices that was signed 2 years ago.
The last 3 years off the plan prices in Sydney and Melbourne has met and exceed the market price, as the property market has skyrocketed by an impressive 10-15% growth per year.
However we predicts the market to slow down to a normal 2-4% growth per year due to APRA reducing investment lending activities on bank and a possible interest rate rise in 12-18 month time, mixed with a unstable unemployment rate and the China slow down.
This means some "over-priced" OTP that's set to settle in the next 12-24 month time may NOT settle at the contract price, so prepare for a "Lower valuation " as worst case scenario and as an "insurance" policy
1. Have a cash buffer for a min 80% LVR loan ( ie 20% deposit) with an extra 5-10% liquid cash as backup
2. Check that your borrowing capacity is still in order should interest rate go up 1-2%
3. Make sure you have a stable income leading to the off the plan settlement, and most importantly 9 month before settlement check your eligibility for a loan
4. Do a rough market valuation check 6 month before settlement.
5. Check your contract to see if it has a possible exit clause as "backup"
- Sunset date
- Re-sell clause
BE AWARE NOT ALARMED.