Changes announced by APRA have made it harder to secure debt for an investment property. Some lenders will require a minimum of 20% deposit, others will mandate mortgage insurance. Investor interest rates may be higher than comparable owner-occupier loans.
As an investor, present or future, you will have made fundamental assumptions in your calculations about the risk and how you will hold your investment property for the long term.
Now it seems like these assumptions are being brought into question.
As an investor your ability to adapt to change is directly related to your ability to be successful.
“Every change in the market has upside and downside, and with property being a long-term investment strategy, we tend to view this change as an opportunity for investors,” says Neil Smoli, Aviate Group’s Managing Director.
“Any investment strategy takes courage and perseverance. The only way to achieve growth in any strategy is to be aware of the risks and mitigate them appropriately.”
The biggest risk in any investment is a collapse in the market value of the asset, especially when financing the purchase through debt.
The APRA changes will discourage those who are looking to make money fast by buying high-risk property for an astronomical return – otherwise known as speculators. You need only look at the misfortunes of property speculators in Port Hedland and other ex-mining towns to see how wagers such as these can turn out.
Aviate has actively discouraged clients from buying properties of this type.
Refocusing buyers on the fundamentals of an investment property — the requirement that it improves in value over the long-term and gives a comfortable rental yield over that period — may see the demand for A-class stock such as Aviate’s rise. In fact we may see the speculative and inexperienced property players disappear from the market, which will strengthen the position of property investors overall.
We remain confident that an Aviate property will position you well.
There are several well-proved strategies for managing changes in loan requirements. As an Aviate client, if the changes will adversely impact your situation, please contact your Relationship Manager for a confidential discussion. We’re here to help.