May 31, 2011
Today's market conditions favour property investors who are looking to benefit from ongoing seller discounting, healthy rental income growth and longer term capital gains, says Australia's largest independently-owned mortgage broker, Mortgage Choice.
This may be why the value of housing finance demand for investment lending – fixed loans rose for the first time this year in March, by 2.1% according to the ABS*.
Mortgage Choice spokesperson Kristy Sheppard said, “The latest data suggests greater movement from investors taking advantage of subdued market competition and housing price reductions.”
“There are many more properties on the market than usual and less buyers to purchase them. Australians who are ready financially and keen to crack the market or build on their portfolio may find that some solid hard work sees them snap up opportune purchases while demand is low.
“Other encouraging factors are our healthy population and wage growth and low rental vacancy rates. Rents are rising at a faster pace this year while property values have steadied or dropped in many areas, so rental yields are on the increase. This all bodes well for people who research the market thoroughly, have a long-term strategy and are informed about their finance options.”
Mortgage Choice's hints and tips for those considering investing are:
Aim long-term: The market moves in cycles; it has highs, lows and steady patches. Always ensure you are comfortable with the possible pros and cons of an investment asset and think hard about how they match your goals. You will need to budget for interest rate rises and property agent fees as well as the usual ownership costs and lost rent if you struggle to find or keep a tenant.
Research the gains: Read property-related and investment articles. Talk to people in the know, eg. experienced investors and property research companies, about areas you are contemplating buying in. Compare suburbs' rental yields, resident demographics, tenant demand, existing and planned infrastructure, past price growth and predictions and everything in between.
Invest with equity: Tapping into another property's equity can be a strong launching platform. Say your home is valued at $700,000 and the mortgage is $350,000, you may be able to invest up to 95% of your equity ($332,500) to purchase a property, depending on factors such as your lender's approval criteria and your ability to afford repayments. Lenders Mortgage Insurance may also be a cost consideration.
Choose a well suited loan: There is most probably a range of property loan products to weigh up against your financial situation and investment portfolio strategy. Interest only or principal and interest loan? Fixed or variable rate or perhaps a split? Which features are needed? Cash deposit and/or equity? A professional mortgage broker can help you compare a range of home loans and guide you through narrowing it down to one suited to your requirements and objectives.
Meet an expert: Buyers' agents know the market and can be a valuable resource to use for advice or for negotiating with sellers and their agents. You may also need to discuss your move with an accountant or financial planner. Make sure your financial situation is improved by the investment.
Call 13 MORTGAGE.
* ABS Housing Finance report 5609.0
For further information or to arrange an interview, please contact:
(02) 8907 0472 or 0407 416 124