Government’s Resolve to Cool Property Investment

October 19, 2017
Raymond Teh

Do not underestimate the government’s resolve to cool the property market in Sydney & Melbourne. Recent government policies of:

Capping

·        investment property growth to 10% each year

·        interest-only repayment home loans to 30 percent overall share

“Encouraging lenders” to

·        use an assessment rate of 7.00% - 8.00% to calculate borrowing power

·        adopt a significantly higher mandatory living expenses estimate

·        factor that a borrower has much less time to pay off the principal & interest loan when the interest-only repayment term expires

has made it significantly more difficult and expensive for investors to source loans. For example, I organised a $1,100,000 finance earlier in the year. With the introduction of Household Expenditure Measure (HEM) where mandatory living expenses increase according to the household income, the couple's borrowing power today would have been $910,000. HEM reduces the borrowing power of upper middle and high-income household.

Sydney property market has not experienced a major downturn for the last quarter of a century. Notwithstanding this, my words of kind advice when it comes to property investment is: “Practise prudence in leveraging or sorrow could be in sight.”

RT 8/10/17

Posted in: News

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