Prices

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Hi Margaret,
With banks now restricted to only 80% LVR do you think this will significantly affect prices? I have two properties in Sydney. Both are renting for $450 per week
Before this announcement one was probably worth at least 800K (house on land 873sqm) and the other at least $500,000.
Do you think it's worthwhile seeing the yield is so low for my Canley vale property to sell it and buy 2 properties in Brisbane where the yield could be higher and I'll have two more properties despite losing 1?
Would this be still worthwhile seeing I have to pay capital gains tax (purchased 7 years ago for 446K) and taking into account all buying and selling fees.
I have considered more on using buyers agents as maybe they are not all spruikers.
Regards,
Allen
 
Hi Allen, 
Firstly we must make clear that the banks are not technically restricted to only lending 80% (it's not law), and the new, tougher criteria being set by some banks is only targeting investors, with owner occupiers mostly not affected. In response to The Australia Prudential Regulatory Authority's (APRA) calls for stricter controls around investment lending, banks like NAB and CBA have announced an end to pricing discounts for investors. ANZ have done the same, unless you have a PPR mortgage with them as well. Many lenders are also changing the maximum Loan to Valuation ratios (LVR) that they will allow for investors. As an example, BankWest will now apply a maximum LVR of 80% for all investment purposes (property and shares). This means that you will still be able to access funding at higher LVRs if you're an investor, you'll just have to pay for it with an increased interest rate, or, more to the point, no access to the discounts which can usually be obtained if you negotiate well enough. It's my opinion that this won't have a big impact on property prices, instead landlords will simply raise their rents to make up for the difference in their cash flows which the loss of these discounts will cause. We have to remember also that it's simply not suitable to say we are in a boom in the property market - I am sure the people of Adelaide and Perth would be quite surprised to hear they are in a boom, which making such sweeping claims infers.  We should hope that this inappropriate move by lenders doesn't impact the property market, as many areas can ill afford anything else to stunt growth. In terms of your property, I believe that, with or without these moves, people holding Sydney property may well find that the values stall a little in the coming 18 months anyway.  The market has overshot the mark, with frenzied buying pushing prices up well over the intrinsic value of properties in many areas. When that happens and the market cools, as it always does, the values seen in the last phase of that boom often suffer and fall back a little.  In your case you'll still be fine, as even with an adjustment in values, you've still made a really good gain. While I believe that the Brisbane market is likely to run soon, that's not advice to sell what you have in Sydney.  You could be up for a hefty capital gains tax bill which will eat into the returns.  It can be better to instead leverage against the equity and hang on to property you already have, choosing to sell it at times when you know you will be in a lower tax bracket, such as when you have left the paid workforce. 
As you have bought in to these areas while prices were a lot lower, I'm sure that your yields are pretty good, for you.  Yield relates to what you paid for the property, not what it is worth, and as the property has gained so much value, you should be seeing a pretty good return on that initial investment. In terms of a buyer's agent, just make sure that, if you choose to use one, they are a Qualified Property Investment Adviser (with the Property Investment Professionals of Australia) and that they have a broad based knowledge of all markets in Australia. 
You want your adviser to be helping you to buy property in the best area at that moment in time, not just in the area where they personally happen to be active. You should also become as educated as you can about everything to do with investing (not just where to buy) before going any further. In my experience, those who take the time to become suitably educated first usually make better and more lasting choices and build stronger, better performing portfolios.
Have a property question?   <a href="mailto:askmargaret@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
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mlomas-KC9MUPZ6Ca

Ask Margaret: Will bank LVR restrictions affect prices?

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<h2 class="post_title"> </h2>
Every year, as Sydney hits winter we can expect the inevitable property market predictions to come in thick and fast. Now before we get into the nitty gritty of these predictions there are a few observations that I made when I read these somewhat bizarre predictions.
Let’s look at some facts – the Australian Bureau of Statistics (ABS) released their latest data on Residential Property Prices in March 2015 which showed that the total value of Australia’s 9.500 million residential dwellings had increased to $5.500 trillion. At the end of the March quarter 2015 the ABS also advised that household net worth was $8,090.9 billion so we are talking big numbers here.
Researcher BIS Shrapnel noted that house prices (I assume this includes the investor apartment market too) have soared by 45% since 2012 – and they don’t expect a correction to arrive until 2017. Because in 2017 they are expecting the cash rate to start increasing – which I don’t agree with as I expect we will have a low cash rate for quite a few years to come.
A recent PwC study found that more than one – third of Australia was enduring recession conditions as the economy is increasingly driven by a small group of regions. The PwC analysis found about 20% of the national income was now produced in just 10 out of 2,214 locations across Australia, with Sydney, Melbourne and WA’s iron ore belt in the Pilbara among the dominant areas. 
It is also worth noting that Queensland and NSW are on a massive infrastructure spend with Victoria not that far behind.
For those intently following the Sydney infrastructure model, I suggest that you read<a href="https://www.strategy.planning.nsw.gov.au/sydney/the-plan/#section-224&amp;265" target="_blank"> Your Future Sydney</a> – “The Government must accelerate the delivery of new housing in Sydney to meet the needs of a bigger population and to satisfy a growing demand for different types of housing. Making sure that Sydney will have adequate shelter for its future population is a high priority of this Plan.
Over the next 20 years, the population in Sydney will grow much faster than in the last 20 years. Projections indicate that Sydney will need around 664,000 additional homes over the next 20 years. 1 – New housing will be needed in Greenfield locations and the established urban area. Providing housing in a variety of sizes, types and locations will be essential to meeting Sydney’s future housing need. Increasing housing supply will boost economic activity and generate viable infrastructure and business investment opportunities.
Sydney’s house prices are high compared with other Australian capital cities, 2 – and while house prices are the result of consumer demand, governments can help to put downward pressure on prices. Accelerating the supply and the variety of housing across Sydney, such as apartments and townhouses, will make it easier for people to find homes to suit their lifestyle and budget.”
It is also worth noting that the 664,000 additional new homes will be of the strata title variety with many high density subdivisions of air space to be contained mainly on the transport corridors. The Baird Government is well aware that NSW has fallen well behind where present reports have Sydney at approximately 140,000 new homes short of where it needs to be.
When these huge infrastructure models come to fruition which one would assume we will find ourselves somewhere around the 2017 mark – so it makes plenty of sense that investors will be watching this massive construction phase with great interest. By then the councils will have been merged into the new larger councils and we will see major high density subdivisions being rolled out across Sydney.
I have been reliably advised that the Abbott Government will not be changing the foreign ownership laws so foreign buyers can acquire 100% of all new developments – and we need to know that there are plenty of foreign buyers wanting to invest in Sydney, Melbourne, Brisbane and regional areas.
Mosman house levels are now down over 50% on recent years where this week we hit 36 houses on the market which is the lowest in living memory – so no correction happening here as is also the case in the vast majority of suburbs across Sydney.
At the end of the day despite what some may predict the Sydney real estate market is all about that old mathematical equation supply V demand. With the easing of foreign ownership rules the Australian property market is now an international market and that’s where the demand is coming from.
<h4>MOSMAN – 2088</h4>
• Number of houses on the market this time last year – 62
• Number of houses on the market last week – 43
• Number of houses on the market this week – 36
• Number of apartments on the market this time last year – 56
• Number of apartments on the market last week – 39
• Number of apartments on the market this week – 43
<h4>CREMORNE – 2090</h4>
• Number of houses on the market this time last year – 5
• Number of houses on the market last week – 4
• Number of houses on the market this week – 3
• Number of apartments on the market this time last year – 12
• Number of apartments on the market last week – 12
• Number of apartments on the market this week – 16
<h4>NEUTRAL BAY – 2089</h4>
• Number of houses on the market this time last year – 3
• Number of houses on the market last week – 2
• Number of houses on the market this week – 2
• Number of apartments on the market this time last year– 42
• Number of apartments on the market last week – 39
• Number of apartments on the market this week – 25
ROBERT SIMEON is a director of <a href="https://www.rwm.com.au/" target="_blank" title="RWM" rel="nofollow">Richardson Wrench Mosman and Neutral Bay</a> and has been selling residential real estate in Sydney since 1985.  He has also been writing real estate blog <a href="https://www.rwm.com.au/news/" target="_blank" title="Virtual Realty News" rel="nofollow">Virtual Realty News</a> since 2000. 
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robertsimeon-hRNTwJyXkQ

Property is just a simple mathematical equation: Robert Simeon

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A nice comparison of prime real estate prices around the global cities, via Knight Frank.
Sydney falls roughly on a par with Shanghai, Beijing, and Paris, as measured in US dollar terms.
Melbourne is far cheaper in terms of its prime real estate... more of a Mumbai.
<img src="https://3.bp.blogspot.com/-NYVaBetnTSI/XIII_VoRo7I/AAAAAAAAu34/vfa3Oy8P9csz-5G_62oJWMU6xnj-R7opACLcBGAs/s640/IMG_0728.PNG" width="494" height="640" data-original-height="1600" data-original-width="1237">
I've discussed this phenomenon with some high profile fund managers and analysts before, including at the Sydney market peak in 2017. 
Their view was that Sydney's prime real estate locations weren't unusual on a global benchmark, but the further west you travelled, the more irrationally expensive the market seemed. 
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pwargent-M4siyDbqQY

Prime residential real estate prices in Sydney on a par with Shanghai, Beijing, and Paris

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Morgan Stanley, which does not expect cash rates to rise until next year, forecasts growth in the residential property market are at the worst position in three decades.
Analysis by the investment bank Morgan Stanley says credits, regulatory, economic and supply issues are combining to weaken demand after six years of growth and booming prices in major cities.
It warns weakness in price as tightening credit supply pushes economic indicators into negative territory.
"Risks are skewed to the downside," the report concludes.
Analysis conducted by the bank indicates house prices could fall by as much as 6% in annual terms.
<img src="https://edge.alluremedia.com.au/uploads/businessinsider/2018/04/UBS-housing-1.jpg" alt="">
"Conditions for housing for the remainder of 2018 continue to look challenging with further regulatory tightening of credit, an increasing stock of properties to be settled, and continued uncertainty on government policy for housing as the election looms."
Morgan Stanley said its indicators covering credit supply, expectations, housing accessibility, mortgage serviceability, rental conditions and demand/supply impact were at 30-year lows.
"Higher compliance with responsible lending guidelines including serviceability and limit assessment will mean lower capacity," the report states.
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