For the last few months, the news of the banking royal commission has been dominating the news. If you're currently in the market for a new property, or you're keen to sell your own home, you need to read this...
It might seem like there's never the right time to buy or sell your property, but this notion is especially relevant, given the recent findings from the banking royal commission.
With prices dropping in suburbs all over the country, Peter Koulizos, chairman of Property Investment Professionals of Australia shares his insights about what vendors and buyers can expect in the following year.
"The banks have been quite proactive, I think they’ve been anticipating that they would be wrapped over the knuckles for some of their lending practices in the past, so honestly I don’t think it can get any more difficult to borrow money than it is now," says Peter.
While that can sound a bit grim, the outlook really isn't that bad at all. You just need to do your sums and be prepared for the scrutiny. "It’s very responsible lending at the moment, and in some cases it’s quite unreasonable," offers Peter.
"They’re making sure that people have the capacity to pay off they mortgages, so they over inflate their capacity to pay it off. For example, you might get a loan at 3.8 per cent, but then the bank will work if you can still pay it off at double that – 7.6 per cent," he explains.
The last couple of years haven’t been as favourable to investors as there's more risk associated with owning property. "They've had to come up with a bigger deposit, they’re paying a higher interest rate and the banks aren’t using as much of the rent as they used to," says Peter. "It’s a lot harder to buy an investment property and I can’t see it changing – unless there’s a political shift bringing in new reform around negative gearing and capital gains tax," he explains.
"For example, in the past, an investor could get a loan for 5 per cent, but now they need 10 per cent, " says Peter. "People are also required to put in more equity and therefore they need to have a better income or great control over their expenses to prove they can pay off their loan," he explains.
Stay or sell?
Peter recommends doing what you've got to do, despite the changing market. "If it’s your house and you’re going to sell your home a bit cheaper than normal, the chances are you’ll also be buying a cheaper home, so it doesn’t really matter. It’s all relative," he says.
But, if you're in a position to play... "Ideally, if you can buy now and sell in a year’s time that would be great!" he suggests.
Stream new episodes of Selling Houses Australia from March 6 weekly, or watch 8.30pm Wednesdays on Foxtel's Lifestyle.