Newsletter - Inner Circle September 2018
Inner Circle
Stand up for landlords?
OVER the past month a major step forward has been taken with the reforms to Victoria’s Residential Tenancies Act proposed by the Andrews Government, which are designed to give tenants more rights, with their introduction into parliament.
When these reforms were announced last year, we told you we had concerns about the detrimental impact many aspects of the new laws would have on landlords with rental properties due to the increased risks of having substantially less control over their asset.
Our concerns have only strengthened since then, and while we concede some of the changes will be positive, the majority will not. We are standing with the REIV, which has vowed to fight what they’ve described as the ‘Nanny State’ changes to rental laws due to concerns it has the potential to deplete Victoria’s rental housing stock as landlords opt to sell, resulting in a reduction in supply. The so-called Rentfair package the government has signalled is actually unfair. It will bestow new rights on tenants and place greater responsibilities on landlords.
We have advocated strongly against many aspects of this legislation because it swings the pendulum of rights overwhelmingly against property owners.
We have been speaking to the many property mangers we have strong relationships with, and they are seeing their landlords preparing to sell their properties should this legislation be passed. The changes are so strongly weighted in the favour of the tenant and at the expense of the landlord that many investors no longer want to take on the increased risks that come with these new regulations. Why would anyone invest hundreds of thousands of dollars into an asset whereby they have no say around being able to end the lease of a tenant so they can prepare their property for sale? Or that tenants can have pets, but there is no requirement for a dog, for example, to be size appropriate to the property? Or that bonds will be capped in spite of all the additional damage that could be done by pets? It just doesn’t make good financial sense.
The new legislation was introduced into parliament this month but it’s unlikely to be passed before the election in November. To fight against the introduction of these laws which are to the detriment of landlords and will ultimately result in rents increasing, please sign the petition here:
In positive news for Victoria, the state edged out New South Wales to be the top-ranked state economy in Australia for the first time in its nine-year history, according to a CommSec report. The state’s population growth and construction activity gave it enough of a boost to beat out NSW.
If you want help finding an investment-grade property in Victoria that will stand the test of time, contact us for some advice today.
Banking changes are impacting the market
Banks are feeling the effects of the Royal Commission and the fallout is starting to trickle down the market.
More than ever before in recent years, lenders are tightening their grip on the amount of money they will lend to even the best of borrowing candidates, and in some cases they are literally doing a 180 degree turn on the amount of money they were throwing at borrowers as recently as late last year. We have had clients qualify to spend $2.2m, then extend their Approval in Principle, only for the bank to decide to reduce their budget down to a mere $1.6m by comparison. This was devastating to our client, yet is quite commonplace now and the ramifications are yet to be felt fully by buyers who are yet to apply for a loan.
Effectively, borrowers are being given less money than in recent years and their expectations of what they want to buy will need to adjusted accordingly. This is having the effect of driving up competition in the lower price points up to $750,000 and for smaller properties such as townhouses, units and villas. Things have changed somewhat since our March Inner Circle report on the topic. This is also evident in the clearance rates having progressively dropped over recent months to as low as 53% in Melbourne. Money is harder to get, the market is slowing down, buyers are more cautious and some are waiting to see how low it will go before buying in.
The danger with that strategy is that buyers assume the bank will lend them the money when they want it, which for many has proven to be a strategy that has now backfired. It has left them being able to borrow a lot less than they were hoping for, or no longer qualifying for money at all. And banks aren’t just looking at a borrowers savings history; they are analysing their spending patterns much more rigidly than in the past. Managing disposable income and lifestyle carefully may be the only way many buyers will qualify for a loan in the future.
For more information or advice on how to navigate the changing financial landscape, contact us today for an obligation-free discussion.
Madhu is a successful surgeon based interstate who engaged our services earlier this year to buy an investment-grade property in Melbourne.
After successfully purchasing a development site for Madhu, our happy client asked us to also buy her a property for her SMSF. Given the strict obligations of trustees of the SMSF, a moderate risk investment and portfolio diversification was applied, and we secured a fantastic investment-grade property for her in the leafy eastern suburbs.
As buyers’ agents, what we brought to the table for Madhu was the ability to analyse, inspect, assess and negotiate the deal within 48 hours of finding the property. Our skills in this regard resulted in the prime property being taken off the market, while three to four other buyers were left scratching their heads, wondering what happened, given they were still doing their due diligence. We also managed to buy it $50,000 under budget and for $17,000 under the vendor’s reserve.
For the month of September we are offering a limited number of full service buyer agent clients a 10% discount. If you, your friends or family want to take advantage of this offer and benefit from the advice and expertise of our buyers’ agents, click here to book a time with us to discuss your requirements. It’s 100% obligation free. This offer must end September 30th 2018.
Ballarat
We bought this property in Ballarat for our lovely client Ben late last year. It was a highly sought after property so we had to compete with multiple offers and implement some crafty strategy and strong negotiating to secure it.
As it happens, our client needed to sell recently and the property was put back on the market, selling within two days of the property being listed (and before the first open for inspection). Three parties battled it out, resulting in Ben earning a substantial 15% capital growth in just 10 months.
Now that’s what we call an investment-grade property!
If you want similar results, click here to book a time with us to discuss your requirements. It’s 100% obligation free.
If you want to invest or buy the right home for your budget, click here to book a time, or call us for a chat about securing your financial independence.
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