Good Opportunities For Property Investors

Lenders are struggling to keep pace with an unexpected increase in applications from people who have fled the share market into the security of property, taking as long as a month to approve loans, which has led to some buyers missing settlement dates. Changes in lending criterion are also contributing to the backlog, in addition to first home buyers trying to sort out their paperwork. Banks are being forced to add staff to mortgage processing divisions, which they had previously run down.

Adding to the complexity is recent changes to Australian superannuation laws, which allow superannuation funds to borrow in certain circumstances. Super funds can now borrow against properties that are being let out. However the lending criteria for self-managed superannuation funds are still being ironed out by some banks.

Although self-managed super funds can now borrow more against property, they are not allowed to get into negative gearing. Accordingly, given that interest rates are roughly one-and-two-thirds times net rental returns, equity of about 50% will be necessary to borrow money to buy property through your self-managed superannuation fund.

Overall, the number of mortgages in Australia is increasing, despite the global recession. The latest ABS figures show that the average home loan in Western Australia jumped by over $30,000 during the past year to $264,800.

There are still some affordable properties in the major capital cities, and many of these are being snapped up by landlords. Prudent landlords are not overlooking the gains that can be made by renting older apartments and the short term gains that can be made by fixing them up and selling them on.

As a lot of properties are for sale at the moment, discounts are starting to become the norm. Investors are snapping them up, renovating them for a cheap price, and selling them at a profit.

Investors who renovate these older style apartments can achieve substantial increases in weekly rents and this means that any mortgage taken in respect of the rental property can be speedily repaid.

It is also possible to buy cheaply in areas where there’s a large amount of mortgage stress. For example, Sydney’s Bankstown sits in the federal electorate of Blaxland, an area acknowledged as having one of the highest rates of mortgage defaults in the nation. Several hundred families lost their homes in that area due to mortgage stress last year.

When fewer people are able to buy their own home, there is higher demand for rental accommodation, which means better returns for investors. Investors remain wary of the share market, and with the property market giving good returns to investors, they have returned in force to that market. If you are looking to get into property investment, speak to a Brisbane mortgage broker about your options.

By: marktc

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