Finally the prudential regulator has moved to put the brakes on property lending, which raises new questions about what you need to consider when buying.
The Australian Prudential Regulation Authority has asked all banks to tighten their lending practices particularly on interest-only and investor loans.
It comes in light of rising property prices particularly in highly sought after locations in Sydney and Melbourne.
The key change from APRA was an expectation that lenders limit interest only loans to 30 per cent of new mortgage lending from around 40 per cent currently.
But some economists don’t think the move went far enough.
“The main surprise was that the investor lending speed limit remains at 10 per cent rather than being cut to a more reasonable 5-7 per cent,” said AMP Capital chief economists Dr Shane Oliver.
“Limiting interest only lending may have the same effect as cutting the speed limit because around 60 per cent or more of investor loans are interest only, but time will tell so further action may be required.
“Putting that uncertainty aside though, the latest moves by APRA, coming on the back of bank mortgage rate hikes over the last two weeks, the likelihood of action to boost affordability in the May budget, including a cut to the capital gains tax discount, the surge in unit supply at a time of silly prices, are all likely to result in a slowdown in property price gains in Sydney and Melbourne this year ahead of a 5-10 per cent price fall starting next year some time,” he said.
With this all in mind, it’s likely that many buyers will become even fussier about the types of property they invest in.
So what are the key things you need to think about before taking the plunge?
1. What do you love to do?
Think about your lifestyle and what you actually enjoy doing.
If you buy your dream home and it’s in an area that you don’t love, then you’ll inevitably spend a lot of your time away from the home.
This is the one place that you so desperately wanted so don’t rush your decision.
Research the area where you want to live and ensure it suits your lifestyle.
2. What do you hate?
Is there anything about a property that you just can’t stand?
If you have a list of non-negotiables, such as busy roads or no natural light, it helps to write off those homes that are never going to fit your criteria.
3. Why are you moving and what do you need?
Ask yourself these questions and write down your answers;
What your dream home looks like – how many bedrooms, bathrooms, car spaces and living areas do you need?
Where is it located – does it need to be near the kids school or your work, public transport?
Any major need and wants that you and the family have – Do you want a pool or a big backyard?
Knowing the answers to these simple questions, before you even start looking, will make the process 10 times easier and a lot less stressful for you and the family.
