01 October 2018
Author: REIWA President Hayden Groves
Real estate transactions are complex. For many West Australians, it can be a challenge to determine their individual rights and responsibilities when it comes to dealing with property issues.
REIWA launched a public information service in 1992 to assist buyers, sellers, tenants and landlords navigate their property journeys. This valuable service allows members of the WA public dealing with a REIWA agent to find answers to their real estate queries and concerns.
Last financial year more than 20,000 phone calls were placed to the REIWA Information Service (2,000 more than the previous financial year), with West Australians seeking clarification and assistance from the Institute on a wide range of real estate matters.
As the WA market has slowed these past few years, the REIWA Information Service has seen call volumes increase. Residential property management continues to be the most common topic the public ring about, with 70 per cent of all phone calls for the year to date received from tenants and landlords. The remaining 30 per cent of calls have generally related to residential sales.
When it comes to WA tenants, they most commonly call REIWA to discuss the early termination of their rental lease. They also want to know what rights their landlords have to enter their property while tenanted and what rights they have with regards to repairs and maintenance.
Landlords, on the other hand, most commonly call to seek information on a tenant’s obligation to pay rent, to find out how the court system works in order to claim damages and to clarify their rights around abandoned goods.
In the residential sales market, buyers who call the REIWA Information Service generally do so to get information about their obligation to obtain finance approval within a period of time. They also commonly call to clarify their rights for the pre-settlement inspection. While WA sellers most frequently ring to find out about the settlement process, satisfying contractual conditions and to discuss buyer requests which are not addressed in the contract for sale.
The REIWA Information Service team is comprised of two full time staff members and 70 local REIWA agents who give three hours of their time every few months on a voluntary basis.
When you call up, you are given direct access to these local property experts who can educate you on areas you’re unsure about and help resolve any tricky property matters you might be facing.
If you are dealing with a REIWA agent and have a real estate query you want answered, I’d highly recommend contacting the REIWA Information Service on 9380 8200 for assistance.
25 September 2018
Over the past six months, grey clouds have been building in the distance for borrowers, and for many, the brewing storm is yet to hit in full force.
Australia’s current lending landscape is a tough one. Moves by legislators and regulators to kerb borrower enthusiasm have created headaches for those now looking to build a
That said, there is opportunity ahead for those able to weather the challenge.
The state of play
The runaway nature of Australian property prices in Sydney and Melbourne from 2012 was causing concern for legislators.
It was claimed investors were taking up all the stock and isolating first homebuyers from the market – and there were no indications things were going to slow down.
In 2014 the Australian Prudential Regulation Authority (APRA) responded by instructing banks to cap growth in investor lending to 10 per cent of their total loan book.
An additional move in 2017 by APRA required banks to keep interest-only loans to less than 30 per cent of their mortgage portfolio too.
While both these measures were said to be temporary – in fact, the first has been recently relaxed – they appear to have done their job too well with investor-loan growth now at single-digit percentages.
Add to the mix the current banking enquiry. It’s findings so far have levelled criticism at bank practices.
To compensate and prepare for the eventual recommendations, lenders are already tightening their requirements from borrowers – particularly investors.
The upshot is that getting a property loan approval at the moment is tough.
It’s been a fast turnaround too. Whereas six months ago a bank customer might have been approved to borrow $800,000, nowadays that same client might be lucky to get $500,000.
That means many who contract to purchase based on a pre-approval gained under the old guidelines, will find their application knocked back under the bank’s new rules.
Another reason for impending mortgage stress is many loans are about to roll over from Interest-only to Principal-and-Interest in the next 12 months.
This means higher repayments for some already stressed borrowers.
These customers will have little choice but to accept the new loan terms being offered by their current lender, because competition for interest only lending will be virtually non-existent.
Here’s the perfect storm scenario:
- The cost of money will go up,
- The availability of money will drop,
- And, in certain markets, value growth will be non-existent for a number of years.
Is there opportunity?
In short – yes, but it’ll be those who got their affairs in order early who’ll benefit most.
Investors who’ve built a resilient portfolio are certain to take advantage.
Your investment strategies must be long-term so you can smooth out the peaks and troughs of market and finance cycles in order to secure your future for decades to come.
1. Have impeccable records
Now more than ever, it’s important to have kept your financial records in tip-top order.
By this, I mean you need to know your numbers inside and out, and back to front.
It all has to be documented as well. Not so long ago, for example, it was acceptable to front up to the bank with little more than your estimated living costs and gross income, and with a signed statutory declaration as back up.
Nowadays, it’s a case of being able to account for every dollar. You may have put “Annual clothing allowance – $1000” in the loan application, but today’s banking credit departments are checking your credit card statements as well.
They know your Gucci shoes and Burberry briefcase cost twice that, and they’re willing to say, “No!”
Having impeccable records means you can accurately account for every dollar.
It also demonstrates to the bank that you can stay on top of your loan commitments.
Being a good customer really can pay dividends in these trying times.
2. Maintain cash flow
Cash flow is king when it comes to loan serviceability, so if you’ve built a multi-property portfolio, make sure your income isn’t overextended.
Key to this is portfolio diversification. We always recommend maintaining a buffer as part of your investment strategy because changes in interest rates, personal circumstances and the cost of living are inevitable.
In addition, banks are now upping their ‘stress test’ on client’s finances – increasing their own interest rate and cost tolerances on your supplied numbers.
Being on top of your cash flow can be the difference between a yes or no on your next loan.
3. Equity buffer
Along with cash flow you must maintain an equity buffer as well.
Having adequate equity is essential to a lender’s requirements.
The problem that often occurs during a period of high property value growth (like recently) is some owners use their new-found equity on unproductive debt.
They might spend up big on their credit cards and then consolidate that debt into their house loan.
While they’re at it, they might get a bit extra from the bank in order to buy a new car or go on holiday.
These borrowers are not allowing for the future and have effectively re-bought their property off the bank at today’s prices because they ‘feel wealthy’.
The best opportunities are there for those who have liquidity in their equity.
I’m a big believer in making your money work for you and if your equity isn’t liquid, you can’t capitalise on opportunities when they arise.
Building a resilient portfolio in times of great growth is essential so you not only survive any eventual slowdown, but can pounce on newly revealed profitable prospects.
If you’ve failed to prepare for our new, tougher financial times, now might be the chance to catch your breath, talk to an expert strategist and plan for the cycles next turn.
After all, the state of your wallet dictates the state of your mind.
30 July 2018
via The West Australian
The West Australian economy is “out of the woods”, one of the nation’s most respected forecasters has declared, with housing and wages finally gaining traction.
Amid warnings the Turnbull Government was making the same mistake of the Howard government by spending a temporary revenue bump on expensive personal income tax cuts, Deloitte Access Economics said the outlook for WA was definitely brightening.
The State endured its worst year on record through 2016-17 while the domestic economy had been in the doldrums for the past four years. But a string of data, including job figures, point to an important turnaround.
Deloitte Access director Chris Richardson said it was now clear WA was recovering from the economic “wave” that was the end of the mining boom.
He expects a lift in retail sales, population growth, wages and housing construction will all improve through this year and accelerate into 2019-20.
Wage growth alone is tipped to more than double the insipid 0.6 per cent growth endured by private sector workers last financial year. “WA’s economy is out of the woods, but it isn’t quite yet out of the doldrums,” Mr Richardson said.
“The good news is that WA’s economy is gradually making its way on to a more settled and sustainable path. The State is restructuring and rebalancing and looking for non-mining related sources of growth.”
While most focus has been on the collapse in engineering spending by the mining sector, Deloitte Access highlighted the step-up by the State Government to fill the void.
It said the first stage of the $3 billion Perth Metronet, which includes 72km of rail line and 18 stations, would give a needed boost to the local economy. The situation is a little different for the Federal Budget, with Deloitte Access concerned that recent tax cuts are built on a mirage of improved tax revenues.
Mr Richardson said tax cuts were built on an increase in tax revenues that was likely to be transitory. The Budget was also expecting to absorb the cuts while it was still in deficit.
He said a gradual slowdown in China would eat into the better tax collections from the resources sector while a tightening of credit would hit east coast property markets. “Oz has repeated an old mistake: spending a temporary revenue boom on permanent promises,” he said.