The Fallout from the Royal Commission, The Hayne Report and the Property Markets
There is no doubt – “the times they are a changin” in the finance world.
Towards the end of 2017, APRA brought in changes to the way people could access finance and the effects where certainly felt during 2018, the tighter controls on borrowing took the heat out of the Sydney and Melbourne property markets, the impact of which we are still watching unfold.
The Royal Commission into Banking (RCB) and subsequent recommendations in the Haynes Report, in short, reviewed the changes APRA and the banks had already made to access finance, and was generally happy with the measures that were put in place.
However, the big stick has been taken to the Mortgage Brokers, about how they are paid and their role in the finance process. There was issue taken by Mr Hayne, about the fact that banks cover the Mortgage Brokerage fee and pay them trailing commissions for the life of the loan.
Despite this payment process having been reviewed several times by independent bodies in recent years and found to be fair. The Hayne Report claims that this is the root of all evil and should outlawed. The major winners out of this will be the banks, and if all the recommendations are brought into play, the mortgage broking industry as we know it will be all but wiped out.
The Key Points to understand are as follows
· Will it be harder to borrow money?
No – It was already harder to borrow money due to the APRA changes in late 2017, So the Hayne report won’t be making it any harder than it already is.
· Can you still use a Mortgage Broker?
Yes – for the time being. Depending on what recommendations are finally adopted will depend on the viability of the Mortgage Broking industry.
· Will the cost of borrowing increase?
Possibly – Once again it will come down to recommendations that are finally adopted and how they are implemented. If Borrowers must pay for broking fees themselves, instead of the banks covering the cost, it will be bad for brokers, if banks also have to charge an upfront fee, it will mean borrowers will find it more expensive and harder to change loans or banks.
· Will this impact on the Property Markets?
Yes and No – Yes in the way that we have already seen, with over priced property markets like Sydney and Melbourne experiencing a fall in Median house prices, although it should be noted that not all Sydney and Melbourne Suburbs are falling in value. Some are still increasing. The biggest impacted will be the restriction on finance causing a lack of demand, which creates a price decrease or market slow down.
The No part of the answer is that markets that didn’t that massive price rise or started at a low value level, won’t be impacted as much and will probably continue to steadily rise. With all this in mind 2019 will be the year of Return on Investment (ROI).
With capital gain expected to take a back seat for a while, the yield/ROI is already starting to be a major consideration.
If you want to know more about how to determine the ROI or any other property investment matters, please feel free to get in touch.
Whilst December is always a mixture of winding down or going flat out to get jobs done before Christmas,
It is currently a buyers’ market and whilst the media may have been talking down the capital city markets the regional markets have been soldiering on, with some significant capital growth across many of the major Regional Centers over the past 12 months. A few examples are as follows;
Orange – 11.0%
Wagga Wagga – 5.2%
Tamworth – 5.4%
Dubbo – 3.8%
Nowra – 7.0%
Whilst the markets maybe cooling, they are still experiencing capital gain.
As the markets cool and many buyers get busy focusing on other things at this time of year, it creates an opportunity for focused buyers to take advantage of this market lull. Vendors tend to be more focused for those people that are still hunting around and are usually willing to consider lower offers.
Vendors have plans too that they need to get on with and the sale of the property may be the critical step they need to move on. If you have been sitting on your hands this year with a “wait and see” attitude, in the above-mentioned markets for example it has already cost you somewhere between $16,000 - $44,000 on the median house price on capital gain alone.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry concludes shortly, once the recommendations have been handed down, the banking sector will know where they stand, and finance availability should start to open up, after all, Banks are in the business of lending money.
As finance becomes more accessible, sometime in the New Year the property market will see the impact of pent up demand, of the many investors who were shut out of the market or opted for the “Wait and See” approach for the later part of the 2018.
If you are in the position to buy property for either investment or owner occupation, NOW is the time to make that happen and fill your Christmas Stocking with Bricks and Mortar.
For all of you who have supported Aspect Buyers Agency through out 2018, we thank you, it’s been a great year and we very thankful for everyone’s continuing support.
We are closing for the Christmas Break 21st December, and will reopen 2nd January 2019, so if you have any enquires regarding property purchasing or any general property queries we are always happy to help.
On behalf of the team and myself, I wish you all a very Happy Christmas and a Safe New Year, and I look forward to working with you in 2019.
Happy Investing – Matthew Ward.
There has been a lot of noise in the media of late about the increasing popularity of living and investing in larger regional cities, and one of those cities is Orange NSW. It has been touted as a real “Hot Spot” for property investors and owner occupiers a like, in addition to a great food and entertainment destination.
We decided to have look at what is making Orange “So Hot Right Now!”
From an economic stand point, there is an enormous amount of investment coming into Orange across several sectors, coupled with a proactive Local Government, which is helping pitch Orange as the financial, medical and R &D centre of Regional NSW.
Some of the main headline investments for 2018/2019 are as follows:
· Regional Development Fund - $4 Billion Government Loan Fund, Head quartered in Orange with 32 new jobs
· SparkLabs Cultiv8 – Collaborative Ag Tech R & D Hub, combining government and private funding to enhance and accelerate agri tech solutions and companies, attracting domestic international companies into the region
· Department of Primary Industries relocation - $30 million development with room for 900 staff
· Bloomfield Medical Centre - $50 million development, incorporating a new 82 Room motel with function centre, Allied Health Clinic, and retail space, creating around 500 new jobs
· New Quest Apartments – $10.5 million 77 Room motel, conference and retail space development and associated job creation
Whilst these are the main investments there are a significant number of smaller investments, and other yet to be announced larger investment schemes for the Orange region.
Orange is positioning itself as the Medical and Education Hub , with tertiary education provided by the Orange Tafe, and Charles Sturt University, contributing to approx. $28 million annually to the Orange economy and supplying over 400 jobs. With long term success of the University the main goal of CSU, further investment in the Orange Campus could be expected.
Kinross Wolaroi Private School provides the opportunity for access to a similar or better caliber of education and school facilities as some of the top Sydney private schools and is often a deciding factor for tree changing families to settle in Orange.
Significant investment from the NSW Health Department in the development of the New Orange Base Hospital in 2012, has set the foundation for a rapid increase and concentration of specialist doctors and health facilities to be based either at the new hospital or within Orange.
The Health and Social services industry currently provide approx. 21% of the employment base in according to the 2016 ABS data.
Another is the regions mining sector which adds approx. $2.6bill in export revenue annually and provides over 3,500 jobs across the regions 3 main sites.
This broad multi
facet economy is offering the career-oriented jobs that attracts, those with
specialist skills and higher incomes.
Employment opportunities is only one side of the equations, what turns short term positions into life long careers is the ability to attract and retain the right kind of people into those positions.
This is where Orange has another strong game.
The Lifestyle factor, coupled with the strength and dominance of the of the local food and wine industry and associated business, has boosted the quality and quantity of the what the town has to offer.
With many social events and tourism-based activities, the great sporting, recreation and leisure facilities. The ability to engage and entertain the residents is key to retaining people in the city.
The introduction of direct flights to Brisbane and Melbourne, in addition to the existing Sydney flights, means that business and holiday options are suddenly more accessible and affordable, opening further opportunities, and adding to the lifestyle and tourism benefits.
Infrastructure
improvement has also taken place with the multi million upgraded facilities of
Orange airport to cater for larger planes and $250 million upgrade to the Great
Western Highway between Katoomba and Lithgow.
Its this combination of lifestyle, Jobs, facilities, infrastructure and education that are combing to create a very desirable destination for the weekend or for a more permanent stay. The rising number of tree changers who are either retiring or moving their families out of ever increasing congested and over priced capital city is rising every year, with population predictions expected to hit 60,000 in the not too distant future.
So how does all this impact on the property market?
Average House Prices Increased approx. 11% in past 12 months
Current V acancy Rate 1.78% (anything under 2.0% – 2.5%is desirable)
Gross Rents increased approx. 5.88% in past 12 months
(Source; realestateinvestar.com.au)
Part of the reason behind this is investors looking for more affordable property, but there is a significant sector of tree changers and inter regional movement as Orange has become a destination of choice for many retiring farmers or regional based workers looking to take advantage of the cities offerings.
To Find out more about buying in Orange please contact Aspect Buyers Agency - Your Regional Property Experts.
