Is all this APRA hoopdela actually an opportunity for investors

To me the majority of housing has been running fairly hot over the last few years. Almost to a point where it has been fairly difficult to find that sweet spot.
With FHB flooding the market, everyday investors jumping on the bandwagon, pesky foreign buyers driving the market up - its been pushing us everyday investors into small pockets of opportunities. Which unless you are watching closely are hard(er) to find and takes a lot of effort.
Gone are they days when 'any property is a deal'.

So with APRA stepping in and tightening serviceability, banks upping the rates and the market getting skittish - are things going to come back to a new normal which presents us 'ordinary investors' with the usual opportunities?

From adversity comes opportunity - No?

Blacky

 

You have been reading my mind...dark clouds have silver linings!

 

I agree with this. Surely it will decrease competition in the hot investment markets. I found it draining around April/May when I was in the market, although my Buyer's Agent was doing much of the work.

If you have the serviceability for the finance and cash for deposits then you are in a great position. Less so if you need equity, that is becoming tougher.

So no more ...

 

If you are cashed up and have extra serviceability you will get great deals when the market is heading downwards.

If you are needing funds you need to wait for the market to go up to allow extra funds to be used.

 

The next 6 months will be the best time to go shopping.

 

Interesting times. Would be nice for those who offloaded properties recently before APRA sprung into action.

Those who were paying attention will be rewarded with rich pickings.

 

Its also a great time to shop around on rate, the Big 4 (minus WBC) are responding by increasing margin, however the second tier lenders, mutual and credit unions are not being watched as hard by APRA that's the space for Property Investors to be looking at IMO.

 

The APRA situation has a silver lining for investors cum OO.

Consider lenders wanting to increase interest rate for investment property - leading to more deductable expenses. At the same time, lenders want to make up for the loss of business on IPs by increasing lending to OOs with the incentive of reducing interest rate. What's there not to like? - lower non tax deductable expenses associated with PPOR and concomitantly increase in tax deductable expenses on the existing IPs.

More good debt with some offset of reducing bad debt.

Of course, those investors with ready reserves and released equity can look for the next investment property with less competition.

l expect supply for the rental pool will be restrained corresponding to the reduced investment in IPs and give support to increasing rental rate, overlaying the market environment of lower interest rate.

 

More specifically, this would be a good time to not just make offers, but to keep an eye on properties already under offer. When financing falls through, there will be desperate vendors...

 

These small players have very limited funds to lend.

It would be silly to assume the Council of Financial Regulators (RBA+APRA+ASIC) have not taken this into account).

 

I disagree

 

Why? Do you know where they get their funds from?

 

Yep I work at one of these financial institutions and have worked at another one previously.

 

obviously you don't work in their treasury departments.

 

Not any more but I have spent a number of years in the treasury department.

Yes there is more than one way to raise/hold Capital and manage liquidity.

What APRA have done here has actually made the second tier, mutual's and credit unions more competitive in the Property Investment market.

 

RMBS issuances are becoming more expensive lately. These lenders have to compete with big banks for depositors, many don't even get deposits. It would be simple thinking to assume they are immune from the regulatory action taking place.

 

I don't think the answer lies in the mutuals and credit unions.

Whilst in many respects these are great lenders, they're also inherently conservative. They tend to have tighter servicing and more policy restrictions than many other lenders in the market. Certainly some are very competitive rate-wise, but they don't give their money to everybody.

Increasing capital requirements is driving the rate rises in the majors. Given the disparity between the majors and the second tiers, it's reasonable to assume that there will be an explosion in lending with the second tier lenders. APRA is already talking to these lenders, it wouldn't surprise me to see rate increases there eventually either, along with further policy restrictions.

The lenders falling outside of APRA aren't immune either. Securetised lenders carry a massive risk which saw consequences during the GFC, and where APRA doesn't cover a lender, ASIC does.

The opportunity for investors lies with those who are cashed up, have conservative LVRs and strong cash flow. If you're getting close to being maxed out in serviceability or doing all your lending at 90%, things are only going to become tougher. My advice for these people would be to take the time to rationalise their portfolios, pay down debt (non-deductible first), and look towards improving cash flow.

 

You mean sell ? Why would it be a good idea to sell. Investing in property is for long term anyway. the cost for offloading and getting a new one will be just to expensive.

 

Credit Union Australia (CUA) has introduced different variable rates for owner occupiers and investors.

30 basis points difference

Who would have thought the small players would not do the same as the biggies?

 

Let the rich gets richer