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Property & Finance News – May 2019

A Liberal win in the Federal Election means no changes to Capital Gains Taxation or Negative Gearing. More importantly the unsureness or nervousness surrounding the proposed Labor changes have gone away. Property Investment sector will continue to rise & A re-elected Coalition Government will guarantee deposits for first home buyers it was announced on Sunday.This policy to help more first home buyers into the market by assisting with deposits also makes more financial sense than one that potentially reduces property values.

APRA Scraps 7% Loan Buffer – The largest impediment to adding to your property portfolio has been APRA's requirement for banks to assess your ability to repay your loans using a rate of 7%. APRA have recognised this is no longer a valid position to take. Banks are now allowed to set their own minimum buffer. However, they still need to test if a borrower could service a loan assuming a rate 2.5% higher than the lending rate applied to the borrower. For most of investors, current interest rate will be between 3.90% to 4.25%. This is the most significant change to the existing restrictive lending criteria.

RBA signals Rate Cut - Reserve Bank of Australia governor Philip Lowe has given his clearest signal yet that interest rates will be cut next month (June 2019). Most banks and analysts have been predicting one or two rate cuts this year. However, such a forward looking statement by the governor is very positive. The market is also expecting the banks to pass on all or most of any RBA rate cut which means save money on mortgage and an immediate improvement in your borrowing capacity when you combine it with APRA's elimination of its buffer.

What do we think this means for property ? We believe this will have a significant improvement in confidence, with the ability to borrow more for property investment. And, a reduction in the amount of your interest payments which means property owners save money on mortgage. This will lead to a positive effect on demand for property with upward pressure on selling prices.

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