I love super bowl Monday. It’s my little tradition I have with a few friends where we take the day off and enjoy American wings and beers whilst watching a game we don’t really understand or care about too much!

But this year, my super bowl experience was rudely interrupted by the release of the final report from Commissioner Hayne on the royal commission. What was meant to be a review into misconduct of the financial services sector, particularly in banking, instead turned out to be strategy to shut down the mortgage broker industry.

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Well here we are, another year is upon us and like every year, I am full of optimism and excitement for the year ahead. Now of course, this excitement only has a finite amount of life in it and I’m sure I’ll no doubt turn into my bitter, jaded self in the months ahead!

However, nonetheless, I wish you a belated Happy New Year and hope 2019 will be your best year yet.

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Since APRA imposed sweeping changes to the residential lending market in 2015, home loan approvals have dropped significantly. The ABS recently reported total home loan approvals have fallen by 13.6% year-on-year and within that drop; investment loans have slid 20.5%.

One of the major contributors to this drop in lending has been the policy changes that all APRA regulated banks have imposed. Prior to the changes, most lenders would assess a new loan with an interest rate buffer of 7.5%, but any loans a customer had with other lenders would be assessed based on what the actual repayments were.

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The other week, I came across an article which confirmed a suspicion I’ve had about what many investors may be going through with their home loans right now…

Written by business reporter Stephen Letts for the ABC news site, he referenced mortgage comparison website Mozo who found that, “Mortgage holders who borrowed near their limit in recent years where finding it increasingly difficult to refinance their loans and were “trapped” with their current lender.”

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When it comes to property investing sometimes I think we can complicate things a bit. I often hear investors get really focused on buzz words like negative gearing, depreciation, yields and purchasing structures that they can lose track on what really matters – the investment itself.

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The past couple of weeks have seen further changes to the major bank’s product lines off the back of increased scrutiny they’ve been exposed to via the royal commission.

Last week CBA confirmed they would be stopping their low doc residential loan product and this week Westpac and St George confirmed they would be calling stumps on their SMSF loans.

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It’s a conundrum that many people face right now, particularly with the property boom we’ve seen in Sydney & Melbourne over the past 5 years. That is, the decision to focus on saving for a place to live or perhaps to purchase an investment property instead.

I get asked this question a lot by my clients, so I thought I’d give you my two cents in case this has been something you’ve been thinking about recently.

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The May CoreLogic Home Index values came out last week noting the 8th consecutive month-on-month fall in property values nationally since the market peaked in September last year.

So if it wasn’t clear before, I think we can all now agree that we’re well and truly entered a new phase of the property cycle with the market effectively swinging around to be a flat, (I wouldn’t say depressed yet) buyer favoured environment where emotion is no longer much of a factor.

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One of my favourite market commentators is AMP Capital’s Dr Shane Oliver. I’ve been reading his stuff for over a decade now and find him one of the few economists that provide concise insights that make (somewhat!) sense.

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For years whenever I sat down with a client to discuss loan repayments a general rule of thumb was always applied…

If the property was owner occupied, it was best to have principal and interest repayments as the interest attached to the loan was non-deductible.

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Every business goes through natural cycles. The start is the most stressful time where money is flying out the door and there’s not much coming back in!

Eventually though, things start to become more established. Cash flow evens out and in doing so, one of the questions you might have is, “I love our office but why are we spending all this money on the lease when we could own it ourselves?”

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We all know the stats now. Since 2012, house prices have risen 50% in Melbourne and 70% in Sydney.

So it’s only a matter of time until we have a significant correction right?

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Debt recycling is a simple strategy that is underutilised by wealth creators. In this post, I want to explain how it works so you can consider if it’s something you might want to use for yourself.

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Valuations are the bugbear of my existence. An individual’s personal opinion on the value of a property can completely make or break someone’s finance application.

his post will shed some light on how bank valuations work and some of the strategies you can use to get the best result for your property.

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I had a question from a prospective client recently who asked, “Why do commercial banks usually only offer 3 year rolling terms as opposed to a 30-year term like a residential home loan?”

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They say that purchasing your first property is the most stressful thing you’ll ever do. For those that have done it, I’m sure you’ll attest to this fact. However, in my opinion, your first property doesn’t compare to the eventual upgrade in which you need to sell your current property in order to move into a new one.

 

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Similar to Australia’s recent 4-0 Ashes victory, it’s fair to say looking back at 2017 that commercial property markets had a good run!
 

So what’s ahead in 2018? Well, it’s always a bit of fun to make a few predictions at the start of the year and then look back later on to see how they panned out.

Below are my four predictions for what’s install for commercial markets this year…

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Since the introduction of APRA regulations in 2015, the overall market has flattened due to tougher lending criteria resulting in borrowing capacities greatly diminishing.

There are no signs these regulations will disappear this year. However, what we have seen during this time, particularly over the last 6 months are smaller lenders, not governed by APRA creating niche policies to capture certain segments of the market.

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For the past 4 years money has been cheap.

At the start of this month, the RBA yet again decided to keep the cash rate of 1.5% on hold where it has been for the last 16 months.

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The home loan market is constantly changing, with new and attractive deals coming up all the time. Refinancing can help you secure a more competitive interest rate, access the equity in your home, add features (such as an offset account) or consolidate your debts, but there are some important questions to consider before you get the ball rolling.

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