Over the past couple of months we have been keeping an eye on some major developments coming through that were set to impact lending and the property market. These are now playing out in the real estate market with Sydney now in growth for the second consecutive month.

Sydney, Melbourne and Brisbane all grew +0.2% for the month of July.

This follows growth in June of +0.1% for Sydney and +0.2% in Melbourne.

Before June, values had dropped since the peak of the market by -15% in Sydney, -11% in Melbourne and -3% in Brisbane.

The two key drivers have been in play so far. These are the boost in confidence driven by the Liberal party retaining government, and two consecutive RBA rate cuts.

We are yet to see the effect of the third and what I think is the biggest driver – which is the revision of APRA assessment “floor”. A reminder for those not familiar, loans were previously assessed at a repayment capacity of 7% interest rate (most were at 7.25%) and this has now been removed in place of “actual” interest rate + 2.50%. Most lenders are putting their own “floor” in which varies depending on lender. At this stage the lowest is ME bank at 5.25%, but most sit around 5.50-5.75%.

What this has unlocked is an increase in borrowing capacity for most – and as a result many are now able to realise a benefit. Some real world examples of how this has impacted some scenarios that I’m working on for clients:

  • A new home purchase +24% increase in borrowing capacity
  • Additional new investment property purchase – via refinancing & restructure existing investment portfolio.
  • Refinance and extend a new 5 year interest only period for multiple investment properties (which couldn’t be done prior to the changes)
  • Delivered significant interest rate savings for clients previously unable to service to refinance

ANZ was the first lender to introduce these new rules effective 11th July, which means the flow on effect of scenarios like the above will not yet be in effect. As a result I suspect we will start to see the market continue in positive territory as we move into Spring.

If you wanted to see what these new changes mean for you and your plans, feel free to get in contact for a no-obligation assessment.

Please note – all the above is opinion only and should not be taken as financial advice.