Which property type will be best for you in 2017?
The cost of money (capital) is increasing for lenders. Property investors will now find it more difficult to obtain loan approvals. There has always been a degree of “stress testing” when applying for a loan, where loans at 4.5% are tested at say a 6.5% rate, these margins are now even higher. The Big Four Australian banks have a large amount of security tied to residential debt, so while you may put in an application at four point five per cent it is likely to be tested at six point five or seven per cent. Many banks also feel that inner city apartments should be avoided in 2017 and are making borrowing on this type of property more difficult. House and land and townhouses and villas are likely to perform best in 2017 and 2018.
This means that being able to prove cash flow is now the number one concern, highlighting two major players: those who have assets but are cash flow poor and may struggle to liquidate and those with strong balance sheets with a large amount of cash on hand.
The temptation in these circumstances is to look for higher yield, nearly always available through commercial property which traditionally offers better yields at the expense of often a much poorer capital growth potential.
There are a few articles in this section arguing the fact that property is not a short-term venture and as such, disruptions in the market should not instantly prompt investors to sell. Almost always, the only people who lose in investing in property are those who panic and sell in a softening market. It is extremely likely that interest rates will remain low for several years to come. If you are sensible with the amount you are borrowing, and gear yourself comfortably, you are likely to be in a winning position in the long run.
There is now a fantastic opportunity for real success in investment property. With prudent and logical advice and understanding the current research, there’s plenty of opportunity to capitalise through property investment.
