Author Archives: Hy5ley

Why we need investors

In recent years, the term ‘investor’ became a dirty word: they were blamed as the root of the housing affordability issue, locking first home buyers out of the market by capitalising on record-low interest rates to augment their wealth portfolios.

The activity of investors – propelled by record low interest rates – prompted the Australian Prudential Regulation Authority (APRA) to put a 10% ceiling on the growth of lending to investors and placed a limit on interest only loans, a product which investors prefer. The thinking was that with less investors in the market, affordability would improve.

Fast forward to now, and we’ve seen a moderation in price growth in major markets such as Sydney, and there are less investors in the market, as noted by the Australian Bureau of Statistics. From August to September this year, the value of new investor loans dropped 6.2 percent. It may not sound like much, but it represents a month-on-month slide of close to $300 million in new investment.

Which brings us to the point: is a prolonged strategy to curb property investing a good thing, especially with the benefits investors bring? It’s a question worth contemplating when the market, in general, is moderating (the value of owner-occupant lending reduced by 2.1% over the aforementioned period). Plus, Chinese investors – who have a long-held affinity with Australian real estate – now have much greater difficulty in getting funds out of their country as their Government tries to strengthen the Yuan.

‘Investors’ shouldn’t be a dirty word. The benefits that investors bring to the economy and marketplace include:

  • Supporting an under-supplied housing market
  • Increasing rental opportunities
  • Fostering construction activity
  • Promoting economic activity
  • Direct and indirect job creation

In recent years, Master Builders Australia has analysed the impact of the construction industry on the wider economy. It estimated that ‘$1 million of extra demand results in five direct jobs and 14 jobs in total, direct and indirect combined’. Additionally, Master Builders claims “one million dollars of extra demand for output of the construction industry results in total benefits to the economy of close to three million dollars”. On top of that, it increases tax revenue of federal and state governments. It also helps increase the revenue base of local governments through fees, charges and levies collected during the planning process and additional council rates on completion.

Outside of new property development, investors are centrepieces in indirectly employed occupations: everyone from taxation specialists whom minimise withholdings to commercial gardeners, tradespeople undertaking repairs and maintenance to even takeaway food trucks servicing worksites. The trickle-down effect of investment is long and winding.

And when there is a healthy supply of investors in the market, there is more choice and affordability for renters. Property investment is just one way – but a very effective way – of building wealth. But individuals will always take the path of least resistance in building their wealth strategies; when banks can’t help them into the property market, they’ll look at shares, bonds or other opportunities.

In capital cities like Sydney and Melbourne, where double digit price growth has become the norm in the last three years, homeowners are looking to capitalise on the equity they hold in their homes. We buy houses Miami Lakes!

APRA and the Reserve Bank need to keep a close watch on the market, because if the initial retreat from the market by investors turns into a trend that gathers pace, the ramifications for people directly and indirectly employed by the property market, tenants and the wider economy will be significant.

Summer proof your investment

The onset of summer brings days by the pool and backyard barbecues. But summer also brings the dangers of storm season.

It’s important to consider how your investment property is protected from the threats of Mother Nature.

Appropriate home insurance for your rental property is important for covering your investment and ensuring peace of mind.

But there are other things you can do – in consultation with your tenants – to lessen the impact of storms.

How long has it been since the gutters were cleaned? Are drains and downpipes free of blockages? If these parts of the house are clogged, it can cause leaks and damage to the roof as a result of high levels of water in the gutters during a storm.

A roof needs to be in good condition to absorb the pressure which storms harness – strong winds and sheeting rain.

It is also worthwhile making sure that large trees with branches that are close to the house are trimmed back. But do not attempt to trim tree branches near power lines! This is a highly dangerous activity and should be left to a professional or your electricity service provider.

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Fix any corrosion, loose fittings and rotting or termite affected timber.

It’s also recommended for landlords to:

  • Securely anchor garden sheds and make sure fences are stable;
  • Secure any awnings and shade cloth;
  • Install a surge protector with an automatic cut out facility. A protector can prevent electrical damage if lightning strikes during an electrical storm and help keep tenants safe.