Lenders generally accept 80% of gross rental income along with other income, such as a salary, to calculate borrowing capacity. They assume that the balance of the rent will be used to pay for managing agent fees, council rates, strata levies, repairs and cash needed to cover periods when the property is vacant.
Chris Foster-Ramsay, director of Foster Ramsay Finance, said: “Other banks will follow the easing of lending conditions as the case for property investment stacks up. There are not enough homes in the pipeline to meet the growing demand.
Cizauskas, an information technology consultant, is building an investment portfolio of four properties to boost his retirement savings with the option of retiring at age 55. He is encouraged by the easing of loan conditions to help him complete his portfolio.
In the past 12 months he has purchased a townhouse, villa and detached house in suburban Brisbane and is looking to purchase another property. His home is financed by Loans.com and the rental properties are on principal and interest loans from the ABC, the nation’s largest lender.
“I’m confident about the long-term prospects for real estate and I don’t care at all about the current downturn,” Cizauskas said. “I’m looking for long-term capital growth so I have the option of not working in 14 years.”
Each of Cizauskas’ properties is negatively trending, which means that any net rental loss during the year can be offset by other income.
“Rental demand is extremely strong and I have been able to increase rents every time the lease comes up,” he said.
Sydney home rents have climbed more than 28% in the past 12 months, according to SQM Research.
Melbourne rents rose 25% while Perth and Adelaide rose around 20%, according to the analysis.
Rents for student housing are already 10% higher than pre-pandemic levels and are expected to continue rising through the 2023 academic year, according to student rental specialist Scape Student Living.
Investor mortgage rates, which have more than doubled since May when the Reserve Bank of Australia began raising cash rates, are expected to continue rising after this month’s 0.25 percentage point increase this at 2.85%.
Westpac and ANZ believe spot rates will peak at 3.85% next May. The ABC predicts a spike of 3.1% and the NAB 3.6%.
The accompanying charts from RateCity, which monitors loans, show the lowest rates for investors paying interest only or principal and interest for a $1 million fixed or variable rate loan with a $1 million deposit. 20%.
Melbourne-based buyers’ agent Cate Bakos said investors “don’t get any special treatment” from lenders.
“Investor valuation and interest rates are tougher than homeowners. Their difficulty getting a loan will be magnified if they have other debt, such as a home or car loan,” Bakos said.
Investor borrowing has fallen the most in Sydney, down 26% since May. Queensland is down 23% and Victoria is down 20%, CoreLogic found.
“The falls came shortly after a spike in house values in Sydney and Melbourne, highlighting that investors tend to be driven more by the prospect of capital gain than other factors, such as rising yields,” said CoreLogic’s Lawless.
“The drop in investment activity is bad news for rental markets, with less investment activity implying a slowdown in rental supply at a time when more rental supply is desperately needed,” he said. -he declares.
Buyers’ agents say investors remain cautious after the sharp decline in house prices and the likelihood of further rate increases.
“There’s a lot of kick in the tyres,” said Patrick Bright, a Sydney-based buyers’ agent. “Many investors think most of the big rate hikes are behind us. But they want to wait until they think prices have bottomed out and there is no clear indication that this is the case. »
In Adelaide, where prices were lower than major east coast capitals, demand remained strong, said Adam Hindmarch, director of Prospa Property Advisory.
“There are not as many aggressive offers as there were two or three months. Demand will fall as prices fall. But the long-term outlook is solid as rental vacancy rates are low.
Kate Hill of Sydney-based Adviseable Property said: “Experienced investors see the opportunities.”
A growing flow of skilled immigrants, the return of international students and locals returning to major cities after COVID-19 shutdowns are driving double-digit rent growth as vacancies fall to record lows of around 1 %.
But landlord groups, such as the Australian Landlords Association, say onerous government regulations and taxes are making shortages worse by forcing landlords to sell or reallocate rental properties.