Welcome to our August newsletter, exploring the current landscape of the industry, the key considerations for upsizers and an update on our new commercial lending offering.

Interest Rates and Property Market

In August, the Reserve Bank of Australia (RBA) increased the cash rate by 0.50% for the fourth consecutive month, leaving the cash rate sitting at 1.85%.

The property market continues to feel the impact of the interest rate rises with CoreLogic’s dwelling value index falling for the third month in a row, which coincides with interest rate hikes. The fall in the last three months comes after the national dwelling value surging by over 28% from October 2020.

Source: Corelogic

The market expectations around where the cash rate will end up into next year have changed over the last few months. Economists have adjusted their outlooks to a potential cash rate high of 3% in 2023, down from earlier predictions of upwards of 4%.

Economists are also now predicting the cash rate will hit its peak in early 2023 and potential falls throughout the back end of next year.

Source: Greg Jericho

Upsizers

Upsizing is the process of moving to a larger home with more space. This can be for several reasons:

• A growing family – you need more bedrooms and space;
• Children moving into their teenage years – they need their own space;
• Lifestyle – you enjoy entertaining friends and family at home;
• An elderly parent needs care;

For upsizers there are four options:

1 – Sell current property first

Key considerations:

1. Know exactly how much cash you will have for the next purchase
2. Have to move twice i.e., once to parents/rental and then into new place
3. Will ensure you have max borrowing capacity/purchase price available
4. Main additional cost is for rental, but this is similar to mortgage costs
5. Least stressful

2 – Simultaneous settlement

Key considerations:

1. Can be tricky to coordinate with multiple parties
2. If you are buying first and don’t have the equity/savings for a bridging loan you will have to sell on auction day no matter the offers
3. Pressure to sell or potential compromise of sale price
4. Moving day is stressful and unless you can get early access to the new property you would have to move twice

3 – Buy new property before selling current/ Bridging loan

Key considerations:

1. Expensive as the bank is lending you the equity/savings you have locked up in your house and this is normally at a rate ~2% above market
2. Need a lot of equity in existing property and savings to be able to hold both places @80% LVR and banks will often add in a 10-15% buffer on existing property sale price
3. Only one move out of existing and into new
4. Depending on bank allowed to be in place for 6-12 months. Not offered by all banks
5. Borrowing capacity normally based on end debt

4 – Hold both properties

Key considerations:

1. Great if you have the borrowing capacity and equity
2. Ensure you speak to an accountant or finance professional to ensure the move of your existing property to an investment property is structured in a tax effective way

Borrowing capacity, equity/savings position and family circumstances will all contribute towards which options are available.

Commercial Lending

We now offer commercial loans, and this includes:

• Loans for the purchase of commercial real estate including established, vacant or to be developed land; owner occupied or investment; and zoned from retail, industrial, office, warehouse, factory unit, to specialised property such as aged care facilities, or hotels and taverns.
• As well as buying a trading business or franchise, a new business start-up or the expansion of an existing business.

So, if you are looking to purchase a commercial property, wanted to chat about your existing one or are looking to buy a business then get in touch.

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