Monthly Archives: February 2016

How will you be paying today? – Finance the new frontier.

Cheap finance has powered the booming property market over the past 3 years. That’s ‘cheap and readily available’ finance. Expect finance to remain cheap throughout 2016 just don’t expect it to be as easily and readily available.

Cashed up, ready to buy buyers have been in abundance to the point that vendors did not even need to entertain conditional offers. As the banks clamped down, firstly on investors and then home buyers in late 2015, the abundance of cashed up buyers begun to tighten.

Buyers need to be aware that ‘qualifying’ for a home loan on an internet quiz is not a loan approval, it’s called marketing. This marketing is simply a ‘lead generator’ for the respective financial institution.

Buyers are being led to believe that they have a binding loan offer from a financial institution, when in fact they don’t.

If you are dealing with a mortgage broker on your finance, note that they are inherently optimistic about attaining finance. They have to be, that’s their job. There are two areas of caution with mortgage brokers. Can they actually attain the amount of money the marketing gimmick otherwise known as a ‘loan calculator’ claimed? Secondly, can they attain the finance in the required time frame.

The banks have become slow and cautious. No amount of harassment from a mortgage broker is going to see the banks by-pass proper due diligence.

Sellers need to be aware of non-binding/subject to finance offers. A subject to finance offer is not an offer. It’s an aspiration from the buyer. If you receive an appealing ‘offer subject to finance’ keep the bubbly on ice. There is still a long way to go!

The Inner West market is actually holding up well, although it’s off it’s peak from mid 2015. Greater Western Sydney has been hardest hit by the tightening in finance.

The end of the boom does not mean that a market crash has begun. But it does mean that dozens of cashed up (ready to sign a contract) buyers fighting to buy real estate is probably over. And that’s a good thing.

The single consistent factor in global property markets that crashed has been easy/excess credit sold to buyers by banks. Sydney and Melbourne were both recently named in the Demographia International Housing Affordability Survey for the Top 5 most unaffordable global property markets.

The fact that our banks are being forced into prudent lending is a positive, albeit with some short term jolts.

Before asking the buyer what will you pay, it’s better to first ask, how will you pay?