It’s not all bad news
Don’t get me wrong, it’s tough being a borrower in this market! Particularly when every article you read in the media is doom and gloom about property prices and LVR restrictions. Without a doubt, it’s a hard time to be a borrower but at the same time, now is the time to strike.
The need to have quality expert assistance such as brokers is getting more and more important. Banks are unwilling to take risks and internal credit policies have successfully slowed the market. Whether or not this continues post-election remains to be seen. Obtaining approvals from lenders is getting harder and there are a number of reasons for this.
But it’s not all bad news… you can get loan approvals, and you can find property where the numbers work. You just need to know where to look and who to speak to. Getting “bank ready” is key. Banks are more inclined to cherry pick clients so you should be doing more of the things that work and less of the things that don’t.
Know the rules
If you’re an investor you should know the reserve bank rules inside and out by now. Your ability to grow successfully depends on it in a market like this. My two favourites are simple things like:
- The ability to use a like-for-like refinance to move your properties across lenders (regardless of LVR) can be a great way to free up equity or simply to protect your future self by split banking. Doing this now, when you can, will give you the ability to move forward faster when credit policies are eventually loosened. This isn’t about loop holes, it’s about understanding the rules of the game and using them to your advantage. Much like Team NZ using leg power rather than following the rest of the teams in doing what’s always been done.
- New build properties being exempt. This is one that doesn’t get the attention it deserves. Any new build (provided it’s purchased from the developer or builder within 6 months of CCC) is exempt and therefore, within reason, the LVR restrictions do not apply. A $200,000 deposit will get you one “second hand” property at $500,000 or it will get you two new builds at the same value… Not only that, but if you do it right and use the right people, you end up with a better quality portfolio!
Be valuation ready
More and more I am seeing valuations come in short of where they were expected to be, or worse, where they need to be. This isn’t great news but it’s also not surprising as Valuers will be significantly more conservative when the market is talking about a ‘drop in house prices’. As well as that, low stock simply means good quality comparable sales are harder to come by.
Banks are getting strict on where the valuation is ordered from. If it’s not ordered from Valocity or Core Logic then it simply won’t be accepted. So before you waste $1,000, speak to your advisor.
If you have reason to believe the value of your property should be at a certain level, then let the Valuer know. You’re within your rights to push back and get the valuation reviewed. But it can’t just be opinion based, so work with your advisor to gather evidence to support your thinking.
In this market, I would not be going unconditional until I have satisfied the bank’s requirement for a valuation (if there is one).