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How You Can Create & Benefit From Your Own Property Boom
The media have been focusing on the “property boom” happening in the country right now, and many are saying that high investor activity and shortage of housing supply are key reasons why house prices are going up.
One important point that people rarely mention is the importance of low interest rates in creating the boom.
The truth is that the low interest rate environment we’re experiencing right now is one of the main factors why people are excited to buy property once again. Lower interest rates mean lower mortgage payments for many Aussies, and this builds their confidence to buy and invest. In the end, pumping much needed activity back into the property market and driving house prices up.
This is what I call the “wealth effect.” When house prices go up, consumer confidence goes along with it, even though the person who invested hasn’t realized their profits from their property investment.
As we’re currently in a low interest rate environment this should mean easier financing for home buyers. But, surprisingly, a recent study showed that only 12 percent of first home buyers are able to get bank financing for a home.
So why are first home buyers still being left out, despite favourable conditions to buy?
I can’t stress this enough, but we’re not in the good old days anymore. Banks are still lending money for home loans; however, it takes Grade A people to get it and it will only get harder once the new Credit Code takes effect next year.
From March 2014, credit reporting bodies can disclose your repayment history information, along with other credit-related personal information, to licenced credit providers. Those credit providers may use this information to help determine your eigibility to be provided with credit.
This means that if you fail to make the full amount of a payment on time from December 2012 it may affect your ability to obtain credit in the future. The new enhanced “US style” credit reporting will make it even more difficult to get a bank loan.
Australia’s history of stability and it’s relatively strong economy and continued captial growth in our captial cities is driving foreigh investment in Australia which continues to push property prices higher.
Unfortunately, the current market situation favours those cash-rich investors who are snapping up properties left and right around Australia.
The sad thing is that the government isn’t doing anything about this since more money is being invested in the coffers. Non-residents invest in Australia because they see it as a safe harbour for their money, it’s a stabe, strong economy in comparision to their own.
A lot of first home buyers save up for a deposit, but because it takes such a long time, that when they finally have enough cash, their opportunity for home ownership is out of reach as prices rise.
Many buyers and sellers believe there is no way for them to participate in the boom. One solution is seller finance. Whether it’s a boom, bust or flat market this strategy creates a bridge to access the property ladder. Here’s why: the seller can achieve their selling price. While the buyer can realize their dream of homeownership.
As a seller, you can provide flexible terms; by providing seller finance it becomes easy for the buyer to purchase your property. Aside from that, it can also increase the number of people inquiring about your property since the property you’re selling is suddenly within their price range because the buyers don’t immediately need as much up front depsoit.
Seller finance simply works like this: buyers who don’t have enough cash to pay for the deposit can ask the seller to finance some of the deposit for an agreed period of time and at exchange, pay the seller their asking price. Sellers and buyers are often open to this arrangement, because the realize how they both benefit.
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Australian property investment specialist and best selling author, Rick Otton, has been investing and teaching his innovative real estate strategies for 23 years. As the founder and Director of We Buy Houses Pty Ltd, his goal is to empower people with knowledge through his cutting edge investment strategies.
Disclaimer: while due care is taken, the viewpoints expressed by contributors and/or sponsors do not necessarily reflect the opinions of Your Investment Property.
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