Is the RBA likely to change the cash rate in 2015?

Property investors have enjoyed access to cheap finance in recent times as Australia’s official cash rate has remained at a record low for 17-months consecutively, but what’s in store for 2015?

The Reserve Bank of Australia (RBA) last changed the official cash rate in August 2013 when the bank cut the rate by 25 basis points to 2.5%.

RBA governor Glenn Stevens noted recently that the historically-low cash rate had flowed through to consumer interest rates, which were “very low and have continued to edge lower over the past year or so as competition to lend has increased”.

The lower interest rates on offer have created a good environment for property investors to access cheap finance, as lenders battle to grab their share of the home-loan market.

But what will happen in 2015? Will the RBA continue to hold the official cash rate at 2.5% or is there a chance that it might be changed?

Over the past year Glenn Stevens has largely been pushing the same message – “the most prudent course is likely to be a period of stability in interest rates”.

This was again reiterated in the RBA’s most recent meeting on December 2. However, since then there has been a growing chorus of industry analysts predicting a rate cut in 2015.

This includes a range of investment banks and asset managers, as well as two of the biggest banks in Australia – Westpac and NAB.

Both Westpac and NAB believe the RBA will make two separate cuts in 2015 to reduce the official cash rate to 2%.

These predictions came in late 2014 after national business conditions remained flat and sentiment weakened, along with further falls in commodity prices.

Given the present economic conditions, the large majority of analysts are predicting rates to remain on hold or to be cut in 2015.

The Commonwealth Bank of Australia recently changed its stance on interest rates. The bank had predicted that the RBA would increase rates in 2015 but now anticipates they will remain on hold for the entire year.

Meanwhile, ANZ’s latest forecast, issued in November, predicts rates to rise in late 2015.

Either way, the forthcoming 12 months will prove to deliver favourable conditions for property investors to access cheap finance.

Furthermore, it will also be a good time for property owners with established mortgages to refinance to secure a better deal.

In 2015 we can expect more borrowers taking up refinance opportunities to lock in record-low fixed-rate products.

The RBA next meets on Tuesday, February 3 to decide whether to change the cash rate or leave it on hold.

4 benefits of buying a property in a downturn

Many investors are inclined to adopt a pack mentality when buying an investment property, but what are the benefits of going against the herd?

When the market is hot, and property prices are climbing sharply, many investors will feel the need to buy a property to avoid missing out.

Conversely, when the market experiences a downturn, and property prices stagnate, many investors will shy away and abandon their intent to make an acquisition.

This herd mentality simply comes down to human nature.

However, if you’re looking to purchase a property next time the property market softens, it might be wise to continue unabated because there are many benefits to buying in a downturn.

Four reasons to buy in a soft property market.

1. Increased housing stock – generally during a downturn there will be more listings on the market, which means buyers will have a much wider choice. Subsequently, buyers are more likely to find a more appropriate and better dwelling.
2. Less competition – given that most property investors follow the herd mentality, during a downturn buyers will encounter less competition and can secure a property that they might not have been able to in a booming market.
3. Secure properties for less – reduced competition means buyers can purchase properties at a lower price or even below asking price. Furthermore, in a cooler market buyers are less likely to have to outbid others.
4. More control in contract negotiations – with less competition in the market buyers can have more control in contract negotiations and ensure contracts are weighed in their favour.

While buying property in a cooler market presents advantages, there are also many benefits to purchasing property when conditions are more favourable.

However, when purchasing property to create long-term wealth, it’s generally best to make acquisitions sooner rather than waiting for the ‘perfect’ environment.

Como: ideal location with comprehensive amenities

In a desirable location on the Swan River, Como is the epitome of a family suburb containing many reputable schools, large parks and in close proximity to Perth’s central business district.

Como, located 6 kilometres south of the CBD, is home to more than 12,000 residents living in a mix of housing stock.

This includes low and medium-density dwellings with many older 1950s single residential houses surrounded by newer villa and townhouse complexes.

The suburb, which is within the City of South Perth, has good accessibility to major arterial roads, such as Kwinana Freeway and Canning Highway, and sits next to the Canning Bridge train station, which links Mandurah to the Perth CBD.

Three major shopping centres can be found on the periphery of Como, including Victoria Park’s Park Shopping Centre, Karawara’s Waterford Plaza and Booragoon’s Garden City.

Como’s main retail centre is the Preston Street shops, which host a supermarket, butcher, hairdresser, baker, bottle shop, restaurants, bars and other everyday retail and hospitality facilities.

With several highly-reputable schooling facilities in and around Como, including Penrhos College, Como Secondary School, Aquinas College and Wesley College, the area is highly sought after by families.

The Swan River foreshore, McDougall Park, Collier Park and Collier Golf Course also make it an attractive area to live.

Como is also likely to benefit from major plans by state and local governments to redevelop the Canning Bridge precinct to include further high rise buildings, restaurants, cafes and a new bridge.

There are also longer-term plans for the precinct to contain a bus and ferry terminal, making Como even more accessible to other areas of Perth.

Buying a tenanted property – help or hindrance?

Acquiring a tenanted property can deliver many benefits, however, there can be various pitfalls as well. So what are the pros of cons of buying a property with existing tenants?

It’s a situation that many property investors find themselves in.

After securing finance, spending months searching the property market, scouring the internet and attending countless home opens, you’ve finally found a property that meets your requirements and budget. But then you’re told the property is tenanted.

Depending on your situation and your intentions for the property, this can prove to be either a help or a hindrance.

So what are the pros and cons you need to be aware of?

Pros

• Save money: you don’t need to pay a letting fee or spend money on advertising to find a tenant.
• Save time: you don’t have the hassle of having to vet applications and choose a tenant.
• Receive rent immediately: you can start receiving rent from day one and can rest assured that your property won’t sit vacant while you look for a tenant.

Cons

• Sub-standard tenants: the existing tenant may not meet your standards, fail to pay rent on time or take care of your property in an appropriate manner.
• Difficulties with the tenant: the tenant may not appreciate your style of management compared to the previous owner. The previous owner may have been too complacent and not held the tenant accountable.
• Inadequate contracts: the tenant’s lease may be inadequate (in some cases no contracts at all) or the terms of the lease might be unfavourable to the owner (under-priced rent, long-term contract, inspections too infrequent).
• Maintenance requests: with a new owner, the tenant may see this as an opportunity to lodge their list of maintenance requests, leading to unexpected costs for you.

When acquiring any property, particularly a tenanted property, it is crucial to ensure all relevant documentation is reviewed prior to unconditionally purchasing.

This can help to mitigate the risks and ensure you have a comprehensive understanding of the associated contracts, such as lease agreements.

Additionally, in the case of tenanted properties, it pays to do your research on the tenant by asking questions of the current landlord, property manager and selling agent.

Red tape to be slashed for property developments

Red tape on residential and commercial developments will be slashed under the largest planning reforms in Western Australia in 50 years.

As part of the proposed changes more property developers will be able to bypass Local Government Authorities (LGAs) and apply directly to the state’s Development Assessment Panel (DAP) for construction approvals.

The shake-up of WA planning laws is expected to cut costs for developers and save time in the pre-development process.

Under the reforms developers with projects costing between $2 million and $10 million can choose to submit planning applications to either their respective LGA or the DAP.

The threshold is a change from the previous range of between $3 million and $7 million.

The reforms apply to developments in all metropolitan and regional areas of WA, excluding the City of Perth, where the threshold would be between $2 million and $20 million.

Developments costing less than $2 million will be required to apply for planning approval with the relevant LGA, while those costing more than $10 million, or $20 million for projects within the City of Perth, will be required to be processed by the DAP.

The changes are expected to be passed within the next 12 months and were recommended as part of a review of the DAP.

The planning reforms are part of a wider review, which started in 2009 by the Department of Planning and the Western Australian Planning Commission, to improve the state’s land use, planning and development approvals process.

The reforms have been tipped as the most significant since WA’s metropolitan region scheme in 1963.

Momentum Wealth named as finalist at Better Business Awards

Momentum Wealth is proud to have been shortlisted as a finalist for the 2015 Better Business Awards in the best independent office category.

The awards recognise Western Australia mortgage brokers and their achievements and excellence in customer service for the past year.

Momentum Wealth won the best independent office category (fewer than five brokers) in 2014. However, after growing our mortgage broking department over the past year, we have entered the ‘more than five brokers’ category in 2015.

Furthermore, two of our mortgage and finance specialists have also been named as finalists in individual awards, including best customer service and best residential broker categories and the rising star award.

The winners of the 2015 awards will be announced at the Better Business Summit in March. 

Information in the Property Newsletter kindly provided by Momentum Wealth.