Invest
Help! My property is undervalued
Home-owners across Australia may feel uneasy about the softening market, but off-the-plan investors probably have it the worst.
Help! My property is undervalued
Home-owners across Australia may feel uneasy about the softening market, but off-the-plan investors probably have it the worst.
SMSF trustees have been warned to stay away from off-the-plan property as property prices fall and a slight apartment oversupply takes effect.
According to Omniwealth lending specialist Alfred Moller, off-the-plan investors are “starting to feel the pressure” as their properties slide from their original value.
He said investors in this situation should consider their ‘Plan B’, and the five considerations that come with it.
1. Do you have sufficient savings to meet a shortfall?
“If you purchase a property for $600,000 and it is valued at only $550,000 you would have to cover an additional $40,000 to settle,” Mr Moller said.
“The alternative is to borrow within lender's mortgage insurance (LMI), which is an insurance paid by you to cover the bank’s risk.”
2. Could you sell investment assets?
The second option to consider is whether assets like shares or other liquid assets could be used to cover the shortfall.
“Selling shares can be a great idea to cover a shortfall if you do not have savings, however you should be aware of potentially triggering a capital gains tax (CGT) event and you should talk to a qualified accountant first to be clear on your tax obligations,” he added.
3. Have you thought long term?
A momentary dip probably wouldn’t cancel out the long-term gains over five or 10 years, Mr Moller said, reminding investors to be prepared to hold the property over the long term.
“Keep in mind that you do not experience a loss until you sell your property, so any short-term market fluctuations will not impact you,” he said.
4. Let’s rewind – should you even buy this off-the-plan property?
There are evident risks in the off-the-plan market, Mr Moller said. This means investors can expect unfavourable valuations and some apartments in the Sydney metro area could be valued $80,000 less.
He said investors should be aware that, according to the Australian Bureau of Statistics, a further 19,038 units have been approved for April 2018 across the country. That’s a 5.7 per cent increase on April 2017.
5. Which suburbs are at risk?
“As the onslaught of completions and approvals outlive the perceived ‘property boom’, I expect no immediate improvement in the valuations of off-the-plan properties,” the lending specialist said.
“High-density residential developments such as Waterloo, Zetland, Parramatta and Docklands [in Sydney] are particularly at risk.”
Property
Millennials believe first home buyers need more support
Australia’s up-and-comers in the housing market say more needs to be done to slow rising house prices. ...Read more
Property
3 in 4 borrowers in trouble are in lockdown: ANZ
Despite offering support, ANZ said freezing home loan repayments will be the last resort, as three in four requests for support stem from NSW. ...Read more
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Property
Millennials believe first home buyers need more support
Australia’s up-and-comers in the housing market say more needs to be done to slow rising house prices. ...Read more
Property
3 in 4 borrowers in trouble are in lockdown: ANZ
Despite offering support, ANZ said freezing home loan repayments will be the last resort, as three in four requests for support stem from NSW. ...Read more
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
