Average size of new home loans up as financial pressure mounts on property investors
By Paul Bennion, Managing Director DEPPRO
A combination of low interest rates, surging population and rising property prices has seen the average size of a home loan in Victoria smash through the $400,000 ceiling for the first time. Figures produced by the ABS show that during 2017, the average size of a new home loan in Victoria surged by over $25,000 to $404,000.The average size of a new home loan in New South Wales also recorded a big jump over the last year where it jumped by over $36,000 to $460,000 during the period January to December 2017.Overall, the average size of a new home loan throughout Australia surged by $30,000 to $393,000 during the past year.
This big increase in the size of home loans has put added pressure on property investors who are now having to paying higher interest rates on their loans due recent lending changes imposed by APRA.It is important to consider the impact of the APRA changes have not been fully felt on the property market especially in relation to policy changes to interest only loans where more investors are being forced to take out principal and interest loans once their interest only period has expired.
Moving to principal and interest only loans from interest only loans can result in average repayments by a property investor increasing by over 40%.And the scale of this issue has been highlighted by recent figures that show more than $140 billion in interest only mortgages could mature this year which could send shockwaves through the Australian property market.This $140 billion is much higher than previously estimated and means that the number of investors facing a big repayments spike this year - as there interest only periods end - may have been severely underestimated.
The CBA, alone, is expected to have almost $40 billion worth of interest only loans expected to mature this year. Investors who are faced with converting to principal and interest loans during 2018 need to focus on boosting their cash flow to meet the additional repayments. That is why is it critical property investors claim their full tax depreciation benefits associated with property investment.
These tax depreciation benefits can amount to thousands each year that can allow property investors to help pay their home loan mortgage.An investor can claim these tax benefits by using the services of the tax depreciation specialist called who prepares a tax depreciation schedule.
A depreciation schedule is a report undertaken by a quantity surveyor company (such as DEPPRO). It generally should be undertaken when the investor buys the property. You only need to do one depreciation report for a property and it can be updated each year by the accountant if the investor for example, installs a new kitchen.If a property investor has not claimed tax depreciation benefits in the past, they can do retrospectively which can give a massive boost to their cash flow. The cost of a depreciation report as prepared by DEPPRO is around $600 and this is tax deductible and covers the lifetime ownership of the investment property.
Click the link below and complete the details to ensure your client receives a higher return on their cashflow.