07.31.2018 Tax & Finance

Are The Banks Influencing Sydney Real Estate?

Are The Banks Influencing Sydney Real Estate?

With tighter lending regulations coming into effect in Australia, some buyers are finding loans more difficult to access.

But will the financial services Royal Commission have any real impact on Sydney’s resilient eastern suburbs?

What the Royal Commission means for borrowers

The financial services Royal Commission means banks are looking beyond traditional tools like the Household Expenditure Measure (HEM) to decide whether to grant loans and focusing much more closely on living expenses. This is resulting in pre-approvals taking longer and borrowers being granted pre-approval for lower loan amounts than they may previously have expected.

Why buyers should move quickly to secure loans

As the Royal Commission progresses, it’s likely we’ll see even more stringent restrictions placed on borrowers. If you’re planning to buy property during this year’s spring sale season, it’s advisable to apply for your pre-approval as early as possible. Waiting longer could result in losing a significant percentage of your potential loan.

How buyers can handle the new bank restrictions

Securing a loan may be more challenging this year, but there are things buyers can do to make the process run as smoothly as possible. For the best chance of securing pre-approval and the right loan, buyers should:

  • start the pre-approval process early, well before the spring sale season
  • research the suburbs where you most want to live, along with those just outside your target areas
  • work closely with your real estate agent to understand your options.

Are interest rates set to rise?

After a sustained period of record low interest rates, financial forecasters are now talking about a ‘very high chance’ of interest rate rises over the next few months. While nothing has changed yet, it could be another motivating factor for buyers to move quickly, even before the spring sale season officially begins, to lock in a more manageable loan.

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What this year’s bank activity means for sellers

The question sellers are asking across the eastern suburbs is whether these changes will have a wider impact on property prices. CoreLogic data does show less stable prices for Sydney as a whole, with a 0.33% dip in June. But a closer look at key locations across the east doesn’t match this trend. Suburb-specific data for the past quarter reveals these median price increases:

  • Surry Hills: 3.15% increase
  • Double Bay: 2.05% increase
  • Bronte: 1.86% increase
    Woollahra: 1.47% increase

What sellers should ask their real estate agent

Working with an agent who understands the markets in the eastern suburbs is more important than ever this year. In choosing the team to help you reach the best possible sale price for your property, make sure you ask questions including:

  • What type of buyer will be most interested in my property?
  • What is the ideal price bracket to attract as much interest at auction as possible?
  • Which areas of my property should I emphasise to appeal to buyers?
  • How should I time my sale? Is spring the best time to sell or should I move more quickly to avoid the peak auction period?

While the market will continue to change as Australian banks adapt to the new financial environment, these strategies will support buyers and sellers across the east.