A Promising Outlook for Inflation and Commercial Property

FOR WHAT IT’S WORTH … my view is that there is growing evidence to suggest inflation will not be as sticky as many pundits would have you believe.

Despite a recent surge in residential rentals, Australia’s inflation seems to have reached its peak and is expected to rapidly recede. And that’s evidenced by the June figures just out, showing that inflation has fallen from 7% to 6% per annum, over the last quarter. [Read more…]

Commercial Property and the Likely Impact of the Budget

CONCERN OVER HIGH INFLATION is what is causing the RBA to continue raising interest rates.

So the real question is … will the latest Budget be responsible for adding to inflationary pressures?

Anyway, let’s quickly pick apart the critical issues of the latest Budget – as far as they relate to Commercial property. [Read more…]

Commercial Property Going Forward in 2023

WITH A CLEARER OUTLOOK for interest rates, Commercial property is expected to bounce back in 2023. Particularly, with several pundits suggesting the RBA could well start to ease rates again later this year.

Understanding the facts

There will be some investors, who may initially take a cautious approach. [Read more…]

Let’s Look Behind the Inflation Curtain

DESPITE THE RECENT new Omicron variant, consumer demand is surging against the backdrop of labour shortages, supply chain blockages and recent price increases.

All of this is causing confusion and some concern. And pundits around the world are detailing strong Inflationary pressure – which usually means interest rates are likely to increase, sooner rather than later. [Read more…]

Economy Continues to Grow

IN REALITY, the Australian economy is showing solid growth in the metropolitan areas. And there is a flow-on effect into most regional cities – the only exceptions being those areas recently struck by drought and bushfires.

While not buoyant (and there may be a short-term pullback from natural disasters) … overall, the economic fundamentals look fine.

Therefore, we need to steer clear from unwittingly talking ourselves into recession. Because, as soon as confidence returns (and it will), consumers will start spending again. [Read more…]

Why Do Politicians Pay Such Scant Regard to the Truth?


SURELY THE GENERAL PUBLIC aren’t that gullible? Maybe they are.

Everyone knows politicians tend to massage the truth to suit their purpose. However, it seams Bill Shorten is once again trying to mislead people – in much the same way as he did with the “Medi-scare” campaign, in the lead up to the last election. [Read more…]

You Can Turn Your Mortgage into an Asset

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DO YOU VIEW your mortgages as liabilities or assets? The way you look at it can actually determine your financial success.

People often think that debt is bad and you should repay your loan as soon as possible. However, the truth is, some debt is good if used to own appreciating assets. [Read more…]

How Will Trump’s Win Affect Commercial Property?

Trump and Commercial Property

WHILE THE WORLD may be stunned by Donald Trump’s win, you’ll most likely find things will not be nearly as bad as everyone thinks.

And that’s reflected in the huge rebound in the stock market — once investors began studying his policies in more depth.

How did Trump achieve the Win?

In many respects, the media is responsible for the outcome — because so much airplay was given to his outlandish rhetoric. [Read more…]

APRA Cracking Down on Commercial Property Investment Loans

AS MANY INVESTORS would already be aware, borrowing for investing in property has become increasingly difficult over the past 12 months.

And that's because APRA (the banking regulator) has issued a warning to major banks to reduce their exposure to investment property loans.

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Recent Changes to the Lending Environment

THE CURRENT LENDING environment has changed markedly over the last two months with the main developments being:

  1. Lending to foreign investors has been severely restricted or entirely removed by all Australian banks.
  2. Interest Rates have been cut, with the drop passed on for owner-occupied loans and partially passed on for investment loans.
  3. Concerns have been raised about housing oversupply in certain parts of the country, including Melbourne and Sydney, and lenders have placed increased restrictions on higher density developments. 
  4. Some banks have been advised that their loan books are too heavily weighted to property investment (including commercial) and have thus pulled back their lending ratios.
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Commercial Finance for Business

business-finance

IN THE CURRENT low-rate environment, demand for property funding has spiked considerably over the past couple of years, fuelling some concerns in various quarters for a property bubble.

As a result, most of the major banks have loan portfolios heavily weighted to property.

Slowly but surely, this has resulted in increased competitiveness for the small business sector, which has resulted in some attractive terms being offered for small business loans.

Below are some tips about business loans in the current market. These will be useful if you are looking at purchasing a small business or expanding your existing business:

Borrow at Home Loan Rates

If you have equity in residential property, you may be able to borrow at home loan rates.

The major banks tend not to allow business purpose for loans through their home loan departments, and will unnecessarily sell their customers into more expensive business loan products.

If you have equity and can afford the repayments, there is no reason to have a bank overdraft (sold at rates up to 13% pa) or even bill facilities that are subject to frequent review.

Before taking out a business loan secured by a residential property, explore the market for possible home loans for business use, they will be much cheaper and more flexible.

A suitably qualified mortgage adviser will be able to do this for you at no cost.

Loan Terms are as Important as Loan Rates

Most businesses live and die on cash flow. Therefore it is important to look past just the interest rate and fees on a loan and consider actual repayments.

This is the major benefit for using home loans where there is sufficient equity in residential property as they can be taken out interest only and usually rolled over continually.

Banks offer “unsecured” business loans against some businesses.

But these are subject to sharp amortisation periods (anywhere from 1-7 year loan terms). So consider the actual repayments as well as the rate before progressing with a particular loan product.

Ensure You Have Sufficient Capital

You are unlikely to get over 50% of the purchase price of a business. The exception to this is for well-established franchises, for which borrowing can be as high as 70%.

As discussed earlier, you may be able to use equity in property to bridge the gap, but you need to consider from where the capital will be raised.

If you are purchasing a franchise, banks will hold approved franchise lists outlining the terms that the bank will extend against a particular business.

It is worth speaking to more than one bank (or engaging a mortgage adviser to do it for you) to make sure you are getting the best deal as banks will vary on terms extended against each franchise.

Learn About the Different Finance Options on Offer

For existing businesses there are many different types of financing that can assist with cash flow and growth strategies.

These include the following:

  • Asset financing
  • Debtor financing
  • Invoice factoring
  • Trade Finance
  • Credit Insurance
  • Overdrafts
  • Bank guarantees

BOTTOM LINE: Too many business owners learn about these products only when they are in difficulty. Smart management demands that the right debt strategy be an integral part of any business planning.