Foreign buyer activity picks up

Foreign buyer activity picks up: what does this mean for first home buyers?

Foreign buyer activity is on the rise with buyers buying up new property investments — a trend that is only expected to increase in the coming months. 

For those seeking home loans in upcoming months, this is sure to be of interest.

The desire to buy real estate is strong, and foreign buyers are no exception to this rule. In fact, they made up 16.8 percent of overall demand for new property during the third quarter — approximately one in six buyers — according to NAB‘s Quarterly Australian Residential Property Survey.

Looking back to the third quarter of 2011 – foreign buyers only made up a share of around five percent nationally.

Foreign buyers head east

The eastern state of Victoria is a hotspot for foreign investors, according to NAB‘s findings.

“Foreign buyers were more active in all states, but especially in Victoria where they accounted for an estimated 24.8 percent of total demand, or one in four all new property sales” said Alan Oster, NAB Group Chief Economist.

It’s expected that demand for real estate among foreign buyers will soar over the coming months. While they currently make up 16.8 percent of existing demand, it’s expected this proportion will rise to 17.3 percent next year.

Local investor numbers dip

While foreign buyers are taking out investor home loans in droves to secure property, the same isn’t quite true for domestic investors.

Local investor demand fell by over five percentage points, between the second and third quarters, from 32.5 percent to 27 percent.

However, this figure is ahead of foreign investment. Along with existing homeowners and first-time buyers, there could well be some fierce competition in the market.

So just which areas are tipped for strong interest in the future? NAB has provided some interesting insights, which are sure to capture the attention of investors and everyday home buyers alike.

The hottest areas for real estate purchases

NAB highlighted areas set for “above-average capital growth” in the future, with a range of locations across Australia set to enjoy favourable growth. 

In the west, this includes the likes of Armadale, Baldivis, Cannington, East Victoria Park, Forrestfield, High Wycombe, Joondalup, Mandurah and Midland.

In the Northern Territory, the capital city of Darwin’s growth prospects look promising. South Australia’s Mile End and Norwood should experience above-average capital growth, while Ashgrove, Brisbane, Noosa and Toowoomba are some of the Queensland areas tipped for solid growth. 

Investors buying property in Blacktown, Cambelltown, Chatswood, Oran Park, Penrith or Sydney may find their investments do well. Those looking further south than these New South Wales locations may wish to investigate Victoria — from Footscray to South Melbourne, there are numerous areas set for strong capital gains.

Just remember, whether you’re buying or investing, using a home loan calculator is always a smart move.

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How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

What is bridging finance?

A loan of shorter duration taken to buy a new property before a borrower sells an existing property, usually taken to cover the financial gap that occurs while buying a new property without first selling an older one.

Usually, these loans have higher interest rates and a shorter repayment duration.

What is an investment loan?

An investment loan is a home loan that is taken out to purchase a property purely for investment purposes. This means that the purchaser will not be living in the property but will instead rent it out or simply retain it for purposes of capital growth.

How much is the first home buyer's grant?

The first home buyer grant amount will vary depending on what state you’re in and the value of the property that you are purchasing. In general, they start around $10,000 but it is advisable to check your eligibility for the grant as well as how much you are entitled to with your state or territory’s revenue office.

What is appreciation or depreciation of property?

The increase or decrease in the value of a property due to factors including inflation, demand and political stability.

What is equity? How can I use equity in my home loan?

Equity refers to the difference between what your property is worth and how much you owe on it. Essentially, it is the amount you have repaid on your home loan to date, although if your property has gone up in value it can sometimes be a lot more.

You can use the equity in your home loan to finance renovations on your existing property or as a deposit on an investment property. It can also be accessed for other investment opportunities or smaller purchases, such as a car or holiday, using a redraw facility.

Once you are over 65 you can even use the equity in your home loan as a source of income by taking out a reverse mortgage. This will let you access the equity in your loan in the form of regular payments which will be paid back to the bank following your death by selling your property. But like all financial products, it’s best to seek professional advice before you sign on the dotted line.

How does Real Time Ratings work?

Real Time RatingsTM looks at your individual home loan requirements and uses this information to rank every applicable home loan in our database out of five.

This score is based on two main factors – cost and flexibility.

Cost is calculated by looking at the interest rates and fees over the first five years of the loan.

Flexibility is based on whether a loan offers features such as an offset account, redraw facility and extra repayments.

Real Time RatingsTM also includes the following assumptions:

  • Costs are calculated on the current variable rate however they could change in the future.
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  • Fixed-rate loans with terms greater than five years are still assessed on a five-year basis, so 10-year fixed loans are assessed as being only five years’ long.
  • Break costs are not included.

How can I calculate interest on my home loan?

You can calculate the total interest you will pay over the life of your loan by using a mortgage calculator. The calculator will estimate your repayments based on the amount you want to borrow, the interest rate, the length of your loan, whether you are an owner-occupier or an investor and whether you plan to pay ‘principal and interest’ or ‘interest-only’.

If you are buying a new home, the calculator will also help you work out how much you’ll need to pay in stamp duty and other related costs.

What is stamp duty?

Stamp duty is the tax that must be paid when purchasing a property in Australia.

It is calculated by the state government based on the selling price of the property. These charges may differ for first homebuyers. You can calculate the stamp duty for your property using our stamp duty calculator.

How will Real Time Ratings help me find a new home loan?

The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.

That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.

Best of all, the ratings are calculated in real time so you know you’re getting the most current information.

What is an interest-only loan? How do I work out interest-only loan repayments?

An ‘interest-only’ loan is a loan where the borrower is only required to pay back the interest on the loan. Typically, banks will only let lenders do this for a fixed period of time – often five years – however some lenders will be happy to extend this.

Interest-only loans are popular with investors who aren’t keen on putting a lot of capital into their investment property. It is also a handy feature for people who need to reduce their mortgage repayments for a short period of time while they are travelling overseas, or taking time off to look after a new family member, for example.

While moving on to interest-only will make your monthly repayments cheaper, ultimately, you will end up paying your bank thousands of dollars extra in interest to make up for the time where you weren’t paying off the principal.