The REIV auction clearance rate remains steady at 75% with 631 auctions reported over the weekend.  324 properties sold at auction, 150 before auction, 157 properties passed-in and there were an additional, 282 private sales.  In comparison, the same weekend last year, there were 713 auctions resulting in a clearance rate of 77%.

Over the past 12 months, there has been a significant increase in investors across the country selling their investment property(ies).  This has largely been driven by the increased cost of holding an investment property with higher interest rates and taxes not being covered by the rental income.  Investors have also been opting to sell their investment properties to cash in the equity to pay off their owner occupier debts.  Mortgage repayments on properties have dramatically increased over the past 18 months and home owners will do everything they can to ensure they can keep their home, and in many cases, selling their investment properties has been the best solution.

However, there is another way of buying investment properties (residential and commercial) and that is via a self managed super fund.  Over the past 12 months, there has been an increase of 11% in SMSF lending and this could largely be due to fact that people still want to have an investment property, but they don’t want it to come at a cost of their lifestyle.  A SMSF is a private super fund that you self manage and your super contributions are put into the SMSF to raise a deposit for the purchase.  Banks will then borrow money within the SMSF to allow the fund to purchase property (there are some criteria that must be met in order for the property to be an acceptable asset).

This tool can also be great for business owners who can purchase a commercial property through their SMSF and then rent it back through their business with some significant tax advantages in doing so.  Although, it doesn’t just have to be a business owner who can do this, anyone (with the financial capacity to do so) can set up a SMSF and purchase an investment property.  Whilst this can be a great tool for some to enter the investment property market, it isn’t for everyone as the costs in setting up the SMSF are high and strict audits are to be conducted on an annual basis of the fund (which is also an added expense).  Banks also require larger deposits to purchase a property and the interest rates are higher.  So it is important to speak to a professional who specialises in this area before deciding it is the right path for you.

In regards to the general feeling within the current property market, June/July are usually very quiet months of the year.  It’s cold, people don’t really want to be out and about, and vendors feel their properties are not looking their best and are holding off until Spring.  That being said, we have had a very busy month of buying thus far at Elite.  Both securing off market and on market properties, whether by private sale, expressions of interest or at auction.  So whilst it is quiet, transactions are still occurring and buying conditions at the moment are positive for buyers.

Have a great week!

Kim Easterbrook – Managing Director