Finance brokers are warning property investors not to rush into auctions in the wake of tax changes announced in the Federal Budget this week. Some buyers have already been burned, they say.
As the dust settles from the confirmation that negative gearing will no longer be available to investors in existing properties (as well a new capita gains tax regime from 2027), banks are reassessing how they determine borrowing limits for investors.
Sydney broker Joseph Sukkar said “it will definitely” reduce the amount banks are willing to lend investors.
“Each bank has their own calculator, but the way they calculate it with negative gearing [being available] allows investors to borrow more,” he told Yahoo Finance.
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He has one client who attended an auction on Wednesday night, the day after the budget, with a pre-approval to borrow $800,000 with one of the major lenders. According to Sukkar, his client won the auction and paid a 10 per cent deposit on the spot.
However the bank has since come back and reduced what it’s willing to lend to about $500,000.
“People need to know, they shouldn’t just rush into an auction and buy a property.
“There is a high risk that the bank can turn around and do this, because they have done it,” he said.
“We’re in an uncertain period.”
Sukkar told Yahoo Finance he hopes the bank, which he asked not to be named, will ultimately relent and lend somewhere near the initial amount, otherwise he is confident another lender can be found, but he is warning others not to get caught in the same situation as his client.
“Overnight, my client had his borrowing capacity practically halved by his lender,” he warned in a post on LinkedIn on Thursday.
“I don’t think people realise how quickly things are moving.”
‘We have made changes to our investor lending policy’
Another Sydney broker, Nick Graham, who is the Director at Experity Capital, shared a similar warning about the surprising impact the budget changes could have on investor borrowing capacity.
“$405,530.
“That’s how much borrowing capacity a high-income married couple just lost overnight when looking at established investment property,” he wrote in his own post.
Speaking to Yahoo Finance, he said that figure came from removing all of the “tax deductibility” component in the lending calculator for an investor home loan with Macquarie Bank, but might be “overstated”.