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Property investors are being warned not to rely on pre-approvals prior to the federal budget being handed down. \u00b7 Getty <\/p>\n Property investors are being warned not to rely on pre-approvals prior to the federal budget being handed down. \u00b7 Getty <\/p>\n
Finance brokers<\/a> are warning property investors not to rush into auctions in the wake of tax changes announced in the Federal Budget this week<\/a>. Some buyers have already been burned, they say.<\/p>\n 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<\/a>), banks are reassessing how they determine borrowing limits for investors.<\/p>\n Sydney broker Joseph Sukkar said \u201cit will definitely\u201d reduce the amount banks are willing to lend investors.<\/p>\n \u201cEach bank has their own calculator, but the way they calculate it with negative gearing [being available] allows investors to borrow more,\u201d he told Yahoo Finance.<\/p>\n RELATED<\/p>\n 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.<\/p>\n However the bank has since come back and reduced what it\u2019s willing to lend to about $500,000.<\/p>\n \u201cPeople need to know, they shouldn’t just rush into an auction and buy a property.<\/p>\n \u201cThere is a high risk that the bank can turn around and do this, because they have done it,\u201d he said.<\/p>\n \u201cWe\u2019re in an uncertain period.\u201d<\/p>\n 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.<\/p>\n \u201cOvernight, my client had his borrowing capacity practically halved by his lender,\u201d he warned in a post on LinkedIn on Thursday.<\/p>\n \u201cI don’t think people realise how quickly things are moving.\u201d<\/p>\n \u2018We have made changes to our investor lending policy\u2019 <\/p>\n 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.<\/p>\n \u201c$405,530.<\/p>\n \u201cThat’s how much borrowing capacity a high-income married couple just lost overnight when looking at established investment property,\u201d he wrote in his own post.<\/p>\n Speaking to Yahoo Finance, he said that figure came from removing all of the \u201ctax deductibility\u201d component in the lending calculator for an investor home loan with Macquarie Bank, but might be \u201coverstated\u201d.<\/p>\n \u201cIt\u2019s a scenario type out there that what could happen if they do change policy,\u201d he said.<\/p>\n But he admitted \u201cit\u2019s still too early to tell, because we don’t know what what the lenders are going to do in terms of policy on that\u201d.<\/p>\n Macquarie Bank, which has been challenging the Big Four banks by aggressively grabbing market share in home loans in recent years, confirmed to Yahoo Finance it has changed its lending criteria in the wake of the budget.<\/p>\n “In light of last week\u2019s Federal Budget, we have made changes to our investor lending policy to ensure we continue to comply with our responsible lending obligations,\u201d a spokesperson.<\/p>\n \u201cThese changes help us ensure property investors are able to afford their loan when the changes to negative gearing come into effect.”<\/p>\n Get the latest Yahoo Finance news – follow us on Facebook<\/a>, LinkedIn<\/a> and Instagram<\/a>.<\/p>\n