Property Investors Urged to Rethink Pre-Approvals Following Federal Budget Changes
In light of recent alterations to Australia’s tax policy, finance brokers are advising property investors to exercise caution and not rush into property auctions. The warning follows the federal budget announcement that confirmed the abolishment of negative gearing on existing properties, alongside the introduction of a new capital gains tax regime set for 2027.
As banks reevaluate their criteria for determining borrowing limits for investors in response to these tax changes, concerns have emerged regarding how much banks might be willing to lend. Joseph Sukkar, a Sydney-based broker, highlighted this shift, stating that these changes would inevitably reduce lending amounts.
Sukkar shared a cautionary tale about a client who attended an auction immediately after the budget announcement, armed with a pre-approval to borrow $800,000. Although he successfully secured a property and lodged a 10% deposit, the lender subsequently slashed his borrowing capacity down to $500,000. Sukkar stressed to Yahoo Finance that potential buyers should refrain from hasty decisions, warning of the high risk of lenders reassessing their available borrowing limits.
“This is an uncertain period,” Sukkar noted, emphasising the need for prospective buyers to be fully aware of the changing financial landscape. He remains hopeful that the bank will revert to a more favourable lending amount for his client but cautioned others to avoid similar pitfalls.
In a similar vein, Nick Graham, Director at Experity Capital, echoed Sukkar’s concerns, revealing that even a high-income couple could lose a startling $405,530 in borrowing capacity due to the removal of tax deductibility from the lending calculator at Macquarie Bank—though he suggested this amount could be an overestimation. He underscored that the long-term implications of these fiscal changes remain uncertain as lenders adjust their lending policies.
Macquarie Bank confirmed to Yahoo Finance that it has updated its lending criteria in accordance with the new budget measures. The bank stated, “These adjustments help ensure property investors can afford their loans when changes to negative gearing come into effect,” signalling a proactive approach to lending amidst the evolving regulatory environment.
Investors, particularly those reliant on pre-approvals, should tread carefully, as rapid changes in borrowing capacity can have significant consequences. The landscape is set for a challenging transition for property investors navigating these new financial realities.
