Less bridges crossed
Pragmatism is the current order of the day when it comes to bridging finance, writes Ben Hyde.
THE number of people taking out bridging loans has dropped as consumers take a cautious approach and look to lock in the sale of their existing property before diving into another. Lenders have experienced a drop in inquiries and commitments for bridging finance, which they say is a result of the softer real estate market.
Community CPS Credit Union general manager retail Peter Rutter says consumers are being cautious.
‘‘Inquiries are definitely trending down and the feedback we are getting from members is that they are concerned about buying before they sell,’’ he says.
Mr Rutter says consumers can put themselves in a tricky position if they commit to a new property before selling their existing one.
‘‘There is still a continued degree of concern with how ambitious they can be with the sale price,’’ he says. ‘‘We have seen people take the bridging finance option and then struggle to sell their property for what they hoped and then you become under more pressure to sell.
‘‘Effectively people have two home loans throughout this period and are paying interest on the property they’ve bought and the property they’re selling and there is increased pressure and that just continues to build.’’
Mr Rutter says there is a silver lining for those buyers who aren’t relying on the sale of an existing property.
‘‘This scenario does mean that there is less buyers around and it does put downward pressure on prices,’’ he says. ‘‘Not everybody in the market is negatively affected.
‘‘If you are entering the market without having to sell your existing property, the current market can be an advantage for some buyers, particularly first-home buyers.’’
BankSA general manager Chris Ward says much depends on the individual circumstances of the vendor when it comes to bridging finance.
‘‘There are options available, such as relocation loans, where they have up to six months to sell their existing home if they buy another one first,’’ he says. ‘‘Naturally, demand for relocation loans has reduced in line with the changed market conditions and this is understandable as people take a more cautious approach to real estate purchases.’’
Mr Ward says a conservative and pragmatic approach is required by people intending to upgrade to another property.
He says the ideal situation is to sell the existing property first, making sure it is presented well and has a realistic price tag that reflects the current softer market conditions.
‘‘They can then negotiate hard on the price of the property they are upgrading to and are able to make an unconditional offer,’’ he says.
‘‘Another option to consider is to keep the existing home as an investment property and purchase another property to live in, although it’s important to seek expert financial advice and make sure it’s part of a long-term investment strategy you are comfortable with.’’