Less bridges crossed

Prag­ma­tism is the cur­rent or­der of the day when it comes to bridg­ing fi­nance, writes Ben Hyde.

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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.’’

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