One of the biggest challenges facing families today is borrowing capacity. It’s an issue that’s affecting many people, not just at Teach Me About Property, but across the broader market. Borrowing less than expected can be a frustrating experience, especially when it comes to buying your first property or expanding an investment portfolio.
Why Borrowing Capacities Are Falling
The major factor driving down borrowing capacities is interest rates. As interest rates rise, the cost of a loan increases, making it harder to borrow large sums. Lenders are also adding buffers of up to 3% to their loan assessments, meaning if the interest rate is 7%, your loan is being assessed at 10%.
This isn’t just impacting first-time homeowners. In fact, investors with existing portfolios are often the hardest hit. Banks are reassessing their entire portfolios at rates of 9% or 10%, slashing their borrowing capacities.
The Double Negative: Lower Borrowing Capacity and Higher Property Prices
The frustrating thing for many first homeowners is that it’s a double negative—borrowing capacities are falling, but property prices are rising at the same time. What used to be affordable is now out of reach.
For example, back in 2016 and 2017, if you had a borrowing capacity of $300,000 to $400,000, you could easily buy a new property in Queensland. Fast forward to today, and those same properties are selling for $700,000 to $800,000. The result is frustration for buyers who are eager to enter the market but feel trapped by their lower borrowing power.
What Can First Homeowners Do?
For first homeowners, this situation is particularly tough. Many are asking, “What do I do? I just want to buy a property.” While it might seem like an uphill battle, there are options available.
At Teach Me About Property, the team works with professionals like Edgar from PA Realty to help families and investors find properties that match their borrowing capacity. By working closely with buyers’ agents, they are able to identify properties that fit within tight budgets while still offering good value.
Investors: Adapting to the Affordability-Led Boom
It’s not just first-time buyers feeling the squeeze. Investors are also competing for properties at the lower end of the market due to falling borrowing capacities. Over the last 6 to 12 months, the market has experienced an affordability-led boom, meaning the most aggressive activity has been happening in the $400,000 to $800,000 price range. As a result, both first homeowners and investors are competing for the same stock.
The key to success in this competitive market is adapting to the conditions. Instead of wishing for a higher borrowing capacity, the focus should be on making the most of the borrowing power you have. This is where buyer’s agents like Edgar play a crucial role. They help investors find properties that meet their needs and fit their financial constraints.
The Shift in the Market
The reality is that the market is changing. Borrowing capacities are down, prices are up, and the competition for affordable properties is fierce. For investors, it’s about getting the best value within your current borrowing limits.
Edgar and his team are helping families and investors navigate this tricky market, and the results have been impressive. Even some of the more experienced members of the Millionaires Club have taken advantage of this approach, finding great opportunities in today’s tough borrowing environment.
Conclusion: Getting the Best Bang for Your Buck
Borrowing capacity challenges are real, but that doesn’t mean opportunities are out of reach. It’s about working with the right team and focusing on what you can achieve with the resources you have. The combination of lower borrowing capacity and rising property prices is difficult, but with the help of professionals like Edgar and the team at Teach Me About Property, buyers and investors can still find great value in the market.
