Looming loan restrictions could mean a shift in property prices

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Looming loan restrictions could mean a shift in property prices

With demand greatly outweighing supply, houses are selling well over reserve at auction and recent COVID-19 restrictions have affected property sellers’ willingness to go to market.

While this property boom strengthens some sectors of the economy, there are numerous economic implications. With houses skyrocketing in price, Australians yet to enter the market are seeing their chances of buying a property grow slimmer.

However, there is still high activity in the market for those with the capital to spare. But with higher prices comes higher property loans, as Australians are borrowing more in order to secure a property. Around 22% of all borrowers are now taking out loans that are six times larger than their annual income.

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Market Essentials - September 2021

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Market Essentials - September 2021

Welcome to Spring! Traditionally the busiest time of the year for real estate nationwide. Typically, sales and listing volumes both rise from September to November, and while buyer demand and property supply increase over the season, the impact on prices is usually marginal.

As we enter September 2021 however, a large portion of the country remains in lockdown. Demand remains high, but stock volumes are low.

Data from Core Logic shows increasing median prices in most capital cities, quick sales and continuing real estate records, and as lockdowns lift, a robust recovery should follow.

On the plus side, vendor activity is predicted to increase, bringing better listing volumes to market. Mortgage rates remain low, household savings have grown, and international borders remain closed; these factors point to increased buyer activity.

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How has buying property changed during the pandemic?

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How has buying property changed during the pandemic?

The COVID-19 pandemic has forced the property market to adapt, from restricted open homes, online auctions, and the switch to digital communication over face-to-face. The recent Delta outbreak has resulted in further restrictions in NSW, with Greater Sydney under lockdown since the 26th of June. While restrictions are looking to lift with NSW approaching its vaccination target, there have been some major impacts on the process of buying a property that are expected to continue temporarily.

How have the recent COVID-19 restrictions impacted property buying?

The research process remains relatively unchanged. What has changed dramatically is the ability to thoroughly inspect a property and the shift from face-to-face to digital communication.

Communication with the agent

Due to the recent COVID outbreak and resulting restrictions, buyers must make contact with the real estate agent in advance of viewing an open home. Real estate agent Rosalie Gordon believes this has resulted in open homes being more exclusive.

“We are now screening the buyer before taking them through to open homes by asking what position they are in, whether finance is approved, if they are looking to buy property for investment or as a home, and whether they have already sold their current home.”

— Rosalie Gordon

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30,000 new housing grants released - do you benefit?

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30,000 new housing grants released - do you benefit?

On the 1st of July, the Australian Government made 10,000 new places available under the First Home Loan Deposit Scheme, the New Home Guarantee and the Family Home Guarantee, respectively.

This totals to 30,000 new scheme places released to support Australians buying a home. Under the First Home Loan Deposit Scheme and the New Home Guarantee, you can purchase a property with a deposit of as little as 5% without paying lenders mortgage insurance (LMI), which would be typically required for deposits under 20%.

The newly announced Family Home Guarantee lowers the deposit required to 2% without paying LMI for single parents with dependent children, regardless of whether or not you’re a first home buyer.

This is because the federal government guarantees the remaining value of a 20% deposit to the participating lender. There are over 30 participating lenders in the scheme through whom the scheme places are made available.

These spots are likely to be filled within a matter of months – so if you’re interested, it’s a good idea to reach out to your mortgage broker soon. But first, make sure that you meet the eligibility criteria below.

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Six factors affecting property market growth

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Six factors affecting property market growth

In March, the Australian housing market hit its fastest national growth rate in capital gains since 1988. Record low interest rates, heightened consumer confidence due to overperforming economic recovery, and Government stimulus measures such as the First Home Loan Deposit Scheme have spurred demand.

But there are also factors that indicate that this growth is at its peak. A continued boom is unsustainable, and markets are inherently cyclical. According to property market research firm CoreLogic there is unlikely to be a dramatic decrease in the housing market, but that its growth will slowly taper in the next few months – a change that is indicated by the following factors.

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The current property boom highlights a disparity amongst Australians

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The current property boom highlights a disparity amongst Australians

With the start of 2021 came an unprecedented growth in property prices, mortgages, and auctions. Several factors such as record low interest rates, decreased spending on recreation and holiday due to COVID, and government incentives spurred movement in the housing market, as Australians took the opportunity to invest in property.

In July, housing values in Australia increased by another 1.6%, bringing housing values to 14.1% higher over the first half of 2021, and 16.1% higher over the past year, as reported by CoreLogic. Australia’s property market has not seen this pace of annual growth since February 2004.

A combination of record low interest rates and active listings at approximately -26% below the five-year average in contrast to dwelling sales which have reached 40% above the five-year average has contributed to the property boom.

Increased housing values have allowed existing property owners to reap benefits, while despite lowering interest rates, prices soar out of reach for some looking to get in the market.

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