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Home loan restrictions ‘torturous’, CEOs say

September 27, 2019

Matthew Cranston| Australian Financial Review|26 September 2019

https://www.afr.com/policy/economy/property-lending-restrictions-torturous-chief-executives-20190926-p52v1y

The chief executives of Australia’s biggest real estate companies are backing the government’s calls to break overly stringent lending restrictions to get credit flowing again and avoid a dangerous slowdown in construction.

Speaking at The Australian Financial Review Property Summit in Sydney, the CEOs also demanded that the government start to act on measures to stimulate business investment and cut red tape estimated to cost the sector $176 billion a year.

Mirvac chief executive Susan Lloyd-Hurwitz says lending curbs are “torturous”. AFR

With financial markets pricing in a 70 per cent chance of a 0.25 percentage point rate cut this Tuesday to 0.75 per cent, pressure is building on banks and regulators to start freeing up credit.

Mirvac chief executive Susan Lloyd-Hurwitz said Treasurer Josh Frydenberg’s warning on Thursday – that responsible lending laws were being applied too stringently and would hit the property market – were accurate.

“Credit is flowing but it’s very painful for customers. It just takes so long,” Ms Lloyd-Hurwitz said, revealing that she had first-hand experience of the difficulties in securing a loan after buying a property at Mirvac’s Eastbourne development in Melbourne.

“Personally I just settled myself and it was a very painful process. It’s torturous.

“People tell us about being assessed on how many coffees they drink. It can get nonsensical about how much scrutiny there is.”

The chief executive of Australia’s largest listed property developer, Stockland’s Mark Steinert, said regulators were not interpreting the law correctly when assessing the way banks tried to lend.

He said ASIC’s decision to appeal against the infamous “wagyu and shiraz” court case it lost against Westpac after alleging the bank breached responsible lending was “really problematic”.

“As the treasurer said, caveat emptor … We need to allow judgment in lending if we want the capital system to work efficiently,” Mr Steinert said.

Credit history

“Credit history in Australia is very good, some of the lowest credit loss ratios in the world.”

Ms Lloyd-Hurwitz said that without credit flowing again, Australia could find itself with a housing shortage within a year, echoing concerns from the Reserve Bank.

“Very soon we are going to be in a supply shortage situation,” she said.

Mr Steinert agreed. “We need 180,000 dwellings a year to keep up with demand, and it’s not going to happen.”

Treasurer Josh Frydenberg greets Mirvac CEO Susan Lloyd-Hurwitz at the Property Summit on Thursday. Peter Braig

He said there was “virtually no capacity for mid-tier developers”, adding that huge red tape constraints in the order of “$176 billion” were hindering development and this would flow through to construction activity within 12 months.

The value of total construction work was down 3.8 per cent in the June quarter to $48.8 billion. It has triggered warnings from economists about weaker GDP.

Reserve Bank governor Philip Lowe said the construction downturn could lift property prices, which have already risen 1.9 per cent in Sydney in three months.

“It seems to me quite possible that we could have a period now of rising housing prices because construction activity is slowing while the population is still rising quite quickly the world. So there are some underlying drivers of housing prices.”

The Treasurer and Prime Minister Scott Morrison have warned banks not to be too “sheepish” and to do away with an “instinctiveness” towards overly tough lending standards.

On Thursday, Mr Frydenberg told the Summit he expected banks to pass on any interest rate cut that might be delivered this Tuesday.

“My message to them is to cut as much as you can. The RBA governor is saying that they should. I think banks pay attention to those comments,” he said.

Home lending has started to rise again, picking up 5.1 per cent in July, marking its biggest monthly gain in four years, but system lending is still much lower than the double-digit growth the banks were reporting last year.

Regulations such as the 10 per cent cap on investor lending growth, the 30 per cent cap on interest-only loans and the 7 per cent serviceability buffer have been lifted in the past year, helping to turn this around.

While the government has been pushing for credit growth, it has also been urging greater business investment.

Call for genuine incentives

However, the chief executive of the country’s biggest office landlord, Dexus’ Darren Steinberg, reacted to the investment calls by suggesting that the government deliver genuine incentives.

Evoking Donald Trump’s tax cut incentives that attracted significant investment from Australia’s richest person Anthony Pratt, Mr Steinberg said tax breaks were overdue.

“It’s a real shame that the government’s proposed corporate tax cuts a year or so ago were abandoned because of political pressure.

“Hopefully, the governments work together to ensure there’s some kind of physical incentive for businesses to spend more money in Australia.”

He said that in terms of the federal government’s mooted business investment allowance, there was already plenty of competition from overseas.

“Singapore and Hong Kong government’s huge tax rebates very strongly attract Australian businesses out there. And it’s fierce competition. But we haven’t woken up here.”

“Our customers have choices where they can allocate their money to the west coast of America rather than Australia,” he said.”

‘Don’t force banks to curb loans’

September 27, 2019

Matthew Cranston| Australian Financial Review| 26 September 2019

https://www.afr.com/policy/economy/treasurer-to-rein-in-asic-on-home-loans-20190925-p52utj?fbclid=IwAR3TcwNdxK3uFb4agZ23jHE2UTvbPaVDttWXP6OkZyzRIQ2ZmoFhyE7VTt8

Treasurer Josh Frydenberg has pushed back against regulators being too stringent in enforcing responsible lending rules, warning that this could penalise “hard-working families” trying to get a housing loan and hurt the economy.

In a speech to The Australian Financial Review’s Property Summit in Sydney on Thursday, Mr Frydenberg welcomed the pick-up in capital city housing prices, citing Treasury research that a 10 per cent increase in house prices could boost GDP by 0.5 per cent.

Mr Frydenberg said he “appropriate” application of responsible lending obligations legislated a decade ago was central to strong and competitive credit markets.

But he added that the shadow of the banking royal commission and the Australian Securities and Investments Commission’s litigation against the banks have given rise to uncertainty about how the laws should be implemented, calling for “personal responsibility and personal accountability” to remain central to bank lending.

“It’s in everyone’s interest that the aspirations of hard-working families are not collateral damage in this regulatory process,” Mr Frydenberg said.

“If responsible lending laws are applied too stringently, they will also negatively impact consumer behaviour…”

The Treasurer’s views back up Prime Minister Scott Morrison’s warning to banks on Tuesday not to be too “sheepish” and to do away with an “instinctiveness” towards overly tough lending standards.

While regulations such as the 10 per cent cap on investor lending growth, the 30 per cent cap on interest-only loans and the 7 per cent serviceability buffer have been lifted in the past year, signs of improved home loan lending have only just started to show.

“Clearly, the risk that the provision of credit may cause substantial hardship to some should not result in a significantly reduced ability to access credit by the vast majority of borrowers,” Mr Frydenberg will say.

‘Principles-based approach’

“To date, the Australian Securities and Investments Commission has adopted a principles-based and scalable approach. This has allowed flexibility for lenders to appropriately take into account the facts and circumstances of each case and vary the degree of inquiry and verification depending on the customer risk involved.

“Common sense dictates that a sensible balance needs to be struck because an unduly restrictive application of these obligations can do as much harm as an overly lax one.”

Earlier this month, ASIC launched an appeal against a Federal Court judgment in the so-called “Wagyu and shiraz” case that found Westpac had not breached responsible lending laws more than a quarter of a million times.

ASIC claimed Westpac used a “frugal” benchmark – the household expenditure measure (HEM) – to estimate potential borrowers’ living expenses. It argued that Westpac approved some loans using the HEM, when the customers’ actual declared expenses were higher than the benchmark.

The case was dismissed by Justice Nye Perram, who said: “I may eat Wagyu beef every day washed down with the finest shiraz but, if I really want my new home, I can make do on much more modest fare.”

Mr Frydenberg warned against too much responsibility being thrown on to bank lenders rather than mortgage borrowers.

“The value of personal responsibility and personal accountability must remain central to our society and if the pendulum swings too far in the abrogation of these values, then it will inevitably reduce the availability of credit and increase its price,” he told the Financial Review Summit.

Home lending on the rise

ASIC is currently updating its guidelines for responsible lending and received 72 submissions earlier this year from stakeholders and observers over its proposal.

While the banks have tightened up lending following the royal commission into banking and superannuation, home lending has already started to pick up again, along with property prices in the main cities.

Home lending jumped 5.1 per cent in July, marking its biggest monthly gain in four years, as owner-occupiers and investors roared back into action as sentiment changed and credit curbs eased.

The monthly increase picked up on June’s 3.2 per cent gain and lifted the total of monthly new loan commitments to $17.9 billion.

This pick-up in lending has been followed by a surge in prices in Australia’s two biggest property markets over August. Property values increased 1.6 per cent in Sydney and 1.4 per cent in Melbourne, after much milder growth in June and July.

Mr Frydenberg noted that Treasury estimates that a 10 per cent increase in house prices could result in a corresponding lift to GDP of about 0.5 per cent. The RBA expects that a 10 per cent rise in household wealth could increase the level of consumer spending by up to 1.5 per cent.

Reserve Bank of Australia governor Philip Lowe said on Tuesday that he foresaw another upswing in property prices and that he had no concerns with that as long as there was no surge in credit growth.

“It seems to me quite possible that we could have a period now of rising housing prices, because construction activity is slowing while the population is still rising quite quickly the world. So there are some underlying drivers of housing prices,” Dr Lowe said.

“From a monetary policy perspective, it’s not an issue at the moment. It would become an issue if credit growth accelerated rapidly, but I see no signs of that at the moment.”

Credit growth figures for home and business lending will be released by the RBA on Friday.

Mr Lowe also said lower interest rates and rebounding house prices were not having the same effect on consumption as he had hoped in the past.

“Once upon a time, when we lowered interest rates, people would run off to the bank to borrow to kind of go on a holiday or buy furniture or kind of do some spending, they don’t do that anymore.”

“When we lower interest rates, they are more likely to go to the bank and say, ‘Look, I want to pay off my mortgage’,” Dr Lowe said.

Household consumption growth slowed in the June quarter to 0.4 per cent, and moderated to 1.4 per cent on an annual basis according to the Australian Bureau of Statistics, just above the RBA’s revised forecast of 1.3 per cent.

“The main source of domestic uncertainty continues to be the strength of household spending,” Dr Lowe said.

Bank Funding Eases

August 23, 2019

Pete Wargent BlogSpot| 20 August 2019

https://petewargent.blogspot.com/2019/08/bank-funding-eases.html

Funding costs fall
There was a lot of hype about rising interest rates and funding costs last year, but that’s all dissipated.

Both 3-month and term are where Aussie banks hedge, fund, and borrow, and deposit flows have been solid.

3-month bills are now tracking at under 1 per cent.

As appetite for mortgage lending picks up I expect we’ll see more stories about mortgages being available from 3 per cent or even lower.

Upside-down economy: The Banks Charging the Rich to Deposit their Money

August 23, 2019

Jonelle Marte| Sydney Morning Herald| 22 August 2019

https://www.smh.com.au/business/banking-and-finance/upside-down-economy-the-banks-charging-the-rich-to-deposit-their-money-20190821-p52j4l.html

The typical banking relationship looks something like this: Banks pay interest to depositors. Then they use that cash to issue loans and charge borrowers a fee, pocketing the difference.

UBS in Switzerland announced last month that customers whose deposits exceed 2 million Swiss francs ($3 million) will need to pay an interest fee of 0.75 per cent after November.Credit:Bloomberg

But in some parts of the world, that relationship has been turned on its head.

Banks in Denmark and Switzerland recently announced new fees for wealthy clients with a lot of cash. Instead of earning interest, those savers will pay the banks for holding their deposits.

The shift toward negative interest rates in some parts of Europe comes as central banks step up efforts to spark stagnant economies. Nations that are in or near a recession are pushing rates down in the hopes it will encourage people to borrow and spend more. In some countries, including Japan, yields have been pushed so low that they are now in negative territory.Advertisement

Some banks – which struggle to make money when interest rates are low, much less negative – are finding creative ways to adapt to the new environment.

Jyske Bank in Denmark, announced Tuesday that it will start charging a 0.6 per cent fee in December for customers with more than 7.5 million Danish crowns ($1.7 million) in deposits. It follows a similar move from UBS Group in Switzerland, which announced last month that customers whose deposits exceed 2 million Swiss francs ($3 million) will need to pay an interest fee of 0.75 per cent after November.

Negative interest rates present challenges for banks, said Greg McBride, chief financial analyst for Bankrate.com. When rates are on the rise, banks can earn more off of loans. When rates are falling, banks have to lower what they charge on loans, reducing their profits. And when rates are negative, some banks, including the Jyske Bank in Denmark, are pushed to pay borrowers for taking out loans, upending their business model and removing a main source of revenue.

“If they’re paying borrowers to borrow money, that’s not a business,” McBride says. “The money has to come from somewhere.”

Hence, the charges on deposits.

The move from Jyske Bank was sparked by expectations that the negative interest rates in Denmark could last for several years. This month, the Danish lender began offering an interest rate of -0.5 percent on 10-year mortgages, meaning that borrowers over time would pay back less than what they had borrowed. Video Player is loading.

Global stock markets fell heavily as the fear of recession has increased.

“Conditions in money and capital markets remain very challenging,” UBS said in a statement. “We assume that this period of low interest rates will last even longer and that banks will continue to have to pay negative interest rates on customer deposits at central banks.” The fee applies only to deposits in Switzerland.

Some economists say negative bond yields could have unintended downsides. For example, some banks that are hesitant to charge savers for deposits because they don’t want to drive away customers might try to make up costs by increasing the rate they charge on loans, says Ben May, director of global macro research for Oxford Economics. In other cases, consumers spooked by negative interest rates may become more cautious and boost savings, instead of spending more, he said.

“You think ‘I’m not getting those high returns I was expecting any more so I’m going to have to save more,'” May said.

It’s important to remember that the fees on deposits are targeting the wealthy, which means most consumers will not be affected, McBride says. It may also be a while before U.S. banks follow suit.

Though investors and economists generally expect the economy to grow more slowly, some experts point to strong consumer spending as a sign that the US is not on the verge of recession. Interest rates are also still positive in the states and Federal Reserve officials have some wiggle room if they need to lower interest rates to boost economic growth.

The Washington Post

Sydney leads auctions to two-year high

August 23, 2019

Larry Schlesinger| Australian Financial Review| 18 August 2019

https://www.afr.com/property/residential/sydney-leads-auctions-to-two-year-high-20190817-p52i6n

The national auction clearance rate surged to a two-year high of 76.6 per cent this week based on preliminary CoreLogic figures, providing strong evidence of further strengthening of house prices this month.

This was well above last week’s final clearance figure of 67.8 per cent, despite the total number of scheduled auctions rising to 1221 from 1111 a week ago.

“As remaining results are collected, we expect the final clearance rate across the combined capitals will revise lower, however it will likely hold above 70 per cent which is something we haven’t seen since May 2017,” said CoreLogic national commentator Kevin Brogan.

19 Sargood Road, Toorak sold for over $7 million, well above agent estimates. Supplied

Leading the pack was Sydney, with a preliminary clearance figure of 81.7 per cent from 444 auctions, up from a final 76.2 per cent last week, while Melbourne returned 78.3 per cent from 588 auctions, up from a final 72.3 per cent last week.

The smaller auction markets – Canberra, Perth and Adelaide – also performed strongly returning preliminary clearance rates of 81.8 per cent, 71.4 per cent and 70.4 per cent respectively.

CoreLogic’s daily index shows house prices are set to rise moderately again in August on the back of lower mortgage rates and stronger sentiment, building on the small gains recorded by Sydney and Melbourne over the past two months.

Domain, which recorded a 73.4 per cent national clearance figure, reported that the top result over the weekend was the sale of a five-bedroom home at 19 Sargood Street, Toorak. It sold for $7.05 million through Marshall White Stonnington.

Buyer’s agent Emma Bloom, from Morrell & Koren, attended the auction and said the result indicated the market was showing signs of life.

“This home was due to go to auction about 10 weeks ago, but was postponed due to the vendor being unwell. At the time agents were quoting $6 to $6.6 million.

“It appears the hiatus has benefited the vendors, given all the uncertainty in June around the federal election,” Ms Bloom said.

As there were just two bidders Ms Bloom said it also showed the market was “not yet at full pelt” and “not flying”.

Ray White, the country’s biggest real estate agency, said the average number of people attending auctions rose to 74 in Melbourne, up from 46, while in Sydney average registered bidders and active bidders were “creeping north week on week” according to its NSW chief auctioneer Alex Pattaro.

“Sydney suburbs within 15 minutes of the CBD all performed extremely well today [Saturday]. Properties that are fairly priced, well positioned and close to amenities all sold convincingly above reserve prices,” Mr Pattaro said.

In Sydney, a four-bedroom flat in Manly sold for $4.55 million.

Ms Bloom said her firm was fielding a lot of inquiries from expats in the wake of the lower dollar. “We are acting for a few them.”

She added that the unrest in Hong Kong would also be a positive for local auction markets.

A Legacy of Defects

August 23, 2019

Sean Nicholls, Sharon O’Neill and Naomi Selvaratnam| ABC| 18 August 2019

https://www.abc.net.au/news/2019-08-18/how-bad-could-the-apartment-building-crisis-be-in-your-state/11413122

For the past two decades, Australia has been in an apartment building boom.

Governments have got out of the way, removing red tape and introducing private certification for an industry that’s worth more than $141 billion*.

But when Sydney’s Opal and Mascot Towers were evacuated because of structural cracking, the issue of defective high-rises was laid bare.

Experts have told Four Corners that the problem stretches across the country and many apartments built in the last 20 years are likely to contain some kind of defect.

So how bad could the problem be in your state?

Right now, there are plans to build close to 140,000 more apartments around the country.

There is no guarantee these new developments will be built under the stricter regulations recommended in a report by lawyer Bronwyn Weir and former senior public servant Peter Shergold, commissioned by Australian state and federal building ministers.

The report’s 24 recommendations included a crackdown on private certification, and registration of everyone involved in the building process.

At a meeting in July, building ministers committed to implementing the reforms.

Ms Weir warns the recommendations will do nothing to fix potential problems in the 667,394 apartments built in the last two decades.

“There’s a lot of existing building stock that has defects in it,” she said.

“There’ll be legacy issues for some time, and I suspect there’ll be legacy issues that we’re not even fully aware of yet.”

House prices in mining towns are surging again after the end of the boom sparked a huge crash

August 23, 2019

Andrea Mayes| ABC| 22 August 2019

https://www.abc.net.au/news/2019-08-22/mining-town-house-prices-booming-again-in-wa-queensland/11438774?section=business

Mining town real estate is rebounding, according to new figures which show both house prices and rental yields are rising in resource-rich areas at a faster rate than city housing markets.

Key points:

House prices in mining regions have fallen up to 80 per cent since the mining boom
This year, prices have surged as much as 30 per cent in WA and Queensland
But analysts caution prices are unlikely to reach boom-time peaks again

In Western Australia’s East Pilbara, home to the iron mining towns of Newman and Marble Bar, house prices have risen almost 30 per cent in a year and rental yields sit at a healthy 14 per cent on average.

It is a similar story on the other side of the country, where house prices in Queensland’s Central Highlands region — which encompasses the coal mining towns of the Bowen Basin — have jumped more than 30 per cent in the same period.

The price hikes come off a low base and after years of plummeting prices that followed the end of the mining boom.

In July 2012, the median price of houses in WA’s East Pilbara was $880,000, but by July this year that figure had plummeted to $170,000, a massive 80.5 per cent slump.

House prices in Port Hedland dropped almost 75 per cent in the same period, while the coal mining region of Isaac in Queensland saw housing prices fall 80 per cent, to an average of $124,000.

CoreLogic research analyst Cameron Kusher said the plummeting prices had finally brought renewed interest from investors.

“The price crash was brought on by a number of factors but the major reasons were that the mining boom ended and commodity prices fell, along with the fact that mining investment saw a sharp slowdown as many of the mines shifted from expansionary phase to production phase,” he said.

“The production phase typically requires far fewer workers than the expansion phase, so in this context fly-in fly-out workers certainly did contribute.”

Mr Kusher said mining investment had begun to pick up again, as had commodity prices, in turn contributing to a stronger housing market.

Newman houses in demand as business goes ‘ballistic’

Newman real estate agent Brett Philp has seen first-hand the reversal in real estate fortunes.

The town, about 1,100 kilometres north of Perth, is home to about 7,000 people — many of them employed in the nearby BHP iron ore mines — while a further 4,000 work on a fly-in fly-out basis.

Mr Philp said during the downturn from 2012–2013, the big miners cut back on maintenance of the many company-owned houses in Newman, resulting in them falling into a state of disrepair.

“Now they’re having to spend treble what they saved in maintenance to bring them back up to scratch,” he said.

Mr Philp said the rising iron ore price and ongoing demand from China had led to increased mining activity and a resurgence of business in the town.

“Now there’s no vacancies in the shopping centres and the industrial commercial sector is going ballistic,” Mr Philp said.

He said the situation had changed quickly.

“It’s a very volatile [real estate] market up here — it rises and falls and can do so overnight,” he said.

“But at the moment things are very active, and we are struggling to keep up with rental enquiries.

“I’ve got a four-bedroom, four-bathroom house on the market at the moment for $650 a week, and I’ve got two companies booked in to look at it.

“Anything modern or in a good location is getting lots of interest.”

Analyst doubts prices will return to boom peaks

Mr Kusher said prices were unlikely to return to levels seen in 2012.

“I hesitate to say they never will, but I think it will a long time before prices hit that level again,” he said.

“I am 38 years old and I doubt I will see prices as high again in those locations during my lifetime.

“Some growth is supportable but I think long-term ongoing price rises [are] potentially not.”

Mr Kusher said both investors and lenders were likely to be more cautious after the downturn, and coal mining towns were particularly susceptible in the future.

“Certain mining areas are also linked to commodities that are becoming less in demand, and as the world becomes more environmentally sensitive, demand for thermal coal for example is likely to reduce,” he said.

But in the immediate future, Mr Kusher said mining towns were enticing for investors.

“As interest rates continue to fall, investors will be attracted to higher-yielding investments and the yields on offer in mining towns, from that perspective, are already quite attractive,” he said.

Young Aussies ‘blindly optimistic’ about home ownership

August 23, 2019

Mortgage Business| 16 August 2019

https://www.mortgagebusiness.com.au/breaking-news/13713-young-aussies-blindly-optimistic-about-homeownership

Approximately 32 per cent of young Australians expect to purchase a home in the next five years. However, their aspirations are not driving them to take the appropriate steps required to enter the market, a new study has found.

According to new research commissioned by the Australian Housing and Urban Research Institute (AHURI) – which involved a survey of 2,477 Australians aged between 18-34 conducted by Swinburne University and Curtin University – 32 per cent of young Australians said they would be in a position to purchase a property in less than five years, while 36 per cent said it would take between five-10 years.

However, according to Dr Sharon Parkinson of Swinburne University, many young Australians were not taking the appropriate steps necessary to enter the property market.

“We found that many emerging adults had a ‘blind optimism’ that they would be able to achieve their housing aspirations despite not actively planning for their housing future,” Dr Parkinson said.

In contrast, 32 per cent of respondents said it was not possible or were not intending on purchasing (20 per cent) or didn’t know when they could purchase a property (12 per cent).

Respondents without any post-school or certificate level qualifications were least likely to believe that home ownership was possible, had no intention or were unsure when they would be in a position to purchase a property.

The research found that the main barriers young Australians identified to purchasing a home included the deposit gap (53 per cent), insufficient income (44 per cent), housing affordability concerns (cumulative 36 per cent) and a lack of permanent employment (34 per cent).

Aspirations put on hold

Moreover, the research found that many young Australians are putting their longer-term housing aspirations on hold to meet other life goals, which include completing education or gaining secure employment.

An analysis of data from the Australian Bureau of Statistics (ABS) found that only 17 per cent of young adults aged 18-24 lived independently in 2015-16, with most (66 per cent) still living with their parents.

Additionally, around a third of Australians aged 25-34 either remained or moved back with parents or lived in shared housing.

“As house prices and rents have risen ahead of incomes, it is taking longer for young adults to create their own independent and secure households, and for some it is not attainable in the foreseeable future,” Dr Parkinson added.

“This has led many to staying or returning to the family home, or taking up informal living arrangements such as living in group households.”

Almost a quarter of home owners mulling an upsize

August 23, 2019

Mortgage Business| 20 August 2019

https://www.mortgagebusiness.com.au/breaking-news/13721-almost-a-quarter-of-home-owners-mulling-an-upsize

The proportion of home owners considering an upsize has more than doubled over the past year, according to new Westpac research.

The latest Housing Sentiment Survey, commissioned by Westpac and conducted by Lonergan Research – which involved a survey of 1,033 Australians – has revealed that 37 per cent of respondents are “significantly more likely” to buy a new home, 24 per cent of which are considering to upsize – up from 11 per cent last year.

The rise was underpinned by a broader improvement in sentiment, with 51 per cent of Australians feeling more confident about the housing market than in 2018.

Further, 53 per cent of respondents said they were eager to capitalise on current market conditions, particularly in light of the record-low interest rate environment.

According to the research, “next home buyers” were most optimistic about the property market, with 71 per cent feeling more confident about the market than in 2018 and 66 per cent believing “now is a good time” to purchase their next home.

The survey found that 62 per cent of surveyed Australians intend on making some sort of change to their housing situation in the next five years, with 20 per cent motivated by interest rates, followed by falling house prices (18 per cent) and the desire to live in a new area (17 per cent).

Reflecting on the research, Will Ranken, general manager of home ownership at Westpac, said: “Record-low interest rates have created a positive environment for home owners to not only get ahead on their mortgage repayments but to also purchase their next home.

“Australians looking to upsize, many of which are families, are particularly motivated to purchase a larger space.

“When you consider more young people are choosing to live with their parents longer than ever before, it’s no surprise many are hoping to purchase a bigger home to help future-proof their family.”

Despite a growing willingness to enter the property market, almost one in five (18 per cent) of next home buyers said they were “feeling challenged” by a lack of property supply listed on the market.

However, the study found that home owners are now 50 per cent more likely to sell their home compared to last year, with 10 per cent intending to sell in the next 12 months.

“We’ve seen a recent rise in auction clearance rates, so it could be an opportune time for sellers to capitalise on growing demand, particularly in the lead up to spring, the time of year when house hunters tend to be the most active,” Mr Ranken added.

Meanwhile, more than half of Australians (55 per cent) think it’s important they’re informed about changing market conditions, and 42 per cent would like to be better educated to have a competitive edge over other home buyers.

Over a quarter (28 per cent) of next home buyers said they’re relying on online tools and calculators to help them along the home buying journey.

Buy Now – Pay Later?

August 23, 2019

Is now a good time to buy? The banks are lending us more, loan repayments have dropped and house prices appear to have stopped falling.

But rate cuts happen for a reason and the global economy seems to be spluttering – partly driven by fears of a trade war.

Historically, there have only been two causes of recession in Australia; unemployment and high interest rates – and both play into the 2019 home buyers’ favour.

Interest rates are at record lows and likely to get lower; already we are seeing rates that start with a 2
At 5.2 per cent unemployment is below the 6.5 per cent it reached due to the Global Financial Crisis and the Reserve Bank wants to drive it down further

However, it’s a mixed bag for the future of the economy. The Westpac-Melbourne Institute Leading Index, which indicates the likely pace of future economic activity, has turned positive for the first time since November last year. It rose from –0.09 per cent in June to +0.05 per cent in July.

At the same time, Key Purchasing Managers Index (PMI) figures show a deterioration in Australian business conditions, impacted by a lack of confidence across the economy.

And the spate of bad news on the quality of apartment construction does not help confidence

Undoubtedly, the immediate future is uncertain. But, for property, the fundamentals remain strong. Australia’s population clock will roar to beyond 25½ million within the next six weeks, having first passed 25 million just a year ago.

This is something worth bearing in mind when we see headlines about apartment ‘oversupply’.

Australia is a long way from boom conditions, but its even further from recessionary conditions.

Rush in to the market and you could regret it if you don’t do your research

Is now a good time to buy? Probably.

Credit history

Call for genuine incentives

‘Principles-based approach’

Home lending on the rise

Key points:

Newman houses in demand as business goes ‘ballistic’

Analyst doubts prices will return to boom peaks

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