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Brisbane first-home buyers need 4.5 years to save, despite pandemic

birsbane home buyers
Low interest rates, falling prices and less smashed avo on toast have mixed a prime purchasing cocktail for Brisbane’s first-home buyers who are now taking less time to save for a unit compared to this time last year.

New research from Domain has revealed that despite the COVID-19 pandemic, entry-level home hunters have shaved two months off the time needed to save the average deposit before climbing their initial steps on the unit property ladder, with real estate experts citing an enticing blend of government grants, forced financial good behaviour and the still-competitive unit market as key drivers.

According to figures released in the latest Domain First-Home Buyers Report on Thursday, it’s now taking just three years and three months for the average couple to bank a 20 per cent deposit for a unit, which is two months faster than September 2019, and a whopping seven months quicker than half a decade ago.

Time to save a deposit, entry-level units

CityEntry price20% depositTime to saveAnnual change, months5-year change, months
Sydney$585,000$117,0005 years 7 months1-5
Melbourne$424,500$84,9004 years 3 months1-1
Brisbane$328,000$65,6003 years 3 months-2-7
Adelaide$285,000$57,0003 years02
Perth$257,000$51,4002 years 5 months-1-6
Hobart$320,000$64,0003 years 6 months112
Darwin$200,000$40,0001 years 8 months-2-22
Canberra$370,000$74,0003 years 4 months0-1

Source: Domain

In Sydney, it takes the average first-home buyer six years and six months to save for a 20 per cent deposit on an entry-level abode.

The research assumes a couple on average earnings for a 25-34-year-old in their city can save 20 per cent of their post-tax income every month, deposited in a standard online savings account. It excludes transactional costs of buying property.

Entry-level homes are based on the 25th percentile, or the cheapest quarter of homes for sale.

In Brisbane, this means a budget of $450,000 for a house, for which a 20 per cent deposit would be $90,000.

But while the Domain report painted prime conditions for Brisbane’s first-home buyers in the unit sector, the average saving time climbed slightly for those purchasing a house (now four and a half years compared to a month less last year), with experts also warning the good times could soon end as stock levels tighten.

Domain senior research analyst Dr Nicola Powell said while the figures highlighted the city’s long-suffering unit sector, a decline in new builds and developments could spark a new trend in coming months.

“Deteriorating unit prices have really helped to fast-track that journey to first-home ownership … but I do think that construction cycle is coming to an end, so I wonder if we are also at the end of these falling prices,” she said.

“So it will be interesting to see what does unravel.

“I also think many first-home buyers are seizing this [current] opportunity to gain market access.

“There are so many things in place to entice them such as low interest rates and a number of grants … there’s the federal super scheme and the federal deposit scheme which guarantees a 5 per cent deposit, so that has super-charged that journey.”

While the Domain report revealed a two-month time drop across Greater Brisbane, the data further unearthed the city’s hottest spot for first-home buyers, with Cleveland-Stradbroke, Bald Hills-Everton Park and Kenmore-Brookfield-Moggill undergoing the greatest reduction in the time taken to save an entry-level house deposit.

Dave Harding, from Ray White Capalaba, said the prime first-home buying conditions in his patch had sparked a level of out of control activity he’d never seen before in the base end of the Redlands market, which was leading to an increase in property prices.

“I’m baffled [by the rate of activity] … but with those first-home buyers, I think it could be that they were forced to save during COVID … and they have moved out to the Redlands and the Capalaba area,” Mr Harding said.

“Before COVID most of our buyers were from the Redlands area, but now 70 per cent are from outside of it … and while I thought something like a school or a new harbour would put a spotlight on the Redlands map, what sped it up was the pandemic.

Time to save a deposit, entry-level houses

CityEntry price20% depositTime to saveAnnual change, months5-year change, months
Sydney$680,000$136,0006 years 6 months24
Melbourne$600,000$120,0006 years216
Brisbane$450,000$90,0004 years 6 months18
Adelaide$375,000$75,0003 years 11 months03
Perth$366,580$73,3163 years 5 months-1-6
Hobart$380,000$76,0004 years 2 months315
Darwin$362,000$72,4003 years 1 month-1-7
Canberra$606,060$121,2125 years 5 months412

Source: Domain

“Since COVID, people can work from home and they aren’t going to the entertainment in the city. Now anything under $600,000 is flying out the door.”

But while that attractive cocktail of purchasing conditions had fuelled the surge, he said a lack of stock was sparking fierce competition.

Ray White Holland Park agent Steve Landeta also reported a strong rise in first-home buyer activity and said many were hitting the market at a sprint, buoyed by low interest rates and the government deposit scheme.

“A lot of people weren’t spending money with COVID … and they aren’t going out as much,” Mr Landeta said.

“But stock levels are very low at the moment especially in these areas [such as Holland Park] and next year there’s a lot of economists saying early-to-mid next year it will be a bit shaky.”

The time taken to save a deposit for an entry-level unit in Capalaba and Holland Park-Yergona dropped 6.5 per cent and 6.7 per cent respectively over the past year, while on the other end of the spectrum, first-home buyers of budget units in Brisbane’s inner east are now taking 6 per cent longer to save their deposit.

This article is republished from https://www.domain.com.au/  under a Creative Commons license. Read the original article.

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Finance

RBA Urges Banks to Keep Lending

RBA Urges Banks to Keep Lending-min

The Reserve Bank is urging major banks to use their buffers to keep lending to support business and developers following the largest economic contraction since World War II.

The Financial Stability Review showed banks’ share-to-price book ratios have recovered from March but they are still below pre-pandemic levels “reflecting a decline in the earnings outlook and a reduction in investors’ risk appetite”.

Although banks may want to maintain capital buffers, reducing credit would have a significant impact on the economy according to the RBA.

According to stress test simulations in the report showed banks have sensitivity to falls in GDP, property prices and unemployment.

Despite this uncertainty, housing finance grew 12.6 per cent in August off the back of government stimulus packages.

However, there were still risks associated with commercial real estate with conditions deteriorating in retail and the once tight office sector according to the RBA.

“The Australian banking system entered the pandemic with a much stronger capital position than in previous downturns,” the RBA review said.

“This balance sheet strength has enabled banks to absorb shocks, rather than amplify them as they did in the GFC.

“Banks have continued to lend, including enabling businesses to draw down lines of credit as a precaution early in the crisis.

“They do, however, face the prospect of sharp rises in borrower defaults.”

The review recognised some banks may be unwilling to eat into buffers due to facing automatic restrictions on earning distributions and acquiring lower capital ratios which could limit access or increase cost of funding.

Banks also want to avoiding regulatory repercussions as a way of reducing their own risks and protecting themselves.

“If banks were to cease lending in an attempt to conserve their capital buffers, the reduction in credit availability would have a significant contractionary impact on the economy,” the RBA said.

“By amplifying the downturn, this contraction in credit supply would ultimately be detrimental to the banking system.”

This article is republished from theurbandeveloper.com under a Creative Commons license. Read the original article.

________________________________________________________________________________

RENEE MCKEOWN

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Finance

Stimulus Pushes Lending to Record Highs

Stimulus Pushes Lending to Record Highs

Government stimulus has shown up in the latest lending figures as Australians take advantage of record low interest rates and government support to invest in new housing.

Housing finance grew 12.6 per cent in August, outstripping the previous 10.7 per cent gain in July, with first home buyers and owner-occupiers leading the charge.

First home buyers grew 18.3 per cent, while owner-occupiers clocked a 13.6 per cent increase—the largest month-on-month rise in the history of the series.

Housing finance figures are expected to increase again when the removal of responsible lending curbs take effect and place upward pressure on house prices despite stagnant net migration acting as a counter weight.

ABS’ August figures reflect customer demand in June and early July—prior to Victoria imposing its stage 3 and stage 4 restrictions.

Westpac economist Matthew Hassan said the impact on lending from Melbourne’s lockdown will be seen in next month’s figures.

“However, some other drivers of the strength in August will continue,” Hassan said.

“Reopening rebounds are likely to gather momentum in other states—‘catch-up’ activity augmented by low interest rates and ongoing fiscal supports.”

Meanwhile, the Reserve Bank said that rising levels of financial stress will increase the risk of home loan defaults.

In its bi-annual financial stability review, the bank said that if the unemployment rate hits 10 per cent it will double the rate of housing arrears.

“While credit is available at very low interest rates, reduced housing demand from very low immigration and the rise in unemployment contribute to the risk of further falls in housing prices,” the central bank said.

“This increases the potential for losses for lenders in the event of a rise in distressed sales.”

Mortgage arrears are expected to increase once the payment deferrals period ends.

Almost 900,000 mortgages, about one in 10, were deferred in March. By August, 9 per cent of loans worth $160 billion remained on deferral.

S&P analyst Erin Kitson said mortgage arrear rises are likely to be more pronounced in Victoria and areas where tourism is a major employer.

This article is republished from theurbandeveloper.com under a Creative Commons license. Read the original article.

________________________________________________________________________________

ANA NARVAEZ

________________________________________________________________________________

Continue Reading

Finance

Stimulus Pushes Lending to Record Highs

Stimulus Pushes Lending to Record Highs

Government stimulus has shown up in the latest lending figures as Australians take advantage of record low interest rates and government support to invest in new housing.

Housing finance grew 12.6 per cent in August, outstripping the previous 10.7 per cent gain in July, with first home buyers and owner-occupiers leading the charge.

First home buyers grew 18.3 per cent, while owner-occupiers clocked a 13.6 per cent increase—the largest month-on-month rise in the history of the series.

Housing finance figures are expected to increase again when the removal of responsible lending curbs take effect and place upward pressure on house prices despite stagnant net migration acting as a counter weight.

ABS’ August figures reflect customer demand in June and early July—prior to Victoria imposing its stage 3 and stage 4 restrictions.

Westpac economist Matthew Hassan said the impact on lending from Melbourne’s lockdown will be seen in next month’s figures.

“However, some other drivers of the strength in August will continue,” Hassan said.

“Reopening rebounds are likely to gather momentum in other states—‘catch-up’ activity augmented by low interest rates and ongoing fiscal supports.”

Meanwhile, the Reserve Bank said that rising levels of financial stress will increase the risk of home loan defaults.

In its bi-annual financial stability review, the bank said that if the unemployment rate hits 10 per cent it will double the rate of housing arrears.

“While credit is available at very low interest rates, reduced housing demand from very low immigration and the rise in unemployment contribute to the risk of further falls in housing prices,” the central bank said.

“This increases the potential for losses for lenders in the event of a rise in distressed sales.”

Mortgage arrears are expected to increase once the payment deferrals period ends.

Almost 900,000 mortgages, about one in 10, were deferred in March. By August, 9 per cent of loans worth $160 billion remained on deferral.

S&P analyst Erin Kitson said mortgage arrear rises are likely to be more pronounced in Victoria and areas where tourism is a major employer.

This article is republished from theurbandeveloper.com under a Creative Commons license. Read the original article.

________________________________________________________________________________

Ana Narvaez

________________________________________________________________________________

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