House prices are tipped to fall by 11 per cent over the next three years as the COVID-related economic downturn bites, and for one group of Australian homeowners, it could not come at a worse time.
There are an estimated 730,000 investors, many of whom are self-funded retirees or people planning for retirement, who have taken out interest-only bank loans in the belief property was a safe bet.
Coronavirus has already delivered challenges, including rent arrears and the prospect of losing their tenants altogether.
But now these private landlords are facing big hikes in their monthly bank repayments as they switch from interest-only to paying off the principal of their loans as well.
Max Green is one of many who has been trying to negotiate with the banks for an extension to the interest-only period of his loans.
The 69-year-old and his partner have bought two properties — one in Brisbane, the other in Perth — in the past 10 years to help fund their retirement.
But the value of the Brisbane property has flatlined and the Perth property, a unit in the city’s outer suburbs, has plummeted from $425,000 in 2016 to $300,000 today, according to a recent valuation.
“The intent was … to provide us with some equity growth in the properties, which would then assist us in the future once I had retired,” Mr Green said.
“We had been advised that we would be able to extend the interest-only period.”
Instead, the couple face paying an additional $1,900 a month from July as they begin to pay off both the principal and interest on their loans.
Mr Green said he still enjoyed his work as a project manager at WA’s Water Corporation, but conceded his retirement ambitions had not gone to plan.
He said he would now be forced to either keep working beyond 70, dip into the couple’s superannuation to pay the banks, or sell at a loss.
Investors brace for massive losses
Others with similar investment plans have already decided to cut their losses and are now facing negative equity as a result — where their home is worth less than the amount they owe.
Wayne Grimes, 50, said he couldn’t help but laugh when he considered the price he would likely now get for his luxury investment unit.
“I’m laughing because it is just ridiculous,” he said.
This article is republished from www.abc.net.au under a Creative Commons license. Read the original article.
‘Absolutely inundated’: Lack of stock drives Queensland interest
As open-home restrictions begin to lift, a Brisbane agency has reported huge interest from first home buyers clamouring to get onto the property ladder despite COVID-19.
Coronis Agency has reported that it had more than 80 potential buyers attend the first scheduled open home of an Archerfield property.
The three-bedroom, two-bathroom property only hit the market last Thursday and received more than 56 phone and email enquiries within 48 hours.
Director Anthony Hunt said the agency was “absolutely inundated with buyer enquiries within 30 minutes of the property going live, with many buyers asking to schedule a private inspection on the Thursday night or Friday as they were eager to beat the rush on Saturday”.
“In the end, I opened the property up on Friday afternoon and had nine groups of buyers turn up purely from responding to their calls and emails,” he explained.
He added that at the Saturday open home, which was the first advertised inspection, “it took more than an hour to get everyone through the property due to the social distancing restrictions, but on the whole, everyone was really understanding and willing to wait their turn”.
Mr Hunt said the general feedback he received from most parties is that “they want to buy something right now, despite everything going on with COVID-19”.
“Many of them are first home buyers with pre-approval who are looking to get their foot on the property ladder and aren’t fazed about going out in public to attend open homes,” he said.
The director believes that what they’re more concerned about is the lack of properties to choose from and how quickly properties are selling at the moment.
By Saturday afternoon, Mr Hunt said he had received four offers and it was under contract by Saturday night for a price that exceeded the seller’s expectations, “so they’re very happy”.
While 140 Granard Road was “beautifully presented”, the agent expressed the opinion that the main reason it was so popular with buyers was because it offered “great value for money in a suburb only 15km from Brisbane CBD”.
He iterated that buyers are willing to look outside of their desired suburb to purchase the right property.
His message to those who are considering holding off on selling? Don’t wait.
“In the past week, the Coronis sales team has received more than 1,000 buyer enquiries, and from that, 550-plus groups attended an open home on the weekend, so there is no doubt about it — buyers have a strong appetite to purchase now, they just need more options to choose from,” he concluded.
This article is republished from www.smartpropertyinvestment.com.au under a Creative Commons license. Read the original article.
How COVID-19 has impacted tourism hotspots
New research has revealed the impact COVID-19 restrictions have had on Queensland’s tourism property markets.
The Palaszczuk government’s mandatory COVID-19 restrictions went live from 20 March 2020, with knock-on effects to the state’s property market.
However, despite the perceived effects, the REIQ said the sunshine coast capital – Brisbane – has reported a relatively stable vacancy rate of 2.44 per cent for the last quarter.
But how has this translated to tourism hotspots?
According to the REIQ, this quarter’s rental vacancy data provides a peek at the initial impacts of the coronavirus pandemic across popular tourism hotspots in particular.
“The Gold Coast saw an end-of-summer sharp spike result in a 1.2 per cent rise to 3 per cent (with only a 0.4 per cent increase in the Scenic Rim region).
“Up the coastline and it’s not so different around the Bay Islands district where the archipelago average soared by 2.7 per cent to a vacancy rate of 4.3 per cent (making up part of the state’s 10 per cent weakest regions).
North of Brisbane
When it comes to areas slightly north of Brisbane, the REIQ noted that most areas have remained stable with little movement either way.
“For example, Caboolture saw a drop in vacancies (-0.6 per cent to 0.8 per cent) while Redcliffe saw a marginal rise of 0.1 per cent to level out still within tight vacancy range at 2 per cent,” REIQ said.
“Further north and the Sunshine Coast hasn’t offered up any side effects from COVID-19 as of yet, with a 0.2 per cent drop in vacancy rates across the region to 1.4 per cent.
“Even inland across the majestic hinterland region the average vacancy rate reflected a 0.8 per cent decrease to 1.5 per cent.”
There’s some “unmistakeable movement upward” when it comes to areas back along the coastline, according to the REIQ.
“Early tremors of COVID-19 [are] attributable to those results recorded in Noosa (+1.3 per cent to 3.6 per cent) and Fraser Coast (+1.4 per cent to 3.1 per cent) which includes Hervey Bay (+2.4 per cent to 4.3 per cent),” it said.
“Drive a few hours north and more stable yet tight vacancy rates become the norm once more from Bundaberg (+0.9 per cent to 2.4 per cent) through to Rockhampton (-0.3 per cent to 1.3 per cent).
“However, the outlier here is Gladstone. With mining and infrastructure projects on the go, demand for trades has boomed – with vacancy results reflecting rental demand by a staggering 2.5 per cent to a record low of 1.6 per cent for the region.”
The REIQ noted Mackay represents the only area across Queensland that’s remained unchanged over the quarter (2.5 per cent).
Far North Queensland
Townsville remained relatively unscathed with vacancy rates fairly stable (+0.8 per cent to 2.9 per cent), according to the REIQ.
Meanwhile, Mount Isa saw a 1.1 per cent drop to 2.5 per cent, proving the state’s largest township maintained a healthy rental market in the first quarter of 2020.
“Unfortunately, the same couldn’t be said for Cairns,” REIQ said.
“As the gateway to the Great Barrier Reef, Port Douglas and the Daintree Rainforest, the tourism-driven region closed out the quarter with a 1.8 per cent increase to 3.5 per cent rental vacancies – teetering on the edge of weak market conditions after experiencing record-low vacancies over the last 12 months.”
Commenting further on the results, REIQ CEO Antonia Mercorella said:
“Any further surges in vacant properties across Queensland’s tourism regions are likely to be addressed by future tourism-focused initiatives to boost domestic holidaymakers.”
“It’s an optimistic start to the year. The next quarter will reveal more about the true impact of COVID-19 on the Queensland rental market.”
Home Sales Fall as 600,000 Jobs Lost
The loss of 594,000 jobs in April is the biggest monthly decline in employment on record, far surpassing the previous record of 74,900 jobs in November 1992.
While the official ABS jobless rate climbed by one percentage point to reach 6.2 per cent, the number of jobs lost, and mass layoffs, paints a much starker picture of the impact of Covid-19 on job security and the broader economy.
But the impact of job losses on the property market is uncertain at best. In its April financial stability review, the Reserve Bank said that while the pandemic would impact the turnover of housing stock, it “remains unclear how this will affect residential property prices”.
The Commonwealth Bank is the latest lender to model bearish house price falls—warning that a second wave of infections could cause house prices to fall by up to 32 per cent.
The bank’s chief executive Matt Comyn said that a second lockdown could worsen joblessness and put the housing market under significant pressure.
University of Sydney research fellow and economist Cameron Murray points out that unemployment is not helpful in predicting house price movements.
“The last time we had similar unemployment numbers, Sydney house prices increased 13 per cent the next year,” Murray said.
Murray said that reports of an uptick in enquiry and increasing investor interest means that it is hard to know which way prices will go.
“Don’t dismiss the possibility of a sharp boost in house prices over 2020.
“If foreign buyers come back into the market then we are in for a multi-year property upswing.”
With anecdotal evidence that there has been an increase in enquiries—Australia’s largest residential developer Stockland has reported a boost—there’s also reports of a surge in demand from Chinese buyers.
“Australia has so far managed the pandemic well and looks even more appealing to foreign buyers than in the past,” Juwai IQI executive chairman Georg Chmiel said.
“We still have strong demand from Chinese buyers for Australian property.”
Meanwhile, the sale of new homes fell to record lows in April, declining 22.8 per cent over the month according to the Housing Industry Association’s sales figures.
HIA chief economist Tim Reardon said that falling sales has pushed project cancellations to more than four times the typical rate.
“During shocks such as the GFC or the 2018 credit squeeze, the cancellation rate peaked at 17 per cent.
“In net terms, this equates to a contraction of more than 50 per cent in the volume of new building work, [which] will be felt in the second half of 2020.”
This article is republished from theurbandeveloper.com under a Creative Commons license. Read the original article.
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