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Houses Shrinking but Apartments Getting Bigger


Apartments are getting bigger, reflecting the Covid-driven desire for extra living space, but simultaneously the size of new houses being built across Australia is shrinking.

Nevertheless, compared to most other countries, Australians are still living large.

Overall, however, new homes—both detached houses and apartments—were on average slightly smaller nationally, according to the Commsec Annual Home Size Report.

Queensland was the only state to buck the trend, building bigger houses and apartments throughout 2020-21.

The size of the average new home in Queensland increased by 5.5 per cent over the period to an eight-year high of 205.8sq m.

Commsec chief economist Craig James told The Urban Developer that although the pandemic may have influenced home size, it was relatively early days in the construction cycle to clearly determine why Queensland was building bigger detached houses and apartments.

“But what we have seen in the past couple of years is continued strength in terms of the Gold Coast and the Sunshine Coast as destinations for people to live in and that may be an influence,” he said.

By comparison, new home sizes fell in New South Wales (-1 per cent), Victoria (-3.4 per cent), South Australia (-3 per cent), Western Australia (-1.6 per cent), Tasmania (-2.9 per cent) and ACT (-0.4 per cent). Northern Territory—where apartment sizes fell—recorded an increase in home sizes (3.8 per cent) off the back of bigger houses (5 per cent) being built.


▲ The experience of Covid has caused more families to look for bigger homes, particularly apartments.

The Commsec report—based on commissioned Australia Bureau of Statistics data on the average floor space of new homes built in Australia— indicated the average new apartment completed in 2020-21 was at an 11-year high of 138.3sq m, up 0.4 per cent over the year.

Meanwhile, the average free-standing house completed in the same period was 229.3sq m, down 2.9 per cent from seven-year highs.

Across the board, however, the size of the average new home built over 2020-21 was 195.8sq m, down 0.4 per cent from the six-year high set in 2019-20.

“There have been shifting trends in the sizes and styles of homes over the past decade and Covid-19 has been throwing another element into the mix,” James said.

“The big question is whether Aussies continue to embrace working from home, opting to move away from apartments in, or near the CBD, in preference for a larger home in a regional or suburban ‘lifestyle’ area.

“Or it may be just a case that bigger apartments will be sought—either close to capital cities or in the suburbs.”

In 2017-18, the average size of an apartment hit record lows but prior to Covid a higher proportion of Australians were choosing to live in apartments rather than detached houses.

“The experience with Covid-19 has certainly caused more families to look for bigger homes and caused others to add extra rooms to existing homes.,” James said.

“More Aussies want to achieve a situation where family members are able to live, work and relax at home. No doubt, builders and architects have been quick to respond to the new demands by families.”

According to the data, the biggest houses in Australia are being built in the ACT (259.3sq m), ahead of Victoria (238.8sq m); and Queensland (231.5sq m). Victoria is building the biggest apartment and townhouses (156.8sq m) followed by SA (149sq m)and the NT (141.5sq m).

Tasmania has both the smallest houses (176.5sq m) and apartments (91sq m).

The report also confirmed that Australia is living large compared to other countries and along with the US continues to build the biggest homes in the world. But the average size of new homes completed in both countries had fallen over the past year.

In the US, the average new home completed was 192sq m, about 2 percent smaller than the average Australian home.


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Apartment price growth could outperform house price growth in 2022: SQM

house price growth in 2022

SQM Research’s base case forecast is for property prices to rapidly slow from the current annual 20%-plus growth rates

The national housing market is starting to show signs of a peak, according to the SQM Housing Boom and Bust Report 2022.

But 2022 should see a turnaround in the unit rental markets and unit price growth could outperform that of houses.

“With houses being overvalued, apartments are relatively affordable and are expected to be in greater demand from an expected rise in net migration from interstate and overseas with Australia’s border now open,” Louis Christopher, managing director of SQM Research said.

“As 2021 draws to a close, the national housing market is starting to show signs of a peak.

“Auction clearance rates have fallen from their highs amid record listings.

“However, we may also be recording some seasonality and pent-up selling after vendors held off listings during the lockdown.

“Nevertheless, we expect the market to peak in 2022, with further expected intervention by APRA, which could come as early as next month, halting the price momentum.”

SQM Research’s base case forecast is for property prices to rapidly slow from the current annual 20%-plus growth rates.

The research house expects a slower rate of price rises over the first quarter of 2022, followed by price falls as early as mid-2022.

The price falls will be led by Sydney and Melbourne houses, given a significant overvaluation.

“These cities are the most are sensitive to even minor intervention by the banking regulator, the Australian Prudential Regulatory Authority (APRA) in home lending,” SQM boss Louis Christopher said.

SQM Research forecasts Brisbane will record the largest dwelling price rises over 2022, with prices predicted to rise between 8% to 14%, with prices supported by expected strong interstate migration flows given relatively good housing affordability compared to Sydney and Melbourne.

“This gain will nevertheless represent a slowdown compared to 2021 increases,” he said.

“If the Australian housing market does not slowdown by mid-2022, APRA will likely keep intervening in home lending until the market does slowdown.

“We cannot afford another year of 20%-plus gains across the national housing market.

“And so, to ensure a soft landing for the market, it is best we see additional intervention sooner rather than later to reign in property valuations.”


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House Prices Tipped to Rise 6pc in 2022

House Prices

The ANZ has upgraded its housing market forecasts, tipping house prices to lift by 6 per cent next year before falling by 4 per cent in 2023 as the post-pandemic boom cools.

The bank is predicting the strongest gains will be in Brisbane, lifting by 9 per cent’ Hobart, by 8 per cent; and Melbourne, by 7 per cent.

Sydney, where the median house price is a record-breaking $1.5 million after a 30.4 per cent surge, will moderate to 6 per cent next year before dropping by 4 per cent in 2023.

ANZ chief economist Felicity Emmett said affordability constraints and higher mortgage rates would mean that the gains in house prices over the past year would not be repeated in 2022.

“We expect housing construction to grow another 15 per cent by mid-2022, before activity brought forward by government incentives starts to dry up,” Emmett said.

The Reserve Bank of Australia recently reiterated its stance that the cash rate would not be changed until inflation is sustainably within their 2 to 3 per cent target range, implying a requirement for tighter labour markets and a “material” boost in wages growth before the inflation requirement is met.

ANZ said it expected the RBA to leave the cash rate— currently at 0.1 per cent—on hold until the first half of 2023.

APRA said the move aimed to reinforce the stability of the system and ensure borrowers could meet the level of debt they took on today and in the future.

“Another lift in the buffer or a measure which targets a combination of high debt-to-income and high-LVR loans is the most likely in our view,” Emmett said.

“But financial conditions are already tightening and the market may do some of APRA’s work for it.

“Indeed, the rise in fixed mortgage rates over the past few weeks may see lending slow enough to obviate the need for further macroprudential measures.”

The total value of residential real estate in Australia is now worth a record-breaking $9.1 trillion—almost a third more than all superannuation, the ASX and commercial real estate combined.

Low interest rates, which has propelled market growth, and the increase in housing prices has since pushed up the level of debt Australian homeowners have entered into.

Corelogic head of research Tim Lawless said any early lift in interest rates posed additional downside risk for housing values as well as the economy as a whole.

“We are already seeing the rate of house price appreciation ease due to affordability pressures, rising stock levels and, as of November 1st, tighter credit conditions,” Lawless said.

“Once interest rates start to lift, there is a strong chance that housing prices will head in the opposite direction soon after.”

Last month, Westpac updated its forecasts with similar expectations for housing prices to lift by 8 per cent next year before moving into a “correction phase” and dropping by -5 per cent the year after.

Harcourts Australia chief operating officer Lisa Pennell told The Urban Developer the plethora of forward predictions, despite their “good intentions”, usually failed to hit the mark, as the market is “inherently difficult to forecast”.

“Never would this uncertainty be greater than in the midst of a global pandemic with so many variables at play,” Pennell said.

“Almost 18 months ago the popular predictions were for a major crash—so we would not hazard a guess on what may or may not happen two years down the track.

“What we can say is that while supply has increased post NSW and Victoria lockdowns providing more opportunities for buyers who’ve been waiting in the wings for some time, demand remains healthy and we expect to trade strongly throughout the remainder of the year.”


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What Should Every Entrepreneur Know About Caveat Loans?


Who among us hasn’t entertained the idea of running your own business?

Thousands of Australians launched one throughout their middle years. If you wish to join them, though, raising funds might be a roadblock. However, here’s some good news: when you’re in an excellent financial position and have no debt other than your mortgage, you may qualify for a caveat loan.

“Caveat loans are primarily provided to businesses in need of short-term financing, and they are frequently covered by the business’s or shareholders’ personal property,” says Max Funding’s lending specialist Shane Perry.

If you think caveat loans are a viable financing option for your small business, here’s everything you need to know about caveat loans.

How Do Caveat Loans Work?

The first thing to learn about caveat loans is what they are and how it works for entrepreneurs. Caveat loans are short term loans, also known as “bridge loans.” When you take out a caveat loan, you may use any property (commercial, residential, etc.) as collateral and get funds. This kind of financing does not need a lot of paperwork and maybe approved within a day.

Typical Caveat Loan Conditions

Short-term funding is the goal of most caveat loans, which typically have terms of one to twelve months. As a result, small businesses may find themselves in a precarious position despite the decreased interest rates if they fail to pay back their loans on time, placing them in danger of default. In addition, the lender can forfeit the property if the loan is not repaid on time.

Interest Rates On Caveat Loans

If you’re looking for long-term financing, a caveat loan may not be the best option. Private lenders often disclose caveat interest rates on loans on a month-to-month basis. That indicates a monthly interest rate of 0.99 % to 1.5% for many Australian lending institutions.

At first sight, it seems to be an excellent deal — until you factor in the annual rate. Assuming a 12 to 18% yearly interest rate, a borrower would pay least that much every year. By accepting these rates, cash-strapped borrowers risk default and losing the collateral where the lender has placed a caveat.

Second Mortgage, Are They The Same As Caveat Loans?

One of the most common misconceptions regarding caveat loans is that they are seen as a second mortgage—which is wrong.  Many people mistakenly believe that a caveat loan is a type of mortgage since the property is being used as collateral; however, this is not the case.

Using the equity in the property as collateral, the lender grants you a loan. However, the lender restricts the property by placing a lien on it. The lender’s caveat prevents you from selling the property. In addition, you can’t obtain additional financing against the same property. Mortgages and caveat loans vary significantly in this respect.

Do Some Australian Business Owners Use Personal Properties As Collateral For Caveat Loans?

Small business owners and sole proprietors often use their personal property as collateral, and lenders are more than willing to accept that. However, if the property is occupied as a residence, the risk is just too high.

Final Thoughts

It’s usually a good idea to understand caveat loans before applying. Don’t rush into the deal since you won’t secure additional financing for your property. However, it’s good to note that caveat loans allow you to finance 100% of your loan-to-value ratio even if you have a poor credit history. Caveat loans are a great option if you’re looking to grow your business, launch a new venture, or improve your cash flow.


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