The fear of missing out as housing market rocket is tempting some buyers to take a plunge into the property market with only a small deposit in a bid to take advantage of record-low interest rates.
However, this could leave them with little spare financial capacity to meet mortgage repayments if rates rise again, they lose their jobs, or have their hours markedly reduced.
Mortgage lenders have been keen to increase their share of the market following its temporary cooling off last year.
More than three-quarters of lenders listed on the Canstar database now have mortgages that allow lending to those with deposits of just 5 per cent.
However, snapping up a mortgage with a high Loan to Valuation Ratio (LVR) can have a serious adverse impact on your finances in the long run.
Canstar estimates someone buying a $800,000 a property with a 5 per cent deposit would pay almost $70,000 more in interest over 30 years, compared to the same person putting down a more regular deposit of 20 per cent.
Then there is the extra expense of required lenders’ mortgage insurance, which protects lenders but is paid by any borrower with a deposit of less than 20 per cent. This insurance can run into tens of thousands of dollars.
For a purchase of $800,000 by an owner-occupier who is not a first-time buyer with 5 per cent deposit, Genworth’s lenders’ mortgage insurance calculator estimates it would cost almost $35,500.
With a 15 per cent deposit, the lenders’ mortgage insurance is estimated to be $9,600. The lender usually adds this cost to the loan, resulting in even more interest payable.
Steve Mickenbecker, Canstar’s group executive financial services, says the “ongoing burden and strain on household budgets of borrowing with a very low deposit can be extreme and may be felt for the next 30 years”.
Figures from RateCity also show a doubling in the number of lenders offering “cashbacks” to buyers looking to refinance their mortgages who have sizeable equity in their properties, compared to a year ago.
Sally Tindall, research director at RateCity, says a combination of record-low interest rates and escalating property prices are pushing people to take on more debt.
Property researcher CoreLogic’s figures show that capital city house prices are continuing to march higher. Sydney prices are up 6.4 per cent since the start of the year and Melbourne prices by 4.8 per cent.
The researcher says preliminary auction clearance rates for Sydney last weekend were an astounding 89 per cent, compared with just 40 per cent for the same weekend last year. Melbourne’s clearance rate was almost 84 per cent, up from 38 per cent.
However, the federal government is offering some relief to first-home buyers that are struggling to get a foot on the property ladder.
Under its First Home Buyer Deposit Scheme, first timers can put down a deposit of just 5 per cent and avoid having to pay the added impost of lenders’ mortgage insurance.
Since the start of the scheme a little more than a year ago, 20,000 places will have been offered by the middle of this year for the purchase of new and existing homes. A further 10,000 places are to be added from July 1.
Some financial experts, including Shane Oliver, chief economist at AMP Capital, are expecting the Reserve Bank of Australia to use “macro-prudential controls” to restrict mortgage lending if standards become too lax. He says measures could be introduced later this year that include a return of the imposition on lenders to limit growth in loans to property investors, as well as restrictions on high LVRs and debt-to-income ratios.
Andrew Wilson, consultant economist at Archistar, expects capital city house price growth to remain strong, but could moderate through the second half of the year as affordability declines.
Article Source: www.brisbanetimes.com.au
Travel bans fuel Brisbane’s $30 million auction splurge
Expats and upgraders are splashing major cash on prestige properties across Brisbane with more than $30 million in real estate transacted from 38 auctions on Saturday.
The auction clearance rate was 81 per cent, compared with just 22 per cent this time last year.
Off the back of continued travel bans, property punters say buyers are continuing to pour millions into homes instead of holidays, and stranded Aussies are fuelling the prestige market from afar for fear if they don’t buy soon, they’ll miss out when borders open.
It’s a trend McGrath Estate Agents Cleveland agent Pamela Neilson said had spurred more than a handful of top sales in her area in the past few months, and one that helped her clock the city’s highest recorded auction on Saturday, after an upgrader forked out $4.35 million for a Raby Bay mansion.
“I’m seeing more transactions now between $2 million and $3 million (than I have in a long time). We’re finding this market is just continuing to move and I can’t see it quietening down,” Ms Neilson said.
“The biggest thing is expats at the moment and I have clients from London to Chicago, all wanting to come home but they want to get into the market now.
“I sold two [sight unseen] to expats just last month.”
Although it was a local buyer who scored the winning bid on the sprawling Ray Bay home at 11 Grenoble Place, Ms Neilson said the incredible result was indicative of the sheer appetite for luxury homes in the Queensland capital, and also in Raby Bay, where high-end sales had surged in the past six months.
“We had 52 groups through the property and five offers prior to the auction. I think the massive land size of 2479 square metres [fuelled the interest] but also the big pontoon, the glorious views and the tennis court,” Ms Neilson said.
“It all needs updating, but it’s just so private, and after a renovation this property could be worth between $7 million and $8 million.
“The Raby bay area is also a lot stronger [than it has been in years]. The area is getting more attention now – people are finally waking up to it and the people trying to move in have probably missed out.”
Ms Neilson said it was only back in August the suburb price record was smashed with the $8.5 million sale of 1990s Aussie pop star Daniel Jones, of Savage Garden.
In the inner city, an old cottage on a tiny parcel of land clocked an incredible $1.55 million under the hammer on Saturday, after six registered bidders battled it out for a minuscule piece of dirt in “Brisbane’s best suburb”.
The green and yellow four-bedroom abode, at 210 Arthurs Street, Teneriffe, occupies just a 256-square-metre block but with houses frequently clocking more than $2 million in the chic neighbourhood, selling agent Brett Greensill, of McGrath New Farm, said the home was a little piece of gold.
“It´s a small slice of land but, of course, Teneriffe is the most expensive suburb in Brisbane so to get a little slice of the best suburb [is still fantastic],” Mr Greensill said.
“We had six registered bidders, and there was an excellent crowd. The lady who turned out to be the underbidder started off with a cheeky bid of $600,000 but then the next bid was about $1.1 million.
“The reserve was $1.5 million, so we sold it for just over, and five of the six bidders were local.
“I actually sold this house in 2013 for $815,000 when it was first renovated. Here we are not even 10 years later and it has almost doubled. And, in the past six months (alone) this house gained probably 10 per cent (in value).”
Mr Greensill said the sale was another top result in a booming market where houses in particular were streaking ahead of apartments amid insatiable buyer appetite.
“Brisbane has always had headwinds of varying degrees but since Christmas we’ve had tailwinds (in the housing market).
“We have also had lots of conversations with expats recently.”
Other high-end sales across the city included one of Highgate Hill’s original homesteads at 77 Hampstead Road, which sold for $2.6 million through Luke Croft, of Ray White South Brisbane.
Built about 1890, the seven-bedroom, five-bathroom home mixed modern chic with heritage touches after an incredible architecturally renovation.
Under the $1 million mark selling agent Bevin Powell, of Ray White Annerley, set an office record for registered bidders after 30 hungry home-hunters battled it out for a four-bedroom brick home at 3 Appleyard Crescent, Coopers Plains, which sold for $816,000.
“This was an amazing auction, the property market is still hot right now but having said that, I’m not sure we’ll have another auction like this one for a while. The winning bidder purchased the property for their parents,” Mr Powell said.
Ray White Queensland chief auctioneer Mitch Peereboom said across their Brisbane agencies top results were fetched alongside soaring clearance rates with the high-end sector swelling.
“The marketplace is particularly strong in the $800,000 to $1.5 million range. We know buyers are selling and then have been looking to upgrade and that bracket is performing excellently,” Mr Peereboom said.
Article Source: www.domain.com.au
Property Industry Expects Interest Rate Rise
Property industry confidence levels are near record highs but there are rumblings that interest rates could to increase soon.
The ANZ/Property Council industry survey for the March quarter found confidence levels has improved drastically since the pandemic started, led by the residential sector.
The survey canvassed the views of more than 830 respondents—including, owners, developers, agents, managers, consultants and government—across all major industry sectors and regions.
The results revealed respondents also believe there will be an interest rate increase during the next 12 months.
This comes as the Reserve Bank of Australia closely watches the housing market as “cyclically low-interest rates and rising asset prices create a risk of excessive borrowing”.
According to the RBA financial stability review, this could lead to financial instability particularly if lending standards are weakened, which could expose lenders to large losses.
Interest rate changes
For the meantime, the Reserve Bank decided to hold the official cash rate at 0.1 per cent for the fifth time in a row.
Despite expecting an interest rate rise, survey respondents were confident about work expectations, national growth and house prices in the next year.
Property Council of Australia chief executive Ken Morrison said the expectations for house prices were at the highest level in the survey’s 10-year history.
“When the property industry is confident it is exceptional news for the entire national economy because it employs so many people—more than 1.4-million Australians,” Morrison said.
“While the economy still faces significant challenges, the property industry is clearly buoyed by the speed of our turnaround and the strong demand they are seeing, particularly in the residential and industrial sectors.”
ANZ senior economist Felicity Emmett said that for now the combination of record low mortgage interest rates and targeted stimulus was clearly supporting the housing sector.
“Property sentiment has improved again, reflecting stellar economic performance, a large pipeline of work for the coming year and a strong outlook for property prices,” Emmett said
The survey also revealed an easing of concerns about the office sector as more CBD workers return to their work places.
Article Source: theurbandeveloper.com
Property confidence stages remarkable comeback
The latest results from the ANZ/Property Council Survey reveal surging confidence levels in Queensland’s property sector, despite the slower than anticipated return of workers to major business precincts.
Property industry sentiment in Queensland bounced from 124 points in the December 2020 quarter, to 144 index points in the March 2021 quarter. The result shows that industry confidence has nearly tripled since the height of the COVID pandemic, when a low of 58 index points was recorded during the March 2020 quarter. A score of 100 is considered neutral.
Property Council Queensland Executive Director, Chris Mountford, said the results were nothing short of phenomenal, however, it was critical that the positivity was not taken for granted.
“The results highlight a remarkable recovery for Queensland’s property sector, which proved resilient throughout the challenges of last year and is now spearheading the State’s economic recovery,” said Mr Mountford.
“The industry has recorded strong results on most metrics of success, from crane counts to property clearance rates, to our own quarterly confidence surveys.
“However, we do need to maintain some degree of caution as these positive results were recorded prior to Brisbane’s most recent lockdown, and while the benefits of Government stimulus programs continue to be felt.
“It is well documented that these lockdowns cost our economy millions and impact on the confidence of employees to return to their places of work.
“Office occupancy within Brisbane CBD has stagnated at circa 63 per cent, showing the road to recovery for our city centres has clearly not been as smooth as in other property sectors.
“With the end of JobKeeper and the ever-present spectre of another lockdown, there is clearly a need to support our CBDs and the many businesses that rely on the daily visitation of workers, students and tourists to make ends meet.
“Over the coming months, the Property Council will be working with its members, Brisbane City Council and the Queensland Government, to implement a plan to support our city centre and ensure it continues to drive Queensland’s economy,” concluded Mr Mountford.
Article Source: www.miragenews.com
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