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Low Rates Fuel Housing Demand

Low Rates Fuel Housing Demand

The Reserve Bank is now expecting a firmer economic recovery with monetary policy measures and government stimulus boosting the nation’s economy over the coming year.

House prices have increased in most cities and regional Australia over recent months, and despite declines seen in Melbourne the property market has generally remained resilient since the onset of the pandemic.

The availability of finance at low rates has been one-factor supporting demand for housing in Australia, the RBA said.

In its statement on monetary policy released Friday about its historic November meeting, the bank said that despite the somewhat better recent outcomes, a recovery was expected to be “bumpy and uneven, and highly sensitive to further virus outbreaks”.

The central bank, which introduced a package of measures at its Tuesday meeting, cut the cash rate target to 0.1 per cent—the lowest in Australia’s history, in its bid to support a recovery.

In January the official cash rate was 0.75 per cent, with the bank’s latest move signalling the third rate cut this year.

Each of the big four banks have responded to the RBA’s cut, with ANZ the last major to announce its response.

While measures were taken on fixed loan rates, CBA and ANZ said variable rates will remain unchanged, NAB and Westpac made no mention of changes to variable rates.

Australia’s housing values increased for the first time in five months, up 0.4 per cent in October, with Melbourne the only capital city recording a decline.

Finance availability at record low rates has been one-factor supporting housing demand, the central bank’s latest statement said.

“Consistent with this, new commitments for housing finance have recovered significantly, and housing credit growth has also picked up, most notably to owner-occupiers.”

In September Australians borrowed $17 billion to purchase or build new homes, a 36 per cent jump on the same time a year earlier.

Approximately half of the rise in September’s owner-occupier housing loan commitments was for the construction of new dwellings, a 25.3 per cent rise, which the ABS stats show are at historically high levels.

The Home Builder subsidy has also supported demand for new housing, despite the lower near-term outlook for population growth.

In its monetary statement, the RBA noted that rental markets remain soft, with advertised rents, especially for apartments, declining in major capital city markets Sydney and Melbourne.

After contracting by 4 per cent over 2020, GDP is expected to increase by around 5 per cent over 2021 and 4 per cent over 2022.

This would bring GDP back to its end-2019 level by the end of next year, still well short of the path expected prior to the pandemic outbreak.

Importantly, unemployment is now forecast to peak around 8 per cent this year rather than 10 per cent, although it is still tipped to remain around 6 per cent in two years’ time.

A shallower downturn is forecast over the September and December quarters of 2020 with a stronger rebound over the first half of next year.

Sourced from The Urban Developer

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Finance

2020 saw 6,777 interest rate cuts across Australia’s home loan institutions

From 1 January to 31 December there were 6,777 cuts to home loans, with an average cut of -0.30%, according to Canstar’s database.

It recorded:

  • 880 cuts to variable rates for owner occupiers, with an average cut of -0.21%
  • 2,455 cuts to fixed rates for owner occupiers, with an average cut of -0.33%
  • 764 cuts to variable rates for investors, with an average cut of -0.21%
  • 2,678 cuts to fixed rates for investors, with an average cut of -0.32%

Over the same period there were 535 home loan rate increases, with an average increase of 0.20%.

On 1st January 2020 the average variable rate for owner occupiers paying principal and interest was 3.73% (80% LVR). Today that rate is 3.32% The lowest variable rate was 2.69% and it is now 1.99% (80% LVR) or 1.77% (60% LVR).

On the 1st January 2020 the average 3-year fixed rate for owner occupiers paying principal and interest was 3.15%. Today the average 3-year fixed rate is 2.30%. The lowest 3-year fixed rate was 2.69% and it is now 1.89%.

Australia's home loan institutions

Savings interest rates

From 1 January to 31 December Canstar recorded:

  • 529 cuts to savings, with an average cut of -0.18%
  • 262 cuts to regular savings accounts, with an average cut of -0.19%
  • 267 cuts to bonus savings accounts, with an average cut of -0.17%

On 1st January 2020 the average regular savings account rate was 1.12%. Today that rate is 0.43%. The maximum rate was 2.65% and it is now 1.75% (available for 4-months).

On 1st January 2020 the average bonus savings account rate was 1.47%, now just 0.75%. The maximum rate was 2.25% and it is now 1.35%.

 

Article Source: www.urban.com.au

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Finance

Home-buyer confidence at an all-time high

Home-buyers

More than two-thirds of respondents in a recent survey believe that the conditions are right to purchase a home – a level of confidence not seen since the onset of the pandemic.

Finder’s latest consumer sentiment survey, which involved a nationally representative sample of more than 20,300 respondents, found that 67% of Australians feel that now is a suitable time get on the property ladder, up from 42% last April.

This marked the first time that home-buying optimism has reached this level since the financial comparison site started tracking the metric in May 2019.

Confidence was highest in Adelaide, where 77% of those polled thought now is the right time to buy a home. This was followed by Melbourne’s 70%, Brisbane’s 69%, Perth’s 67%, and Sydney’s 59%. Numbers were not available for Canberra, Darwin, and Hobart.

Those expecting house prices in their areas to “significantly increase” also hit an all-time high of 19%, climbing from just 5% in September last year.

Meanwhile, respondents who anticipate property values to “somewhat increase” rose to 44% from a low of 18% back in April.

Graham Cooke, insights manager at Finder, said that the recent spike home-buyer optimism was a good indication of economic recovery.

“This rebound in buyer confidence is indicative of increased economic activity over the past few months, along with an optimistic outlook for 2021,” he said. “Not only did the Australian government do a better job than most at restricting the spread of COVID-19, but federal and state economic support measures helped prop up the property market.”

Cooke said that property prices in every capital city, expect for Melbourne, have reached a higher level compared to the same time last year, adding that he expected “this trajectory to continue,” especially with 86% of economists in a separate Finders survey predicting a full recovery of national house values this year.

However, Cooke advised prospective buyers to carefully consider the pros and cons “before taking the plunge in the current market.”

“Low interest rates and government assistance packages like the First Home Loan Deposit Scheme put buyers in a strong position. The potential removal of stamp duty in NSW will be another boon for buyers and may spread to other states,” he said. “If you’re thinking about dipping your toe in the market this year, make sure you have a strong credit history, and shop around before signing up for a home loan.”

 

Article Source: www.brokernews.com.au

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Finance

50,000 investors in mortgage stress put their tenants in precarious position

investors in mortgage stress

There are 50,000 households that face high housing cost burdens themselves, following the pandemic, who also own a private investment property.

There are 956,000 households living in housing affordability stress (HAS) in Australia, according to a new AHURI report that looked into the impact of COVID-19, with Commonwealth rent assistance (CRA) reducing the number to 758,000.

The situation of the 50,000 was “cause for concern given that private renters have been disproportionately affected by the downturn,” the report noted after modelling from the University of Adelaide and Curtin University.

There is considerable potential for highly leveraged households owning an investment property, who are spending a higher proportion of their incomes on their own housing costs, to run into trouble meeting those costs and/or the servicing of their investment loan commitments, it noted.

“We estimate that there are around 37,500 mortgage home owners living in HAS who also own an investment property, and approximately 12,000 private renters in a similar position.”

It is estimated that the overall number of households living with HAS would have risen to 1,336,000 (from the 758,000 baseline) without the JobKeeper and JobSeeker interventions.

Investors in Mortgage Stress

The study found that the number of households living in a precarious situation is very high, and will likely remain high even after a partial recovery in 2021 and the withdrawal of much of the Australian Government’s income support measures.

Without an extension of the JobKeeper income support measures beyond March 2021, the number of households living in HAS is likely to increase significantly, the AHURI report concluded.

Households living with HAS and owning an investment property themselves are predicted to more than double.

The report noted JobKeeper and JobSeeker interventions reduced the incidence of housing affordability stress by a considerable amount: 861,000 households compared to 1.34 million without the intervention.

“As JobKeeper moves through its later phases, the predicted number of households in HAS is expected to gradually rise by a further 124,000; 73 percent of these households are private renters.”

article source: PropertyObserver.com.au

 

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