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NAB Scraps House Price Call

House Price Call

NAB has revised forecasts for a pandemic-linked 15 per cent decline in house prices and says a jump in sentiment based on stimulus measures and record-low interest rates could now see prices grow by 5 per cent next year.

Bank economists now expect strong growth next year, followed by further 6 per cent lift in 2022.

Promising results from two separate vaccine trials have incited optimism as well as the return of owner-occupier buyers to the market—particularly first homeowners—is now likely to limit the peak-to-trough decline in home values that started in April.

NAB chief economist Alan Oster said the rapidly improving conditions led the bank to substantially upgrade its forecasts for next year.

“This change in NAB’s housing market outlook comes after substantial upgrades to our forecasts for near-term activity and unemployment, as well as the fact that activity in the housing market has held up substantially better than we initially expected.

“We expect that lower interest rates for an extended period will be a key support to the housing market over the next couple of years, seeing a boost to prices across the country.”

Oster warned that the sharp slowdown in population growth, due to border closures, remained the central risk to house prices, particularly in Sydney and Melbourne.

Oster also said that house price growth would likely to be stronger than the apartment segment over the next 24 months.

NAB said Melbourne’s house prices are projected to grow by 3.6 per cent over 2021, while Sydney’s will nudge up 4.4 per cent.

Further gains in 2022 are expected with Sydney house prices to rise six per cent and Melbourne 5.4 per cent.

Earlier in the year, NAB had predicted prices in Sydney to decline -4.9 per cent and -6.5 per cent in Melbourne in 2021, following 2020 declines of -4.7 per cent in Sydney and -7.3 per cent in Melbourne.

“While the deterioration in the labour market would normally weigh on prices, the significant government support has mitigated the rise in unemployment and hit to household incomes,” Oster said.

The bank advised that housing market sentiment had returned in the third quarter of the year, but remains weak, noting the deterioration in Victoria amid stage four lockdown in Melbourne and a modest improvement in New South Wales.

Victoria was the only state to go backwards in the NAB Residential Property Index, which recovered to -7 points from a survey low of -33 points in the second quarter. Victoria fell -3 points to a new survey low -53.

This offset sharply higher sentiment in other states, particularly Western Australia and South Australia.

NAB’s latest projection follows a revision last month by Commonwealth Bank, the country’s largest mortgage lender, of its expected peak-to-trough decline from between 10 and 12 per cent to just 6 per cent.

ANZ also expects strong growth next year with house prices in Perth expected to lift by 12 per cent, Brisbane 9.5 per cent and Hobart 9.4 per cent.

ANZ has also forecast Sydney prices to rise 8.8 per cent—close to the national average—while Melbourne prices will grow by 7.8 per cent.

 

The post “NAB Scraps House Price Call” by Ted Tabet appeared first on the theurbandeveloper.com Blog

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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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