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Property price warning as JobKeeper payments cliff looms

Property price warning as JobKeeper payments cliff looms

About 9 per cent of all housing loans were subject to repayment deferrals at the end of August, raising fears that once government coronavirus relief tapers off, a flood of homeowners could be forced to sell, putting more pressure on declining property prices.

Government support packages have provided support to workers, who have been stood down or lost their jobs because of the pandemic, as well as businesses that have seen their sales plunge.

The government has extended JobKeeper payments for a further six months until March 28, 2021. However, from September 28, eligibility was changed to be based on actual business turnover in relevant periods, with payments stepped down and paid at two rates (for full-time and part-time workers). The rates will step down again from January 4.

Martin North, founder of Digital Finance Analytics, says he expects mortgage defaults in the months ahead, given unemployment rates are likely to stay high, perhaps for years before the full economic effects of COVID-19 are behind us. The Australian Bureau of Statistics said earlier this month the national jobless rate stood at 6.8 per cent.

Employment markets hit the hardest during the early stages of the coronavirus crisis included the retail and hospitality sectors, but now larger companies are downsizing their workforces too.

North says senior managers with big mortgages have joined the ranks of the unemployed.

Lenders’ initial six-month mortgage payment deferral periods are coming to an end for many borrowers and lenders are offering deferral extensions of up to four months for those who are unable to resume repayments. However, what happens after that remains a major concern.

Homeowners exiting deferral arrangements outweigh mortgages coming under new deferrals, so the total amount owing is decreasing, though only slowly.

Australian Prudential Regulation Authority (APRA) figures show that as well as $160 billion worth of mortgages still being being deferred, small- and medium-sized businesses have been hit even harder. About 16.2 per cent, or $53 billion, worth of small business loans are now on a repayment holiday.

North says about a third of smaller businesses have their loans secured by the owner’s property. If these businesses close their doors, lenders may foreclose on their homes, forcing many onto the open property market.

The biggest risk is that those who may be forced to sell could do so at a time when property prices are already under substantial pressure from the pandemic, particularly in Sydney and Melbourne.

CoreLogic figures show that at the end of September, Sydney dwelling prices had fallen by 2.9 per cent from their April high. Melbourne prices are 5.5 per cent lower than their March high; though questions have been raised about the accuracy of the figures as a result of sellers withholding or delaying “bad” sales and auction results.

Other capital cities and most regions are holding up much better as prices did not rise by as much during the boom years and as some people decide to relocate from the inner city to the regions.

Tim Lawless, head of research at CoreLogic, says there are no signs yet of distressed property sales.

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“In fact, the opposite seems to be true, where new listings are being absorbed by the market faster than the rate at which they are being added,” he says.

However, the trend would be important to monitor over coming months as government support tapers and the situation of borrowers taking a repayment holiday is assessed by lenders, he says.

“A rise in ‘urgent’ or ‘distressed’ listings would provide a further test for the resilience of housing values,” Lawless says.

North says those homeowners who continue to have their repayments deferred and are worried that their finances would not return to pre-COVID-19 levels should have a “good look at their cash flow and cut back on discretionary spending”.

“They should be prepared to negotiate with their lender [on solutions], rather than just leaving it in the hands of their lender,” he says.

North says options include restructuring a loan by converting to interest-only repayments or extending the loan terms.

This article is republished from brisbanetimes.com under a Creative Commons license. Read the original article.

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John Collett Writes about personal finance for The Sydney Morning Herald and The Age.

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Opinion

Buyers Shun Liveable for Affordable Suburbs

Buyers Shun Liveable for Affordable Suburbs

Covid-19 has opened a window for buyers in well-serviced, well-located suburbs that 12 months ago would have been out of reach, national property research consultancy Macroplan says.

Buoyed by cheap debt, buyers are increasingly shunning dense urban centres and “liveable” suburbs, instead eyeing “affordable” areas where they can live at a safe distance from their neighbours and embrace flexible work arrangements permanently.

For many workers, not having to commute to work every day has meant homebuyers are now looking at suburbs a few kilometres further afield from the CBD than they would have ordinarily considered.

Recent reports have suggested that house prices will continue to fall during the next year or so as government stimulus tapers off and unemployment potentially rises, in turn further deteriorating household incomes, improving affordability for buyers.

Population growth, a key driver in the housing market, is forecast to fall from 1.2 per cent in 2019-20, to just 0.2 per cent in 2020-21, and 0.4 per cent in 2021-22, while the population is expected to be 1 million people fewer than forecast last year.

Macroplan founder Brian Haratsis said despite the downturn in immigration, detailed population forecasts in the budget suggested affordable suburbs were primed for enquiry and subsequent price increases.

▲ A recent global survey of 10,000 office workers conducted by CBRE found that 85 per cent of respondents would prefer to work remotely two or three days a week in the future.
▲ A recent global survey of 10,000 office workers conducted by CBRE found that 85 per cent of respondents would prefer to work remotely two or three days a week in the future.

“In Brisbane and Perth it will be due to ongoing increasing mining investment while in Adelaide it will be caused by the naval shipbuilding program,” Haratsis said.

“In Melbourne and Sydney it will be caused by flight from the CBD and the suburbanisation of jobs.”

Residential vacancy across inner city areas has continued to rise while rent has continued to fall, sagging by 3.1 per cent for houses and down 5.5 per cent for units during September.

According to Corelogic’s September home value index, property values fell 0.9 per cent in Melbourne and 0.3 per cent in Sydney, but rose 0.8 per cent in Adelaide, 0.5 per cent in Brisbane, 0.2 per cent in Perth and Canberra, and climbed 1.6 per cent in Darwin

Aspiring purchasers have flocked back to the market in recent months, with the value of all housing-related lending surging by a massive 12.6 per cent in August, in search of accessible pricing.

Indicators of rising demand in affordable suburbs are often determined by high auction clearance rates, low vacancy rates, low discounting and quick selling times.

Haratsis said August dwelling approval results revealed increasing demand for detached housing in the wake of the relaxation of restrictions in most states and territories, however, approvals for apartments remain weak—at near eight-year lows.

“These approval numbers mask the impact of first home buyers in the marketplace,” Haratsis said.

“In August, they reached 37 per cent of all owner-occupier dwellings and have driven lending indicators to new highs without the influence of investors.”

Looking away from metro centres, a recent report published by Corelogic identified the best-performing affordable suburbs nationwide for prospective first home buyers and first-time investors.

Topping the list was Broken Hill in NSW, where the median value of houses has increased by 30.7 per cent over the past 12 months to $120,000.

In Victoria, the historic town of Orbost in East Gippsland’s Snowy River country saw values surge 25.6 per cent to a median $200,500 across the year.

In Queensland the standout performer was the coal mining town of Moranbah, where the median value of houses has lifted 23.9 per cent to $238,000, riding the cyclical nature of the resources industry.

Corelogic defined affordable suburbs as having a median price of less than $500,000, ranking them according to capital growth over the past 12 months.

To make the list, suburbs also had to show good historical growth over three- and five-year periods.

This article is republished from theurbandeveloper.com under a Creative Commons license. Read the original article.

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Suburban offices swell as tenants rethink city towers

Suburban offices swell as tenants rethink city towers

The country’s biggest private office landlord, Lang Walker, is keeping his billion-dollar property empire’s focus firmly on the suburbs as the pandemic prompts tenants to reconsider higher-priced city towers.

Mr Walker, who founded Walker Corporation and has a reputation for astutely picking high and low points in the market, said recent leasing enquiries from tenants suggest quality suburban sites are front of mind for major companies working through their space requirements as they assess the impact of the pandemic.

Lang Walker in front of his Collins Square development.CREDIT:ARSINEH HOUSPIAN

“I’m not one to make too many predictions … but I just feel the more high-priced office space will have their challenges whereas the economic space will be in demand,” Mr Walker said.

“In just the last six weeks big corporations are starting to look at space and realise they don’t need to be in expensive offices. I just feel the more expensive end of the market is going to get a lot tougher.”

Mr Walker said tenants moving to A-grade offices with large floor plates outside of CBD centres – where rents are one third of their central city counterparts – will reinforce demand in commercial precincts like Parramatta.

Face rents – which don’t take into account incentives offered by landlords to tenants – in Australia’s major CBD office markets have held firm despite weaker market conditions, according to CBRE’s latest third quarter Office Market Snapshot.

But the tide is expected to turn as a swathe of COVID-affected tenants move out of their offices boosting the amount being offered in the sublease market, CBRE’s head of office occupier research Joyce Tiong said.

“Overall tenant demand remains weak and, with sublease vacancy exceeding previous peaks, we may see face rents start to fall as incentives continue to rise,” Ms Tiong said.

The average rent per square metre in Sydney’s CBD is about $1265. In Melbourne it is $648 per sq m. In Parramatta, it sits around $700 per sq m for premium-grade offices. The Property Council of Australia puts Parramatta’s vacancy rate at 4.5 per cent, but within premium-grade buildings it’s 1.2 per cent: the lowest in the country.

“We’re seeing a tremendous amount of inquiry from big corporations that are wanting to move out of the expensive space and relocate to the satellite precincts,” Mr Walker said.

I’m not one to make too many predictions … but I just feel the more high-priced office space will have their challenges whereas the economic space will be in demand.

Lang Walker, Walker Corp chairmanIn Melbourne, still struggling under a harsh lockdown, Walker Corp has offered rent relief to its retail tenants as the pandemic is “no fault of their own,” Mr Walker said.

“I think there is a lot of alarmists out there,” Mr Walker said, when discussing how quickly the virus spreads and the fear it causes, before adding: “Well, [Victorian Premier] Daniel Andrews is an expert on that”.

“In Melbourne, we’ve been fortunate and very quick off the mark to give rent relief to our retail tenants but the big commercial tenants have been very responsible in paying their way,” he said.

Walker Corp’s major Melbourne tenants include Commonwealth Bank, MLC, Transurban, KPMG, Mars Foods, Tabcorp, NBN and Maddocks.

Mr Walker’s Parramatta Square in Sydney is one of the largest urban renewal projects under way in Australia. It is a three-hectare city precinct with office towers and a new retail and upmarket restaurants, including Maurice Terzini’s CicciaBella and LILYMU run by executive chef Brandon Fong.

In a prescient move late in 2017, Mr Walker switched development plans for a tower earmarked as residential into an office skyscraper. It is now close to being fully leased and will house 4200 state public servants across 43,800 sq m after winning key tenant Property NSW in a tender.

“We remain in discussions with a number of major companies who are looking to relocate to Parramatta to reduce accommodation costs and travel time,” he said.

This article is republished from brisbanetimes.com under a Creative Commons license. Read the original article.

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Units take price hit as rental value decreases

Units take price hit as rental value decreases

Domain’s Q3 2020 Rental Report has sparked concern for some unit owners, with prices in Australia’s two largest property markets – Sydney and Melbourne – dropping to some of the lowest points seen in recent times.

“Fragmented conditions in the rental market remain evident in the September quarter, with weaker unit rents compared to houses,” said Domain senior research analyst Dr Nicola Powell.

“This is particularly so in inner-city areas, which are more susceptible to changes in overseas migration and international students, tourism and job losses associated with COVID-19.

“Nationally, house rents have regained all of last quarter’s fall. National unit asking rents dropped further over the September quarter. Prices are 4.2 per cent lower than March, equating to a $20 a week reduction. This is the deepest fall over two consecutive quarters and steepest annual fall since the start of Domain’s Rent Report in 2004.”

Sydney

Domain’s research found that unit asking rents dropped further over the September quarter, representing a 4.8 per cent decline since March, or $25 taken from the median weekly asking rent.

“This is the deepest fall over two consecutive quarters since the start of Domain’s Rent Report in 2004. Unit rents have now fallen $55 a week from peak prices in 2017 and are now the lowest in six years,” Dr Powell noted.

“Since March, house and unit asking rents in the city and east region have had the largest decline in Sydney – by $125 and $80 a week, respectively. This is followed by a $70 a week reduction to unit asking rents in the lower north shore. These are the only areas in Sydney to record double-digit percentage falls over this six-month period. Tenants are now paying the same price they were in 2013.”

Melbourne

The Victorian capital has seen the greatest decline in unit rents of all the capital cities – no doubt a result of the stage 4 lockdown. According to the research, unit asking rents dropped another $15 a week over the September quarter.

“Tenants will find asking rents are $30 a week lower than the March peak, before the pandemic. The median weekly asking rent now sits at $400 a week, the lowest in roughly three years. This is the first time Melbourne and Hobart unit rents are the same,” Dr Powell said.

“Units in Melbourne’s inner-ring have had the biggest reduction in asking rents. Since pre-pandemic March, unit asking rents in the inner city, inner east and inner south slipped by $65, $35 and $30 a week, respectively. This marks the deepest fall over two consecutive quarters since the start of Domain’s Rent Report in 2004.”

Brisbane

Upwards towards the sunshine state, house and unit rents are now at record highs, with a strong gain of $15 a week over the September quarter, Domain’s research found.

“House rents are now at $415 and unit rents $395 a week. Brisbane is the fourth most affordable capital city to rent a unit. Brisbane unit rents could overtake Melbourne in the coming months, as Melbourne unit rents tumble pushing the rent price gap to $5 between the two cities – a four-year low,” Dr Powell added.

“Amid the pandemic, the estimated number of vacant rentals has returned to expected levels following a dramatic bounce in April. Brisbane’s vacancy rate is on par with pre-pandemic March, with the volume of empty rentals down marginally compared to this time last year. The reduction in available vacant rentals aligns to the easing of restrictions.”

Adelaide

The city of churches also saw a new record over the September quarter, with Domain noting Adelaide asking rents reached $405 a week for houses and $340 for units.

“Unit rents posted the strongest quarterly gain out of all capital cities, along with Perth. Affordability is becoming stretched – rental prices have recorded the highest annual growth since 2007 for units and 2010 for houses,” Dr Powell said.

“Adelaide’s vacancy rate is once again on par with pre-pandemic March, as the estimated number of vacant rentals declines following a strong April bounce. The reduction in empty properties aligns to the easing of COVID-19 restrictions, perhaps reflecting the conversion of rentals back to holiday lets as short-term demand increases.”

Perth

Moving across to Australia’s west coast, Domain found there has been a “stark turnaround” in Perth’s rental market over the September quarter, as asking rents surge and mark the strongest gains out of all capitals.

“House rents jumped $25 to $395 a week, the highest asking rent since early 2016. Units are back to mid-2016 asking rents, increasing by $20 to $340 a week,” Dr Powell said.

“This is the steepest quarterly gain since 2012 for houses and 2013 for units. This is a significant turnaround and unfamiliar territory for tenants who have been in the driving seat, following many years of falling rents.”

Hobart

Hobart has seen stable house rents over the quarter and annually, “but remain $20 per week, or 4.3 per cent, below the record achieved in March”, Domain found.

“Hobart has had the largest fall in house rents of all the capitals since March. This has resulted in gross rental yields deteriorating from the highest yielding capital city to the fourth highest,” Dr Powell said.

“Following a steep decline last quarter, unit asking rents have regained half of the loss over the September quarter. Unit rents are $20 a week lower than the March price peak. This 4.8 per cent drop makes it the second hardest hit unit rental market over the past six months, along with Sydney but behind Melbourne. Unit rents are now $400 a week.

“This is the first time Melbourne and Hobart unit rents are the same price since the start of Domain’s Rent Report in 2004.”

Canberra

Australia’s capital has seen house and unit rents regain all of the fall from the previous quarter over this one, with asking rents back at pre-pandemic highs.

“Canberra remains Australia’s most expensive city to rent a house, at $580 a week, and second most expensive to rent a unit, at $480, behind Sydney, though the difference in unit rents between the two cities has hit an eight-and-a-half-year low,” Dr Powell said.

“If Sydney rents continue to fall and Canberra grows, the nation’s capital could soon become the most expensive capital city for unit rents.”

Darwin

Last but not least, Domain’s report show house and unit rents increased by $10 over the September quarter to $490 a week for houses and $390 for units in Darwin.

“Unit rents are also $10 higher than the same time last year,” Dr Powell said.

“This is the first time unit asking rents have increased annually since mid-2014, and it is the first time house rents have remained stable over the year since late 2017. This marks a significant turning point following a multi-year deterioration of asking rents.”

This article is republished from smartpropertyinvestment.com under a Creative Commons license. Read the original article.

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