Is it cheaper to buy or rent your next home? You might be surprised

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While it might feel like property prices are skyrocketing out of reach, the majority of Australian homes are actually cheaper to buy than rent over the next decade, according to a new report.

The latest REA Insights Buy or Rent 2021 Report reveals it is cheaper to buy than rent around 57% of dwellings across Australia, based on modest housing price growth of 3% per year over the next decade.

Now, the results differ by property type and from state to state, which we’ve broken down further below.

But across the nation, the report found that just over half of houses are cheaper to buy over the next 10 years, while the share of units that are cheaper to buy is almost 75%.

So why is it generally cheaper to buy than rent across the nation?

Well, record-low mortgage interest rates are the main driver of favourable buying conditions.

“Interest rates can currently be fixed below 2% per year and the Reserve Bank of Australia has committed to maintaining low-interest rates until at least 2024,” explains Realestate.com.au economist Paul Ryan.

“This certainty that mortgage costs are not going to increase rapidly provides comfort to buyers borrowing larger amounts.”

Given these low-interest expenses, Mr Ryan says that moderate property price growth (which means having an asset that’s growing in value) will likely offset the additional costs of owning a property, such as stamp duty, maintenance and council or strata rates.

State vs state breakdown

Below is REA Insight’s state-by-state breakdown of the percentage of suburbs where it is cheaper to buy than rent. Houses below have three bedrooms, units have two bedrooms:

NSW: 41.3% (of suburbs) for houses, 69.1% (of suburbs) for units

Victoria: 42.2% for houses, 67.6% for units

Queensland: 85.4% for houses, 98.4% for units

South Australia: 73.6% for houses, 98.4% for units

Western Australia: 69.7% for houses, 98.4% for units

Tasmania: 73.2% for houses, 100% for units

Northern Territory: 97.6% for houses, 100% for units

ACT: 65.7% for houses, 100% for units

So here’s the catch in the analysis

The REA Insights analysis assumes buyers already have access to a 20% deposit, which remains the biggest hurdle for many buyers – especially for first home buyers as prices continue to rise.

“Many would-be buyers can already afford loan repayments, but struggle to save a deposit while renting,” adds Mr Ryan.

“Continued price growth may cause additional concern for many in this position.”

How we can help you start buying, and stop renting

As mentioned just above, saving for a house deposit is the biggest hurdle for many of those dreaming of living in a home they can call their own.

But the good news is that there are several potential options to help you get a foot on the property ladder quicker.

One option is the First Home Loan Deposit Scheme, which allows eligible first home buyers with only a 5% deposit to purchase a property without paying for lenders mortgage insurance (LMI).

It’s due to accept applications for a further 10,000 hopeful homebuyers from July.

There’s also a range of first home buyer grants and stamp duty concessions around the country that you might be eligible to apply for.

For more information, give us a call today – we’d love to discuss with you your finance options to help you make the leap from renter to buyer.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Has the housing market’s latest record-breaking run peaked?

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Property prices climbed at a breathtaking pace in early 2021, which has been good news for homeowners and heartbreaking for house hunters. However, there are seven key signs that the pace of capital gains has peaked, says CoreLogic.

Now, it’s important to note that CoreLogic is not suggesting that housing values are about to dip.

Far from it.

Rather, CoreLogic believes the housing market is “moving through a peak rate of growth and the pace of capital gains will gradually taper over coming months”.

“Overall, we are expecting housing values to continue to rise throughout 2021 and most likely throughout 2022, just not at the unsustainable pace of growth that has been evident over recent months,” explains CoreLogic’s Head of Research Tim Lawless.

Below are the seven signs they’ve identified.

1. CoreLogic’s home value index indicates a slowdown

CoreLogic’s rolling four-week change in dwelling values shows Sydney’s rate of growth has dropped from 3.5% (in the four weeks leading up to 21 March) to 2.3% (in the four weeks to 21 April).

Meanwhile, Melbourne dropped from 2.5% to 1.5%, Brisbane from 2% to 1.8%, and Perth from 1.5% to 0.9%.

The only mainland state capital to record an increase was Adelaide, up 1.7% from 1.2%.

2. Auction clearance rates have dropped

Historically, there’s been a strong positive correlation between auction clearance rates and the pace of appreciation in housing values, says Mr Lawless.

Recently, however, there has been a slight softening in auction clearance results.

The weighted average clearance rate moved through a recent high of 83.1% in the last week of March, before dropping to 78.6% in the week ending 18 April.

3. Vendor activity has increased

There has been a considerable rise in new listings as vendors look to capitalise on the market’s strong selling conditions.

In the four weeks to 18 April as many as 26,470 capital city properties were added to the market, says CoreLogic.

“That’s the largest number of new listings for this time of the year since 2016 and 17% above the five-year average,” adds Mr Lawless.

4. Housing supply is on the rise

Thanks to HomeBuilder, there has been a significant lift in housing construction activity that will add to overall supply levels in the coming months.

Approvals for new dwelling construction are at record highs, points out CoreLogic, and dwelling commencements over the December quarter were almost 20% higher than a year earlier and 5.5% above the decade average.

5. Population growth has turned negative

Due to current tight border restrictions, it’s much harder to get into Australia than usual.

That’s led to a decline in population growth, which can also have an impact on housing demand (although it’s more likely to have a bigger impact on rental markets, as the majority of migrants rent before buying).

“Population growth, which is an important component of housing demand, has turned negative for the first time since 1916 due to closed borders and stalled overseas migration,” adds Mr Lawless.

6. Fewer government incentives and schemes available

You might have heard that applications for the HomeBuilder grant, which started off at $25,000 before being reduced to $15,000, have now closed.

On top of that, JobKeeper has also finished, and JobSeeker has been dialled back.

“Australia is moving into a new phase of the economic recovery where there is substantially less fiscal support which could result in a reduction of housing market activity,” says Mr Lawless.

7. Higher barriers for homebuyers looking to crack the market

Last but not least: the higher prices rise, the higher the entry barrier for home buyers.

And the higher the entry barrier, the fewer active house hunters there are, which means less demand to drive up prices.

“For those looking to enter the market, growth in housing values is substantially outpacing incomes, which means a growing deposit hurdle for first home buyers,” explains Mr Lawless.

Get in touch today for help overcoming these barriers

As you can see, there’s a case to be made that the rate of property price growth has peaked.

But Mr Lawless warns there are still a variety of factors that are likely to keep upward pressure on housing values for some time, including the record-low official cash rate, which the RBA says won’t lift “until 2024 at the earliest”.

So while prices are expected to continue to increase – and it might feel like you’re running on the spot – please know that potential solutions do exist for keen homebuyers.

For example, the federal government’s First Home Loan Deposit Scheme is due to accept another 10,000 applications in early July, allowing eligible first home buyers with only a 5% deposit to purchase a property without paying for lenders mortgage insurance (LMI).

For more information, give us a call – we’d love to help you out.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

How long do you have to snap up a property in the current market?

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You open up the real estate app on your phone, scroll through a few listings, and then there it is: the home of your dreams, ‘added 1 hour ago’. So just how long do you typically have to act in this hot market?

Well, let’s just say it definitely helps to have spoken to us about pre-approval if you’re actively house-hunting right now.

That’s because the average number of days properties are listed for sale on realestate.com.au reached record lows in every state in March, according to the REA Insights Housing Market Indicators Report April 2021.

And that’s likely got something to do with the fact that demand is extremely strong, with ‘views per listing’ at record highs.

So just how long are properties listed for?

The average number of days properties were listed on the realestate.com.au website was 48 in March 2021.

Properties sold the fastest in the ACT (average of 25 days listed), New South Wales (27 days) and Victoria (30 days).

Tasmania (37 days), South Australia (48 days) and Queensland (54 days) were positioned in the middle of the pack, however, they dropped 9, 17 and 19 days respectively over the course of the month.

And while properties in Western Australia (71 days) and the Northern Territory (59 days) took the longest time to sell on average, they recorded the largest falls in average time online over the past year, down 28 and 14 days respectively.

Views per listing and property price searches are also up

Properties are currently viewed an average of 1694 times on realestate.com.au – up from 819 in March 2020.

“This growth can be attributed to several factors, including record-low borrowing costs, government support packages for first-home buyers and limited available stock,” the REA report states.

Buyers are also on the hunt for more expensive properties than they were a year ago.

The percentage of searches for properties valued between $750,000 and $2,000,000 has increased to 52% in 2021, up from 47% in 2020.

Get in touch today to find out more about pre-approval

Make no mistake: competition amongst buyers is fierce.

More people are house hunting for more expensive properties, with fewer days to secure finance for the home of their dreams.

This all highlights the importance of exploring your borrowing options with us in advance, in order to increase your chances of securing a property in this hot market.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

COVID-19 repayment amnesty over: how to avoid a bad credit rating

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The COVID-19 loan deferral program and credit reporting amnesty is now over, which means banks will report any late repayments on mortgage or small business loans to credit agencies unless you’ve entered into a hardship arrangement.

The banks’ mortgage deferral program and subsequent credit score reporting amnesty officially ended on April 1.

The package was created during the peak of COVID-19 to provide loan repayment relief for almost one million home and business loan borrowers facing financial hardship.

Luckily, many people have since been able to resume their repayments – as of late February, just 2,803 small business loans (1.2%) and 22,480 housing loans (5%) were still deferred, figures show.

But, we’re not out of the woods yet.

The JobKeeper wage subsidy scheme has also just officially ended, which has the potential to put tens of thousands of households and businesses at risk once more.

If you think you might be impacted by JobKeeper, read on

Latest reports indicate up to 150,000 workers could lose their jobs this month due to JobKeeper ending.

If your ability to repay your home or small business loan might be affected in the months ahead, then it’s important to act now, rather than wait until after you’ve missed a repayment.

That’s because by then it could be too late and it might end up on your credit file.

Your most appropriate course of action, however, will depend on your individual circumstances, which we’ve broken up into two categories below.

Category 1: Repayments will be tight, but possibly doable

If your upcoming loan repayments are looking tight, but possibly doable, then get in touch with us today to discuss some financing options that might make your repayments more manageable.

These options might include:

– switching to interest-only repayments for a period of time,
– renegotiating your rate with your current lender,
– refinancing to another lender,
– debt consolidation, or
– a combination of these and other measures.

Category 2: You don’t think you’ll be able to make your repayments

If you’ve lost your job due to JobKeeper ending, for example, and the chances of making your repayments are looking a little grim, then it’s important to get in touch with your bank today to discuss entering into a hardship arrangement.

Not only will this potentially give you some breathing space on your repayments, but it will help keep any missed payments off your credit file, as the Australian Banking Association states below:

“For customers that enter into another form of hardship or forbearance arrangement with their bank, banks will not report the repayment history information. Instead, they will leave the field blank for the duration of the arrangement.”

If you’d like to discuss any of the above in further detail please don’t hesitate to get in touch today – we’re here to help any way we can.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Fixed mortgage rates set to rise in coming months: experts

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House prices could jump 17% in 2021 and mortgage rates are set to rise much sooner than expected, ANZ Bank has tipped.

How much earlier than expected?

Well, the Reserve Bank has repeatedly said the official cash rate isn’t likely to increase for a few years, but ANZ senior economist Felicity Emmett believes fixed-mortgage rates have already reached their lowest point, or close to it.

In recent times, more than 30% of new loans have been at fixed rates, says Ms Emmett, with two to three-year fixed-term interest rates available below 2%.

But that’s unlikely to be the case for much longer, she believes.

“In the second half of the year these sub-2%, three-year fixed rates that we’re seeing advertised at the moment are less likely to be around,” says Ms Emmett.

“Cheaper funding is not available forever and that will feed through into variable mortgage rates too.”

Shane Oliver, Chief Economist at AMP Capital, also believes fixed mortgage rates “have already started to bottom out”.

“It’s likely that the 30-year tailwind for the property market of falling interest rates has now run its course and longer dated fixed rates (4+ years) are starting to rise,” adds Mr Oliver.

Wait, did you say ANZ is tipping property prices to increase 17%?

That’s right. ANZ economists expect house prices to rise by a “sharp” 17% across the capital cities in 2021.

They’re tipping Sydney and Perth to perform best with 19% growth, followed by Hobart (18%), Melbourne and Brisbane (16%), and Adelaide (13%).

ANZ’s forecast is much more bullish than those of Commonwealth Bank and Westpac, which in February predicted price increases of 8% and 10% respectively.

Ms Emmet says low housing stock levels are combining with FOMO (fear of missing out) to help drive up the market.

“Buyers are taking advantage of historically low interest rates, particularly fixed rates, as well as various government support programs,” Ms Emmet said.

Got a bit of FOMO yourself?

After the relative hibernation of last year, there’s certainly a lot going on in the world of property and finance right now.

So, if you’d like to chat to us about financing a new home you’ve got your eye on, or refinancing your existing loan, get in touch today and we’ll help sort out that FOMO for you.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.