Guidance needed for borrowers, industry body says

Property owners and prospective first home buyers are increasingly in need of clear guidance on home lending as the housing markets in Melbourne and Sydney begin to cool, says the Housing Industry Association (HIA).

The RBA on Tuesday again resolved to leave the official cash rate on hold at 1.5%, noting that the current settings continue to offer appropriate support for the Australian economy.

Borrowers are uncertain

Despite the stable cash rate, Geordan Murray, HIA Senior Economist, says borrowers are still wary of any potential hike in their borrowing costs.

“In the post GFC era lenders have frequently adjusted home loan rates independently of movements in the official cash rate in order to ensure that their lending rates more accurately reflect their true cost of capital,” explains Murray.

Clear guidance needed

Murray adds that as the housing markets in Melbourne and Sydney continue to cool it will be increasingly important that households have clear guidance on any potential changes they may face in home lending.

While industry guidance is great, having a trusted professional (that’s us!) watching out for market changes on your behalf is even better.

That’s because over the last couple of years there has been an additional degree of complexity in the home loan market – and we can help decipher what that all means for you.

“Lenders have been squeezed by regulators which led to a degree of credit rationing and higher borrowing costs for investors and those wishing to borrow in interest only terms,” explains Murray.

Why were lenders squeezed?

A while back APRA – the regulator – introduced a range of measures that tightened lending standards to curb growth in risky lending.

“APRA’s interventions were appropriate at the time that they were implemented. (However) the housing downturn now has its own momentum and does not need additional assistance from the regulator,” says Murray.

In fact, recent figures published by the RBA show that growth in housing credit to investors has dropped to a historic low and owner-occupier lending growth is also now slowing.

“The housing market is now in a very different position to the time when APRA imposed the restrictions. We have already seen the speed limit on investor lending dropped but other restrictions remain,” says Murray.

“It will be important for the RBA, APRA and the federal government to monitor developments in the housing market and ensure that we have appropriate policy settings to ride out the cyclical downturn smoothly.”

Want some guidance?

As Murray explains, now more than ever borrowers are needing someone to help guide them through uncertain lending times.

That’s where we can help.

We have our ear to the ground when it comes to all industry movements, which means you don’t have to stress about doing so.

So if you’d like to find out more about how we can help you navigate the tricky lending times ahead, get in touch today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.

On the up and up. Keen to jump into a property hotspot?

With housing values falling across half of Australia’s capital cities over the past year – and the media well and truly letting us know all about it – it can be all too easy to forget many regions are doing well. Here’s where property prices have recently experienced healthy growth.

The good news is that almost half of Australia’s 88 sub-regions have experienced growth in housing values over the past twelve months, according to CoreLogic.

These sub-regions are more formally known as SA4 sub-regions, which have populations between 100,000 and 500,000 people.

“Half of these regions have recorded a higher rate of annual capital gain relative to their five year average rate of growth, suggesting some acceleration in market conditions,” says CoreLogic’s Tim Lawless.

“In fact, 35% of the SA4 sub-regions have recorded an improvement in their rate of capital gain over the past 12 months relative to their five year average rate of growth.”

So where’s hot?

Two words: regional areas.

In fact, 57% of all regional areas recorded a rise in dwelling values over the past twelve months, while only 39% of the capital city sub-regions recorded an increase.

Here’s a list of the top 10 healthiest growth markets, all of which outperformed their five-year average.

1. Geelong, Victoria, 11.8% growth

2. Hobart, Tasmania, 10.7% growth

3. South East, Tasmania, 9.9% growth

4. Launceston and North East, Tasmania, 9.3% growth

5. Ballarat, Victoria, 7.1% growth

6. Central West, NSW, 6.1% growth

7. Sunshine Coast, Queensland, 6.0% growth

8. South Australia Outback, SA, 5.8% growth

9. Latrobe – Gippsland, Victoria, 5.3% growth

10. Northern Territory Outback, NT, 5.3% growth

Why are regional markets healthier?

The ‘healthier’ conditions across regional markets can be attributed to a range of factors, says Lawless, including:

More sustainable growth conditions: “Most regional areas have seen relatively sedate housing market conditions compared with the heroic gains across Sydney and Melbourne. The more sustainable history of price growth has kept a lid on housing affordability and made these markets attractive to migrants,” says Lawless.

The ripple effect: “A ripple of demand has been emanating from the largest capitals towards the satellite cities where housing is generally more affordable and lifestyle factors can be appealing.”

Sea change: “Many coastal and lifestyle markets have benefited from a rise in buyer demand, either from those looking for a new residence, second home or investment option.”

Bounce back: “Many of the hard hit mining regions have now levelled out and are now showing some growth.”

Capital cities that have experienced growth

There are some capital cities also doing well, says Lawless.

In Brisbane, seven of the nine SA4 sub-regions have seen a rise in values over the past year.

In Adelaide, three of the four SA4 sub-regions have recorded an annual gain.

Hobart is also experiencing significant growth (10.7%), as seen by its second place spot on the list.

“While conditions are broadly slowing, especially around Sydney and Melbourne, many areas of the country are benefitting from a history of more sustainable growth rates, improving demand and reasonably strong economic conditions,” says Lawless.

Interested in finding out more?

If you’re a first home buyer or an investor looking to purchase property in an area that’s recently experienced growth then get in touch.

We’d love to help you source a great home loan and help make your property ownership dream become a reality.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute 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.

Budget breakdown: implications for property buyers and sellers

How will 2018’s Budget affect the national property market? For buyers and sellers alike, we take a look at what you need to know.
The 2017 Budget had a strong focus on housing supply and affordability. This year, housing took a back seat with no new, direct
measures for first homebuyers or renters. However, some of the changes will likely have an indirect effect on both the residential and commercial sectors.
Stable interest rates
Homebuyers can take comfort from the fact that the Budget isn’t likely to put immediate pressure on interest rates. President of the Real Estate Institute of Australia Malcolm Gunning says: “This expected interest rate stability comes at a time when housing prices in some of our major cities are showing signs of easing, leading to improved affordability for first homebuyers.”1
No change to negative gearing
The government’s decision to leave negative gearing alone brought sighs of relief from the real estate and development industries.
Gunning described this as an ideal outcome for the housing market1, considering the stringent changes introduced last year to quell investor demand.
“[It was] pleasing to see that the government recognises the important role the current taxation arrangements for negative gearing
and capital gains tax play in increasing supply, keeping rents affordable and easing the burden on social housing by leaving these unchanged,” he said.
More land for home building
The budget did commit to establishing a $1 billion National Housing Finance and Investment Corporation and to release more land suitable for housing.2
As well as unlocking some Commonwealth land for development, the government has taken steps to discourage investors from holding on to land3 that could be used for new homes. From July 2019, investors will no longer be able to claim expenses such as council rates and maintenance costs for vacant land that could be used for housing or other development. The aim is to reduce so-called ‘land banking’, a process that allows investors to hold on to land in the hope that its value will rise while simultaneously enjoying tax benefits granted on the basis that the land would be used for homes or commercial buildings. Under the new rules, the deductions will only apply once a property has been constructed on the land and is available for rent.
Easier access to cheaper housing
Housing is cheaper outside the major cities but lack of access can make it an unrealistic option, particularly for those who work in commercial centres. The government’s allocation of billions of dollars in transport infrastructure upgrades4 could help resolve this problem over the longer term.
Projects designed to attract homebuyers into less expensive areas include upgrades to roads on the Gold Coast, the North South Rail Link in Western Sydney, the Melbourne Airport Rail Link and continuing upgrades to the Bruce Highway in Queensland. Nationally, there are also plans to reduce the congestion5 that can make a daily commute from the suburbs so frustrating.
Helping Australians age at home
In last year’s Budget, the government introduced the Downsizer Contribution so that, from July 1 this year, homeowners over 65 will be able to invest up to $300,000 from the proceeds of the sale of their family home into their superannuation fund6. Along with a higher income in retirement, the move could also be seen as encouragement for singles and couples to sell, freeing up more family homes. There was some speculation that in this year’s Budget the government would use changes to capital gains charges for sellers as further motivation to downsize but, instead, it introduced a measure designed to help retirees stay where they are6.
Now every homeowner over the age of 65 has the option of taking out a reverse mortgage worth up to $11,799 a year for the rest of their lives. A reverse mortgage is effectively a loan that allows homeowners to access the equity they have built up in their home without selling their property. The loan is usually repaid when the house is eventually sold and there are limits in place to prevent people from owing more than their property is worth.

More information
If you’re thinking about buying, selling or taking out a reverse mortgage in 2018 or 2019, you might want to talk to your mortgage
broker about the recent Budget and how it could affect you personally.

Sources:
1 https://reia.asn.au/wp-content/uploads/2018/05/Media-
Release-8-May-2018-Budget-2018.pdf
2 www.realestate.com.au/news/budget-to-rein-in-propertyprices-
with-measures-to-increase-housing-supply/
3 https://budget.gov.au/2018-19/content/bp2/download/
bp2_combined.pdf
4 http://minister.infrastructure.gov.au/mcveigh/releases/2018/
may/budget-infra_01-2018.aspx
5 www.ato.gov.au/Individuals/Super/Super-housing-measures/
Downsizing-contributions-into-superannuation/
6 www.australianageingagenda.com.au/2018/05/10/budgettreasurer-
expands-governments-reverse-mortgage-schemeto-
full-pensioners/

HTW Month In Review Nov 2015

Highlights For The Melbourne Property Market This Month

– Investors are very active in Melbourne’s eastern suburbs, in particular Overseas Buyers in Glen Waverley. Typically due to Glen Waverley Secondary College’s academic reputation among the local and Chinese communities and the practicality of being near a major transport hub and shopping centre.
– Melbourne CBD town planners have approved the construction of over 20,000 apartments within the next 4 years compared to approximately 5,500 in Sydney’s inner city over the same future period
– The Melbourne unit market remains strong for Investors and the residential investment market is predicted to become stronger and is only at the early stages of growth
– Despite this, the RBA has concerns and HTW view the risk of a downturn in the Melbourne unit market as high with the potential problem of an oversupply of units within the CBD and inner city areas
– The mid-south eastern and Bayside regions appear to be attractive for investors who are fairly active and purchasing detached houses, townhouses, units and apartments
– The outer south east regions appear to be mainly attractive to first home buyers and families with
medium household income. Investors are much less active in these regions
Thanks to team Alphabroker www.alphabroker.com.au

HTW Month In Review October 2015

HTW’s Theme for the month for  October – Smokin’ hot price points….

Here are some of the highlights from the REVIEW

Lower entry level (Melton) Melton is approximately 35 kilometres west of the Melbourne Central Business District (CBD) and is serviced by a train line that runs to and from the CBD. The suburb is experiencing a significant demand for affordable entry level housing which has driven some growth. Affordability for first home buyers, young families and couples and the attractive record low interest rates are the main drivers in the area for sales of new land and house and land packages by developers.

Melton city’s population growth rate is predicted to be the second fastest growing in Victoria. Demographic research shows that the area is dominated by young families with over 70% of residents being aged less than 45 years old.

In the foreseeable future, Melton’s residential property market is expected to experience growth. This growth appears to be driven by an increase in the area’s population of potential buyers that priced out of the inner suburban Melbourne market and the low interest rates.

According recent Real Estate Institute of Victoria research, the median house price within Melton was $255,000 in June 2015. Below demonstrates a capital gain made possible due to a market movement.

164 Coburns Road, Melton 3-bedroom, 1-bathroom, 112 square metre floor area (no improvements between sale dates). Sold 13 June 2015 for $260,000 Sold 3 April 2014 for $215,000.

Ringwood is an established metropolitan suburb approximately 24 kilometres east of the Melbourne CBD. It consists of a mixture of established residential dwellings on traditional sized residential allotments generally built during the 1950s, 1960s and 1970s. We note that in more recent times, low and medium density unit development is taking place, particularly on the larger allotments and those close to Ringwood central. The area is well serviced by schools, shopping, parks, sports fields, walkways, arterial road access and public transport. The suburb is generally considered to be a mid socio-economic area. A feature of the suburb is the Eastland Regional Shopping Centre and close proximity to Eastlink providing direct access to the Melbourne CBD. The $700,000 to $1 million price sector seems to be running hottest in the Ringwood market for housing at the moment.

Below are some examples of what you can secure in Ringwood within different price brackets. Less than $500,000 will secure a single level conventional style dated brick 1- or 2-bedroom, 1-bathroom unit. $600,000 to $650,000 will secure a single level conventional style circa 1970 albeit fully renovated brick or weatherboard 2- to 3-bedroom, 1-bathroom dwelling on circa 600 to 800 square metres of land. (For example, recent sales include 14 Glencairn Avenue, Ringwood for $600,000 and 3 Margaret Street, Ringwood for $625,000.) Circa $700,000 will secure a single level conventional style original, unrenovated brick or weatherboard 2- or 3-bedroom, 1-bathroom dwelling on circa 700 square metres of land near Eastland Regional Shopping Centre. (For example, 11 Prospect Court, Ringwood sold for $737,000.)

Around $800,000 will secure a two-storey conventional style 1970s albeit fully renovated brick or weatherboard 4-bedroom, 2-bathroom dwelling on circa 590 square metres of land near Eastland Regional Shopping Centre (for example, 16 Prospect Court, Ringwood sold for $810,000).

There are a few factors driving these markets and price points at the moment including:

– Substantial upgrade in nearby infrastructure (i.e. Eastlink, Eastland Regional Shopping Centre, Ringwood Train Station and Bus Terminal);

– Historically low interest rate environment;

– Melbourne’s increasing population; – Substantial foreign investment/purchasing;

– Competition from potential purchasers priced out of adjoining suburbs.

Demand for property in Ringwood can be expected to cause an increase in overall property values for surrounding suburbs in the outer eastern housing market as property prices have increased substantially and buyers are pushed further out.

It is unknown whether the strong performance in Ringwood and its immediate surrounding areas will be sustainable over the coming year.

Recently in the city of Boroondara, new neighbourhood residential zoning has been introduced in accordance with the Neighbourhood Character Study undertaken by the Council. The new zoning restricts subdivision to land over 500 square metres (or 300 metres for NRZ2) and allows a maximum of two dwellings on a lot. The new zoning also restricts the maximum height for dwellings to eight metres.

Median house prices in Balwyn have risen 33% in the past five years due to high demand from foreign investors and also the desire to be in the popular Balwyn High School zone (Source: CoreLogic RP Data). The main price drivers in Balwyn, Balwyn North and Canterbury are:

– School zones, especially Balwyn High School zone

– Close to a number of public transport options

– Chinese and other foreign investors. The Victorian State Revenue Office introduced a 3% duty payable by foreign investors which came into effect on 1 July 2015. The duty has had no discernible impact on foreign investment.

– Record low interest rates

– Affluenza

The future of house prices in Balwyn appears to be unsustainable. Limited supply has resulted in overpriced housing and foreign investment will be curbed in the future, which could cause the market to stall. In the foreseeable future, the Balwyn, Balwyn North and Canterbury prestige residential markets however look likely to remain heated for the next 12 months.

If you haven’t already, you can subscribe to receive this report directly each month for FREE! Simply jump on the HTW website www.htw.com.au and follow the prompts. Thanks to alphabroker www.alphabroker.com.au