Market update – Building the bridge (or invisible stairway) across the economic cliff! (Ep.54)

The Property Planner, Buyer and Professor unpack the economic cliff. What will happen when JobKeeperHomeBuilder and lender repayment holidays end? 

In this episode David Johnston, Cate Bakos and Peter Koulizos take you through:   

  1. How banks will look to help keep many of the most affected borrowers and businesses to stay afloat with new initiatives such as interest only repayments, lower rates, extended loan terms and pauses, although some zombie businesses will need to be let go. 
  2. What holds for employment, as 124,000 people are re-employed in May and a further 850,000 expected by the end of next month.   
  3. HomeBuilder scheme, the ins and outs of the scheme and questions yet to be answered. 
  4. How state governments will provide further stimulus to support home buyers and builders, beefing up stimulus packages offered to Australians. 
  5. Where to get your information from, and why the Treasury, ABS and RBA are the most trusted sources. 
  6. The effect on buyer behaviour as more people work successfully from their home office and recalibrate what is needed in a home and location as part of their Property Planning. 
  7. And of course, our ‘gold nuggets’! 

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Show notes

  • What is the economic cliff? – when stimulus packages and pauses of loans end at the end of September. By the time this comes, JobKeeper may go away, but some people won’t need it. Confidence is coming back – listen to what treasury, ABS and RBA announce, they are trusted sources. Originally the thinking was that unemployment would hit 10%, now they think 8%.  
  • There are some people who say we’re all on life support and there definitely will be people who’s business don’t survive and people who have lost jobs.  
  • Online Uni has data to support that there are people are using this time to skill up.   
  • Banks – working with customers to prevent house sales and mortgagee sales. Some lenders have allowed switch from P&I to IO. 20% of people who have taken repayment holidays are believed to be on some level of financial difficulty. Banks will look at those who have some challenges, look to move them on to interest only or extending pause period. Maybe fixing them on lower rate. There will be effort to keep those in financial difficulty afloat.  
  • Buyer behaviour – vendor attitudes have changed and how we think about lifestyle. This period of working from home, closer family times together. We have the ability to work in a bubble together and relate more to our families. We see more people seek to live further away from the city – selling and move further out to achieve having more space, and reduce debt.  
  • Economy – the next step always appears as you go and many are concerned about what is to come. The likelihood that we keep putting in place more jobs, bring people from overseas, access to finance and improve bank turn-arounds.  
  • Good news last week – 124,000 jobs added in May – tax office payroll figures show an improvement in jobs added and 850,000 more could be re-employed by next month – bring it down to 6.9% jobless rate. 
  • The recovery will be L shaped, not a V – we won’t recover as fast as what we fell, but will recover.  
  • Medication – positive results have been recorded in the UK, where medication has reduced rate of death by 30% by those in serious condition.  
  • HomeBuilder stimulus – a quick recap: cannot gain the stimulus via company or trust, only available to citizens – income caps based on 18-19 tax return. Building contract total value land and improvements cannot exceed $750,000, renovation must be $150,000-$750,000 – the property cannot be more than $1.5M at the end. Construction must commence from 3 months from the contract date. Keep an eye on for more information and clarification.  
  • Some of the challenges: 
  • Planning councils – great increase in applications for builds.  
  • Sign a building contract – when you buy off the plan, you don’t sign a building contract – do you need to sign building contract or just property contract? 
  • In all likelihood the Government will extend if need be. 
  • Does it get paid upfront? 
  • It’s too early to tell what the positive impact will be. Employing a large portion of the work force that was impacted by Coronavirus – however not all of them will be problem solved by this initiative, but a lot will. 
  • State Gov’t will probably beef up package that they will provide – further financial ammunition in the works.  
  • Some perspective on values – ABS – 12 month results – 12% surge in Sydney and 10.8% in Melbourne – from March to March – put it in perspective – yet to transpire, we’re only back to where we were 12 months ago 

Peter Koulizos – The Property Professor’s Golden nugget: for people looking at alternatives for jobs they’ve lost due to covid-19 – have a look at re-skilling yourself, look at a different career or different direction. Uni’s are keen to get students in, they are experiencing a dint because of international students. Everyone has transferable skills – tafe and uni will offer credit or recognition of prior learning. With most universities these days you can do the course online.  

Cate Bakos – The Property Buyer’s Golden nugget: look at the positives of our technical ability and learning, we’ve become really efficient. We’ll look back at history, we were the generation that lived through this, it’s an interesting time and it definitely hasn’t been all bad.  

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