In this episode The Property Planner, Buyer and Professor take a deep dive into the impact of the lockdown in Melbourne and Victoria border closures on the property market and broader economy, and how the key indicators were tracking up to this point.
In this episode David Johnston, Cate Bakos and Peter Koulizos take you through:
- Victoria back into lockdown just as consumer confidence and new listings recover to pre-Covid levels – what does this mean for the property market, economy and what are the differences from the last lockdown?
- Lender scrutiny and efficiencies are clogging up the approval process, how can this impact your ability to snap up the right property? If you’re looking to purchase or refinance, getting your ducks in a row is critical to ensure timely assessment.
- Extension of repayment holidays for an additional 4 months through to 2021 as the liquidity bridge is extended for those who cannot meet their repayments, but how and who qualifies?
- How does accessing your Super impact your ability to borrow? A little hint, it’s not helpful…
- How the property market has bounced back and is normalising with auction clearance rates steadying and new listings recovering – prior to Melbourne lockdown at least.
- Buyer demand continues to hold up prices, with the combined capital city index showing only a 1% drop since Covid started and 1.3 buyers for every one new listing.
- First time buyer purchases are going through the roof, as many take up Government and State based initiatives to get into their first home.
- Rents continue to fall, particularly for the problem child of property – medium to high-density apartments in Melbourne and Sydney CBD and inner suburbs.
- Will there be an economic or fiscal cliff? Public and private sector institutions continue to build the bridge to the other side with talks of extending JobKeeper and Jobseeker but making it more targeted, and extension of repayment holidays.
- And of course, our ‘gold nuggets’
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Resources:
- Forecasting Victoria’s infection peak: 13 July to 20 July
- Covid podcast special #7 – Recovery lessons from recent recessions, the great depression, GFC & Spanish Flu
- What are ‘early market’ indicators?
- Understanding pre-approval
- How is lockdown *different* this time?
- Property stock levels masked by off-market deals
- How property search behaviour has changed during coronavirus
- Stamp duty – Victorian first-home buyer economies hotspots shown
- Dissecting 10 years of Core Logic data – capital cities & regional areas (Ep.42)
- Diversification 101 – How and why to plan for diversification within your property portfolio (Ep.43)
- Why the family home is often the biggest piece of the investment puzzle (Ep.22)
- Why you need to plan for your future home when buying an investment property
- Why short-term investing has long-term consequences
- Mortgage Strategy 101 – Ep 4. Optimise Investment Deductions
- Mortgage Strategy 101 – Ep 9. – Maximising your tax deductions by using a redraw facility
- Offset accounts – God’s gift to mortgage strategy! (Ep.40)
- How will your mortgages serve you in the long run?
- Five mortgage strategies that can grow your wealth
- How mortgage strategy shapes your ability to hold property, and grow your wealth for decades into the future! (Ep.24)
- Unpacking land to asset ratio (Ep.16)
- Mortgage Strategy 101 – Ep 6. Offset Optimisation
- Why your Mortgage Strategy is more important than your interest rate! (Ep. 9)
- Mortgage Strategy 101 – Ep 12. How to keep property as you accumulate!
- Mortgage Strategy 101 – Ep 8. How to keep a stepping stone home when you upgrade
- Mortgage Strategy 101 – Ep 5. Risk Management
- Why your approach and assessment of risk is paramount to property success! (Ep.10)
- How to succeed with Property and Create your Ideal Lifestyle
- Mortgage Strategy 101 – YouTube video series.
Show notes
- Victoria back into lockdown – mid last week:
- Scramble for motivated vendors to sell because of lock down – campaigns are being brought forward.
- Two people in a house at any one time – every inspection is by appointment. Zoom auctions.
- Some buyers are opting to sit it out – this time around buyers have more confidence.
- Some price discounting for buyer’s who had to sell – at the peak it was 10% – now buyers are ready to purchase and ready to take advantage.
- Lender scrutiny and efficiencies:
- Lender efficiencies have ground to a halt – tighter on policy as it pertains to people impacted by Covid and harder to get access to finance. Offshore processing where staff are located in highly affected areas overseas. Buyers are reluctant to bid unconditionally, they want subject to finance because of this.
- Rarely does an application not come back with them asking 1 or 2 additional questions.
- 1-2 months to get formal approval with blown out turn-around times.
- For anyone looking to get a loan approved, provide more than is needed, putting that effort up front is likely to save you more time down the line and headache – optimizing ability to get your loan approved first time. Difference between being able to purchase and missing out.
- Extending repayment holidays:
- ABA has come out last week announcing banks will allow for another extension for 4 months for repayment holidays – on top of the 6 originally offered.
- Stringent – looking into businesses and borrowers who can qualify – a lot of people took up this opportunity without needing it – to build up buffer and cash reserves and solidifying your war chest.
- This is another way in which the banks and institutions are building the bridge or the invisible stairway to the other side.
- Rebound in strength of economy – consumer sentiment indexes had shown return to pre-covid levels (except for Melbourne just recently).
- Anyone who has taken a holiday, it won’t be recorded on your credit record.
- If you’re expecting you won’t be able to pay your mortgage, start talking to your strategic mortgage broker before the crisis hits, there may be an opportunity to change repayments from P&I to interest only instead of extending the repayment holiday.
- Accessing your Super – how does it impact?
- Affects ability to borrow – if banks can see any evidence that an applicant has accessed super, they will not be eligible for a loan.
- Accessing super within the last 3 months – this is a hard one to hide under the rug.
- If you need to extend your mortgage repayment holiday – it won’t affect ability to borrow, but you need to think carefully if you are going to access $10,000 from Super.
- The property market:
- Consumer sentiment bounced back heaps May to June (WBC reading higher than it was in early covid)
- Moves with restrictions easing earlier them expected
- Little slump with VIC 2nd wave, early days.
- Sales and listing jumped significantly – strong demand for buying property – 1.3 sales to every new listing, demand is outstripping supply still.
- Auctions sitting around 60 per cent average – continuing to rise
- Capital cities – 1% over the whole covid period – combined capital city index.
- withdrawal rate is back to normal 10 per cent
- 20-30 per cent accepting offer in advance normalised
- New listings same as last year now, but lower than previous years still (election)
- Buyer demand is stronger than the number of new listings, total stock levels lower, important. Demand is strong.
- New norm for the country as we have smaller outbreaks that can be contained – any continue to open up and ease restrictions.
- Property is resilient – very different to share market. Most property is lived in, which means people will do away with many other luxuries before someone will sell their property, much less their home.
- Total lending compared with 12 months ago – up just over 15%. Owner occupiers up 16.6% and investors up 2.2%.
- First home buyers up 34% – market that has grown the most, interesting and courageous for people who have never purchased before. Incentives in WA total up to $69,000, which would explain why first time buyer stats are the highest in WA. Vic is the second highest – stamp duty concession, new build grant and federal initiative of deposit scheme, Homes Vic shared equity scheme.
- Instead of Government selling housing commission, they will go into a scheme with a purchaser, they allow a discounted price but the government keeps a share of it.
- Rents continue to fall except in Perth and Adelaide:
- Overseas migration as we know is a concern and a big impact on melb and syd and impacts rental more than housing demand.
- Most impacted is Melbourne and Sydney CBD and inner south and east. Medium to high density apartments. 50% of off the plan properties that are settling are coming in below the purchase price.
- Developer inability to complete projects or swap from residential to office space.
- No economic cliff:
- Banks extending repayment holiday pauses
- Talks of extending JobKeeper and JobSeeker
David Johnston- The Property Planner’s Golden nugget: OECD has said Australia will lead economic recovery of G20 countries post pandemic. On a high level, we’re doing really well and we still remain a beacon of how things have been handled so far. Let’s keep that in mind, there will be impacts with what’s happening in Melbourne, but so far we’ve handled things really well and the odds are that it’s likely to continue. One of the big things when you’re in troubled times is to maintain perspective, those OECD expectations are a good thing for us to remember.
Cate Bakos – The Property Buyer’s Golden nugget: economic cliff, biggest concern was around supply and demand, impacting house prices – floor under house prices because of the demand and limited supply. Because of our seasonal pattern, vendors come into spring, this may tilt supply and demand, some vendors will sit tight and pull back plans to sell and this will have a positive impact on the supply and demand.
