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The spring selling season is usually a time when real estate activity ramps up while new listings launch, auction action takes off and buyers are spoilt for choice.
This year, however, is a different story after millions of Australians have spent the majority of the last quarter in some form of lockdown, or with social restrictions in place. Depending on the state or territory, people have had varying levels of liberty when it comes to house hunting, so the show has still been able to go on. But the continued limitations have spooked many sellers.
SQM Research announced national residential property listings fell in August by -9.6 per cent. When comparing year on year data, listings had dropped by -26.3 per cent. The figures represented the lowest count recorded by SQM Research since its series began in January 2010.i
Despite this dramatic downturn of homes coming onto the market, national property portal realestate.com.au claimed demand is proving to be at an all-time high. According to the REA Insights Housing Market Indicators Report for August, search activity on realestate.com.au remained strong. The number of views per listing rose by 4.9 per cent to be 46.1 per cent higher year-on-year.ii
As spring began on September 1, CoreLogic released its August National Home Value Index which shed some light on the trajectory of the Australian housing market. The index revealed that although dwelling values continued to record a broad-based rise of 1.5 per cent nationally in the wake of lockdowns, it was the lowest monthly rise since January.iii
The August increase pushed Australian housing values 15.8 per cent higher over the first eight months of 2021 and 18.4 per cent above levels a year ago – the fastest annual pace of growth in housing values since the year ending July 1989. Over the quarter to August’s end, the national dwelling value jumped 5.2 per cent.
CoreLogic’s research director, Tim Lawless, suggested the slowing rate of growth likely has more to do with worsening housing affordability than ongoing lockdowns.
“Housing prices have risen almost 11 times faster than wages growth over the past year, creating a more significant barrier to entry for those who don’t yet own a home. Lockdowns are having a clear impact on consumer sentiment, however, to date the restrictions have resulted in falling advertised listings and, to a lesser extent, fewer home sales, with less impact on price growth momentum. It’s likely the ongoing shortage of properties available for purchase is central to the upwards pressure on housing values,” he said.
Although the Victorian capital entered its sixth lockdown in the last quarter, the city did still experience an increase in dwelling prices of 4 per cent taking the median home price to $769,968 in the quarter to September.iii
Despite being in a continued lockdown since June, Sydney still had a significant rise in housing prices over the three months to August 31. Dwellings were up 6.4 per cent over the quarter to bring the citywide medium to the highest in the country at $1.039 million.iii
The Queensland capital has escaped relatively unscathed by lockdowns when compared to both Sydney and Melbourne and returned a 6.1 per cent increase in dwelling prices for the quarter to reach a median of $612,377.iii
According to CoreLogic, data collecting for the West Australian city hit a snag for August with the property analysts reporting in the August National Home Value Index, “hedonic indices for Perth and WA have been temporarily withdrawn while we investigate a divergence from other housing market measurements.”iii A calculation by SQM Research on total property listings, however, showed a minimal -6.2 per cent annual drop for Perth.i
In the nation’s capital, which only slipped into lockdown mid-August, housing values experienced the highest metropolitan growth during the last quarter. Values leapt by 7.3 per cent to a median of $816,644.iii
i https://sqmresearch.com.au/31_08_21_Total_Property_Listings_Media%20Release_FINAL.pdf
ii https://www.realestate.com.au/insights/rea-insights-housing-market-indicators-report-august-2021/
Just like the property it allowed you to buy, your mortgage benefits from regular maintenance. Spring is the perfect time to look at your current mortgage and make any adjustments that are needed.
Here are four tips to assist you in reviewing your current mortgage, to set you up for the year ahead.
Australia’s mortgage rates have remained at historic lows for a long time now. No one knows what will happen in the future but it’s a good idea to know what your current interest rate is and whether you can find a better deal elsewhere. At the moment, it’s still possible to find rates under 2 per cent fixed for one year. However, there has been a very slight rise this year.i
Working out whether to go for the lowest rate for a shorter term or lock in a slightly higher one for longer is only part of your decision. You also have to consider whether fixed, variable or a mix of the two is better for your circumstances. You will also need to factor in the costs associated with leaving your current loan and entering a new one too.
When you’re reviewing your loan, it’s important to be aware of how rates vary across different loan structures. Offset and drawdown loans normally don’t have the lowest rates, for example, but if you can pay extra against your loan, they may be financially worthwhile.
We can help you sort through not only your loan options but also the rates available and discuss what is best suited to your financial situation. It may mean approaching your current lender to ask for a more competitive rate.
Deciding how long you want to fix a rate will depend on your own risk tolerance as well as thinking about what may happen in the future. Some people prefer to know exactly what their mortgage payments will be for a set time. Others are more comfortable with the risk of a variable rate that might go up or down at any time. And of course, as COVID-19 has shown us, our risk appetite can change in relation to what’s happening in our lives.
If your circumstances have changed or you would like to discuss whether your current loan set up still suits your lifestyle and future goals, please don’t hesitate to give us a call.
If you’re paying off debts with higher interest rates than your mortgage, it may be possible to use your mortgage to pay them off. This will increase the size of your mortgage but the interest you pay will be lower than the current rate for your debt.
Paying off debt may be more straightforward if you already have a drawdown or offset mortgage with funds available, or you’re switching mortgages anyway. Other common ways to add debts to mortgages include negotiating an increase in your mortgage to include the debt.
Check how much equity you now have in your property by getting a valuation from your lender or a real estate agent. You also need to check your mortgage statement, so you know how much is paid off.
Once you know how much equity you have, you can think about whether there are other things you would like to do with that money. Many people use equity in one property to help fund another. It might pay for a renovation that could increase your equity even more.
As you can see, opening up your mortgage for a good spring clean can raise some exciting possibilities. The easiest way to act on these is to contact us for a review and action plan.
Buying a property with your partner is an exciting milestone. But before you start the endless rounds of open for inspections, it’s a good idea to sit down together and have some important conversations so that you’re on the same page from the outset.
It’s fair to say that for most couples, money talk isn’t a recipe for romance or harmony, which is why we tend to avoid it. In fact, 26% of survey respondents had not discussed their personal financial situation prior to committing to their current or most recent partner.i
Clearly, we need to be talking to our significant other about our individual and combined financial situation before making major purchases, such as property. There are also a lot of things you need to decide when buying property and the process will go a lot smoother if you have made some mutual decisions beforehand.
Choose a time when you will both be able to focus, not when you’re rushing out the door or trying to get dinner on the table, and discuss the following:
It’s important to be open with each other about your respective financial statuses, as intimidating as that can seem, and to discuss the expectations for this joint purchase. How much can you afford as a couple, and how much will each partner contribute to the loan repayments and ongoing bills?
It’s not uncommon for one partner to be more financially secure than the other, so you’ll need to decide what is fair for you both in terms of expectations. Think about future possibilities too, such as whether kids are on the cards – if they are, maternity/parental leave can reduce your overall household income, in which case the other may need to chip in more financially.
It’s pretty important to agree upon your ‘must haves’ in a home before you commence the search and keep reviewing with each other as your priorities may shift over time. There are a number of things to consider – does one of you want a sprawling backyard while the other wants something easier to maintain? You want to be close to the action in the city, while they want a quiet spot further out of town?
How much work you’re willing to put into the property is another factor, and this will help you decide if you choose a ‘fixer upper’ or a move-in ready home.
If the property is an investment, you’ll need to decide whether it should be in one person’s name (personal ownership) or both (joint ownership).
You might opt for personal ownership if you are in a higher tax bracket than your partner is, to maximise the benefit of negative gearing. Joint ownership enables you both to divide the tax benefits – you can be ‘tenants in common’ where the ownership share is determined by you both, or ‘joint tenants’ where ownership is equal.
It doesn’t make for pleasant dinner conversation but discussing what happens if you two split is important. Would one person be able to buy the other out or would the property need to be put up for sale? Would one partner continue to live in the property while the other would need to find new accommodation, and how would you decide on what’s fair in terms of mortgage payments?
More than half of Australian couples argue over money, so it’s not unusual to have conflicting viewpoints, the trick is to listen and hear each other’s viewpoints and be prepared to compromise where you don’t see eye to eye.ii
As you work through these conversations, you’ll need to crunch some numbers and get some good advice as to the best loan for your circumstances and that’s where we come in, so don’t hesitate to get in touch.
ii https://propertyupdate.com.au/heated-conversations-1-in-2-aussie-couples-argue-about-finances/
Stay up to date with the latest developments in the property market over the past month.
Our video takes you through an overview of the state of the property market, including a breakdown across all capital cities of the changes in dwelling values over the past month, as well as over a period of 12 months.
Please click here to get in touch if you’d like assistance finding the right loan for your situation.
Buying and selling a home at the same time – it’s the ultimate chicken and egg scenario. At the best of times, it is a juggling act, but in the current market where prices are rising, listing numbers are low and days on market are shrinking the “which comes first?” dilemma is real.
Traditionally, homeowners tend to sell first so they know how much cash they have to play with, then go and buy their next home. In fast-moving markets, however, some upgraders and downsizers choose to snag a new property first, before sticking the sold sign out the front of their current one.
Whichever path you take, there are certain steps that can help tip the balancing act in your favour.
By studying the market, both where you’re selling and buying into, you can form a better understanding of how to navigate the road ahead.
Conventional real estate wisdom says in a rising market it makes sense to buy first, sell second. The simple reasoning is you can secure your purchase at one price and, with a little luck, sell your current home for a stronger price as values continue to increase.
If you sell before buying in a rising market you’ll be cashed up, but the pressure will be on to purchase with settlement day looming, so you don’t end up paying two mortgages.
In a cooling market the general consensus is to sell first, buy later. Not only will you avoid paying two home loans, but you also reduce any pressure to accept a low-ball offer on your original home. The only hiccup is if you find a buyer before a new home you might need an in-between rental.
Lean on the expertise of those around you to time the transactions in your favour. When choosing a selling agent and conveyancing lawyer, don’t let their fees be the only part of the conversation. If they know you’re seeking a replacement property, then they’ll be prepared.
Your agent and potentially the selling agent of your future home can bring both parties together in a way that works for everyone, alternatively consider engaging a buyer’s agent to broker the deal for you.
In the current climate, some settlements are extending beyond 12 months. Such extensions can be used to varying success, but it all comes down to the willingness of both parties.
If selling first, your buyer would need to accept an extended settlement as a condition of sale. If buying first, you have the option of making an offer subject to an extended settlement which may (or may not) work for the vendor.
Making an offer “subject to completion of sale” is another way to balance the transition. It means, as a buyer, you have added a caveat into the contract of sale saying your offer is only valid once you’ve sold your home. This can take a lot of negotiation from the outset and when buying in a hot seller’s market, the ball isn’t really in your court to make such demands.
Deposit guarantees can help buyers fund a purchase before selling their current home. A financial agreement that can be used in place of a cash down payment, a deposit guarantee is a promise on paper that the buyer will pay the full deposit on an agreed date. Before considering a deposit guarantee, do your homework. They may not be right for every situation and do accrue fees.
Another way to straddle the gap is to obtain a bridging loan. Such loans are often interest-only, albeit usually at a higher rate than a standard home loan and are taken out on top of an existing mortgage. To qualify for a bridging loan, applicants typically need a significant amount of equity in their property, we can crunch the numbers to assess whether a bridging loan will work for you.
Although the idea of a second mortgage might sound scary, it could be the best option if you consider the costs of potentially moving into a temporary rental, two moving days and runaway property prices. Ultimately, it could also take the pressure off accepting any offer just to offload your old home.
If you are trying to navigate the path between selling and buying, reach out and we can discuss the most suitable move for you.
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