The blossoms have started to appear and after the longest and most draining winter in Victoria that I have endured in my lifetime, reminded me things will IMPROVE. So what factors are affecting lending and property now and what can we look forward to?
Interest rates do not look to be going up anytime soon. Interestingly enough though variable rates, which have remained firmly in the high two’s are nudging lower, but fixed owner-occupied rates that have been firmly in the low two’s are nudging higher.
Loan to value ratio loans are becoming more entrenched as the banks price better for better credit worthy clients with lower loans on their higher valued properties.
However, two major banks warned the market that if clients were thinking they might not manage their debts once the stimulus packages dry up, should consider either downsizing their owner occupied homes or selling investment properties sooner rather than later. This is a major indicator of where property prices are heading.
The RBA also released research that a forecast jump in unemployment to 10% and lower levels of spending are major headwinds for the economy.
If you are on a lending pause, please call me for any assistance now. Do NOT rely on an extension in four months’ time when the banks have indicated the pause will cease.
If you have income, get paying those loans down now as making them higher is not a successful wealth creation strategy. As your loan will be larger after a pause, this could mean your REPAYMENT could be larger.
What you can do to help manage loan repayments:
1. Move to interest only (if you consider this is right for your situation); or
2. Split your loans into part principal and interest and part interest-only; and
3. Maybe even ask for a longer loan term overall?
BUT get in early – do not be the last person asking for this assistance – get it sorted. Taking responsibility for your financial situation is empowering.
How are we going to rebound?
If you are wanting to get onto the property ladder and have a secure job, now is a GREAT time to get buying and start paying off your home at the lowest rates ever. You will look back on this time and wish you had done more. Our “FIRST PROPERTY MASTERCLASS” is about to launch online with weekly zoom updates so watch out for this.
Regional and warmer climate properties are already in demand with many clients telling me they are thinking of moving as now is the chance to grab that lifestyle dream as we can now so easily work from home. Lifestyle properties that have sat on the market will benefit from this change in our style of work. Rental properties are in demand in these areas with (for example) vacancy rates in the Sunshine Coast falling to below 1% in some areas.
City Apartments – which have previously managed to hold value and rent due to higher foreign student populations, (over 720,000 were enrolled in 2019 – 260k from China) will hopefully be changed into larger lots and sold to the baby boomers wanting a city pad and a country home. Housing around universities could suffer as not only large numbers of staff have lost or may be losing their jobs, student numbers may reduce.
South East Queensland and northern NSW will also benefit from the lifestyle push. We suggest you buy houses rather than units or apartments as people need more space.
Renovating is in (everyone wants a home office or multiple lounge areas) and a garden and shed or retreat but as for flipping? Don’t count on this as a strategy as you may not have the market to sell into in a hurry. Always make sure you can hold on as long as it takes.
In 2019, Australian residents made 11,300,000 outbound overseas trips so with barely any being made in 2020 and, we suspect, nor in 2021, AIRBNB and holiday home rentals should recover well as more and more Australians will travel at home.
And if you are paying over 3% for an owner-occupied property please let us review it for you. I have full-time staff working constantly trying to review existing client’s loans – call us if you need more urgent help.
Louise Lucas
