“On the cusp of a boom”: CBA’s assessment of the housing market

, ,

Australia’s housing market is on the “cusp of a boom”, with house prices set to leap 16% over the next two years, according to the Commonwealth Bank (CBA).

The head of economics at Australia’s biggest bank, Gareth Aird, predicts national house prices will surge 9% in 2021 and a further 7% in 2022.

Apartment prices meanwhile are predicted to rise 5% in 2021 and 4% in 2022.

“The negative impact that COVID-19 had on Australian property prices turned out to be much more muted than almost any forecaster expected,” Mr Aird has written in a note to clients.

The CBA prediction is similar to that contained in an internal RBA FOI document, which projects house prices could rise by up to 30% if interest rates remain low over the next three years (which the RBA has indicated will happen).

So what can we expect across the country?

In Sydney and Melbourne, dwelling (house and apartment) prices are predicted to grow by at least 12% in the next two years, says Mr Aird.

That would see Sydney’s median dwelling price increase by a whopping $160,000 to $1.2 million, and Melbourne’s median dwelling price increase by $110,000 to $920,000.

Meanwhile, Perth values are tipped to rise 17.7% ($99,000), Brisbane 16.6% ($102,000), and Canberra 15.5% ($132,000).

Rounding out the capital cities, Adelaide is predicted to increase 14.5% ($86,000), Hobart 15% ($87,000) and Darwin 18% ($99,000).

So when and why are property prices set to increase?

Well, it appears as though the “boom” may have already just begun, Mr Aird explains in a CBA podcast.

“Over the first two weeks of February, national prices are up 0.8%. So we’re looking at over 1.5% in February alone,” says Mr Aird.

“Prices are now rising in all capital cities. And they’re rising quite quickly.”

Mr Aird says a strong indicator for property prices is lending figures, and over the last four to five months lending has picked up quite significantly.

“It’s quite intuitive when you think about it. The money that people borrow ends up going into the housing market, and that then pushes up housing prices. There’s usually about a six month lead time,” he explains.

“Initially, that (lending) was with owner-occupiers, but more recently it has spilled over to investors. And that is now feeding into house prices.”

Another strong indicator is auction clearance rates, adds Mr Aird.

“They are very, very firm at the moment. Nationally we’re seeing it sit in the 80s (percent), which historically has been consistent with double-digit dwelling price growth,” he says.

Other key momentum builders are the RBA advising that the record-low official cash rate won’t increase until 2024, says Mr Aird, and strong recovery in the labour market.

“The fact that the Reserve Bank has given explicit public guidance that rates are going to stay very, very low for a number of years, that’s given borrowers a lot of confidence to go out there and take on debt,” he says.

“All of those inputs that go into our model are screaming that house price rises could be faster than at any point we’ve seen before, and our model goes back 10 years.”

Explore your options

If you’re one of the many prospective homebuyers who are feeling confident about the housing market right now and want to explore your financing options, get in touch today.

We’re more than happy to help you determine whether you can finance that home you have your eye on before the next housing boom takes off.

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

HomeBuilder sparks surge in home loans, new builds and renos

, , ,

Thousands of families across the country who had been thinking about a new build, or tackling an overdue renovation project, have rolled up their sleeves and committed to it, according to latest ABS data.

And to be honest, we’re not overly surprised. The federal government’s $25,000 HomeBuilder grant is nothing to sneeze at.

But the Australian Bureau of Statistics’ (ABS) Lending Indicators data makes for very encouraging reading nonetheless.

It shows the total value of new loan commitments for housing rose 12.6% in August to $21.3 billion.

There was also a big increase in people seeking to renovate their homes. ABS building approval data shows the value of alterations and additions to residential buildings (‘renos’) increased by 7% to $784 million in August.

That’s the highest level recorded since April 2016.

But before we get into HomeBuilder, let’s look at the home lending figures in a little more detail.

Borrowers seeking new home loans

Of that $21.3 billion in new housing loan approvals we mentioned earlier, $16.3 billion was comprised of owner-occupier home loans, and there was $5 billion worth of investor loans.

That means owner-occupier home loan commitments increased by 13.6% in August, which is the largest month-on-month rise recorded by the ABS, and eclipses the previous record of 10.7% set in July.

The Housing Industry Association (HIA), which is the official peak body of Australia’s home building industry, says that HomeBuilder is to thank for the surge in demand.

They point out that in August the number of loans for the construction of a new dwelling increased by 22.9% to 4,679 – the highest level in over a decade.

“The short-term stimulus from HomeBuilder is emerging in the housing finance data released by the ABS,” says HIA’s Chief Economist, Tim Reardon.

“There has been a substantial improvement in sentiment and confidence in the housing market.”

So, what’s the HomeBuilder scheme again?

The federal government scheme aims to assist owner-occupiers (including first home buyers) who want to buy a new home, or begin work on eligible renovations, by providing them with a $25,000 tax-free grant.

It’s available to people building a new home for less than $750,000, or to those who spend between $150,000 and $750,000 renovating an existing home, subject to certain eligibility criteria.

You can find out more about the scheme and eligibility here, but here’s the big catch: applications for the HomeBuilder grant must be received no later than 31 December 2020.

So if you’re interested in applying for the scheme, you’ll want to get in touch with us asap.

Not only can we walk you through how to apply for it before the deadline but, just as importantly, we can assist you when it comes to applying for finance.

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

House prices tipped to surge 15%, RBA hints at cash rate cut

, , ,

Strap yourself in: Australian house prices are tipped to experience a mild COVID-19 dip before surging 15% over the following two years, according to some of the nation’s top economists.

And in more good news for homeowners, RBA Deputy Governor Guy Debelle has hinted at further reductions to interest rates, while not going into negative territory.

Both NAB and Westpac economists have been quick to jump on board the rate cut hype train, predicting the RBA could cut the cash rate by 15 basis points to a record low 0.10% as early as October.

But back to that tipped 15% price surge

Westpac’s Chief Economist Bill Evans and Senior Economist Matthew Hassan believe house prices are set to bottom out by June 2021 after a further 2.3% fall – which would mean a total fall of 5% from the peak in April.

But the good news is they’re tipping prices to bounce back hard and fast across the country.

Indeed, the duo expects national dwelling prices to “surge” 15% until mid-2023, or 7.5% per year, led by massive gains of 20% in Brisbane and 18% in Perth.

Sydney (14%), Melbourne (12%) and Adelaide (10%) wouldn’t miss out on the action, either.

If it plays out as predicted, we could see a cumulative increase in national prices of 10% from pre-COVID highs over a three year period.

“This recovery will be supported by sustained low [interest] rates, which are likely to be even lower than current levels,” Mr Evans says.

Such a rebound would also be assisted by ongoing support from regulators, substantially improved affordability, sustained government fiscal support, and a strengthening economic recovery.

Mr Evans adds the recovery would be further aided “once a vaccine becomes available, which we expect in 2021″.

Got your eye on a property?

For those who are confident in their financial circumstances at present, Westpac’s housing market prediction certainly makes it a tempting time to buy, especially if another RBA cash rate cut soon comes to pass.

So if you’re looking to add to your property portfolio, looking for a change of scene, or keen to buy your first home and break into the market, get in touch today.

We’re here to help you find a loan that’s just right for you.

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

Applications now open for $25,000 HomeBuilder grant in all states

, , ,

It’s been two months since HomeBuilder was first announced, and I’m sure many of us spent a bit of that time dreaming about an extra $25,000 to spend on a reno or new home. The good news is grant applications are now officially open.

All states have now opened application channels (see below) for the federal government’s new HomeBuilder grants, with ACT the only government yet to provide an application form (however you can register online).

Back up, what’s the $25,000 HomeBuilder scheme?

The federal government scheme aims to assist Australians who want to buy a new home or begin work on eligible renovations by providing them with a $25,000 tax-free grant.

The scheme was announced as part of the federal government’s economic response to the coronavirus pandemic, with the stated aim of supporting more than 1 million builders, painters, plumbers and electricians across the country.

While many of the eligibility details were quickly revealed, there has been one key problem since the announcement of the scheme back in early June: there has been no way of actually applying for a grant.

But, there is now.

Here’s how to apply for a HomeBuilder grant in each state

New South Wales: Revenue NSW is now accepting applications online. For more information on eligibility and the process, visit: www.revenue.nsw.gov.au/grants-schemes/homebuilder

Victoria: State Revenue Office Victoria is accepting applications online. For more details on eligibility visit: www.sro.vic.gov.au/owning-property/australian-homebuilder-grant

Queensland: In Queensland the Office of State Revenue is taking applications. For more info: www.qld.gov.au/housing/buying-owning-home/financial-help-concessions/homebuilder

Western Australia: For those in the west, Revenue WA is the place to submit your application. For more info visit: www.wa.gov.au/service/community-services/grants-and-subsidies/apply-new-home-construction-grant

South Australia: The South Australian Revenue Office is accepting applications. For more details visit: https://www.revenuesa.sa.gov.au/grants-and-concessions/homebuilder-grant

Tasmania: For those in the apple isle, The State Revenue Office of Tasmania is handling applications. You can visit:  www.sro.tas.gov.au/Documents/HomeBuilder-grants-guideline.pdf

Northern Territory: The Northern Territory Revenue Office is now accepting applications. For more details visit: https://treasury.nt.gov.au/dtf/territory-revenue-office/homebuilder-grant

ACT: As mentioned, the ACT is yet to provide an application form, however you can register online. For more info visit: https://www.revenue.act.gov.au/covid-19-assistance/homebuilder-grant

Get in touch

So, that’s how you can apply for the HomeBuilder scheme. If you’re keen to proceed, the next thing to tackle is financing the project.

And that’s where we can help.

If you’d like a hand obtaining finance to pay for the new home or reno you’ve been dreaming of, get in touch with us today – we’re here to help make your HomeBuilder dreams a reality.

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

Homeowners refinancing in record-high numbers: explore your options

, ,

Homeowners in record-high numbers are taking advantage of reduced interest rates and competitive refinancing offers. Are you ready to take the leap? 

When times are tough, the belt gets tightened.

And we’ve seen that play out across the country in a big way recently, with the number of Australian families who refinanced their mortgage in May the highest on record, according to the latest figures from the Australian Bureau of Statistics (ABS).

In fact, 33,712 Australians refinanced a whopping $15 billion worth of mortgages in May.

To put that into context, before COVID-19 struck, that monthly figure floated around the $10 billion to $11 billion mark.

Anecdotally speaking, the recent 50% increase in refinancing sounds about right to us.

We’ve been flat chat over the past few months helping families refinance their home loans and save thousands of dollars in annual interest repayments.

Why are so many people refinancing?

First and foremost, the economic squeeze brought on by COVID-19 has made people stop and take stock of where they can make savings in their family budget.

And one possible way to do that is by refinancing, as Australian home loan rates have never been lower.

That’s because, on top of the Reserve Bank of Australia (RBA) dropping the cash rate to a record low, lenders are currently competing hard for your business by offering never seen before interest rates.

ABS Chief Economist Bruce Hockman further explains: “The value of existing owner-occupier loans refinanced with a different bank [in May] was by far the highest on record as borrowers responded to reduced interest rates and refinancing offers.”

So how much can you save by refinancing?

Well, that’ll depend on your individual circumstances and a number of other factors, including how big and old your loan is.

But to give you a lower-end-of-the-scale example, a recent RBA study found that for loans written four years ago, borrowers are charged an average of 40 basis points higher interest than new loans.

“For a loan balance of $250,000, this difference implies an extra $1,000 of interest payments per year,” explains the RBA.

And if your loan amount is higher than the above example – or if your loan is older – then there’s a decent chance that refinancing could save you even more than $1000 in interest payments each year.

What’s your next step?

That’s the easy part – get in touch today.

There’s a reason tens of thousands of families are currently refinancing their home loans: now’s a good time to do so as competition among lenders is running hot. And the longer you put it off, the longer you’ll keep paying your current rate.

So if you’d like to refinance your home loan, give us a call and we can run you through your options and get the ball rolling.

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