Australian home prices fall two months in a row

Australian home prices fall two months in a row

Australian housing values have tumbled by 1.3 per cent in the past two months, according to the latest CoreLogic data, as prices drop for a second consecutive month.

A 0.7 per cent decline in June followed a 0.4 per cent decrease in May, which was the first fall recorded since mid-2019. 

When looking at the combined capital cities alone, real estate prices dropped by 0.8 per cent in June. The only capital cities which did not see housing values decline were Hobart, Darwin and Canberra.

Melbourne led the price drops, with median real estate values tumbling by 1.1 per cent to $683,529 in June.

In Sydney, the median property value decreased by 0.8 per cent to $875,749.

Nationally, price changes were still positive in the past 12 months, jumping by 7.8 per cent, as all capital cities bar Perth and Darwin still saw capital growth. Annual price growth was led by Sydney and Melbourne, where housing values surged by 13.3 per cent and 10.2 per cent respectively.

  June 2020 (% change in value) Apr – June 2020 (% change in value) June 2019 – June 2020 (% change in value) Median value
Sydney -0.8 -0.8 13.3 $875,749
Melbourne -1.1 -2.3 10.2 $683,529
Brisbane -0.4 -0.2 4.4 $503,148
Adelaide -0.2 0.7 2.0 $440,267
Perth -1.1 -1.4 -2.5 $441,977
Hobart 0.3 1.0 6.4 $487,827
Darwin 0.3 0.4 -1.5 $387,914
Canberra 0.1 0.7 6.3 $639,965
Combined capitals -0.8 -1.1 8.9 $641,671
National -0.7 -0.8 7.8 $554,741

Source: CoreLogic.

Despite the fall in housing prices over the month, estimated transaction activity shot up in June by nearly 30 per cent, following a 21.5 per cent bounce in May.

Market activity went through the floor in April, plummeting by 33 per cent. This coincided with a national ban by the federal government on on-site auctions and open homes due to the coronavirus in April.

During the ban, auction clearance rates for the combined capital cities hit a record low of about 30 per cent. Since then, auction results have rebounded to some extent, with the average clearance rate at about 60 per cent since mid-May.

CoreLogic head of research Tim Lawless said softening in the residential property market has been “mild” so far.

“A variety of factors have helped to protect home values from more significant declines, including persistently low advertised stock levels and significant government stimulus,” he said.

“Additionally, low interest rates and forbearance policies from lenders have helped to keep urgent sales off the market, providing further insulation to housing values.”

Not the end for decline in property price

But Mr Lawless pointed out that financial support from the government and repayment holidays from lenders will eventually end. The performance of the economy when this happens will determine long-term prospects of the real estate market.

Shane Oliver, chief economist at AMP Capital, was less optimistic, and said it was clear that coronavirus-induced economic downturn and the uncertainty it has caused was taking its toll on home prices.

“Were it not for JobKeeper, the increase in JobSeeker, the bank payment holiday and other support measures protecting heavily indebted households and property investors, prices would be falling more rapidly in response to forced sales,” he said.

Dr Oliver believes housing values are likely to see further declines, with the most likely scenario a national average price fall of 5 per cent to 10 per cent until 2021.

He attributed the predicted falls to rising unemployment and a fall in immigration, which is affecting property demand. A weak rental market is another factor which, according to Dr Oliver, are expected to push up the number of forced sales.

“We expect further falls in prices particularly once support measures start to be phased down (albeit they are likely to be tapered down to avoid a ‘fiscal cliff’ after September).”

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How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

What is a loan-to-value ratio (LVR)?

A loan-to-value ratio (otherwise known as a Loan to Valuation Ratio or LVR), is a calculation lenders make to work out the value of your loan versus the value of your property, expressed as a percentage.   Lenders use this calculation to help assess your suitability for a home loan, and whether you need to pay lender’s mortgage insurance (LMI). As a general rule, most banks will require you to pay LMI if your loan-to-value ratio is 80 per cent or more.   LVR is worked out by dividing the loan amount by the value of the property. If you are looking for a quick ball-park estimate of LVR, the size of your deposit is a good indicator as it is directly proportionate to your LVR. For instance, a loan with an LVR of 80 per cent requires a deposit of 20 per cent, while a 90 per cent LVR requires 10 per cent down payment. 

LOAN AMOUNT / PROPERTY VALUE = LVR%

While this all sounds simple enough, it is worth doing a more accurate calculation of LVR before you commit to buying a place as there are some traps to be aware of. Firstly, the ‘loan amount’ is the price you paid for the property plus additional costs such as stamp duty and legal fees, minus your deposit amount. Secondly, the ‘property value’ is determined by your lender’s valuation of the property, not the price you paid for it, and sometimes these can differ so where possible, try and get your bank to evaluate the property before you put in an offer.

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.

While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.

Savings over

Select a number of years to see how much money you can save with different home loans over time.

e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

How long does NAB home loan approval take?

The time required to get your home loan from NAB approved can vary based on a number of factors involved in the application process. 

Once you have applied for a home loan, a NAB specialist will contact you within 24 hours over the phone to take down relevant information, including your total income, debts (existing loans, credit cards, etc.), assets (car, shares, etc.), and your monthly expenses (food, utility bills, etc.). Your lender might also ask for information related to the property you want to purchase, including the type of dwelling and preferred postcode.

NAB will then verify all your information and check your credit score, and if the details stack up, you should be given a conditional approval certificate. This certificate stipulates how much money NAB is willing to lend you and is typically valid for 90 days. 

Once you have your conditional approval, you can start browsing for properties that you like and that fit within the budget that NAB has provided. After you find a suitable property, you’ll need to give a copy of the signed deed to NAB, following which you should get full approval and access to the funds. This process can take up to 4-6 weeks. 

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.