City dwellers flock to regional property due to COVID-19

City dwellers flock to regional property due to COVID-19

Regional property markets are seemingly benefitting from COVID-19, as the pandemic accelerates the trend of city dwellers relocating to regional areas.

While some capital city CBD markets are recording double-digit rental vacancy rates, with Sydney CBD and Melbourne CBD at 12.9 per cent and 10 per cent respectively, renters hunting in regional areas are facing slim pickings. 

In NSW’s Blue Mountains, a record-low of only 0.7 per cent of the area’s rental property market were vacant in August, nosediving from 2 per cent in March, the latest SQM Research data showed.

The Mornington Peninsula in Victoria saw a similar situation, with its vacancy rate dropping from 1.3 per cent in March to 0.7 per cent in August – also a record low for the region.

The vacancy rate in Queensland’s Ipswich plummeted from 2.1 per cent in March to 0.9 per cent in August, the lowest it has been in the area since 2005.

Louis Christopher, managing director of SQM Research, said the vacancy figures indicate an ongoing transition to regional areas, thanks to the space and low-density living these areas offer.

“The shift towards regional living continues at pace, largely at the expense of higher inner-city rental vacancy rates. I suspect there will have to be a high point in this move soon,” he said.

“However, I also suspect there will be a degree of permanency with the massive population shift.”

Home buyers no longer limited to employment hubs

Pete Wargent, co-founder of buyer’s agency marketplace Buyers Buyers, said many property buyers were moving to regional areas because of the improved lifestyle. 

“Those who work in a stable corporate environment, but do so remotely, are now taking advantage of great buying opportunities in NSW, Victoria and southeast Queensland,” he said.

“Before COVID-19 hit, there was already a strong trend of sea- and tree-change homebuyers looking for the best of all worlds – lifestyle, accessibility to employment hubs and affordable housing.”

RiskWise Property Research’s chief executive officer, Doron Peleg, said Australians have the opportunity to move away from employment hubs to an area with better lifestyle prospects, due to COVID-19 accelerating a move to remote working.

“While there’s nothing new about mobile professionals, the onset of COVID-19 changed the way we work as a nation with vastly increasing numbers working from home - and it’s here to stay,” Mr Peleg said.

He noted that demand for regional areas with lifestyle prospects is likely to surge, particularly among stable income earners. 

That demand could send property prices up in regional areas, according to Steve Laidlaw, the chief executive of People's Choice Credit Union, among the largest of its kind in Australia. 

"I expect property prices in regional centres to grow, and grow strongly,” he told the Australian Financial Review, adding that regional hubs which have strong transport networks with Sydney and Melbourne are tipped to be sought-after. 

“A million bucks doesn't buy you much in Sydney and Melbourne,'' Mr Laidlaw said.

Regional living trend big in Victoria

In Victoria, where the impact of COVID-19 has likely delivered the biggest blow, property listing views for regional areas in the state soared by about 44 per cent since July 2019, the highest point in at least four years, according to Domain Group data

Ad views skyrocketed in some Victorian regional areas during COVID-19, between February and July 2020, including:

  • Hume – 73 per cent
  • Bendigo – 68 per cent
  • Shepparton – 54 per cent
  • North West – 51 per cent

Domain Group senior research analyst, Dr Nicola Powell, said while city dwellers moving to regional locations was not uncommon due to housing affordability reasons, COVID-19 has fast-tracked the trend.

“The demand for a regional lifestyle has clearly been reignited,” she said.

“Demographic changes tend to be a gradual process rather than an instant switch. Prior to the pandemic, the movement of residents from the city to rural areas was already underway.”

Property investors increasingly attracted to regional areas

It’s not just owner-occupiers who want to move away from the big smoke. Property investors are also becoming more drawn to regional markets. 

More than one in five of investors prefer to park their money in regional areas, up from 15 per cent in 2019, a national survey of nearly 1,100 property investors conducted by the Property Investment Professionals of Australia (PIPA) showed. 

Coastal locations are also fielding interest, and were the most attractive investment to 12 per cent of investors, up from 8 per cent last year.

Conversely, the investor interest in metropolitan markets dropped to 61 per cent from 73 per cent last year.

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The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

Can I get a NAB home loan on casual employment?

While many lenders consider casual employees as high-risk borrowers because of their fluctuating incomes, there are a few specialist lenders, such as NAB, which may provide home loans to individuals employed on a casual basis. A NAB home loan for casual employment is essentially a low doc home loan specifically designed to help casually employed individuals who may be unable to provide standard financial documents. However, since such loans are deemed high risk compared to regular home loans, you could be charged higher rates and receive lower maximum LVRs (Loan to Value Ratio, which is the loan amount you can borrow against the value of the property).

While applying for a home loan as a casual employee, you will likely be asked to demonstrate that you've been working steadily and might need to provide group certificates for the last two years. It is at the lender’s discretion to pick either of the two group certificates and consider that to be your income. If you’ve not had the same job for several years, providing proof of income could be a bit of a challenge for you. In this scenario, some lenders may rely on your year to date (YTD) income, and instead calculate your yearly income from that.

Why should I get an ING home loan pre-approval?

When you apply for an ING home loan pre-approval, you might be required to provide proof of employment and income, savings, as well as details on any on-going debts. The lender could also make a credit enquiry against your name. If you’re pre-approved, you will know how much money ING is willing to lend you. 

Please note, however, that a pre-approval is nothing more than an idea of your ability to borrow funds and is not the final approval. You should receive the home loan approval  only after finalising the property and submitting a formal loan application to the lender, ING. Additionally, a pre-approval does not stay valid indefinitely, since your financial circumstances and the home loan market could change overnight.

 

 

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 long does Bankwest take to approve home loans?

Full approval for a home loan usually involves a property valuation, which, Bankwest suggests, can take “a week or two”. As a result, getting your home loan approved may take longer. However, you may get full approval within this time if you applied for and received conditional approval, sometimes called a pre-approval, from Bankwest before finalising the home you want to buy.  

Another way of speeding up approvals can be by completing, signing, and submitting your home loan application digitally. Essentially, you give the bank or your mortgage broker a copy of your home’s sale contract and then complete the rest of the steps online. Bankwest has claimed this cuts the approval time to less than four days, although this may only happen if your income and credit history can be verified easily, or if your home’s valuation doesn’t take time.

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.

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.

How much debt is too much?

A home loan is considered to be too large when the monthly repayments exceed 30 per cent of your pre-tax income. Anything over this threshold is officially known as ‘mortgage stress’ – and for good reason – it can seriously affect your lifestyle and your actual stress levels.

The best way to avoid mortgage stress is by factoring in a sizeable buffer of at least 2 – 3 per cent. If this then tips you over into the mortgage stress category, then it’s likely you’re taking on too much debt.

If you’re wondering if this kind of buffer is really necessary, consider this: historically, the average interest rate is around 7 per cent, so the chances of your 30 year loan spending half of its time above this rate is entirely plausible – and that’s before you’ve even factored in any of life’s emergencies such as the loss of one income or the arrival of a new family member.

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.

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.

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).

Can I apply for an ANZ non-resident home loan? 

You may be eligible to apply for an ANZ non-resident home loan only if you meet the following two conditions:

  1. You hold a Temporary Skill Shortage (TSS) visa or its predecessor, the Temporary Skilled Work (subclass 457) visa.
  2. Your job is included in the Australian government’s Medium and Long Term Strategic Skills List. 

However, non-resident home loan applications may need Foreign Investment Review Board (FIRB) approval in addition to meeting ANZ’s Mortgage Credit Requirements. Also, they may not be eligible for loans that require paying for Lender’s Mortgage Insurance (LMI). As a result, you may not be able to borrow more than 80 per cent of your home’s value. However, you can apply as a co-borrower with your spouse if they are a citizen of either Australia or New Zealand, or are a permanent resident.

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out.