Property buyers out and about but cautious sellers tipped to hold off this spring

Property buyers out and about but cautious sellers tipped to hold off this spring

The property market is tipped to see hot buyer demand over the spring selling season, but sellers are not as keen to let their properties go in an uncertain market, new research shows. 

While spring has traditionally been the bumper season for the property market, with real estate listings usually higher in spring than in other times of the year, buyers may be facing slim pickings this year.

Nearly two thirds of Australians with plans to buy a property in the next 12 months are thinking of making a purchase this spring, according to a survey of more than 700 prospective buyers commissioned by Gateway Bank.

Millennials account for almost three quarters of serious buyers. 

Many believe that the odds are in their favour this year, with more than 60 per cent of poll respondents expecting bargains in the coming months due to the pandemic’s impact on the market.

Gateway Bank chief executive officer, Lexi Airey, said the pandemic has not had the same impact across all Australians.

“COVID-19 may have delayed home buying plans for some Australians, while others believe it will give them the opportunity to fast-track their purchasing plans,” she said.

“That said, buyers should be financially and mentally prepared so they can move quickly should the right property be listed at the right price.”

Nearly half of survey participants believe buyers will come out ahead in the spring selling season, but less than a fifth reckon they will see a seller’s market.

However, tumbling housing prices and uncertainty around the wider economy are front of mind for buyers, with 86 per cent hesitant about the real estate market. 

Sellers hold off temporarily

Sellers appear aware of this sentiment. Just over 40 per cent of those with plans to offload their properties in the coming year intending to sell this spring, suggesting that a large proportion are putting their selling plans on ice.

Ms Airey said the tepid seller confidence could affect the level of supply available this spring, which may not be able to meet buyer demand.

“While many home buyers are positive about market conditions coming into the spring selling season, we are seeing sellers remain cautious,” she said.

“The research shows there are two clear and opposing perspectives and this may lead to demand outstripping supply.”

Ms Airey warned buyers to prepare themselves for potentially difficult competition in the coming months. 

“Although home buyers consider themselves to be better placed leading into what is traditionally the busiest period for real estate, if sellers hold off, this may heighten competition among buyers for their ideal property,” she said.

“It could also lead to some tough negotiation around prices.”

Green shoots emerge as listings begin to nudge up

However, there are early signs that seller sentiment may be improving gradually. While new listings volumes are 35 per cent lower than the previous four-year average, new ads edged up by 0.7 per cent in the four weeks to September 20, according to the latest CoreLogic data.

Monthly_change_in_new_listings_count_to_23rd_august_2020

Sydney took the lead in listings volume among the capital cities, with a leap of 382 new listings, while Perth and Brisbane saw 286 and 235 properties added to the market respectively.

Newly advertised homes in Melbourne declined by a staggering 935 listings, though this has eased from the near 3,000 plunge in listings during the previous four-week period.

Every capital city except Darwin and Melbourne saw a lift in the number of listings on the market.

The surges in listings are unlikely to be caused by distressed sales, according to Eliza Owen, CoreLogic’s head of Australian research. 

“This (increase in listings) signifies that vendors may be more confident in selling their property,” she said.

“The exceptions were Melbourne, where transaction activity is understandably constrained by stage four restrictions, and Darwin, where listing numbers are generally lower and more volatile.”

Ms Owen added that the data indicates that the spring selling season could be picking up, after a “subdued start”. 

With mortgage lenders luring borrowers with reduced interest rates, discounts and cashbacks, some home buyers are expected to potentially benefit from the current environment. 

Sally Tindall, research director at RateCity, said it was “unlikely” that home loan rates have hit the bottom, ahead of a forecast rate cut from the Reserve Bank of Australia in coming months.

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Learn more about home loans

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.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

What is bridging finance?

A loan of shorter duration taken to buy a new property before a borrower sells an existing property, usually taken to cover the financial gap that occurs while buying a new property without first selling an older one.

Usually, these loans have higher interest rates and a shorter repayment duration.

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

What is equity and home equity?

The percentage of a property effectively ‘owned’ by the borrower, equity is calculated by subtracting the amount currently owing on a mortgage from the property’s current value. As you pay back your mortgage’s principal, your home equity increases. Equity can be affected by changes in market value or improvements to your property.

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

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 does pre-approval' mean?

Pre-approval for a home loan is an agreement between you and your lender that, subject to certain conditions, you will be able to borrow a set amount when you find the property you want to buy. This approach is useful if you are in the early stages of surveying the property market and need to know how much money you can spend to help guide your search.

It is also useful when you are heading into an auction and want to be able to bid with confidence. Once you have found the property you want to buy you will need to receive formal approval from your bank.

Why should you trust Real Time Ratings?

Real Time Ratings™ was conceived by a team of data experts who have been analysing trends and behaviour in the home loan market for more than a decade. It was designed purely to meet the evolving needs of home loan customers who wish to merge low cost with flexible features quickly. We believe it fills a glaring gap in the market by frequently re-rating loan products based on the changes lenders make daily.

Real Time Ratings™ is a new idea and will change over time to match the frequently-evolving demands of the market. Some things won’t change though – it will always rate all relevent products in our database and will not be influenced by advertising.

If you have any feedback about Real Time Ratings™, please get in touch.

How much can I borrow with a guaranteed home loan?

Some lenders will allow you to borrow 100 per cent of the value of the property with a guaranteed home loan. For that to happen, the lender would have to feel confident in your ability to pay off the mortgage and in the security provided by your guarantor.

Do mortgage brokers need a consumer credit license?

In Australia, mortgage brokers are defined by law as being credit service or assistance providers, meaning that they help borrowers connect with lenders. Mortgage brokers may not always need a consumer credit license however if they’re operating solo they will need an Australian Credit License (ACL). Further, they may also need to comply with requirements asking them to mention their license number in full.

Some mortgage brokers can be “credit representatives”, or franchisees of a mortgage aggregator. In this case, if the aggregator has a license, the mortgage broker need not have one. The reasoning for this is that the franchise agreement usually requires mortgage brokers to comply with the laws applicable to the aggregator. If you’re speaking to a mortgage broker, you can ask them if they receive commissions from lenders, which is a good indicator that they need to be licensed. Consider requesting their license details if they don’t give you the details beforehand. 

You should remember that such a license protects you if you’re given incorrect or misleading advice that results in a home loan application rejection or any financial loss. Brokers are regulated by the Australian Securities & Investment Commission (ASIC), as per the National Consumer Credit Protection (NCCP) Act. 

What are the responsibilities of a mortgage broker?

Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.

In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).

These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for,  actually meet your needs, and don’t prove unnecessarily challenging for you.

Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.

How to break up with your mortgage broker

If you find a mortgage broker giving you generic advice or trying to sell you a competitive offer from an unsuitable lender, you might be better off  breaking up with the mortgage broker and consulting someone else. Breaking up with a mortgage broker can be done over the phone, or via email. You can also raise a complaint, either with the broker’s aggregator or with the Australian Financial Complaints Authority as necessary.

As licensed industry professionals, mortgage brokers have the responsibility of giving you accurate advice so that you know what to expect when you apply for a home loan. You may have approached the mortgage broker, for instance, because you have questions about the terms of a home loan a lender offered you. 

You should remember that mortgage brokers are obliged by law to act in your best interests and as part of complying with The Australian Securities and Investments Commission’s (ASIC) regulations. If you feel you didn’t get the right advice from the mortgage broker, or that you lost money as a result of accepting the broker’s suggestions regarding a lender or home loan offer, you can file a complaint with the ASIC and seek compensation. 

When you first speak to a mortgage broker, consider asking them about their Lender Panel, which is the list of lenders they usually recommend and who may pay them a commission. This information can help you decide if the advice they give you has anything to do with the remuneration they may receive from one or more lenders.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.