Rebounding house prices surge to record highs

Rebounding house prices surge to record highs

House and unit values are growing once more after recovering from a sharp drop brought about by the coronavirus pandemic.

Property values rose 0.8 per cent in the September quarter, according to data from the Australian Bureau of Statistics (ABS), gaining $87.8 billion in value to reach the record high of $7.3 trillion.

The results represent a stellar rebound when compared to the preceding quarter, where the COVID-19 pandemic plunged the country into an economic crisis, directing property values downwards to uncertain lows. The average home had lost $12,500 in value in the first six months of the year.

Prices were up in all capital cities across the country by the end of the September quarter -- other than Melbourne. Sydney and Brisbane properties experienced the strongest growth, posting lifts of 1 and 1.5 per cent respectively.

Melbourne -- still reeling from one of the longest lockdowns in the world, which helped tame a second wave of the pandemic -- had values fall by an average of 0.3 per cent.

The average Australian home was valued at $689,500, Andrew Tomadini said, head of price statistics at the ABS.

"Results for Sydney and Brisbane are in line with housing market indicators. New lending commitments to households, auction clearance rates and sales transactions all improved during the September quarter,” Mr Tomadini said.

"Property prices continued to fall in Melbourne in the September quarter, due to the impacts of COVID-19 restrictions.”

Experts had forecast property values to break records in February; however, a 12 month rise to September of 4.5 per cent was enough to beat expectations.

Inner city units show some signs of recovery

The lockdown of international borders, a health measure introduced to contain the global spread of the COVID-19 coronavirus, heavily impacted the inner city areas of Melbourne and Sydney, by cutting off access to a key demographic of renters: international students and migrans.

The result of having a lot of units advertised for rent and a lot less renters was a drop in both property and rental values.

But the September quarter data indicates unit property values are stabilising -- and perhaps recovering.

While house prices rose by 1.4 per cent in Sydney, so too did units by 0.2 per cent.

The story in Melbourne was more about a slow down in unit values dropping. House values fell by 0.3 per cent, but unit values fell by less: 0.2 per cent.

But we’re in a pandemic. So why are property values going up?

There’s an understandable disconnect between a pandemic induced recession and record high property prices, and there are many reasons for the rebound.

The first has to do with measures put in place to stop things from getting worse.

There’s the government’s stimulus payments, such as JobSeeker, JobKeeper and JobMaker, which helped keep people in work or keep money in their pockets.

And banks hitting pause on mortgage repayments for six to ten months. This gave people out of a job time to sort out their finances and the chance to recover.

Then there were policies put in place to make the cost of living cheap. This includes dropping the cash rate -- a guardpost used by banks to set the cost of interest -- to 0.10 per cent, an all time low that led to more than 50 banks offering mortgages below 2 per cent.

The second reason for the rebound has to do with making things better by giving people the confidence to spend.

The government’s role has been notable in this area too, with incentives including Homebuilder and the First Home Loan Deposit Scheme.

Combined with the lure of cheap mortgages, these measures made the prospect of buying a home too good to pass up, mostly by offering grants or making it easier for people to buy a home.

The incentives have led to the number of people signing up for mortgages jumping by 30 per cent in October, according to the ABS, when compared to the same period the year before.

Meanwhile, the number of people seeking council approval to build a house reached a high not seen in 20 years.

The rebound in the home market is an indicator the country is leaving the recession behind, Craig James said, chief economist at CommSec.

“The Aussie economy is firmly in recovery mode,” Mr James said.

“Now we just need to keep a focus on jobs to see whether the recovery is generating the sort of growth that authorities are looking for.”

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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.

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.

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.

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 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.



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. 

If I don't like my new lender after I refinance, can I go back to my previous lender?

If you wish to return to your previous lender after refinancing, you will have to go through the refinancing process again and pay a second set of discharge and upfront fees. 

Therefore, before you refinance, it’s important to weigh up the new prospective lender against your current lender in a number of areas, including fees, flexibility, customer service and interest rate.

Can I refinance if I have other products bundled with my home loan?

If your home loan was part of a package deal that included access to credit cards, transaction accounts or term deposits from the same lender, switching all of these over to a new lender can seem daunting. However, some lenders offer to manage part of this process for you as an incentive to refinance with them – contact your lender to learn more about what they offer.

What is an ombudsman?

An complaints officer – previously referred to as an ombudsman -looks at formal complaints from customers about their credit providers, and helps to find a fair and independent solution to these problems.

These services are handled by the Australian Financial Complaints Authority, a non-profit government organisation that addresses and resolves financial disputes between customers and financial service providers.

How much of the RBA rate cut do lenders pass on to borrowers?

When the Reserve Bank of Australia cuts its official cash rate, there is no guarantee lenders will then pass that cut on to lenders by way of lower interest rates. 

Sometimes lenders pass on the cut in full, sometimes they partially pass on the cut, sometimes they don’t at all. When they don’t, they often defend the decision by saying they need to balance the needs of their shareholders with the needs of their borrowers. 

As the attached graph shows, more recent cuts have seen less lenders passing on the full RBA interest rate cut; the average lender was more likely to pass on about two-thirds of the 25 basis points cut to its borrowers.  image002

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

Do other comparison sites offer the same service?

Real Time RatingsTM is the only online system that ranks the home loan market based on your personal borrowing preferences. Until now, home loans have been rated based on outdated data. Our system is unique because it reacts to changes as soon as we update our database.