When are Australia’s property prices expected to go up?

When are Australia’s property prices expected to go up?

A plunge in population growth may delay a rebound in Australian property prices, despite growth in the housing market in the months before the COVID-19 lockdowns.

It may take until the second half of 2021 for the property market to see a gradual recovery, property consulting firm m3property predicts, assuming a potential second coronavirus wave doesn’t happen. More notable market growth may not be seen until at least mid-2022. 

A drop in population growth of about 300,000 people by the end of 2023 due to border closures and high unemployment levels is mainly to blame.

But government stimulus and a faster economic recovery may cushion any price falls until the first half of 2021, m3property expects. And if population growth doesn’t decline as much as forecast, this may also help the housing market to recover.

For now, home-buying intentions stabilised in May, according to the latest monthly Commonwealth Bank Household Spending Intentions (HSI) series.

This was due to a fall in real estate prices and low interest rates, potentially encouraging buyers to submit mortgage applications, Commonwealth Bank chief economist Stephen Halmarick said.

“This was especially the case for owner-occupiers looking to lock in low fixed rate mortgages. Online Google searches related to home buying decreased in previous months and is in line with house price falls for the month.”

The Commonwealth Bank findings align with suggestions from the Reserve Bank of Australia that economic activity in Australia has begun to recover in May, after shrinking in late March and April.

Were property prices growing before COVID-19?

While housing values dipped by 0.4 per cent in May 2020, according to the latest CoreLogic data, the market was tracking well before the pandemic hit Australian shores.

Real estate values climbed by 1.6 per cent in the three months to April 2020, according to fresh figures from the Australian Bureau of Statistics (ABS), and swelled by 7.4 per cent in the 12 months to April. 

Residential property prices grew on an annual basis in all capital cities except Perth and Darwin.

A surge in house prices accounted for most of that growth, rising by 2 per cent in the March quarter and 8.1 per cent in the year to April.

Meanwhile attached dwellings, including units and townhouses, edged up by 0.7 per cent in the past quarter and 5.8 per cent over the year.

Sydney and Melbourne led the value increases, up by 1.9 per cent and 2.1 per cent respectively in the March quarter.

ABS chief economist Bruce Hockman said the numbers aligned with the bureau’s expectations. 

“The majority of restrictions relating to COVID-19 came into effect in late March and therefore did not have a noticeable impact on property prices in the March quarter 2020,” he said.

 

Residential property prices (% change Feb - Apr 2020)

House prices (% change Feb - Apr 2020)

Attached dwellings prices (% change Feb - Apr 2020)

Sydney

1.9

2.6

0.8

Melbourne

2.1

2.3

1.5

Brisbane

0.6

1.1

-1.0

Adelaide

0.4

0.4

0.4

Perth

0.6

0.8

-0.5

Hobart

2.4

2.4

2.4

Darwin

0.7

0.8

0.5

Canberra

0.2

1.0

-2.4

Weighted average of capital cities

1.6

2.0

0.7

Source: ABS.

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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).

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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 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.

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).

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.

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 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.

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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.