Why property buyers are out and about despite a recession

Why property buyers are out and about despite a recession

Australia is officially in a recession but that hasn’t discouraged buyers on the hunt for a property, as consumer confidence surges.

Treasurer Josh Frydenberg this week confirmed that the Australian economy has contracted by 0.3 per cent in the March quarter due to the double whammy of the bushfires and COVID-19 impacts.

Economic growth also slowed to 1.4 per cent through the year, according to the Australian Bureau of Statistics (ABS).

“This was the slowest through-the-year growth since September 2009 when Australia was in the midst of the Global Financial Crisis and captures just the beginning of the expected economic effects of COVID-19,” ABS chief economist Bruce Hockman said.

Aussie property prices edge lower

To top it off, Australian housing values decreased by 0.4 per cent, falling for the first time since mid-2019, according to new CoreLogic data.

Despite the drop in prices, transaction activity in the market leapt back by nearly 19 per cent in May, after a 33 per cent decline in April.

Total sales volume across the combined capital cities surged by 20.4 per cent in May. It’s worth noting, however, this is coming off a low base in April, when recorded monthly sales volume was at its lowest since 1991, if excluding January results.

Another indication of market activity is the number of new properties listed on the market.

If the total stock of properties on the market reach high levels, it’s a sign that supply is outweighing demand, according to CoreLogic head of research Tim Lawless, who added that “this does not look to be the case”.

Looking at the numbers, new listings surged by about 22 per cent in the 28 days to June, but total listings decreased by 2.9 per cent.

This means new listings have not only risen but have also been absorbed, resulting in an increase in home sales.

Lockdown restrictions ease and consumer confidence lifts

CoreLogic’s Australian head of research Eliza Owen said that “buyer demand is outweighing the volume of new listings”.

She attributes the rising buyer demand to an increase in consumer confidence, thanks to the easing of lockdowns and lower coronavirus case numbers nationally.

“People may be feeling more confident about the future of the Australian economy, their personal finances, and property purchases,” she said.

Mr Lawless agreed that consumer sentiment is “consistently improving” since early April.

“With consumers feeling more confident, households are better equipped to make high commitment decisions such as buying or selling a home,” he said.

“A lift in housing market activity should also support broader economic activity, with housing turnover providing positive flow-on effects to other sectors including retail, construction and banking.”

Another factor behind increasing buyer demand is that the workers that have been hit the hardest by the pandemic are not as likely to have a mortgage, Ms Owen noted. As those bearing the brunt are more likely to be renters rather than owner-occupiers, the housing market is showing less of an impact, for now.

“With stability emerging in the property transaction space, it is evident that additional housing stimulus is less urgent among those that can already afford property, and is another case for addressing housing costs for low income earners,” she said.

Did you find this helpful? Why not share this news?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

Learn more about home loans

Does each product always have the same rating?

No, the rating you see depends on a number of factors and can change as you tell us more about your loan profile and preferences. The reasons you may see a different rating:

  • Lenders have made changes. Our ratings show the relative competitiveness of all the products listed at a given time. As the listing change, so do the ratings.
  • You have updated you profile. If you increase your loan amount, the impact of different rates and fees will change which loans are the lowest cost for you.
  • You adjust your preferences. The more you search for flexible loan features, the more importance we assign to the Flexibility Score. You can also adjust your Flexibility Weighting yourself, which will recalculate the ratings with preference given to more flexible loans.

Monthly Repayment

Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

What does going guarantor' mean?

Going guarantor means a person offers up the equity in their home as security for your loan. This is a serious commitment which can have major repercussions if the person is not able to make their repayments and defaults on their loan. In this scenario, the bank will legally be able to the guarantor until the debt is settled.

Not everyone can be a guarantor. Lenders will generally only allow immediate family members to act as a guarantor but this can sometimes be stretched to include extended family depending on the circumstances.

Mortgage Calculator, Loan Purpose

This is what you will use the loan for – i.e. investment. 

Mortgage Calculator, Loan Amount

How much you intend to borrow. 

Why is it important to get the most up-to-date information?

The mortgage market changes constantly. Every week, new products get launched and existing products get tweaked. Yet many ratings and awards systems rank products annually or biannually.

We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

Nobody wants to read a weather forecast that is six months old, and the same is true for home loan comparisons.

How does a redraw facility work?

A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.

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.

Mortgage Calculator, Interest Rate

The percentage of the loan amount you will be charged by your lender to borrow. 

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.

How will Real Time Ratings help me find a new home loan?

The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.

That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.

Best of all, the ratings are calculated in real time so you know you’re getting the most current information.

What is the average annual percentage rate?

Also known as the comparison rate, or sometimes the ‘true rate’ of a loan, the average annual percentage rate (AAPR) is used to indicate the overall cost of a loan after considering all the fees, charges and other factors, such as introductory offers and honeymoon rates.

The AAPR is calculated based on a standardised loan amount and loan term, and doesn’t include any extra non-standard charges.

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 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.