Speculation grows RBA may cut cash rate further

 

The Reserve Bank of Australia may execute another cut

An aggregator head has addressed the growing speculation that the Reserve Bank of Australia (RBA) may execute another cut to the cash rate at its monthly board meeting held next week on Tuesday, 6 October.

According to Finsure Group managing director John Kolenda, cutting the official interest rate from its current record low of 0.25% would have “little impact” on the economy without being combined with additional action, and would be a premature decision.

“While further rate reductions might be a welcome relief for mortgage holders, it won’t necessarily help the economic recovery,” Kolenda said.

“We need further investment into the economy from the federal government by way of more economic stimulus, infrastructure spending, tax reform and business incentives.”

Despite the forecasts another cut could be coming next week gaining in momentum, Kolenda sees it as ‘unlikely’ the RBA would take such bold action on the same day the federal government is unveiling the federal budget and elaborating on its pathway to recovery from the COVID-19 recession.

Rather, the aggregator head believes it would be more prudent for the RBA to absorb the federal budget measures before making any moves, and potentially reconsider a further reduction at its subsequent meeting on 3 November.

Kolenda also made sure to emphasise that mortgage holders should be seeking a better deal from their lenders regardless of whether or not the RBA makes a change – even consumers who have been on a six-month repayment holiday.

“We are still in a highly competitive lending market and banks will offer a better deal if you are ready to resume repayments,” he said.

“Do not be complacent about the interest rate you are currently paying as this can potentially cost you a lot of money. If you are still paying a variable interest rate with a ‘3’ in front of it then it’s time to take immediate action.”

 

Source: Broker News

Positive home value results for Perth

 

 

Perth values remain steady

Australian home values moved through a fourth month of COVID-induced falls in August, with the CoreLogic home value index recording a 0.4 per cent fall, though Perth values remained steady.

The 0.4 per cent drop was driven by a 1.2 per cent decline in Melbourne, 0.5 per cent in Sydney and 0.1 per cent in Brisbane, with all other capital cities recording steady or rising values.

Perth home values witnessed no change through the month, an improvement on a slowing decline for the city over the last 12 months, according to REIWA President Damian Collins.

“Going back a year or so ago, we were declining eight per cent per annum, now it has only been down two per cent over the last 12 months,” he said.

“I think that monthly number is going to go to the positive, if not this month, certainly in the months ahead, because agents on the ground are reporting a lot of people through home opens and prices are definitely starting to move.”

In additional positive news, despite the stationary values overall, nearly half (45 per cent) of Perth suburbs actually witnessed price growth, according to REIWA data.

“Kelmscott saw the biggest increase to its median in August with a 5.4 per cent increase to $320,000, which was followed by Riverton (up 3.9 per cent), Duncraig (up 3.7 per cent), Piara Waters (up 3.6 per cent), and Carramar (up 3.4 per cent),” Mr Collins said.

“Interestingly, three of the top five suburbs had a median sale price under Perth’s median of $475,000, which suggests people are taking advantage of properties in Perth that are priced at the lower end.

“When we go down into more detail, there are some suburbs still struggling a little bit – they have that oversupply legacy – but you will find in a lot of established suburbs, particularly within 12km to 20km from the CBD, there is not a lot of new supply or land releases, and that is where the demand is really strong and there is not much stock around.”

Listings for sale were also down in August, with only 10,627 properties for sale on reiwa.com, which was 1.2 per cent lower than July and 23.2 per cent lower than the same time last year.

“In the last few months, sales activity has been particularly strong due to the various government bonus schemes, so it is only natural as the interest around the stimulus eased we saw activity in August decrease compared to July,” Mr Collins said.

According to CoreLogic’s Head of Research, Tim Lawless, COVID-19 measures nationally have had a direct effect on housing values.

“The performance of housing markets is intrinsically linked with the extent of social distancing policies and border closures, which also have a direct effect on labour market conditions and sentiment,” he said.

“It’s not surprising to see Melbourne as the weakest housing market considering the extent of the virus outbreak and subsequent restrictions, which have weakened the economic performance of Victoria.

“Looking forward we are likely to see a diverse outcome for housing markets around Australia, depending on how well the virus is contained and a region’s exposure to other factors such as its reliance on overseas migration as a source of housing demand.”

In good news for buyers, the latest Real Estate Institute of Australia Housing Affordability report revealed Western Australia was once again the most affordable state to buy and rent in, improving 0.7 per cent compared to the June 2019 quarter.

REIWA President Damian Collins said strong demand in the rental and sales market meant affordability was likely at the best levels we would see, and now was a favourable time for both homebuyers and investors to get into the market before prices started to pick up.

The report found the proportion of income required to meet loan repayments in WA improved to 24 per cent in the June 2020 quarter, a decrease of one per cent compared to the previous quarter, and the average loan size reduced 2.1 per cent to $397,739.

“It certainly appears WA has escaped the COVID-19-induced property slowdown and, given the high levels of demand and limited supply, we may even see house prices rise later in 2020,” Mr Collins said.

“I would encourage anyone thinking of buying, whether as a homebuyer or investor, to act sooner rather than later.”

 

Source: TheWest

The mortgage-holders raking in the savings

 

Lenders have gone rogue on rates.

In fact, they did it long ago.… it was really the GFC that saw them start to hike, hold and hold back on whim, rather than on Reserve Bank announcement.

But the upshot of all those maverick moves, and the more recent Covid-19 rate revisions, is there is now one distinct group of mortgage winners: owner-occupiers paying principal and interest on their home loan.

Owner occupiers’ edge

First up, there have in recent years been concerted moves by the home loan watchdog to try and cool investment activity in the property market.

The Australian Prudential Regulation Authority (APRA) initially capped the growth in investment lending that any bank or lender could enjoy at 10 percent a year.

Then it implemented a restriction on risky loans themselves: limiting the proportion of new mortgages that could be made up of interest-only loans, to 30 percent. These loans do not see the principal owing fall… and therefore maintain borrowers’ debt at the initial level.

After this latest crackdown, which happened in 2017, there was a sharp fall in interest-only lending from its high of 40 percent of all new mortgages written.

And thank goodness as many owner-occupier borrowers had even started using interest-only loans, I suspect on the advice of mortgage brokers who wanted to keep their commissions high. The royal commission into banking was scathing of brokers.

A home should always be on a principal-and-interest basis, so you can eventually call it your own.

Now, both these APRA measures were scrapped in early 2018 as the property market cooled as hoped. But…

Investors and interest-only borrowers are still slugged 

Despite the watchdog taking its foot off the borrowing brake, new research from data house Mozo shows lenders have taken the opportunity to stick to premium pricing in these two areas.

And it’s investors with interest-only loans who are suffering the most.

Firstly, owner occupiers who are paying both the principal and interest on their home loans are being rewarded with lowest average interest rates 68 basis points below those who pay interest-only. The average lowest rate is 2.87 percent (note this is an average of the single best rate offered by each provider in the Mozo database).

So what’s the far sadder story for investors? Well, paying principal and interest versus interest-only earns you a tiny discount – just 29 basis points to an average lowest rate of 3.28 percent.

And that rate is a full 41 basis points more expensive than what owner occupiers who are paying debt down can get.

Homeowner who are actually paying off their loans can do even better than the above, too. Mozo found the leading variable rate is just 2.19 percent, 168 basis points below the average interest-only rate (but be aware that all the cheapest lenders from the table below do not offer real offset accounts, even where they label them as offsets – they are simply redraws in disguise).

Leading Variable Home Loan Interest Rates. Source: Mozo

Heard all the hoohah about mortgage rates that start with a “1”? That’s only an introductory rate that applies for a year so has been excluded. A low rate at outset will never make up for a high rate throughout… remembering that you should be refinancing every three years anyway.

So what’s the bottom line? Against an average owner occupier, P&I rate of 3.38 percent, the best 2.19 percent rate would save you $73,255 on a $400,000 loan.

Better still, do what I call up stumps but still stump up – move your mortgage but keep your repayment at the existing level – and you’d save an extra $20,110 and slash four years off the length of your loan.

So is this pricing justified or unfair? 

With the Reserve Bank shaving 50 basis points off the official cash rate since March and a wholesale interest rate available to lenders of 0.25 percent, they certainly have room to move when it comes to attracting the type of customers they want. And price their loans attractively.

“If you’re living in your home and you are in a position to pay principal and interest, the banks want you on their loan books,” says Mozo Director Kirsty Lamont.

“With the financial pressures caused by COVID putting mortgage holders and house prices under pressure, if you can afford to pay the principal, comparing what’s on offer and banking a rate down around 2 percent will ultimately leave you in a better financial position.”

What if you are tempted to switch to interest-only purely because you’re cash strapped and need to cut costs? You may well be unable to.

In a letter sent by APRA to the banks in 2018, the regulator said it still viewed interest-only loans at a “higher risk” form of lending. It demanded “prudent internal limits” on future interest-only loans.

However, you may be able to fashion a DIY interest-only loan for a short period… by applying for a mortgage repayment holiday. All you need do is manually pay the interest that would instead accrue every month, to save you ultimately repaying a fortune extra.

And hopefully, that will give the financial lee-way to get to the other side of this crazy coronavirus thing.

Source:Yahoo Finance

Home loan commitments recover in June

Reflection on COVID-19 restrictions

The value of new loan commitments for housing in Australia rose in June by 6.2%, according to recent data from the Australian Bureau of Statistics (ABS).

Bruce Hockman, chief economist of the ABS said that the rise in housing loan commitments in June “reflects the easing of COVID-19 restrictions in May on auctions, open houses, and mobility in general.”

“The easing of COVID-19 restrictions drove the rises in May and June but commitments for road vehicles and total fixed loan commitments for personal finance remain below the pre-COVID level,” said Hockman.

According to the ABS, the value of new loan commitments for owner occupier housing rose 5.5%, while investor housing rose 8.%. Meanwhile, the number of owner occupier first home buyer loan commitments rose 3.3%.

“Despite the rebound in lending activity, the value of housing loan commitments in June was down over 10% compared to March after large falls in April and May,” said Hockman.

Sally Tindall, research director at RateCity, said the increase in new lending this month “showed there was still signs of life in the property market despite the turmoil however the outlook was still uncertain.”

“Last month we saw the biggest drop in new lending on record as a result of the nation being in lockdown,” said Tindall.

“It’s not surprising to see new lending has bounced back in June, as restrictions began to lift on auctions and open homes in May. However, with Victoria back in lockdown, and hundreds of new COVID-19 cases emerging every day, the longer-term trend for the housing market is still likely to be down.”

Record low interest rates are pushing Australians to refinance like never before

33,000 borrowers switched home loans in May, a staggering 30% rise over April.

Australian home loan rates have never been lower. And these falling rates are driving existing home loan customers to look at their home loans and find a better deal elsewhere.

In the latest home loan data from the Australian Bureau of Statistics (ABS), the number of refinancers rose 30% month on month. That’s May 2020 versus April 2020 (the latest data we have).

In dollar terms, the value of refinanced loans rose from $12,021,800,000 in April to $15,192,700,000 in May. That’s an increase of 26.4%.

This data tells us that plenty of borrowers are looking for better home loan deals and they are finding them.

The Reserve Bank of Australia has dropped the official cash rate 5 times since June 2019. This has made borrowing costs for lenders cheaper, driving down variable rate home loans.

In April 2019 the lowest variable rate loan in Finder’s database was 3.48%. Today, the lowest rate is 2.19%.

And yet at the same time lenders have dropped their fixed rates even further. The lowest owner-occupier 3-year fixed rate has plummeted from 3.74% in April 2019 to 1.99% today.

This means you can get a much cheaper home loan rate now. But if you already have a home loan you might not be getting the best deal. While many lenders have passed on recent rate cuts it’s quite uneven. Some lenders consistently pass on a 0.25% cut each time. Others pass on less, or only offer their best rates to new customers (a sneaky but common practice).

And that’s why borrowers are rushing out to refinance.

In many cases borrowers don’t even have to look very far for a better deal. A third of May’s home loan switches were internal: borrowers switching loans but staying with the same lender.

It never hurts to check your lender’s website to see what rates they’re currently offering. Your own lender might have a suitable product with a better rate than your current one.

Here’s how much you can save by switching. Let’s use April 2019’s lowest rate versus today’s to see how much you can save.

Interest rate of 3.74%

  • Loan amount: $500,000
  • Loan term: 30 years
  • Monthly repayment: $2,312

Interest rate of 1.99%

  • Loan amount: $500,000
  • Loan term: 30 years
  • Monthly repayment: $1,845

What a difference a year makes. Switching from a 3.74% rate to a 1.99% rate leaves you with repayments that are $467 lower per month. That’s $5,604 a year.

Ready to refinance? Here’s what you need to do

If you’re thinking about refinancing there’s a few things you need to do first. Follow these steps and you’ll be on your way to a better deal in no time:

  • Check your current interest rate. Find a recent home loan statement and check your interest rate.
  • Compare your rate. Look at some of the latest home loan offers and see how your rate stacks up. If there’s a big difference it’s time to switch.
  • Crunch the numbers. Use a loan repayment calculator to see how much you can save by switching. Don’t forget to look at any possible exit costs that come with leaving your current loan. If you’re on a fixed rate, the breaking costs might be very high.
  • Talk to your current lender. Getting a lower rate on your current loan, or switching to a cheaper loan with the same lender, is easier than finding a new loan and lender. See if you can get a better deal, but make sure your lender knows you’re willing to leave if there’s a better deal elsewhere.
  • Find a new loan. If your current lender can’t help it’s time to find a new loan with a lower rate that suits your needs. You also need to consider whether getting a fixed or variable rate is right for you. Currently, fixed rates are very low, and lower than variable rates in some cases. But these products are less flexible and if rates fall even further you’ll be locked into a less competitive deal (although it’s hard to imagine rates getting much lower than 1.99%).
  • Apply. You will need to gather all your paperwork (proof of income, bank statements) and submit an application.
  • Discharge your old loan. Once your new lender (hopefully) accepts your application you’ll need to notify your old lender and discharge your mortgage.

Switching is easier than you think. For a few hours of researching and applying you can save yourself thousands.

Source: Finder

Rich Lister makes near $1b punt on Perth property

Betting on growth: Perth property developer Paul Blackburne at his Dalkeith home last week.  Trevor Collens

 

Perth’s property market will blitz its east coast rivals over the next 5 years

Rich Lister Paul Blackburne is charging out of hibernation with a bullish $1 billion punt that Perth’s property market will blitz its east coast rivals over the next 5 years.

Mr Blackburne, the 44-year-old who has built a $567 million fortune through his eponymous apartment development company, pressed pause on projects during April. But after assessing the potential economic fallout from the pandemic he recently revived the company’s pipeline, including pushing the trigger on a $300 million luxury apartment precinct in one of Perth’s most affluent suburbs.

“Western Australia is without doubt going to be the strongest property market in Australia over the coming five years,” Mr Blackburne said.

“We are not as reliant on the industries affected by COVID-19 as the east coast. Mining has been going strong and we had already adjusted to low growth in tourism and overseas education.”

Iron ore prices are roaring as crippled Brazilian supply and Chinese demand push prices above $US100 per tonne and deliver a potential multibillion-dollar royalty windfall for the WA government.

But the McGowan government says the iron ore boom isn’t enough to prevent a recession, forecasting the economy to contract 3.1 per cent in 2021 with mining royalty gains more than offset by lower payroll tax, property taxes and GST grants.

Mr Blackburne argues the pandemic merely delayed the city’s property recovery by three to six months. Blackburne Group is seeking development approval for the old Sundowner Hostel in Claremont, which borders swanky Peppermint Grove.

Mr Blackburne needs council approval for the massive five building development called Claremont by Blackburne, which he says will create 400 jobs during construction of the 245 luxury apartments. That’s less than the 364 apartments previously endorsed for the site by the Town of Claremont. Blackburne bought the 15,767 square metre site late last year for $25.1 million.

Claremont by Blackburne is expected to create 400 jobs during construction.

He said most of the residences will be below five storeys, with the remainder taking advantage of views to the Indian Ocean or Swan River from the 16-storey and 11-storey buildings.

Mr Blackburne wants to start work on the project as soon as he can get approval and is hopeful construction can start early next year.

Perth completely missed the east coast property boom, with median house prices falling more than 13 per cent to $479,000 since mining and business investment dried up in 2014. The market was beginning to show signs of growth just before the pandemic struck.

But it is because the market has already suffered a deep downturn that fills Mr Blackburne with confidence a rebound is on the way. He said during the lockdown in April inquiries jumped 39 per cent.

“I think the Perth market will double in value over the next 10 to 15 years as it has on average over the past 100 years,” he said.

Real Estate Institute of Western Australia figures show houses listed for sale are down 30 per cent on a year ago while listings for rental properties are down 42 per cent.

“We were entering a recovery phase and growth would have been 3 per cent to 5 per cent a year for the next few years,” Mr Blackburne said. “COVID has just paused that for three to six months. I think we are at the bottom now or very close to it and there will be a rise of $20,000 to $30,000 a year in the median price over the coming years.”

Chamber of Commerce and Industry chief economist Aaron Morey agrees the property market has “largely corrected”.

But he’s far less bullish about the outlook for prices in the coming year or two.

“A few factors will weigh on the market looking forward, including weakness in the household sector with job losses and pay cuts. On top of that mortgage repayment deferrals and JobKeeper are coming to an end, and there will be a reduction in net migration, all while governments are boosting supply with construction grants,” Mr Morey said.

“Ultimately, a sustainable housing and construction sector will be underpinned by strong business investment, which brings with it population growth. To achieve that we need governments to create a more competitive business environment by substantially lowering the tax burden on business.”

Mr Blackburne doesn’t think falls in migration will have such an impact on prices. His company in particular relies on affluent residents downsizing to his luxury apartment offering.

But more broadly he feels population growth over the next 5 years will be about what it was predicted to be before the pandemic hit.

“Immigration will increase and the post recession boom will result in a baby boom like what happened post World War II. I think migration will double next year to make up for any shortfall this year. With low rates this will lead to a huge shortage of supply.”

Source: AFR

Banks offer to extend home loan deferrals

Banks offer six-month repayment holiday

Australia’s major banks have agreed to extend a six-month repayment holiday for home loan customers struggling financially on account of the coronavirus pandemic.

Banks will contact customers with reduced incomes and ongoing financial difficulty due to COVID-19 as they approach the end of their deferral period, to ensure they can return to repayments wherever possible.

However, if they are unable to restart payments at the end of a six month period, customers will be eligible for an extension of their repayment holiday for up to four months, on a case-by-case basis.

The Australian Banking Association on Wednesday said a deferral extension will not be automatic, and will only be provided to those who genuinely need some extra time.

“This next phase of bank support will avoid a ‘cliff’ for customers in September and give them the breathing space they need to work with their bank and get back on their feet financially” ABA Chief Executive Anna Bligh said.

Social restrictions imposed by the government in March led to a wave of unemployment and business closures across Australia, prompting banks to offer a repayment holiday of six months to struggling home loan customers.

The Australian Prudential Regulation Authority in March allowed banks to offer borrowers an option to defer repayments for up to six months, and had said they need not treat the repayment holiday period as a period of arrears for the purpose of capital adequacy and regulatory reporting.

The banking regulator on Wednesday announced it would extend by another four months this temporary capital treatment for bank loans with repayment deferrals, as well as temporarily adjust the capital treatment of loans where terms are renegotiated.

“This will help to avoid unnecessary hardship and foreclosures, and allow the banking sector to work with its customers to find the best solution to manage their debts,” APRA Chair Wayne Byres said.

The ABA said banks will work with customers to find the best options to restructure or vary their loan, including by way of extending the length of the loan, converting to interest-only payments for a period of time or by consolidating debt.

If at the end of this period, customers continue to be severely financially impacted and are unable to make repayments, they will be assisted through their bank’s hardship process to determine the best long-term solution for their individual circumstances, it said.

Commonwealth Bank said while many of its retail and business customers have resumed paying their loans, it will allow customers to keep their loans in deferral for up to a further four months, on a case by case basis.

Australia’s biggest bank said it has so far provided loan repayment deferrals to almost 130,000 home loans and 100,000 business customers, with total financial support of over $15 billion.

Rival Westpac also said it had so far helped more than 130,000 mortgage customers defer their repayments for up to three months, with a further three months available on review. It will also extend the additional deferral option to struggling customers.

ABA’s Ms Bligh said over 800,000 loans have been deferred across Australia, and given the significant amount involved, their would be an impact on banks.

“There’s no doubt that at some point banks’ bottom line will take a hit from the support they’re offering, she told reporters in Sydney.

“But in the long term, banks want to see their customers stay in their homes, they want to see their businesses thriving and … that is in the best interest of customers and of banks.”

Source: AAP

 

Rise or fall: Where will Australian interest rates go from here?

Will interest rates rise or go down?

If you’re buying a home or paying off a mortgage, interest rates matter. After all, if interest rates go up, you could be paying more for your mortgage. If they go down, you’ll have more money in your pocket and may be able to afford to borrow more. We explore what interest rates are likely to do next and how their movements will affect you. 

What are interest rates and why do they matter?

Your interest rate is a crucial part of your home loan. Put simply, interest is the amount you pay on your loan in addition to any payments you’re making to pay off the property. Lenders base the interest rate they charge on home loans on a number of factors, the most important of which is the Reserve Bank of Australia’s official interest rate. They’ll also take into account their own factors, such as the cost of lending money and the type of business they want to attract.

What have interest rates been doing lately?

While interest rates have moved up and down over time, as of early 2018 they are both relatively stable and at historical lows. In fact, the RBA’s official cash rate has been sitting at 1.5% since August 2016. To put this in perspective, official cash rates peaked in January 1990 at 17.5% and since then have averaged 4.9%.

The main effect of today’s low-interest rate environment has been that servicing a home loan has become much cheaper than at many times in the past. This has meant that many people can service a higher loan than they otherwise would be able to. Some believe that this has been a contributing factor to house price growth, particularly in Sydney and Melbourne.

Why are interest rates currently so low?

The current low-interest rate environment is not unique to Australia, but part of a global trend. Broadly speaking, it is a flow on effect of the Global Financial Crisis when central banks around the world began reducing interest rates in an effort to stimulate economic activity. Since then, reserve banks, including Australia’s, have been reticent about raising rates, fearing that doing so may also ultimately cut economic growth.

Which way are interest rates forecast to move next?

While it’s impossible to accurately predict which way interest rates will go, most economists predict they will eventually rise rather than fall. In part, this is because the world economy looks to be growing, and the Australian economy seems set to benefit from this. When this happens, the RBA tends to raise the cost of borrowing to prevent the economy from overheating and keep inflation in check.

Against this, however, some economists point to sluggish wage growth and low inflation in the Australian economy. Both factors would usually suggest interest rates should stay low rather than rise. This leads many to believe that any interest rate rises will be gradual and considered rather than rapid.

What does this mean for your home loan?

Whenever you are thinking about taking out a home loan, you should always factor in a potential interest rate rise to make sure you have the capacity to meet your ongoing repayments. The easiest way to do that is by using a home loan calculator.

Beyond that, whether you believe interest rates will rise or fall could impact your decision to go with a fixed, variable or split rate loan.

A variable rate will go up and down in line with interest rates and could be a good option if you’re unsure or think interest rates will go down. They also often give you the chance to make extra repayments, as well as having other benefits such as redraw facilities and offset accounts.

A fixed rate means you’ll know exactly how much you’ll pay on your home loan and could be a good option if you think rates will go up. However, they often come with fewer features – such as offset accounts and redraw facilities – as well as restrictions about how much extra you can repay. They also often come with ‘break costs’ if you pay your loan out early.

If you’re unsure, you could also choose a split rate loan, which gives you some degree of certainty by letting you fix part of your home loan while also allowing you all the benefits and features of a variable rate loan.

Source: Realestate.com.au

State Government to give $20,000 to WA home builders

 

The $20,000 Building Bonus

BUILDING a new home will become even more affordable with the State Government announcing a $20,000 Building Bonus grant on June 7.

It will be available to any home buyer who wants to build a new house or buy a new property in a single-tier development, such as a townhouse, before construction is complete.

When combined with the Federal Government’s HomeBuilder grant, people looking to build could have access to $45,000 in assistance, $55,000 if they were also eligible for the First Home Owner Grant.

A grant for renovation work was not included in the scheme.

The Building Bonus grant is part of a $125 million Building Bonus package to boost activity in the residential building sector, stimulate the economy and support about 2600 local jobs.

$117 will be put towards the grant while $8.2 million will be allocated to the expansion of the 75 per cent off-the-plan transfer duty rebate scheme.

Like the Federal Government’s HomeBuilder package it will run from June 4 to December 31, 2020, unlike that scheme it will not be means tested and has no cap on the property value.

The UDIA WA was first cab off the rank to welcome the new package.

Chief executive Tanya Steinbeck said the State Government had acted decisively and precisely, not only addressing house and land, but expanding the 75 per cent off-the-plan transfer duty rebate, capped at $25,000, to include purchases in multi-tiered developments already under construction in addition to pre-construction contracts.

“They have demonstrated a detailed understanding of the mechanics of the market, and the grave situation the housing construction industry was facing in the coming months without government support,” she said.

“Importantly, in addition to the multiplier-factor of jobs in housing construction, this stimulus package guarantees more jobs as civil construction works can now commence in earnest across the metropolitan area in order to provide a range of titled land lots for buyers to build their dream home.”

Ms Steinbeck said there were 5,000 land lots available across the metropolitan area over the coming months, combined with a diverse range of new home designs that provided the ultimate housing choice for those looking to take advantage of extraordinary economic circumstances.

Master Builders WA executive director John Gelavis said State Government’s stimulus package, which also included a Social Housing Economic Recovery Package, was a gamechanger and would turbocharge the residential housing and construction industry in WA.

“This is a massive lifeline for our embattled housing and construction sector and brings much-needed relief to the industry and the many small businesses within it,” he said.

“The housing industry in WA has declined over 60 per cent since 2014 to disastrous levels.

“The industry is too critical to the state economy to let collapse; this package will help rescue many businesses such as mum and dad builders, large builders, subbies, manufacturers, suppliers and apprentices and will keep thousands of people in work and thousands of West Australian families financially secure.”

Reiwa may disagree with the building bonus; while understanding the need to support jobs, president Damian Collins previously said the similar HomeBuilder scheme, which was skewed towards new builds, would encourage more building on Perth’s outskirts and hurt those who could least afford it.

The State Government’s Housing stimulus also included a $319 million Social Housing Economic Recovery Package.

Mr Gelavis said it hit the nail on the head, refurbishing 1500 homes, building and purchasing approximately 250 new dwellings and delivering a regional maintenance program to 3800 homes.

“In doing so it creates and supports about 1700 jobs, with 780 of those jobs in regional WA,” he said.

Grass still greener in Perth

 

A shining light for investment

The Western Australian Government’s handling of the COVID-19 crisis may prove to be a shining light guiding foreign investment back to residential real estate, according to Finbar Chief Operations Officer Ronald Chan.

“Our government’s handling of the pandemic situation has only reinforced the benefit of investing in WA,” he said. “We need to remember overseas buyers come mostly from South East Asia, and buying property is still related to education for their children,” he said.

“The weak dollar and our already affordable prices are already a drawcard, with our geographic isolation increasingly being seen as an advantage.”

Mr Chan said he believed overseas buyers would be assessing their investment choices closely at the moment.

“Off-the-plan projects that are due to be completed in two to three years will be on top of the list,” he said.

While he said investment was down due, at least in part, to the introduction of the State Government’s Foreign Buyer Duty in January last year, Mr Chan believed buyer interest was on the rise.

“Our analytics have shown an increase in traffic to our websites from overseas since mid-March,” he said.

“We have achieved three Foreign Investment Review Board (FIRB) sales from countries including China and Singapore this year, verses six at the same time last year.

“Since the introduction of the foreign buyers duty, we have seen a drop of up to 80 per cent in foreign buyers.

“The foreign surcharge needs to be reconsidered by the State Government to help our local property market recover.

“If this is removed, we will see an increase in investments that will benefit the property market and the construction sector, which will boost jobs growth and contribute to the health of the WA economy.”

According to the FIRB’s Annual Report for 2018/19, the Australian Taxation Office completed 1068 residential real estate investigations last financial year, identifying 600 properties that were in breach – equal to those identified in 2017-18.

The report also noted there were 7513 proposed investment approvals in residential real estate, a drop of 2523 from 2017-18.

Despite this fall, the total value of residential real estate approvals rose by $2.3 billion to $14.8 billion, however, this still represented a significant drop from the peak in 2015-16, when that figure stood at $72.4 billion.

The FIRB report floated a range of possible reasons for the foreign buyer dip nationwide, including foreign investment application fees, a tightening of domestic credit and increased restrictions on capital transfers in home countries, state taxes and foreign resident stamp duty increases and the introduction of an exemption certificate so only one approval is required for individuals considering a number of residential properties with the intention to purchase only one property.

Victoria had the lion’s share of residential foreign real estate approvals in 2018-19 , according to the report, with 42 per cent. Queensland and New South Wales came in joint second with 18 per cent, followed by WA at nine per cent, with 657 approvals.

Despite these figures, Ray White Dalkeith Claremont Principal and Director Vivien Yap said recent signs were encouraging in terms of overseas buyers in the Perth market.

“We are getting a lot of enquires,” she said. “Buyers realise WA is a safe haven and we have never had the strong rise and big falls in the market, so it is really stable place to come back to.

“They are confident with the low infections of COVID-19, and so based on that they are very comfortable purchasing the property sight-unseen.”

Ms Yap said low currency and interest rates were enticing propositions, though the extra charges related to FIRB application fees and stamp duty could make it difficult for foreign buyers.

“It does make it very difficult for foreign buyers, who have to pay all these extra costs to purchase,” she said.

Recent changes to the FIRB investment framework might prove another hurdle to foreign investors, with the board’s decision period on purchases extended from 30 days to six months in response to the COVID-19 pandemic.

 

 

Source: TheWest