• LoanCaddie

Welcome to our November 2020 Newsletter

It has been an exciting past month in the property world, with the housing recovery continuing to gather momentum. In recent months, all capital cities except Melbourne saw dwelling values increase. Here’s our latest market news and insights.


Finance news


The Reserve Bank of Australia (RBA) announced it has decided to cut the official cash rate to a new record low of 0.10 per cent at its meeting on the 3 November. The Board sees the combination of the RBA’s bond purchases and lower interest rates to assist the economic recovery further by:

  • lowering financing costs for borrowers;

  • contributing to a lower exchange rate than otherwise; and

  • supporting asset prices and balance sheets.

In October, the RBA reiterated a commitment to maintain highly accommodative policy settings as long as required. RBA governor Philip Lowe highlighted the importance of the labour market as the Board continues to consider how additional monetary easing could support jobs and the overall economy. “In terms of unemployment, we want to see more than just ‘progress toward full employment,’” governor Lowe said in his speech. “We want to see a return to labour market conditions that are consistent with inflation being sustainably within the 2 to 3 per cent target range.”


The 2020/21 Federal Budget was delivered on the same day as the October cash rate announcement. The Budget highlighted the government’s economic measures to support Australian households and businesses on the path to recovery.


Our most competitive interest rates are as follows.


Owner occupiers - principal & interest repayments:

  • 1.94% (4 years fixed) - comparison rate 3.21%*

  • 2.29% (variable) - comparison rate 2.66%*

  • 2.19% (variable intro rate) - comparison rate 2.56%*

Investors - principal & interest repayments:

  • 2.29% (2 years fixed) - comparison rate 3.26%*

  • 2.69% (variable) - comparison rate 2.69%*

  • 2.49% (variable intro rate) - comparison rate 3.00%*

Investors - interest only repayments:

  • 2.59% (3 years fixed) - comparison rate 2.96%*

  • 2.89% (variable) - comparison rate 2.84%*

For more interest rates, please contact us.

 

Home value movements


Housing values started to move into recovery mode recording a 0.4% rise, marking their first monthly increase since April. This is great news for homeowners and investors – dwelling values increased in all capital cities except Melbourne in October.

  • The biggest jump was seen across Darwin (1.21%), Adelaide (1.17%), Hobart (1.00%) and Canberra (1.01%), where values in each city increased at least 1%. Although Melbourne home values were lower in October, it showed promising signs as restrictions eased late in the month where new listings surged, clearance rates lifted and buyer activity is recovering.

  • CoreLogic data shows that total advertised stock levels remain low despite the surge in new listing numbers in the past weeks, suggesting strong buyer demand.

  • Consumer confidence has consistently improved since the virus curve has flattened and Australians have responded positively to measures announced in the federal budget. In October we saw a surge in consumer sentiment, rising clearance rates and an increase in valuations for property purchases

Diverging house and unit market prices - The October results show early signs of divergence between house and unit market performances. The rise in capital city housing values over the month was entirely attributable to a 0.4% lift in house values which offset the 0.2% fall in unit values.

  • Through the COVID period so far, unit values have actually shown a smaller decline in values than houses, but this is probably set to change. Almost two-thirds of Australian units are rented, and rental conditions have weakened, especially around the key inner-city precincts of Melbourne and Sydney. These areas have a higher concentration of unit stock and historic exposure to demand from overseas migration. Low levels of investment activity, relatively high supply of unit stock in the inner-cities, and international border closures are key factors that imply units will underperform relative to houses over the medium term.



Rental markets


Rental market trends are showing a more significant divergence between houses and units. Between the end of March 2020 and October 2020, capital city unit rents are down a cumulative 4.8%, while houses have recorded a 0.4% rise in rents.

  • The difference between house and unit rental performance is most significant in Melbourne and Sydney where, since March, unit rents are down by 6.6% and 5.8% respectively. he divergence in Sydney and Melbourne can be explained by a combination of supply and demand factors. Both cities have a multi-year history of significant supply additions to the high-rise unit sector where the majority of properties are owned by investors. From the demand side, the evaporation of overseas migrants, including foreign students, has led to a sudden and material drop in the number of renters requiring accommodation.

  • Additionally, weaker labor market conditions across industries where workers are more likely to rent than in any other sector have further impacted rental demand.


Perth and Darwin stand out with the tightest rental market conditions. Both house and unit rents are up through the COVID period to-date.

  • The stronger rental conditions come after a long period of weakness in rental markets; dwelling rents in Perth have only increased by 0.4% over the past five years while in Darwin rents are actually 11.4% lower than they were five years ago.

  • This latest rise in rents can be attributed to the recent history of low private sector investment which has kept rental supply low.


Corelogic National Housing Update


For more information, please watch the following Corelogic National Housing Update.


 

We’re here to help you achieve your property goals


The interest rates will remain low for a while, so now could be the time to secure the property you want at a competitive price. To secure a home loan pre-approval so you’re in a strong position to negotiate, please get in touch with your broker.


 
Additional Sources: https://www.rba.gov.au/media-releases/2020/mr-20-28.html https://www.corelogic.com.au/news/strength-regional-rental-markets-offset-decline-capital-city-rents-national-rental-decline https://www.corelogic.com.au/research/monthly-indices https://www.realestate.com.au/insights/november-2nd-rea-insights-weekly-property-search-report-2020/ https://www.corelogic.com.au/news/increased-auction-volumes-return-highest-preliminary-clearance-rate-march https://www.corelogic.com.au/news/corelogic-october-home-value-indices


Disclaimer:

*Interest Rates are correct as at 23 November 2020 and are subject to change at any time. Comparison rate calculated on a $150,000 secured loan over a 25-year term. WARNING: Comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.