This Week in Real Estate: 30 Sep 2017

By September 30, 2017News

Mortgage Strain Better Than 5yrs Ago

The proportion of income needed to service current household debt is lower than it was in 2011 because of historically low interest rates.

In Brisbane for example, 30% of a household’s income is required to service an 80% loan-to-value-ratio mortgage, compared to 40% five years ago.

Mortgage Choice chief executive John Flavell says: “So while property is certainly expensive and the level of household debt is high, it would seem many Australians are actually in a better position now than they were five years ago.”

The small percentage of borrowers falling behind with payments is mostly due to a change in personal circumstances, such as a relationship breakdown or job loss.

“That’s why people are falling behind in payments, not because they have been given access to credit they can’t afford,” he says.

Worker Move To Cheaper Cities Tipped

The current two-speed property market could see workers leave Sydney and Melbourne and move to cheaper cities, says Macquarie Group’s chief economist Ric Deverell.

Sydney prices have grown 13.6% in the past year while Melbourne is 16.8% higher, according to CoreLogic figures, and the outlook remains stable.

“Between 2003 and 2008 monetary policy was being driven by the mining boom and that meant interest rates were too high for Sydney and Melbourne, and too low for Perth and Brisbane,” said Deverell.

Since the mining boom ended, the reverse has occurred.

Data from the ABS shows that Brisbane had a net gain of 10,149 people in the past financial year from interstate migration, while Sydney had a net loss of 23,176. The population gain was the strongest in Brisbane for 10 years.

Quote of the week

“ASo while property is certainly expensive and the level of household debt is high, it would seem many Australians are actually in a better position now than they were five years ago.”
John Flavell, Mortgage Choice chief executive

Concessions Boost FHBs

The number of first-home buyers using stamp duty concessions has doubled since the Victorian Government introduced the measures on July 1.

Data from the State Government also indicates the incentives have been popular in regional centres including Ballarat, Bendigo and Shepparton.

The changes mean people buying their first home do not pay any stamp duty on properties under $600,000 and receive stamp duty concessions for properties under $750,000.

The Government also doubled the first home owners grant to $20,000 for the purchase of newly-built houses in regional Victoria.

Taj Singh, director of First Home Buyers Australia, said cuts to stamp duty had allowed young people to enter the market with bigger house deposits, but added that the increased competition was nudging prices up.

APRA Curbs Unfair, Say Banks

Second-tier lenders, including Suncorp, Bank of Queensland and industry super-owned ME, are calling on APRA to revise lending restrictions which are effectively ‘locking in’ the market share of the big four banks and restricting competition.

For almost three years, banks have faced a 10% annual growth cap in their housing investor loan portfolios, enforced by APRA. In March this year, APRA imposed a further restriction, capping interest-only lending at 30% of new loans.

The smaller banks say this is stifling competition and want the restrictions to be only applied to the hottest property markets such as Melbourne and Sydney, or to have tougher conditions placed on the big four and not the rest of the industry.

Suncorp’s chief executive of banking and wealth, David Carter and Bank of Queensland chief Jon Sutton agree the focus point should be Sydney and Melbourne the caps could also be changed so some banks had higher speed limits than others.

Tourism to Drive the Economy

Tourism and travel are likely to overtake the mining sector as the growth engines of the Australian economy, according to analysts.

Although there are four major hotels and numerous other accommodation projects being developed in Sydney, there remains a shortage of beds.

The chief operating officer of AccorHotels, Simon McGrath said Sydney has not had any new hotels opened in a decade. That has led to a severe shortage and with a rise in travellers, the 3,500 being opened between now and 2023 may still not be enough.

The new International Convention Centre at Darling Harbour has created demand for nearby hotels while Sydney Airport has experienced an 8.3% increase in August’s international traffic growth compared to the corresponding period.

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