Not so long ago, banks were warning that property values could drop as much as 20% and that there could be a bevy of bad debts as the COVID-19 pandemic cuts a slice of the market. Australian economy.
Now that we are finally starting to enjoy more freedoms after the virus has been better contained, there is a growing school of thought that we may be bracing for a real estate boom rather than a collapse.
To be sure, there are still headwinds with the possible level of uncertain unemployment and the phasing out of government income support measures such as JobKeeper and JobSeeker which could cause market damage.
Cliff becomes less of a problem
However, the dreaded “cliff” when the mortgage vacation ends is less and less of a problem.
APRA’s September data showed only 7.4% of home loans remained in vacation mode and bank information suggests loan books are returning to normal a little faster than expected as repayments resume. .
Even in the most vulnerable CBD markets of Sydney and Melbourne, which have been hit hardest by the shortage of international students, the signs aren’t too bad other than rising vacant rentals and rising property values. General has held up well or increased, even in the Melbourne lockdown epicenter.
Commonwealth avoids forced sales
The Commonwealth Bank has pledged not to force the sale of homes owned by customers hit hard by the pandemic and in general this echoes the attitude of most banks that they would much rather keep people in homes rather than disrupting the real estate market too much with a spate of mortgage sales.
There is other evidence that things might not be as bad as expected.
According to Domain figures, 72% of properties for sale in Melbourne last Saturday (11/14) were auctioned off, up from almost identical 74% on the same date last year.
The number of bank loans is increasing as new buyers and those looking to refinance grab fixed rates below 2% and variable or honeymoon offers that are better than they used to be.
Bank loan numbers are stealing
Almost one in 10 Australian mortgage holders have chosen to refinance their existing mortgages, with figures from the Australian Banking Association showing that 500,000 home loans, or 8% of all mortgages, were refinanced over the course of the last year.
Data from the Australian Bureau of Statistics shows that the number of monthly loan commitments for new home finance in September increased by 5.9% compared to the previous corresponding period, with the HomeBuilder grant resulting in increased demand for loans to construction.
Surveys also show that Australians are still very supportive of real estate as an asset class for living and investing.
Declines in interest rates have increased the borrowing power of many potential buyers and significantly reduced the gap between mortgage payments and rental fees.
Price and sentiment still on the rise
CoreLogic data showed that house prices rose in all capital cities except foreclosure-hit Melbourne the following month, while an ME Bank survey showed that around two A third of Australians (65%) believe that prices in their region will stay the same or increase over the period next year.
The survey showed that 38% of Australians felt positive about the property market in the fourth quarter of 2020, compared to 29% in the second.
Those who feel negative about the real estate market have dropped from 27% to 20%.
Buyers and sellers on the rise
A third of Australians (34%) are considering buying a property and 12% are considering selling, up from 29% and 10% respectively when the pandemic was at its worst in the second quarter.
Most of those numbers point to a housing boom rather than a collapse, although there’s always the possibility that that could change as job losses hit and government support wanes.
Even investment housing should get a boost, as rental yields start to look more attractive day by day compared to the yields on term deposits and loans which are now flowing more freely after banks had the green light to stimulate lending by cutting a large part of credit. responsible lending laws.
Finally, the overall economic outlook is improving, with the Commonwealth saying the unprecedented level of fiscal and monetary stimulus, coupled with an expected reduction in accumulated savings and further easing of COVID-related restrictions, will support growth economic and job creation.
The bank now expects a faster and larger rebound from the pandemic recession, with a GDP drop of 3.3% in 2020, followed by a GDP increase of 4.2% in 2021 and 3, 8% in 2022.