Housing Affordability Worries Remain in 2020

According to CoreLogic’s national home value index, home values rise through December 2019, cap-ping off a solid ending to the real estate market for the calendar year. This minimal rebound in dwelling prices indicates home owners are becoming richer, which may also assist in paying for household expenses.

On the other hand, housing affordability is forecast to worsen even further as house prices surpass growth in household incomes, indicating an impediment for people who are saving for a deposit.

The deteriorating housing affordability is likely to slow down the activity across price-sensitive sectors of the market. This particularly true for Sydney, where housing prices are already pegged at 8.2 times greater than gross annual household incomes midway through 2019.

Regardless, an increase in investors who are drawn in by opportunities for capital gains and a positive spread between mortgage rates and rental yields should help counteract a decline in active from more price-sensitive buyers. 

In addition, minor cities where housing prices are more reasonable and economic conditions appear recovering may provide certain protections for investors who will see advertised stock levels increase.

Jobs and population growth is weakening in NSW and Victoria, while the situation is picking up in Queensland, Western Australia and, to a lesser extent, South Australia.

Relatively low dwelling prices, combined with increased migration rates and recovering jobs growth, could prove beneficial for the capital cities in these regions.

With household values tipped to increase through 2020 across most regions, the year may result in a change in the growth dynamic, with bigger cities forecast to experience a slowdown in the fast pace of progress seen through the second half of 2019.

In contrast, minor capital cities like Perth and Brisbane, as well as major regional hubs and lifestyle markets like Newcastle are expected to enjoy improved conditions as buyers are drawn in by affordable prices combined with job opportunities and lifestyle factors.



Newcastle House Prices Increase, Interest Rates at Historic Low

Newcastle homeowners have begun to recoup some of their on-paper losses following a 0.6% increase in property prices in September 2019.

On the day the Reserve Bank of Australia slashed official interest rates to its lowest ever of 0.76%, CoreLogic released figures in October showing the house median price in Newcastle and Lake Macquarie increased to $543,000.

Apartment prices declined 1% following an increase of 0.7% in August 2019.

Beyond Newcastle, the rest of the Hunter area saw a 1% in median house values, to $433,000, following a 0.8% drop the month before. Unit values declined 0.2% to $334,000, or down 20% from their peak.

Across Australia, the market improved 0.9% in September, its highest monthly growth since March 2017 and its third successive month of increase, thanks mostly to a 1.7% monthly increase in Sydney and Melbourne.

Median values in Sydney and Melbourne have climbed over 3% during the winter months – July, August & September.

According to CoreLogic, population growth and the jobs market stayed more robust in NSW and Victoria compared to other states.

Other factors driving price increases are lower interest rates and better access to credit. There are indications that a lot of the larger regional hubs are beginning to mend with Geelong, Illawarra and of course our Newcastle-Lake Macquarie region.  All posting an increase in prices over the September quarter.

In other CoreLogic data, 6% of homes sold in Newcastle in the June quarter did so at a loss to sellers. The number of houses and units selling at a loss increased twofold in Newcastle over the year of June 30 and was at its peak since October 2013.

In the remainder of Hunter, the percentage of houses and homes that was sold at a loss in the June quarter was 7.1%.

To know more about your home and the market conditions of your suburb, call Annette for a free appraisal or a copy of her postcode report.

How has Uber Eat habits stopped some buyers from getting a home loan?

Home buyer loans increased slightly in February 2019, according to the first figures published from the time of the financial services royal commission’s final report.

However the amount of the loans approved over the month remains much lower compared to last year.

Prospective homebuyers have experienced more difficulty in securing loans over the last couple of years than in the past because the bank regulator’s crack down on lending requirements, specifically to investors and riskier borrowers.

The highlight of 2018’s financial services royal commission also revealed loans approved to people with unreported living expenses. Following the hearings, banks implemented stricter rules about verifying borrowers’ expenses. There were even accounts of borrowers getting rejected due to the Uber Eat habits.

The value of home loans for residential properties, not including refinancing, increased 2.7% to $17.64 billion in February, versus the January figures.

The small growth follows the release back on February 4 of the royal commission’s final report.

However, household loan values remain 18.6% lower than in February 2018.

Investment property loans rose 0.9%, but remains 29.1% lower than the year-ago period.

Loans for owner-occupiers rose 3.4% but dropped 13.9% from 2018.

Economists are saying that there are tentative signs of more demand for borrowing, and banks may be a little more inclined to lend but warned against over analysing one month of data following the declines over the last one to two years.  Also be aware that minor growth follows the increase in auction clearance rates in Sydney and Melbourne from their declines in late 2018 and that clearance rates hitting roughly 50% could be a sign of more price declines in 2019.

According to senior economist in the banking sector, movements in home lending are likely a good major sign of the path of housing values. One upbeat moth is too early to say that the weakness in housing values are ending because when figures are joined with the slight declines in housing prices in March, it could mean the most severe decline are over.



Loans for first-time home buyers posted their biggest share of loans to owner-occupiers in six years, at 27.1%.

However, loans for first-home buyers remain down from last year, though a more moderate level than other owner-occupier loans.

According to state, NSW loans rose 5% in February but remain down, at 23% from last year. Loans in Victoria were up 2% for the month but dropped 21`% over the year.

Now that the election is over, we are noticing changes in our local market with more activity from both sellers and buyers equally showing more confidence in their decisions.



Property Exchange PEXA Purchased by Major Bank


You may have hear months ago that the Commonwealth Bank disclosed in a statement to the ASX that it has purchased Property Exchange Australia Limited (PEXA) in a shared bid with Morgan Stanley Infrastructure Partners and Link Administration Holdings Limited.

PEXA is a web platform that helps users with lodging of documents to Land Registries and electronic financial settlements on property matters.

Per PEXA’s website, it has handled over 1.7 million transactions valued at a total of $237 billion. The company was established in 2010 “to fulfil the Council of Australian Governments” (COAG) initiative to deliver a single, national e-conveyancing to the Australian property industry.”

PEXA has 7,581 members comprising of real estate agents, as well as actors related to the property transaction process such as lawyers, conveyancers, developers and financial institutions.

PEXA’s shareholders officially approved the joint bid in November 2018, having been first filed in October 2018 and then augmented on 5 November 2018.

The deal calls for CBA to inject $50 million into PEXA and acquire a 16% equity share in the company, upping its current share in the company of 13.1%

According to Commonwealth Bank’s CEO, the move is an indication of its confidence in the Australian property sector.

The completion of the deal still depends on several conditions being met, but it is expected to be be finalised by the end of 2018.

Many of the conveyancers and solicitors One Agency Pinkerton Properties find themselves working with are now using PEXA.  It certainly streamlines the process and we receive the ‘Order on the Agent’ much faster enabling us to had over the keys to the purchasers sooner and pay the deposit held to the seller too.

Report: New Home Loans Plunge in 2018

Economists report that the number of new homes approved in 2018 declined by nearly 20%, indicating more price drops and cheaper homes.

The major reasons for the drop were stricter lending requirements, weakening investor demand and the then-impending banking royal commission final report.

Australian Bureau of Statistics figures showed that the number of mortgages taken out across Australia declined by 19.8% in the year ended December 2018.

According to chief economist Bruce Hockman, the December slowdown in lending for investor homes continues the steady drop over the last couple of years, with the number of new investor loan commitments dropping by about 40% from the peak at the beginning of 2017.

The slowdown in owner-occupier loans is more recent, with the declines mostly occurring in the last six months of 2018.

A Domain economist forecasts that property values in 2019 will be determined by home lending so too did Kevin Brogan at a Corelogic event I attended recently in Newcastle.

There is a strong correlation between changes in home lending and changes in home values, so there is a strong possibility of further price declines in 2019. This could signal of what happens in the housing market.

Home lending December, which declined by 4.4%, nearly double the past month, was worsened by the uncertainty in the lead-up to the final report by the banking royal commission.

Chief economist for AMP Capital, Shane Oliver believes the general decline in home lending in 2018 was due to both supply and demand. The banks have become stricter in approving loans, but demand is for loans is also weak. A significant portion of that weakness is focused on investors.

A lion’s share of the home lending downturn went to a drop in investment home loans, which dropped 27.8% in 2018.

The upside to investors staying away from the market was that one in four buyers getting new owner-occupier loans were first-home buyers. This means a bigger share of new lending is made up of first-home buyers. They make up about 27% of all owner-occupier commitments, not including refinancing, up from 20% at the beginning of 2017.

The lending decline was inevitable. The growth was coming to a halt. The environment will eventually become easier for first-time home buyers, which makes for an easier entry into the market.

There had been a boom in both property prices and debt levels. We are now returning to normal, which is welcome news and will eventually mean stable house values and debt levels.

Tim Reardon, peak construction and development lobby group Housing Industry Association principal economist, the slowdown in investor activity would change when house values stabilise.

The slowdown has long been anticipated, however, there are present risks concerning the length and depth of the slowdown.

The market is forecast to remain strong while unemployment rate and population growth will continue at present levels in the long term.

Stock Levels Increase to their Highest Levels Putting Buyers Back in the Driver’s Seat

The cyclical upturn in listing numbers in on going, with new listings addition rising 16% compared to the end of winter. But despite the increase in fresh listings the new stocks being added are trending at nearly 4% lower compared to the same year-ago period, the lowest seasonal level since 2012. The cause of the low number of fresh listings is anaemic seller confidence. This doesn’t come as a shock because the housing market situations have slowed down and selling conditions have become more difficult.

The level of newly advertised stock is muted but the overall advertised listing numbers have been tracking higher while the rate of absorption becomes sluggish. If nothing changes in the present trend, the number of properties advertised will surpass the recent highest levels recorded in 2012. Total listing figures are up 10.2% compared to 2017 and are at their peak for the same period since 2012.

A panicked surge in fresh listings is not the reason for the increase in total listing numbers. It can be attributed more to weak demand, which is triggering an increase in re-listings, combined with extended selling times (more days on market) and fewer successful sales at auction.

It is now taking 53 days to sell an standard capital city housing by private treaty versus 42 days last year and discounting rates have increased by 6.5% on average compared to 6.0% a year ago.

If there is more stock, there are more options for buyers and more difficult selling conditions for property owners, which is basically a buyer’s market. There is little sense of urgency for buyers under these circumstances; they can aggressively negotiate, linger in making a purchase decision, and if they can’t accept the property price, they can simply move to the next property. There are a lot of properties for sale in the market that sellers would have to be realistic with their pricing expectations.

Now more than ever, sellers need to make sure they choose and agent who knows how to run an effective marketing campaign to stand out from other properties for sale (the competition).