Leading mortgage brokers say banks are cautiously taking the
brakes off home lending and removing extra checks on borrowers
that were introduced at the height of the pandemic.
The trend comes amid an ongoing surge in new lending, but brokers
say they are not seeing a rise in high-risk borrowing, and nor do
they believe regulatory caps on home lending will be introduced
any time soon.
Several brokers including Aussie Home Loans and its merger
partner Lendi say banks have become less conservative compared
with the height of the pandemic last year.
Aussie chief executive James Symond says banks had “pulled
in their horns” during the peak of the pandemic, but are now taking a more “commercial” approach to credit assessments. “We are seeing a more balanced approach by the banks,” he says.
Lendi says the proportion of loan applications where lenders are requesting more information from the customer has dropped from 48% in March 2020 to 28% this year.
First-home buyers are using renovations to create their dream home, according to research by comparison website Finder.
According to Finder’s First Home Buyers Report 2021, 79% of FHBs plan to renovate their new home. The research found 22% will renovate immediately
after buying, while 30% will do so within the first 12 months. A further 23% will do a home makeover within the first five years.
Sarah Megginson, Finder home loans expert, says FHBs are getting creative with different tactics to get into the market.
“It’s not always possible to buy your ideal home, let alone your dream home,” she says. “Some firsthome buyers are finding that their best chance to
get on the property ladder is by purchasing a ‘fixerupper’ in a suitable suburb.”
For city dwellers, 82% of FHBs intend to renovate at some stage, compared with 75% of those living regionally. “Australians have spent more time at
home in the past year and, for many, our kitchens bedrooms and dining rooms became our new offices,” Megginson says.
Rental vacancies remained low in March and rents continued to rise in the smaller capital cities and in regional Australia, according to figures published by SQM Research.
Vacancy rates are below 1% in five of the eight capital cities and 1.5% in Brisbane, after vacancies fell in March in Melbourne, Canberra and Darwin, and
remained unchanged in Brisbane, Perth and Hobart.
SQM says that, overall, the national residential rental vacancy rate rose to 2.1% in March from 2.0% in February. The rise was driven by an increase in vacancies in Sydney, from 3.3% to 3.4%.
With vacancy rates tight in most locations other than Sydney and Melbourne, house rents have risen 14.7% nationally in the past 12 months, while unit
rents rose 6.5%, pushed up by strong growth in regional locations.
House rents rose 2% or more in Adelaide, Perth and Brisbane over the month to 12 April, while unit rents also rose. Over the year, rents have shown strong
growth in the smaller cities, including rises of 25% for houses and 11% for units in Darwin.
Australian homes are in short supply and selling at record speeds, with the average number of days that homes are listed for sale hitting record lows in every state in March.
According to a housing indicators report by realestate.com.au owner REA Group, dwellings were listed for 48 days on average last month, down from about 60 days in January and 71 days in June last year. Properties sold the fastest in the ACT, at just 25 days. Following close behind were NSW (27 days) and Victoria (30 days).
REA Group says average views per listing have also been surging, with every state hitting record highs in March. Nationally, views per listing were up 6.1% over the month and 107% year-on-year.
The report’s author, economist Anne Flaherty, says the growth can be attributed to multiple factors, including government support packages for first-home buyers and limited available stock. “Buyers are searching for more expensive properties than they were a year ago,” Flaherty says. “They are also looking for more space, with inquiries for houses and land surging, while demand for units has softened.”
The Federal Government says it is “very pleased” that high consumer confidence is leading to a “strong housing market” and remains unconcerned about rising debt levels.
The Reserve Bank has warned that optimistic borrowers may lead to a debt blowout. But Assistant Treasurer and Minister for Housing Michael Sukkar says the Federal Government is pleased that high confidence levels, the strength of the economy and the improving unemployment rate are leading to a strong housing market – with first-home buyers are at 15-year highs and owner-occupiers dominant.
“On average, we’re looking at affordability being at 20-year highs, which is why first-home buyers are at such high levels and why owner-occupiers are nearly three-quarters of the market,” Sukkar says.
He says owner-occupiers are in “an absolutely dominate position” because $220 billion has been saved by business and households during the pandemic. “A lot of that $220 billion is now finding its way into investment in housing,” Sukkar says.
House prices could rise 15% this year as investors push into the booming market, with APRA unlikely to intervene, says investment bank UBS. The forecast is significant because UBS generally takes a highly negative view of real estate prospects.
The forecast comes as the latest CoreLogic housing data suggests national house prices are rising at the fastest pace in three decades.
A shortage of houses, rising sentiment, government stimulus, credit availability and a willingness to borrow have combined to push house prices to fresh record highs, with the market now watching for APRA’s next move.
“The future expectation of low rates has given the market another leg up,” says UBS Australia chief economist George Tharenou. “People are thinking that over the next three to five years they’re going to have continued low interest rates, so their willingness to borrow more has increased materially.”
One in five Australian first-home buyers are considering buying in another state to get ahead in the real estate game.
That’s 2,300 people per month who are prepared to move interstate to get their foot on the property ladder, according to Finder’s First Home Buyer survey.
The move is being fuelled by the Exodus to Affordable Lifestyle trend, with many people looking to leave bigger cities for more lifestyle-appropriate areas.
“Given the exodus of people from major cities like Sydney and Melbourne and an increased demand for regional properties, it isn’t surprising that so many
first-home buyers are open to a regional or interstate move,” says Sarah Megginson, home loans expert at Finder. “The booming market in certain areas is starting to see first-home buyers being priced out of
their own cities.”
In Victoria, 17% of first-home buyers say they would consider purchasing in another state with men (24%) more likely to do so than women (17%).
The RBA has retained record low interest rates at its April meeting. The board, with newly appointed members Carolyn Hewson and Alison Watkins, notes that housing markets have strengthened, with prices rising in most locations.
“Housing credit growth to owner-occupiers has picked up, with strong demand from first-home buyers,” RBA Governor Philip Lowe says, adding that the board does not see a cash rate change until 2024 at the earliest.
Susan Mitchell, CEO of Mortgage Choice says: “The latest RBA decision comes as no surprise when you consider the unemployment rate and inflation are some way off the RBA’s targets.”
But some economists believe there will be a cash rate increase by the end of the year. Finder’s RBA cash rate survey saw six out of its 39 panellists suggest there will be a rate change, with Dale Gillham of Wealth Within expecting a rise as early as July. Five other economists predict a cash rate rise in the December Quarter.
Westpac CEO Peter King has highlighted a lack of housing supply as a major problem for the nation and a reason for climbing property prices.
King says a strong bounce back in house price growth has been an outcome of the Federal Government and the Reserve Bank moves to stimulate borrowing and economic activity to help the recovery from the pandemic recession.
But he says supply issues in the market are exacerbating house price growth.
“In relation to what’s driving housing prices, from my perspective it’s supply and demand,” he says. “One of the ratios we look at is new listings to sales and it’s still out of whack, with more sales than new listings.
“I don’t think bank debt is a driver of the housing prices, I think it’s a fundamental supply-demand issue.”
The strength in demand for housing is echoed by Mortgage Choice CEO Susan Mitchell who cites a rush of first-home buyers. “Everything has blossomed – it’s just been an incredible period of time,” she says.