The cost of housing is always a topic of discussion in Australia. High prices, the challenges for first home buyers, the number of baby boomers wanting to downsize and sell their big family homes, and the move from the traditional family block to apartment living - these contribute to the continual ebbs and flows in house values. Low-interest rates and favourable economic conditions in Australia built some good momentum in the housing market last year, with prices being relatively steady. But since the beginning of 2020, house prices have been decreasing despite interest rate cuts and a number of government incentives.

Covid-19 and the associated economic slow down has and will continue to impact on housing prices and affordability, so is it the right time to be thinking about taking out a mortgage?

Uncertainty around employment and future income levels has created some clear homebuyer categories

  1. Those with secure jobs are in an improved position because of weaker housing prices and lower interest rates.
  2. Those who have lost their jobs or are on reduced hours have pretty much been taken out of the market for the time being even if they had saved a deposit prior to the COVID impact. This also applies to those who are in jobs but face uncertainty and possible reduction in income.
  3. Those who were going to buy but might now renovate and upgrade their existing home to try and increase its value.
  4. Investors who had had wealth tied up in other assets such as shares that could have been used to finance home purchases have had their current overall wealth diminished. This group is also facing an oversupply and downward pressure on rent prices in some markets.
  5. Investors who are relatively cashed up and can ride out a period of lower returns; so lower property prices are attractive.

This confused response to the housing market is becoming an increasingly more urgent challenge for our governments because the housing sector is one of Australia’s most crucial economic sectors, employing around 1million people both directly and indirectly. Throughout the course of the pandemic, there have been a number of estimates predicting that the number of new homes constructed could drop by as much as 35 percent – leading to big job losses but also of reduced stock for when the economy starts to pick up again.

To keep the industry moving governments across the country are introducing a number of incentives to encourage people to buy or renovate their homes. These vary from state to state and seeking advice might help identify which is applicable to you.

  • A First Home Owners Scheme or Concession Schemes is aimed at supporting first homebuyers.
  • The recent HomeBuilder grant can be used for purchase, construction or renovation of a house and can be used in conjunction with other grants.
  • State and Territory governments are providing their own complementary grants.
  • Early withdrawal of superannuation funds and whether this could or should be put towards a deposit for a home in conjunction with the grants available.
  • Fixed term interest rates are the lowest they have ever been and can be used to leverage the benefit of these grants.

As they say for every action, there is an equal and opposite reaction and we all know that access to free money is generally never free. Therefore advice and discretion is always advisable before making any decision.
Houses are and always will be a key asset in anyone’s personal or investment portfolio and are still being bought and sold every day. What are some of the things you should keep in mind if you are looking to buy either a house to live in or as part of your investment portfolio?

  • Assess your situation in terms of employment and ongoing income levels.
  • You should always plan for the unexpected, but more so these days. Do you have a financial buffer just in case there is a change of circumstances in the household?
  • Property is a long-term investment and should always be viewed that way. Panic buying or panic selling generally doesn’t end well.
  • See an adviser who can help you assess where you currently stand and will be able to help identify appropriate incentives, identify the right mortgage structure and put in place a long-term strategy to achieve your goals.

Speak to the friendly team at ActonLendingSolutions.