It’s been a tumultuous year for the property market so far, but after an interest rate cut and major regulatory and policy changes, the market looks set to take a turn for the better.
1) A new Government scheme
This year’s federal election brought with it a lot of uncertainty around property, particularly as many potential buyers and sellers were holding out to see whether or not the Labor government’s controversial changes to negative gearing would get the go-ahead.
With Scott Morrison’s liberal government winning the vote, negative gearing is here to stay, and their election promise of a First Home Loan Deposit Scheme will be introduced from January 1 next year.
The new scheme will allow eligible first home buyers to purchase a house with a deposit of as little as 5 per cent. It is set to be capped at 10,000 loans per year and will be available for single applicants earning up to $125,000, or couples with a combined income of $200,000.
While the scheme may not appeal to all first home buyers (after all it means there will be more to pay off long-term), it will be able to help them move into a new home faster and save them from having to use Lenders Mortgage Insurance.
2) Looser lending rules
Getting mortgage approval can be a big hurdle, however the APRA have recently announced it will relax serviceability assessments for new residential mortgage loan applications, so that home buyers will be able to borrow more.
The changes will eliminate the ‘stress test’ on loans where borrowers had to show they could afford repayments on a rate of 7.25 per cent. This is quite high considering most owner-occupied rates now sit closer to 4 per cent.
Scrapping the stress test means banks can assume the rate will be the rate they actually charge on their mortgages, plus a 2.5 per cent buffer in case of future rate rises.
3) Rate cuts
In June the RBA changed the official cash rate for the first time in almost 3 years, bringing it to an all-time low of just 1.25 per cent.
Most lenders have followed suit and dropped their variable rates too, meaning many people’s home loans repayments are a little cheaper.
The average mortgage holder should be saving about $58 a month, or $700 a year if their lender has passed on the full cut.
4) Improved sentiment
All of the above mentioned points lead to a more confident property market. With more buyers coming out of the woodwork, sellers will see better competition for correctly priced homes.
The rise in buyer activity may be subtle in the early months, but there’s certainly a lot to be optimistic about for both buyers and sellers.