The coronavirus (COVID-19) has brought with it times of uncertainty amidst what is essentially a lock down of society. Hundreds of thousands of Australians have lost their jobs or had their employment suspended. While the curve seems to be flattening and we appear to be getting the outbreak under control, we know that conditions can change quickly and the full economic fallout of the pandemic is yet to be determined.
St George Bank released a forecast of property price movements on Wednesday 22 April. The preliminary forecast projected a sharp fall in values this year followed by a minor rise in 2021. The bank projected a 7-10% decline in national housing values this calendar year due to the weaker economy and job losses.
Ultimately it comes down to your situation. If you are a first home buyer with a secure job then now could be a great time for house hunting with less competition and some vendors feeling a sense of urgency.
ASSESS YOUR SITUATION
How secure is your job? While we hope the worst of the fallout is behind us, we are still facing months of economic recovery and uncertainty. If you find yourself working in an industry that is currently affected or will possibly be affected then you need to take a realistic look at the likelihood of continued employment.
If you are confident your income is sound, however, your time could be now.
FINDING YOUR PROPERTY
Social distancing restrictions such as bans on public inspections and onsite auctions are in place to restrict the spread of COVID-19. However, real estate agents and the rest of the market have adapted to the new restrictions. Virtual tours of homes, private inspections and online auctions have replaced the traditional ways of buying and selling property.
PLANNING YOUR FINANCES
With so much uncertainty, it is wise to plan your finances for the worst case scenario. Identify any risks and weigh them up. While it’s impossible to know exactly what the future holds you can plan for the unexpected by making sure there’s a financial buffer for you to access when times get tough.
If you’re thinking of taking out a new mortgage, naturally you should do your best to make sure you’ll be able to service the loan going forward if you or someone else in the household loses an income.
It’s never been cheaper to pay off a home loan. CoreLogic data suggests that more than a third of Australian properties had estimated mortgage repayments less than local weekly rents. However, whilst record low interest rates are certainly worth considering but not relying on. At the end of the day, you need a solid income to be able to service the loan.
In these unprecedented times, loan approvals are taking longer than normal and it is essential to have sound legal advice before committing to an unconditional contract. We are recommending our clients include a subject to finance clause of at least 14 days in their purchase contracts, to ensure that you are protected in the event of delays in obtaining formal finance approval. As property values may decline, there could be risks in bank valuations not coming back at the usual expected levels, so it is critical to have formal finance approval before committing to an unconditional contract. In these cases, a subject to finance clause protects our clients from any unforeseen risks.
NAVIGATING GOVERNMENT GRANTS
Lockdown laws have changed the way real estate is to be sold for the foreseeable future, but state and federal government assistance for first-home buyers has stayed the same.
The NSW Government’s First Home Owner Grant (new home) and First Home Buyers Assistance Scheme still apply.
The First Home Loan Deposit Scheme is an Australian Government initiative that assists eligible first home buyer to purchase with a deposit as low as 5%. If you are unable to find a property and enter into a contract sale prior to the expiry of your pre-approval under the Scheme, you may be entitled to an extension for another 90 days. For more information visit https://www.nhfic.gov.au/what-we-do/fhlds/
SEEK OUT THE BEST ADVICE
Before heading into a long-term relationship with a home loan lender, you’ll want to speak to as many knowledgeable experts you can.
As we all keep hearing, these times are unprecedented and the norm is no longer normal. Now more than ever is the time to ensure you are getting the soundest advice. The more informed you can be about all likely scenarios, the better position you will be in to make the right decisions.
If you’re in doubt about your financial situation, speak to your bank first and foremost. Be open and honest about your situation to enable them to give you the best advice for your situation.
Just remember, property should be a long-term investment. Property prices may dip in the short term but property values will continue to increase over the long term.