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Watch Out For These 4 Housing Market Scenarios This Year

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They say the New Year brings an opportunity for things to improve, but market watchers are not getting their hopes up for Australia’s housing market as conditions remain dire.

In a market forecast, CoreLogic head of research Tim Lawless said there are four scenarios that are likely to play out over the course of 2019, with the general downturn still continuing throughout the year.

The housing downturn in Sydney and Melbourne will continue to be the main culprit of the housing downturn. On the other hand, while other capital cities are expected to lose some momentum, they are likely to witness positive growth in nominal terms. “There will be a few exceptions: with the improving trend in Darwin, it looks likely the top end market will continue what is likely to be a long and gradual recovery in 2019, while the Perth market could also move back into positive growth territory through the year,” Lawless said.

On the home loan front, tight credit conditions are expected to persist, limiting housing market activity to below-average levels. The unfavourable lending environment will also discourage potential homebuyers from breaking into the market. The strict lending conditions will also have a negative spillover into consumer sentiment, which is already projected to weaken as Australia approaches a federal election.

The third likely scenario is the continued downturn in the new unit market, particularly in Sydney and Melbourne. This is due to weaker conditions across the two markets brought about by slowing migration rates from both overseas and interstate, fewer domestic and overseas investors, low valuations for off-the-plan unit settlements and overall tougher lending conditions.

Despite these discouraging market projections, one part of the market is likely to buck the trend. Lawless said lifestyle markets along the coastline and hinterland locations adjacent to the major capitals will remain a bright spot in the market as they continue to see strong demand from a variety of market segments.

While growth conditions will not be as stellar as last year, values are expected to trend higher throughout 2019.

Western Australia’s mortgage ‘delinquents’: The stories behind the stats

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Ms Meerman’s team of three counsellors based at Midlas in the Midland CBD helped Perth’s north-east deal with more than $50 million worth of debt last financial year. In the past six months, half of their clients were having issues paying off their mortgage. Mortgage delinquency occurs when someone falls more than 30 days behind on their home loan repayments.

Despite slight improvements on delinquency rates across the country and in WA, it remains a rampant issue. Recent figures from Commonwealth Bank suggest more than 1.5 per cent of its WA customers were in arrears on their home loan, second only to the Northern Territory.

Moody’s April 2018 mortgage delinquency map showed four of Australia’s worst performing regions were in WA: the WA outback, the Wheatbelt, Mandurah and Perth’s north east, which includes Midland. While the numbers paint a concerning picture, behind them are thousands of families who have experienced job losses or sickness, which is causing huge financial strain and serious mental health issues.

 

“It is really sad and most of these clients coming into me, they’re in their 50s or early 60s, they have worked their whole life, they’ve never been out of a job this long.

“It’s about their identity as a person and they feel like they’re failures. They’re facing bankruptcy, they’re at the end of their life with nothing to show for a lifetime of work.”

Ms Meerman said these clients usually had great payment histories on their home loan and it was frustrating for her to see banks pursuing them relentlessly after missing payments.

 Construction woes trickle down to families

Waikiki resident Samantha*, her husband and teenage daughter are healthy but they were affected by the ailing WA construction industry.

Her husband lost his job in April for three months, which was a huge blow to the family income.

“It wasn’t his choice to lose the job … he works with timber and that feeds the building industry and when that collapsed his company started retrenching people, he was sort of the last one on so the first one to go,” she said. The family’s mental health was strained from the financial stress coupled with the often crushing nature of job hunting her husband was going through.

“I think (my husband) applied for over 100 jobs. He would go for interviews, sometimes three at the same place and not hear anything.

“It got to the stage where he would’ve gotten a job in Welshpool, and travelled three hours a day just to have a job to pay the bills.

With the help of a financial counsellor both Samantha and Adam were able to get the bank off their backs and navigate their ways out of financial strife in ways they would have never thought of themselves.

Ms Meerman said falling behind on mortgage payments was a complex and stressful time, which is why the free service the financial counsellors network provides was so important.

She said the first thing they asked was whether the lack of income was because of illness or injury.

“If that’s the case you want to get onto your insurances ASAP. Not just insurances you know you’re paying for but the ones you might not know you have on your loans and with your super.

“Some people are insured for quite a lot of money through their super. They can pay out their house.

“I have seen people lose their house when they could have actually paid it out.”

Visit financialcounsellors.org for more information.

LOCAL MORTGAGE BROKERS

 

 

Amid an epidemic of mortgage stress, a perfect financial storm is on the way

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Homeowners, particularly in the mining states of WA and Queensland, are already grappling with a number of factors including unemployment, under-employment, stagnant wages growth and weak house prices.

Another looming threat is rising interest rates, with three of the four major banks raising variable home loan rates earlier this year independent of the Reserve Bank of Australia.

Andrew and Rachel Hayden built their dream home in Perth’s south-eastern fringe three years ago, but they are expecting a mortgage default notice from their bank within a month.

“We put probably $600,000 into it and [are] probably going to sell it for $480,000 — shocking,” Andrew Hayden said

He said he wanted to unlock his superannuation to pay his mortgage but couldn’t until the bank served him a default notice.

The couple’s financial problems began when Rachel Hayden fell ill 18 months ago.

The mother of five was forced to stop work and Mr Hayden had to shut down his business to care for her.

“[I feel] absolutely gutted,” she said. “You do everything by the book, everything. Gutted for the kids, they don’t do sports or anything and haven’t because you just can’t afford to.

“It took us so long to get here and we thought yes, no wasted rent money or anything like that

A perfect storm of rising mortgage costs

Credit Ratings agency Moody’s has predicted the situation will worsen as a growing number of interest only loans convert to principal and interest, adding about 30 per cent to monthly fees based on current interest rates

About 40 per cent of all mortgages funded by banks during 2014 and 2015 were interest only, and many of them included clauses which stipulated homeowners would have to start paying principal payments after five years.

Throw into the mix flat wages growth nationally, underemployment on the east coast and stubbornly high unemployment in the west, and according to Keith John, founder of Pioneer Credit — which buys debt off the banks once people default on their loans — you have a perfect storm.

“A perfect storm in the sense of, and I think we’re seeing it play out now, really low retail sales and a general lack of consumer appetite, and … people are desirous to paying down debt but don’t have the capacity that they did a year ago, or two or three years ago,” he said.

 

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Home Loans

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Home loans make the process of buying a new home more affordable than ever.   When you buy a home, you should understand as much as you can about the process, as well as the questions you will be answering.  This way, you will be familiar with how things work and you will find the entire process to go much smoother.

 

When you look towards a home purchase loan, you will need to fully understand the interest rates. They are never the same and will vary among the different financial institutions, as well as from time to time. When you buy a home, it is very important that you keep up with the economy.  Any change in interest rates for a home loan can either increase or decrease the amount you pay back.

 

When getting a home loan, you will also need to understand the terms and the length of the loan.  Almost all financial institutions and lenders have a variety of different plans or periods for you to choose from.  If you choose a longer period, in most cases your interest rate will drop.  You can find this out yourself by using a mortgage calculator.  This way, you will know how much your mortgage payment will be before you decide to further pursue the loan.

 

As you probably already know, your ability to pay the loan back is very important.  Some lenders require that you keep your loan full term, while others may provide you with the option to pay it off any time you wish. Home loans that give you the option to pay it off early will normally save you quite a bit of money in the end.

 

Even though the early payoff option is great to have, it can also come back to haunt you if you end up defaulting on the home loan.  Or, if you decide to sell your home in the future, the early payoff can haunt you as well. For those very reasons you should always consult with a specialist before you commit to any type of home loan.

 

For the potential home buyer, home loans offer several different opportunities.  Before you rush out and get a home loan, you should always know what you are agreeing to.  You should also look into the company you are thinking of getting the loan from as well, so that you can better prepare yourself when you go through their process of getting your loan.