Over the past few weeks there have been signs that the property market may be set for a minor rebound, and those in the mortgage broking and finance industry are preparing for an influx of customers who may need help accessing home loans they might not have been available to just one month ago.
Having seen property prices across many parts of Australia suffering the steepest declines in years, some signs of optimism may be creeping back into the market. Several market segments may be about to find it easier to invest in property all around Australia, those in Melbourne no exception.
During the final weeks of the federal election campaign, the Coalition government introduced a new scheme which would seek to enable first home buyers an easier road into the market.
The now-new-government promised to allow first home buyers to front up just 5% for a deposit, with the government offering to chip in the remaining 15% in order to save the buyer paying lender’s mortgage insurance (LMI). Although this is not yet policy, and the details are sparse, this policy had bi-partisan support and is a sign that first home buyers may soon find it easier to get their hands on the first home, or at least make it easier to get pre-approval for a home loan.
Even more recently, the Australian Prudential Regulation Authority (APRA) has signaled it may lay to rest its policy of imposing a seven percent interest rate servicing floor. This floor is what lenders must use when assessing how much a borrower can loan. With current interest rates offered to borrowers sometimes half of that, it significantly limits how much a finance a borrower can access. APRA is said to be replacing that seven percent with a 2.5 percent buffer above the borrowing rate, meaning that if calculating serviceability under this new policy, most borrowers will be able access significantly more funding. It looks like home loan calculators are going to need to be revised once this new policy is implemented, as this will be a significant change to how banks and brokers have calculated borrowing capacity in recent years.
Finally, in the lead up to the 2019 Federal Election, most pundits had banked on a Labour win, and were beginning to factor in changes to negative gearing for investors. Without doubt, had Labour's negative gearing policies been implemented they'd have sent a massive ripple through the investor market. Now, with the coalition government securing an unexpected victory and seemingly with no interest in touching negative gearing policies, investors will be more certain of their positions and take a view that it is business as usual.
Due to these factors, we’d expect to see a bump in the property market in the second half of 2019. There are also signs that we’re likely to see further interest rate reductions during the second half of the year too. All of these factors combined led us to believe the property market is almost certain to pick up again.