Investors and first home buyers are making a big return to the property market, with three state capitals seeing particularly strong real estate demand and higher loan values.

As the inflation beast is gradually brought to heel, borrowers are becoming increasingly confident that interest rates have reached their zenith and are again borrowing with relative gusto.

It’s first home buyers who are leading the charge, with investors not too far behind.

The latest Australian Bureau of Statistics (ABS) data shows that in November new home and investment property loans were up 13.1 per cent over the year.

The value of new loan commitments for investors was rising higher than owner-occupier borrowers. Investment lending increased by 18 per cent to reach $9.72 billion while owner-occupier new loan commitments were up only 10.6 per cent over the year to reach $17.86 billion in loans.

But it was first home buyer activity that stood out, with a 25.8 per cent increase in the value of new loan commitments for first-time buyers that saw the value of new loans reach $5.25 billion.

First home buyers as a portion of owner occupier housing finance graph

(Source: CoreLogic)

Canstar’s lending expert, Steve Mickenbecker, said the figures suggested Australian had confidence in the property market excelling in 2024.

“You could say investors are back, with new lending up by 18 percent year-on-year, suggesting they hold a healthy expectation for property prices over the coming few years.

“Looking at the number of buyers, first home buyers’ participation represents 37 percent of all new loans.

“First home buyers have in recent years had to weather the impact of rate rises on borrowing power.

“Canstar’s analysis shows for the average income, a solo borrower has seen their borrowing capacity fall since April 2022 by $137,000 and likewise, a double-income couple’s budget has been depleted by $331,000.”

Real Estate Institute of Australia (REIA) President, Leanne Pilkington, expressed relief that there was a return of investors.

“The results follow the latest ABS data showing the consumer price index rose 4.3 per cent in the 12 months to November 2023, down from 4.9 per cent per cent in October.

“The 13 interest rate rises have finally curtailed inflation, with all signs showing the economy is now heading in the right direction.”

Ms Pilkington said owner-occupier loans recorded moderate growth in November with some states such as Tasmania and NSW showing signs of stabilising.

Investors as a portion of total lending by state (based on value, excluding refinancing)

Investors as a portion of total lending (based on value, excluding refinancing) graph

(Source: CoreLogic)

ABS data shows new loan commitments in Queensland rose 3.3 per cent, Victoria rose 2.0 per cent, South Australia rose 6.9 per cent, in the Australian Capital Territory rose 9.4 per cent and in the Northern Territory rose 6.0 per cent while New South Wales fell 1.1 per cent, in Western Australia fell 2.9 per cent and Tasmania fell 15.2 per cent.

While new loans may have slipped in Western Australia, the value of the average loan size reached record levels there, as well as in Queensland and South Australia, reflecting the strong capital growth in those property markets over the past year.

Queensland reached $557,510, South Australia $510,057 and Western Australia $497,275 in average loan size.

Helen Avis, Director of Finance, Specialist Mortgage, said Perth was seeing a lot of interest from eastern states buyers.

“With stock levels so low – there are now just over 3,000 properties for sale in Perth and many are being sold as soon as they are listed – it’s little surprise that borrowers are taking bigger loans to achieve their property goals.”

“While not quite on the same scale, a similar picture was playing out in Adelaide and Brisbane and south-east Queensland.”

Maree Kilroy, Senior Economist for Oxford Economics Australia, agreed that Perth could expect further strong growth in 2024.

Following the rebound over 2023, we expect 2024 will be a softer year with home prices increasing a more muted 2.7 per cent nationally.

“Units are expected to outpace houses as affordability pressures, migration patterns, and weak apartment completion volumes intensify competition in the city apartment markets.

“While Sydney and Melbourne are expected to record relatively softer growth, Perth is well-equipped to lead the pack as the city develops a more sizeable dwelling stock deficiency.”

Rate cuts could mean game on for refinancing 

Refinancing largely stabilised in November after three months of steep declines.

The value of refinanced mortgages rose slightly in the month of November, lifting by a modest $121 million – the first increase in four months.

RateCity.com.au research director, Sally Tindall, said that while we’re now well past the peak in refinancing, the value of mortgages switching each month is still at elevated levels.

“Rock bottom rates in 2021 might have shone a spotlight on refinancing, but the rising cash rate has been the blowtorch that’s spurred many borrowers into action.

“The latest ABS data shows over 700,000 mortgages have refinanced since the start of the rate hikes, switching more than $360 billion worth of loans.

“Refinancing could well drop further in the first half of 2024, however, if we do see cash rate cuts later in the year it could be game on for some borrowers ready for their next move.

“It’s fantastic to see first home buyer numbers rising again in the month of November, despite rising rates and property prices.

Total value of refinancing - November 2023

“These numbers are likely to lift further in 2024, particularly when the government’s much touted Help to Buy scheme finally gets up and running.

“While this scheme will help lower-income first home buyers on to the property ladder without having to shackle themselves to super-sized debts, the places in this scheme are set to be capped at just 10,000 per year, which is unlikely to be enough to cater for the potential demand,” she said.

Article Q&A

Who are the most active buyers of Australian property?

The value of new loan commitments for investors was rising higher than owner-occupier borrowers. Investment lending increased by 18 per cent to reach $9.72 billion while owner-occupier new loan commitments were up only 10.6 per cent over the year to reach $17.86 billion in loans. But it was first home buyer activity that stood out, with a 25.8 per cent increase in the value of new loan commitments for first-time buyers.

Which states have the most new loan activity?

ABS data shows new loan commitments in Queensland rose 3.3 per cent, Victoria rose 2.0 per cent, South Australia rose 6.9 per cent, in the Australian Capital Territory rose 9.4 per cent and in the Northern Territory rose 6.0 per cent while New South Wales fell 1.1 per cent, in Western Australia fell 2.9 per cent and Tasmania fell 15.2 per cent.

At a time when the household saving to income ratio declined to its the lowest level in 16 years, new data has revealed that home ownership remains the biggest source of personal happiness.

In the pursuit of happiness, there’s a special kind that comes from owning your own Aussie home.

Recent research from Great Southern Bank has revealed that homeowners are happier than renters. There’s a unique sense of fulfilment that accompanies having a place to call your own, and it extends beyond mere bricks and mortar.

The Aussie dream: more than a roof over your head

According to the No Place Like Home report, 70 per cent per cent of respondents agreed that owning a home is an important factor in their happiness.

Despite interest rates increasing and global issues of concern, the report’s research still shows optimism among Australians wanting to purchase a home.

Half plan to buy a home to live in within the next three years. Half of renters are also hopeful of buying a home to live in within the next three years too.

What the research shows is there is still growing aspiration to own a home, with it not just being homebuyers that are looking. Forty-two per cent of existing homeowners are thinking of buying their next home – either upsizing, downsizing or making a lifestyle change.

Embarking on the journey to home ownership is more than a transaction – it’s a voyage toward a happier, more fulfilling life – and the research proves it.

Owning a home is not just about having a roof over your head. It’s about embracing a lifestyle that reflects the warmth of the Australian spirit. Here’s what makes homeownership Down Under a key to happiness:

Stability and Security
A home is a sanctuary, a place where you feel secure, and your roots are firmly planted. It’s a stable haven in a world that’s constantly changing.

Community Connection
Aussie neighbourhoods foster a strong sense of community. From barbecues in the backyard to conversations over the fence, owning a home brings you closer to a network of friends and neighbours.

Investment in the Future
Beyond immediate joy, homeownership is an investment in your future. It’s a cornerstone for building wealth, providing a sense of financial security for years to come.

Personalisation and Pride
Your home is a canvas for self-expression. The ability to personalise and transform your space brings a deep sense of pride and accomplishment.

Freedom to Flourish
With a home of your own, you have the freedom to create the life you desire. Whether it’s raising a family, starting a new chapter, or enjoying your golden years, home ownership paves the way for your unique journey.

More than just bricks and mortar

The report found most people (81 per cent) consider their home their ‘happy place’, and almost three quarters (72 per cent) believe home is wherever their family or loved ones are.

Just over half say having a home is about having a place to celebrate their culture and traditions.

Home ownership is a journey that can be difficult.

Australian Bureau of Statistics data released Wednesday (6 December), showed the household saving to income ratio declined from 2.8 to 1.1, the lowest level since December 2007.

Household saving declined due to a strong rise in income payable (+6.3 per cent), which experienced its highest growth through the year (+27.9 per cent) since September quarter 1977. Income taxes drove the rise, in the absence of the Low and Middle Income Tax Offset, which ceased over 2022-23.

Inflationary pressure led to increased nominal household consumption (+1.4%), as consumers faced higher prices for goods and services, further contributing to the decline in household saving.

“Gen Z and millennials tell us that saving a deposit is the key barrier to taking that first step towards buying a home,” Megan Keleher, Chief Customer Officer, Great Southern Bank, said.

“It’s clear, however, that Australian home owners do become happier over time, as they build the equity in their home.”

Happiness is at its highest for mortgage-free home owners and Baby Boomers, with 57 per cent in each group saying they are happy with their current housing situation, compared to just 29 per cent of long-term renters.

The report found that 51 per cent of renters are feeling heavily burdened by their financial commitments – significantly higher than 36 per cent of home owners.

Many are being forced into share house situations they’d prefer to avoid.

Long-term renters are also more concerned about the cost of living (84 per cent) and housing affordability (80 per cent) compared to those who have purchased their own home (73 per cent and 62 per cent).

“Every individual’s home ownership journey and personal experience is different, but the report highlights that owning your own home does bring increased happiness for the vast majority of Australians,” Ms Keleher said.

Getting those keys  

Navigating the path to home ownership may seem daunting, but with the right guide, it becomes a joyous adventure.

Award-winning mortgage broker Helen Avis, Director of Finance, Specialist Mortgage, said finding a team that can help with the pathway to home ownership was a fundamental part of the process.

New home in suburban Australia.

Home ownership may appear a distant dream but there are finance experts who can help make it achievable.

Tailored financial solutions – Every home owner’s journey is unique. We work closely with you to understand your goals and customise financial solutions that align with your aspirations.

Exploring the mortgage terrain – The world of mortgages can be complex. We simplify the process, providing clarity on terms, interest rates, and the various options available to you.

Maximising your buying power – We leverage the team’s expertise to ensure you get the most out of your investment. From finding the right loan to securing favourable terms, we are committed to maximising your buying power.

Ongoing support – Whether you’re a first-time buyer or looking to expand your property portfolio, we provide ongoing support to ensure your financial goals are met.

Article Q&A

How do you get to buy your first home?

According to the No Place Like Home report, 70 per cent per cent of respondents agreed that owning a home is an important factor in their happiness. The path to that ownership is difficult but mortgage professionals can implement strategies to make it achievable.

Are household savings in decline or rising?

Household saving declined due to a strong rise in income payable (+6.3 per cent), which experienced its highest growth through the year (+27.9 per cent) since September quarter 1977. Income taxes drove the rise, in the absence of the Low and Middle Income Tax Offset, which ceased over 2022-23.

Mortgage brokers are an intrinsic component in any real estate investment strategy, says award-winning finance expert from Specialist Mortgage, Helen Avis.

In the dynamic world of property investment, making informed financial decisions is crucial for long-term success.

As a seasoned property investor, there is an intricate web of factors that influence investment outcomes.

One of the key players in this realm is mortgage broker.

Their expertise can be an invaluable resource for any property venture, whether it’s a first home, investment property, or overseas purchase.

Helen Avis, Director of Finance, Specialist Mortgage, who has recently been recognised as a finalist in multiple categories of the Specialist Finance Group (SFG) National Awards, said an award-winning mortgage broker brings a wealth of knowledge that extends beyond the transactional aspect.

Why engage an award-winning mortgage broker?

Tailored solutions

A mortgage broker’s expertise lies in understanding the nuances of an investment strategy.

A personalised approach can ensure buyers’ financial needs are met with more precision than if left to an enthusiastic but unqualified investor.

Market insights

As a property investor, staying ahead of market trends is crucial.

An award-winning broker will be well-versed in the shifting dynamics of the property landscape, offering insights that can positively influence investment decisions.

Optimised financing

The ability to secure competitive financing options is a fundamental part of the broker’s role.

By assessing each unique financial circumstance and investment goal, a mortgage broker can guide clients towards loan structures that align with their long-term objectives.

Navigating complexity

Property investment often involves intricate financial arrangements and regulatory considerations. A mortgage broker’s expertise can help in navigating the complexities of financing and ensuring compliance.

Overseas property purchases

Investing in Australian property from overseas adds a whole new layer of bureaucracy and financial complexity. Mortgage brokers with specific experience in this field, with experience working with expatriates and foreign buyers, will simplify the process significantly.

Holistic approach

A mortgage broker’s role extends beyond securing loans. It takes into account an entire financial portfolio, aligning mortgage decisions with a client’s broader financial strategy.

“Whether you’re expanding your property portfolio, exploring your first investment, or navigating cross-border transactions, an award-winning broker can be your compass in the dynamic world of property investment,” Ms Avis said.

This year’s SFG National Awards will be held on 16 November.

While the pause in interest rates has come as a relief to many, everyone from first home buyers to owner occupiers and seasoned investors faces the prospect of harder times before they get easier.

There is a palpable sense of relief among borrowers that interest rates have been paused for a few months and may even be on their way down in the not-too-distant future.

But the reality is that many Australians are feeling the mental, physical and financial strain of a dozen rate hikes since May last year and are struggling to cope with the markedly higher mortgage repayments.

Research conducted by finance platform MNY found that three quarters of Australian mortgage holders have been adversely impacted in terms of their personal lives or wellbeing.

That same 75 per cent said they would not trust any Reserve Bank of Australia (RBA) interest rates forecasts again.

With mortgage interest now averaging around 6.5 per cent, the reign of interest rate hikes means households with a $500,000 mortgage on a variable rate have seen their repayments increase by $1,500 per month in the midst of a cost-of-living crisis as their incomes are eaten away by high inflation.

Sept23_finance-2

Source: MNY.

Compounding the situation for those struggling is the argument that interest rates will likely rise, at least once more, before the tide turns and they begin to retreat.

Inflation is on a downward trajectory, which should bring rates down with it, but there some leading indicators that the battle against inflation may not be over.

Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist, AMP Investments, said the risk in the short term is still on the upside for rates.

“In the short term, the risks are still skewed to a further increase in interest rates and or a delay in the start of rate cuts as: inflation is still too high; the labour market remains tight with upwards risks to wages flowing from higher minimum and award wage rises; productivity growth is very weak; and the rebound in home prices is partly offsetting the tightening impact of higher interest rates.

“Consistent with this, the RBA retained its guidance that some further rate hikes may be required.

“Key to watch will be the global economy, household spending, inflation and the labour market.”

Mortgage stress rampant

While the RBA has consistently stressed that Australians are well placed to manage higher interest rates after accumulating savings during Covid and paying down debt ahead of time.

But researchers are also revealing that mortgage stress is rampant.

Almost half (46 per cent) of mortgage holders are now under serious financial stress, according to Mozo, as home loan variable rates starting with 5, 6 and 7 become the norm.

The average variable rate of an owner occupier home loan is now 6.60 per cent across all lenders, and 7.21 per cent across the Big Four banks.

Based on the average variable rate of 6.6 per cent, since May 2022 monthly repayments on a $500,000 home loan have increased by $1,031.

Sept23_finance-2

In a market where one in three borrowers think refinancing is too much of a hassle, Helen Avis, Director of Finance at Specialist Mortgage, said it was imperative those with stretched finances sought financial advice and better deals.

“The refinancing process may seem time-consuming but the savings on offer make it worthwhile and the application process these days is not as onerous as people may actually think.”

The incentive to refinance is also backed up by research from RateCity.com.au that reveals more than a quarter of Australians (27 per cent) are living payday to payday.

It found one third (33 per cent) of respondents were feeling stressed or uneasy about their budget, while 32 per cent couldn’t survive off their savings for more than a month if they were to lose their job.

Financial strain doesn’t just hit the hip pocket. The survey also found of those in a relationship, over a third (39 per cent) said cost of living concerns have caused increased friction with their partner about money.

First home buyers facing major hurdles

First home buyers are being kept out the property market, often as a result of policies that had been intended to help them.

University researchers enlisted by the Australian Housing and Urban Research Institute (AHURI) found that the path to buying a first home is increasingly reliant on parental resources.

Professor Stephen Whelan, University of Sydney, said the issues confronting first home buyers were more complex than just higher property prices.

“While high and rising house prices are often cited as the biggest challenge faced by first homebuyers, our inquiry highlights that the problem is significantly more complex,” Professor Whelan said.

“Critically, we found existing policy settings are likely to have exacerbated rather than alleviated the challenge faced by first homebuyers to finance home ownership.

“Politically seductive measures such as first homeowner grants and tax concessions have failed to arrest declining rates of home ownership over time.”

A rapid expansion of owner-occupation in the early postwar period peaked at over 70 per cent in the late 1960s but was followed by a gradually declining home-ownership rate since 2000—especially among younger adults, where the rate for the 25–34 age cohort fell from 51 per cent in 2001 to 44 per cent in 2021.

There is evidence that housing affordability has decreased over time.

AHURI’s research showed that since 2001, the national ratio of median house price to median income has almost doubled to 8.5, and the time required for the accumulation of a deposit for a typical property has increased from six years median earnings in 1994 to 14 years today.

Sept23_finance-1

 

The decline in home ownership among younger adult cohorts has occurred despite expenditures in excess of $37 billion over five decades designed to enable first home ownership.

AHURI’s findings stated that policies designed to assist first home buyers must recognise and address structural issues associated with the treatment of housing in the tax and transfer system.

“Policy settings need to encompass intermediate tenures, such as shared equity as legitimate housing outcomes that may enable households to attain homeownership,” the report said.

Article Q&A

What percentage of borrowers are in mortgage stress?

Almost half (46 per cent) of mortgage holders are now under serious financial stress, according to Mozo, as home loan variable rates starting with 5, 6 and 7 become the norm. Research conducted by finance platform MNY found that three quarters of Australian mortgage holders have been adversely impacted in terms of their personal lives or wellbeing.

Will interest rates rise or fall?

Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist, AMP Investments, said the risk in the short term is still on the upside for rates, before easing in mid to late 2024.

Borrowers are refinancing in record numbers as their lower-priced fixed rate loans end, only to be switched to higher priced variable rates.

A Google analysis in 2022, conducted by a Queensland bank, found that the number of people searching the term ‘refinancing’ had increased by a staggering 5,000 percent.

Helen Avis, Director of Finance, SMATS Group

Helen Avis, Director of Finance, SMATS Group

Lending indicator data released Friday (13 January) from the Australian Bureau of Statistics (ABS) shows a whopping $19.5 billion worth of mortgages were refinanced in November – the highest monthly amount in Australian history.

This figure smashed the previous record set in September 2022 by almost $1 billion.

“Recent ABS data has revealed that enormous numbers of borrowers are refinancing their home loans, indeed, the past six months have been the six biggest months in refinancing history,” Helen Avis, SMATS Group’s Director of Finance, said.

“Part of the reason so many borrowers are refinancing right now is because many lenders charge lower interest rates to new borrowers than loyal customers, as shown by Reserve Bank data.

“In October, owner-occupiers who took out new variable loans were charged, on average, 0.51 percentage points less than owner-occupiers with existing loans.

“Refinancing to a comparable lower-rate loan could potentially save tens of thousands of dollars over the life of your loan.”

Megan Keleher, Chief Customer Officer, Great Southern Bank

Megan Keleher, Chief Customer Officer, Great Southern Bank

The source of the Google analysis, the Great Southern Bank’s Chief Customer Officer, Megan Keleher, said rising interest rates and the increased cost of living have affected household budgets and driven more customers to seek options to save on their home loans.

“They’re using the internet to find out how much they can borrow, how to refinance, and what support may be available for first home buyers.

“Using tools like a refinance calculator can really help; we’ve seen a 16 per cent increase in people using our refinance calculator over the last three months,” Ms Keleher said.

Negotiating a lower rate with their lender or switching in pursuit of a better deal is one of the best ways for mortgagees to prepare for even higher interest rates, Canstar’s Financial Services Group Executive and chief spokesperson, Stephen Mickenbecker told API Magazine.

“The Canstar Consumer Pulse Report released recently, found just a small proportion of mortgage holders (15 per cent) have switched lenders in the past year and secured a better deal, while only 8 per cent tried and failed. This means 77 per cent of borrowers could potentially be paying a lot more for their loan than what is on offer in the market today,” he said.

Stephen Mickenbecker, Group Executive, Financial Services and Chief Commentator, Canstar

Stephen Mickenbecker, Group Executive, Financial Services & Chief Commentator, Canstar

Released in mid-December 2022, the Canstar report surprisingly revealed that when it came to mortgage holders coping with higher interest rates, almost one in two – 48 percent – of homeowners with a mortgage and 37 percent of investors with a loan – are unsure how much their mortgage interest rate has risen since the Reserve Bank started aggressively lifted interest rates in 2022.

“When asked how prepared they are for even higher interest rates, close to two-fifths (39 per cent) of homeowners and more than one-quarter (27 per cent) of investors are not prepared. The majority of these indicated they would need to cut their living costs further to make ends meet,” Mr Mickenbecker said.

“It’s disappointing that borrowers are not more engaged with getting a better deal, either from their own bank or by switching banks.

“Most borrowers are paying interest rates well above the relatively low rates being offered to new customers, and the monthly savings are too big to ignore.

“Borrowers can’t wait until they are unable to pay the bills to refinance into a lower rate loan as by then their desperation will be matched by lender aversion and they may find themselves out of luck with new lenders,” he said.

Fixed rates about to fall off cliff

As the countdown to the fixed-term cliff approaches for many property owners, few new borrowers are fixing their home loans.

The housing market, as well as borrowers, will be faced with $478 billion in fixed rates loans transferring to variable rates.

This is the so-called mortgage cliff that arises from the rollover of fixed rate mortgages taken out mid-2020 to early 2022 at interest rates around 2.5 per cent, and transitioning within the next 18 months into loans priced at 5.5 to 6 per cent. There is a large proportion of these loans falling due before the end of 2023.

“Unlike a year earlier when about half of borrowers were doing so, only 4 per cent of borrowers fixed their loans – both new loans and refinance – in October (the most recent data available).

“By contrast, 44 per cent of borrowers fixed in October 2021 and 46 per cent in August 2021, when fixing peaked,” Ms Avis said.

“While the Reserve Bank only started increasing the cash rate in May 2022, lenders knew it was coming, so they’d already started raising interest rates on their fixed- rate loans.

Value of new loans - fixed vs variable

“In response, borrowers had begun shifting towards lower-rate variable loans.”

This is confirmed by Reserve Bank data on new owner-occupied loans.

In October 2021, the average interest rate on a new fixed loan (with a fixed period of three years or less) was 0.63 percentage points lower than a new variable loan. By February 2022, new fixed loans had become 0.09 percentage points dearer; by May they’d become 0.70 percentage points dearer.

That has since declined – by October, they were only 0.30 percentage points dearer.

Mr Mickenbecker said 39 percent of homeowners and 27 percent of borrowers polled in Canstar’s Consumer Pulse Survey in 2022 were unprepared for further rate rises.

“According to the survey, a small group of property owners (5 per cent) say they are considering selling in the next two years because they can’t afford higher loan repayments.

“While this is a small minority, the group is likely to be concentrated among more recent borrowers, with their larger loans and repayments, who have no time to have put together a buffer and have low equity.

“The impact of interest rate rises and falling property prices spreads unevenly, and recent first home buyers who overreached to get into the market will carry more than their share of the pain,” Mr Mickenbecker said.

Mortgage stress mounting

That pain will translate into falling house values and mortgage stress.

When surveyed for the Pulse Report, close to two fifths (39 per cent) of homeowners and more than a quarter (27 per cent) of investors were not prepared for higher interest rates.

The majority of these indicated they would need to to cut their living costs to make ends meet.

“If the price declines deepen to the point where many new loans in particular start falling into negative equity, the concern will heighten.

“At that stage, individuals will be feeling extreme pain and the system will be at risk,” Mr Mickenbecker said.

“With the full force of interest rate increases yet to take its toll, borrowers in particular look to be on a knife-edge, and have a limited buffer.

“A worthwhile New Year’s resolution for Australians might be to sit down and do a refresh of their household budget to work out a way to restore their financial resilience.”

Can there be high demand for housing with high interest rates?

Dr Kristle Romero Cortes

Dr Kristle Romero Cortes, Economist and real estate markets expert, UNSW Business School of Banking and Finance associate professor

Economist and real estate markets expert, UNSW Business School of Banking and Finance associate professor Dr Kristle Romero Cortés, told API Magazine she believes housing demand can withstand these financial pressures.

“Intrinsically, mortgage rates and house prices are related via supply and demand channels. If we see that the trend is that home purchases become unaffordable due to repayments, you may see a decrease in home purchases.

“However, high-income earners need more incentive to accept lower prices when selling their homes if they can afford their repayments.

“The repayment rates would need to reach a level that selling the house now to purchase one in the future eventually becomes an attractive option.

“There has already been a move to short-term fixed loans to stabilise payment expectations. This will remain the case for borrowers; it will be interesting to see how the long-run rates on fixed loans react (3 to 5 years) because, currently, those are priced high,” Ms Cortes said.

This article, first published 11 January, was updated on 13 January with the latest ABS refinancing data.

Article Q&A

What is a mortgage cliff?

When interest rates were at historic lows during Covid, many homebuyers entered the property market on very low fixed rate loans. The terms of a large proportion of these loans end over the next 12-18 months, meaning billions of dollars in loans will switch to higher variable rate mortgages. This steep, looming rise in repayments is termed a mortgage cliff.

Is now a good time to refinance the home loan?

A Google analysis in 2022, conducted by a Queensland bank, found that the number of people searching the term ‘refinancing’ had increased by a staggering 5,000 percent. Australians refinanced $17.8 billion of mortgages in October, close to the August record volume. Property finance experts suggest now is a good time to sit down and do a refresh of the household budget to work out a way to restore financial resilience.

Undeterred by property prices in Melbourne and Sydney coming off the boil or the threat of higher interest rates, expatriate Australians are continuing to snap up prestige properties.

Undeterred by property prices in Melbourne and Sydney coming off the boil or the threat of higher interest rates, expatriate Australians are continuing to snap up properties priced considerably higher than median city values.

Helen Avis, the SMATS Group Director of Finance, said the expatriates that had recently returned to Australia were moving from rentals into their own properties and could afford prestige real estate in highly sought-after areas.

“The $2 million to $4 million bracket has been very active as expats plan their eventual return and want to buy the future home, or move from their temporary rentals having recently returned,” Ms Avis said.

The recently-name finalist in the national Better Business Awards, in Best Residential Broker category, said she had also seen a lot of buyers targeting regional areas, holiday locations and the holiday home market.

“There’s very little investor or expatriate interest in CBD city apartments – that market has dried up – but there is still a lot of demand for luxury apartments as well as houses in the higher-priced suburbs.”

The first quarter of the year has seen Australian dwelling values rise by 2.4 per cent, less than half the pace of the same period last year.

But expatriates seeking a home rather than an investment can afford to pay the premiums that two years of rapid price growth has delivered and are not phased at the prospect of higher interest rates.

Interesting times

The big four bank economists are forecasting official cash rate hikes could begin between June and September.

Not waiting for the Reserve Bank of Australia, Australia’s third and fourth largest banks, NAB and ANZ, on Friday (1 April) hiked fixed rates by up to 0.40 percentage points.

“We have seen all banks raise fixed rates so many times in the last six months and I expect the RBA will raise rates from June,” Ms Avis said.

Helen Avis

Helen Avis, finalist in the Better Business Awards

“I don’t think they want to raise them and then continue to raise them regularly, so it should be a slow progression, but the market is expecting interest rates to rise.

“All borrowers are assessed at 3 per cent over the benchmark rate, so it shouldn’t put stress on people’s ability to maintain their loans.

“With the borders just opening back up, we should have a two-year backlog of intended migrants, expats and international students start to push up the rental market as well as CBD sales.

“The intended migrants will likely rent to start off with, but most will likely want to buy, so demand will again be strengthened.”

Ms Avis said SMATS Group’s aussieproperty.com had clients looking at all states’ markets but Queensland was generating the most interest.

Sydney, Melbourne, Perth and the West Australian southwest were also on the radar of returning expatriates, she said.

The Better Business Awards seek to champion the leading players of the broking industry in each state and territory of Australia.

Reaching the finalists stage is regarded as an incredible achievement across the Australian broking industry, showcasing the depth of dedication and commitment each individual and team brings to advancing the industry.

Ms Avis said she was humbled to be recognised and proud to be named as a finalist. Winners are announced at a ceremony on 19 May.

Foreign property buyer numbers have taken off, with international real estate investors shaking off their post-Covid blues and turning their attention to Australia.

Foreign buyers are returning to the Australian property in large numbers, with total transactions soaring by 27 per cent over the previous financial year.

The Australian Taxation Office on Friday (21 June) released its Register of foreign ownership of residential land, which showed that Victoria had become the preferred choice of foreign investors.

Foreign buyers spent $4.9 billion on 5,360 Australian dwellings in the financial year to 30 June 2023 (the most recent data available), with Victorian investment leaping a massive 32 per cent over a year.

Foreign buyers paid an average price of $914,000, which is just below the overall average price across the country of $959,300 in the March quarter, according to the Australian Bureau of Statistics.

The data also showed that buyers were expressing a degree of confidence in the Australian property market, with buyers far outstripping sellers.

They sold 1,119 homes, with a total value of $1.0 billion. It is noteworthy that the definition of sale also includes when a foreign buyer becomes a permanent resident or citizen, even if they don’t actually sell the property, so the actual sales number is inflated against the buyer figure.

The number of offshore buyers in New South Wales was flat, and actually decreased by 1 per cent, from 664 to 656. Meanwhile, the number of buyers in Queensland and Victoria jumped. The number of buyers in Queensland climbed 17 per cent, while the number of buyers in Victoria jumped 32 per cent, by about a third.

Map of purchase transactions

(Source: ATO)

While Queensland attracted more buyers over all, New South Wales attracted more millionaire buyers. Foreign buyers purchased 284 homes in New South Wales during the year that were worth at least $1 million, compared to only 200 in Queensland.

“Victoria got by far the most millionaire buyers, with 569 foreign buyer transactions worth over $1 million each.

Overseas buyers not super wealthy

A widely held perception that foreign buyers are wealthier than local buyers was dispelled by the data.

Residential properties with values under $1 million formed the majority of residential property purchase transactions, accounting for 78.2 per cent of property transactions in 2022-23. This is an increase compared to 75.4 per cent in 2021-22.

Nor did this investment lead to any significant population growth. Of the 5,360 purchase transactions in 2022–23, 164 registrants became a permanent resident or gained Australian citizenship during the year (and are included in these statistics).

Daniel Ho, Juwai IQI Co-Founder and Group Managing Director, said the 27 per cent increase in buying last year shows that overseas buyers were bouncing back after the travel slowdown during the pandemic.

Purchase transactions by state, maps

(Source: ATO)

“Why do foreign buyers like Australia?

“This report, encompasses buyers from all over the world, including all parts of Asia, North America, South Africa, and the UK and Europe, and such a wide population has varying motivations, but they all have some things in common – they appreciate Australia’s strong economy, good education system, and attractive lifestyle.”

He added that these foreign buyers contributed to the government’s coffers.

“In many cases, these buyers paid 7 per cent or 8 per cent of the purchase price on stamp duty and tens of thousands of dollars, or more, on foreign buyer application fees (compared to local buyers) and once they own their property, at least until they become permanent residents or citizens, they will pay an additional land tax every year.”

Mr Ho said Australia’s apparent popularity was actually reflective of a wider international trend.

“People have been moving to Australia in record numbers, and that shows up in the foreign buyer reports but it’s not just Australia, because we see the same thing happening in the US, Canada, Europe, and the UK.

“There is a significant wave of post-Covid migration as people act on plans they had to put on hold during the pandemic.

“We also see it in Southeast Asian countries like Thailand, which have seen rapid intake of their golden visa programs since the pandemic.

“If the Australian government succeeds in reducing the number of foreign students and other migrants coming to the country, we can expect foreign buying to be affected.”

There are signs that foreign buyers are expanding their search beyond the east coast of Australia.

Victoria, New South Wales and Queensland still represent 86.9 per cent of all sale transactions, making up 91.3 per cent of the value of sale transactions for the reporting period.

But this is down markedly from 2021–22, when Victoria, New South Wales and Queensland represented 97.0 per cent of all sale transactions and 97.8 per cent of the value.

Tracking purchases over five years shows that South Australia features among the top three states, along with Victoria and Queensland, when it comes to transactions on vacant land.

Foreign buyers still a small pool

Foreign buyers comprise just 1.1 per cent of residential property sales across Australia.

Terry Ryder, Managing Director, Hotspotting, told API Magazine, that the latest number actually underlined just how little foreign investment there is in Australian residential real estate.

“There may have been a 27 per cent annual rise in transactions, but that’s from a really low base.

“Foreign buyers have been slugged in major increases in taxes in recent years, a trend that continued with the latest Federal Budget and some of the state budgets.

“It’s resulted in fewer foreign investors compared to historical norms and that has impacted the supply of apartments.

“Foreign buyers were once a major source of off-the-plan sales that allowed high-rise developers to get sufficient pre-sales to secure finance and proceed with a major project.

“Using foreign buyers as a cash cow with no electoral consequences is very short-sighted and has contributed to the rental shortage and the overall undersupply of new dwellings.”

Property buyers and sellers alike stand to save potentially big dollars if they time their property purchase right in relation to the seasons.

When considering purchasing an investment property, seasonality is often forgotten as one of the important aspects to consider.

Seasonal changes will have an impact on buyer and seller sentiment, which in turn influences property prices and the movement of the market.

Understanding the seasonal patterns will help property investors to time their purchases and sales, capitalise on seasonal trends, and maximise their returns.

How does seasonality impact property markets?

Spring/summer

While the overall effect of seasonality will vary by region and state, general trends and patterns can be observed when comparing the cooler months to the warmer months.

During the spring and summer months, the Australian real estate markets tend to be more vibrant.

Warmer weather encourages more open house inspections, auctions, and overall property activities (like gardening and renovating).

The warmer weather and sunshine often influences buyers to be more positive and optimistic and generally willing to get out and explore open homes in a positive light, which can influence the overall sales price for the seller.

The longer daylight hours and favourable weather conditions means there might be more stock available for sale on the market, more open homes, and more sales via auction campaigns.

Investors should take note of this, because when there is more activity and positive buyer sentiment, this is likely to increase real estate prices, particularly as it gets closer to Christmas and some buyers start to feel a little desperate to get into a home before Christmas, which might push up prices.

Sellers will usually take advantage of this increased activity and market their properties more aggressively, hoping to attract higher bids across the spring and summer months.

Characteristics of spring/summer markets:

  • increased buyer activity and competition
  • sellers are more willing to list properties
  • more open house inspections and auctions.

Autumn/winter

Conversely, the cooler months across autumn and winter typically see a decline in market activity.

Colder temperatures and shorter days may deter potential buyers from attending open houses and auctions, especially if it is unusually rainy or cold.

Seller sentiment may also wane, leading to fewer property listings.

This slowdown can be more pronounced in regions with harsher winter climates, such as Victoria, while warmer areas like Queensland we expect to see less of an impact.

Now consider Victoria, with its colder and more variable winter climate, experiences a more noticeable seasonal effect.

Buyers might be less inclined to venture out, and sellers may prefer to wait until spring or summer to list their properties.

It is likely some of the colder towns may experience reduced market activity and some supply issues when it’s cold.
There is an exception though.

Areas known for their cold climates might go through a period of heightened activity.

Think about the areas close to snowfields and snowy mountains that are buzzing with activity over the winter months and ski seasons.

We are likely to see more properties come onto the market, and more buyer activity because the properties will be shown off in their best light – with views over the snowcapped mountains or holiday homes listed for sale to show off how they are busy and booked over the winter months.

Sometimes visiting tourists love the location so much they start to investigate options to purchase a holiday home or even relocate if they love the area during their visit. There is more about this below.

Characteristics of autumn/winter markets:

  • decreased buyer activity and fewer open houses in most areas.
  • less motivation for sellers to list properties, unless in areas close to the snow.
  • potential for fewer auctions and slower market pace.

Other considerations

There are always going to be exceptions to these rules. This is just the overall impact that seasonality can have on property markets, so it is really important to understand the market you will be buying in as well as how the seasons will impact that area.

Think about the below considerations:

Queensland

Queensland is known for its generally warm climate. Because it experiences milder winters compared to southern states, the colder climates won’t have as large an impact on the property markets here.

Because of its warmer weather, winter does not significantly deter market dynamics and many people who live in the southern states might consider relocating to Queensland into coastal cities like Brisbane and the Gold Coast that experience more consistency in the property markets, even during winter.

Property prices don’t drop as much during the winter months in Queensland, as the weather remains conducive to outdoor inspections and tourism.

Strategic considerations for property investors

If you are investing in property it is important to understand these seasonal trends so you can make informed decisions.

Timing the market:

Investors looking for better deals might consider purchasing during the winter months when demand is lower, potentially securing properties at reduced prices. Selling during the summer months can attract more buyers and potentially yield higher sale prices.

Region focus:

In warmer regions like Queensland, investing can be more consistent year-round, reducing the need to heavily time the market.

In colder regions like Victoria, investors might find better opportunities by targeting winter purchases and summer sales.

Specialty investments:

In ski resort areas, focusing on winter investments can be highly profitable due to the seasonal tourism boom.

Vacation homes and short-term rentals in these regions can provide substantial returns during the winter season.

Market adaptability:

Staying informed about local market trends and climatic conditions can enhance investment outcomes. Whether investing in steady coastal markets or booming winter resort areas, a nuanced approach to seasonality can significantly enhance investment success.

Article Q&A

Do the seasons affect property sales?

While the overall effect of seasonality will vary by region and state, general trends and patterns can be observed when comparing the cooler months to the warmer months. During the spring and summer months, Australian real estate markets tend to be more vibrant.

How to make your offspring financially savvy – unlocking Financial Wisdom at any age, the Top 6 things you can impart now!

Nurturing Financial Life Skills in Children

In the intricate tapestry of life, imparting financial literacy to our children stands as a crucial thread. The earlier we weave this thread, the more resilient and empowered our children become in navigating the complexities of the financial world. It’s a lifelong skill that transcends age, and there’s no better time to start than now. I’ll discuss some easy principles to start with and some fun learning activities to engage in with your soon to be financially savvy offspring!

These activities lay the groundwork for a healthy financial relationship by instilling the values of saving, budgeting, earning, and making thoughtful financial decisions from an early age.

Starting Early: The Power of Seeds

Financial education is like planting seeds of wisdom. The earlier we sow them, the deeper the roots grow. As the adage goes, “mighty oaks from little acorns grow.” Simple lessons about saving, spending wisely, and understanding the value of money can be introduced even in the early years.

The Savings Jar Start with a simple savings jar for each child. Teach them to allocate a portion of any money they receive into the jar.
Discuss goals for the savings, whether it’s for a special toy or a future treat.

The Wish List Create a wish list with your child, including items they desire. Discuss the concept of prioritising and saving for more significant items.
Encourage them to revisit the list periodically, adjusting priorities as needed.

Going digital – cash was king, but now purchasing, buying habits even transferring money is all done online and with more and more banks shopping up shop and going completely digital perhaps setting up an online bank account and demonstrating that just because you don’t have physical cash doesn’t mean you need to rely on the plastic card.

Set your goal, save – then spend without any cash slipping through those fingers!

Age-Appropriate Lessons: Tailoring Wisdom

Adapt the lessons to the age of your child. For young children, start with tangible concepts like using piggy banks to save. As they grow, introduce budgeting for toys or treats. For teenagers, delve into more complex topics like loans and debts, preparing them for the financial decisions that await them.

Avoid the ‘satisfaction straight away’ stigma and teach the art of patience – wait for something, save up and then spend, don’t spend first with money you don’t have!

Budgeting Game – Develop a simple budgeting game where your child manages a hypothetical budget for a week. Allocate funds for various categories like toys, snacks, and savings.
Discuss the outcomes, reinforcing the concept of making choices with limited resources.

Real-world Application: Learning by Doing

Children learn best by doing. Consider giving them an allowance and encouraging them to budget for items they desire. As they make choices, they grasp the concept of trade-offs and consequences. Real-world application transforms theoretical knowledge into practical wisdom.

Earning Allowance – Introduce the idea of earning money through chores or tasks, outside of their regular household duties. Think of these as little tasks you would get someone to do for you. Assign a monetary value to each task, allowing them to see the connection between effort and reward.
Discuss the importance of work ethics and responsibility.

Open Conversations: Diminishing Financial Stigma

Create an open dialogue about money. Remove the stigma associated with financial discussions. Whether it’s a trip to the grocery store or planning a family vacation, involve your children in financial conversations. This demystifies money matters, fostering a healthy relationship with finances.

Grocery Shopping Adventure Take your child grocery shopping and involve them in the process. Provide a small budget for a particular meal or snack.
Encourage them to compare prices and make choices within the budget.

Utilise Resources: Tapping into Tools

In a digital age, educational resources are abundant. Utilise interactive online games, books, and educational apps that make learning about finances engaging. Many platforms provide age-appropriate content that transforms financial education into an enjoyable adventure.

Leading by Example: The Ripple Effect

Children emulate the behaviours they witness. Be a positive financial role model. Share stories of financial successes and challenges. Demonstrating responsible financial habits instils a lasting impact, shaping their own financial attitudes.

Role-Playing Purchases – Engage in role-playing scenarios where your child takes on the role of the buyer. Provide them with a set budget and guide them through making decisions.
Emphasise the importance of critical thinking and making informed choices.

In a world where financial decisions impact every facet of life, instilling financial life skills in our children is an investment in their future. Remember, it’s never too early or too late to unlock the doors to financial wisdom for the next generation.

How to make Buying Australian Property as an Expat as easy as 1, 2, 3. (Your 2024 guide)

For Australian expatriates wishing to invest in property back home navigating the process can seem daunting. Being armed with the right information and planning makes buying Australian property as an expat a feasible and rewarding endeavour. We’ll step you through the basics to successfully navigate the Australian property market.

Are you ready to purchase Australian property?
Like everything in life you need to be prepared before starting anything. Before jumping straight in it’s crucial to research and understand the Australian property market. Consider factors such as market trends, property prices, rental yields, and economic conditions. Engage with local real estate agents and online resources to gather relevant information or speak to one of our friendly mortgage professionals and they’ll point you to the right person. We have a network of agents, accountants & brokers to provide you with the knowledge you need before embarking on one of life’s biggest investments.

Can you afford an Australian home loan?

Don’t forget about your financial goals and budget too. It’s all very well to know what suburb is providing a sound return on investment but can you actually afford it? It’s important to first know the purchasing budget you are working with. That way you, and your mortgage broker will get a better understanding of your purchasing range and the properties you can look at.

Having a chat with an experienced Australian expat mortgage broker will give you a good indication of your borrowing capacity, and how much deposit you will need to have for the Australian property you are going after. Your Australian mortgage broker will then being able to pin point some of the incentives you may be eligible for also.

Get professionals in your corner for all things Aussie Property.
We’re not experts at everything so why pretend to be? To navigate the complexities of the Australian property market, we do advise to engage the services of professionals such as a real estate agent, mortgage broker, and a solicitor. A reputable real estate or buyer’s agent can assist in finding suitable properties, your mortgage broker can help secure financing options tailored to your needs & a solicitor will guide you through the legal processes involved in property transactions.

Did you know if you purchase a property in New South Wales on the East Coast of Australia, whilst only holding a PR status and not hold an Australian passport, you would be subject to an additional 8% stamp duty surcharge on the purchase? It’s important to understand your liabilities and having an expat mortgage broker will only strengthen your options when purchasing Australian Property.

The Fund part – Accessing Australian home loans.

Arranging finance is tricky for everyone, and as an Aussie expat or repat there can be some loopholes and barriers. Exploring your financial options like securing a mortgage from an Australian lender or utilising existing funds in an Australian banking institution can really help. Talk to us, or consult a mortgage broker so you can understand the requirements, interest rates, and terms and conditions associated with Australian expat mortgages and non-resident lending.

Virtual Reality when purchasing bricks and mortar investments.
The biggest question we get all the time is how can I purchase property in Australia if I’m not physically in Australia? I can’t go and inspect properties?!

Yes, its always best if you can personally inspect potential Australian properties but in this digital age it is not uncommon for even locals to not even set foot in their future home. You can now leverage technology to conduct virtual property inspections, seek detailed property reports, and engage with trusted individuals to assess properties on your behalf. Ensure the property aligns with your investment goals, location preferences, and meets necessary standards.

Once you have identified a property, (digitally or elsewise!) make an offer through your real estate or buyer’s agent. Ensure the offer is contingent upon due diligence, including property inspections, finance approval, and legal requirements and negotiate the purchase price and terms to reach an agreement beneficial to both parties. You can do this all electronically and remotely if required.

After due diligence and legal processes are completed, proceed with settling the property purchase. Coordinate with your solicitor, lender, and real estate or buyer’s agent to ensure a smooth settlement process. We too can take care of this entire process for you with our dedicated team that work with expat clients daily. We know the ins and outs and act as your proxy every step of the way.

Purchasing Aussie Property worldwide.

Buying Australian property as an expatriate may require additional considerations and processes, but with thorough research, professional assistance, and careful planning, it is an achievable goal. By understanding the market, adhering to regulations, and engaging the right professionals, expats can successfully invest in Australian property, benefiting from long-term capital growth and potential rental income. Is it time you invested in Australian soil?