Market Recap | Sept/Oct 2020

There were 182 house sales in Newcastle in July with a median price of $653,750. This represents a 1.3% rise from the previous month.

During that same period, Sydney's property prices were down 0.9% while Melbourne was down 1.2%. Despite these falls, both cities are up over the last 12 months (12.1% and 8.7% respectively).

These figures indicate that our housing markets have remained relatively resilient throughout the COVID period (so far!). Across the country, the 0.6% decline in July prices are the third monthly drop in a row. However, these declines are relatively minor.

It is worth keeping in mind that prices across Newcastle and most capital cities dropped around 10% in 2018 as a result of bank lending changes. Prices were on the sharp rebound just before COVID-19 hit. However, the pandemic has so far proved to be less impactful on prices.

Government support and loan repayment holidays for distressed borrowers have helped to insulate the housing market from a more significant downturn.

As we have mentioned several times, the lack of new listings is a glaringly obvious feature in the current market. Advertised supply levels have remained tight across the country. Nationally, the total number of properties for sale sits 15.2% below where they were this time last year. We don't have exact figures for Newcastle, but we’re guessing they would be pretty similar.

It’s now the beginning of spring which is typically the busiest time in real estate. This year has been anything but typical so it will be interesting to see how the next few months unfold. What we are watching closely is the supply of new homes coming to market. This will have the most significant bearing on prices for the remainder of the year.

We think it is unlikely that there will be plenty of new listings hitting the market, which is not good news for buyers (or agents). Many people we are talking to would prefer to sit on their hands and wait and see what happens. But this won’t last forever.

It will also be interesting to see if we start to see some distressed sales. You would expect in a recession (not that we’ve had many), that some people may be forced to sell, even if the price wasn’t perfect. Maybe our sample size is small, but we haven't seen a lot of this.

The banks have allowed some borrowers to pause their loan repayments. 11% of housing loans were deferred in June, which represents a staggering $1.8 trillion. These repayment holidays are due to expire at the end of Q1, 2021.

Back in April, the Federal Government allowed Australians to access up to $20,000 of their superannuation savings. Whilst some people used these funds to help them out of a tough spot, others saw an opportunity to buy property, particularly first home buyers.

This seems to make some sense especially when the government is offering to get some first timers onto the property ladder with as little as 5% savings by guaranteeing their loan with the First Home Buyer Deposit Scheme. It’s not all smooth sailing though. Part of most lenders rules are that the borrower has to show evidence of genuine savings. Generally, lenders will require a three or six month transaction history which shows you have been able to save. If you cashed in some super now, the banks are not likely to lend you money as technically the super withdrawal is only supposed to happen when you are experiencing financial hardship.

However, we have heard some buyers get around this as banks often define genuine savings as funds being accumulated over a three month period, or more importantly funds that have been held for that long.

So, if you withdrew your super and didn't touch it for three months, depending on the bank, you may qualify for a loan.

On the flip side, we have had a buyer that used their super withdrawal to pay for a new car. In this instance, the bank declined their loan because despite them having substantial savings, the super withdrawal technically meant the bank deemed them under financial hardship and declined the offer of finance.

If you are thinking this is a good idea to help you get into the market or use these funds for an upgrade, we would strongly suggest getting advice from a mortgage broker first as different banks will have different rules and you could get stuck very easily. It would help if you also talked to a financial advisor as touching your superannuation savings could cost you dearly when retiring.