With interest rate cuts, mortgage relief packages and stimulus for small businesses amongst the key initiatives announced in the wake of the coronavirus outbreak, mortgage brokers across Australia are urging homeowners and investors to consider their credit options.
The coronavirus outbreak has seen the Federal Government commit to $189 billion in emergency stimulus to support the Australian economy, including more than $100 billion in emergency banking measures to support households and businesses through the economic fallout.
As lenders begin announcing assistance packages for Australian borrowers, Momentum Wealth’s Team Leader of Finance, Caylum Merrick, is encouraging buyers to weigh up options to protect and strengthen their financial position.
“The economic environment in Australia is entering new unknowns as the impact of the coronavirus develops, and our priority as mortgage brokers is to ensure borrowers can introduce as much certainty as possible to their financial position to weather these changes and protect their financial wellbeing.”
“We have already received an influx of enquiries from investors and are actively working with them to review their situations and identify any cash flow management strategies to protect and improve their financial positioning, including evaluating current repayment options, assessing the availability of offset accounts to store additional mortgage repayments and accessing available equity from their existing portfolio as an emergency cash buffer,” he said.
The Perth-based broker said recent rate cuts are also providing opportunities for some homeowners and investors to review existing rates and reduce repayments.
Official cash rates dropped to a record low of 0.25% on 19th March as the Reserve Bank of Australia announced an emergency rate cut in a bid to ensure continued availability of credit to businesses and households.
“These are some of the lowest rates we have seen in our history as brokers, so we’re working with a number of clients and their lenders to assess the potential to negotiate more favourable rates on existing loans, or in cases where this isn’t possible evaluating whether there could be benefits in refinancing to save money on repayments,” Mr Merrick said.
Perth’s property market: pain ahead?
As Western Australians grapple with the economic uncertainties of the coronavirus pandemic, Chair of Momentum Wealth’s Investment Committee, Emma Everett, said property investors are also considering the implications for Perth’s residential property market.
“Perth’s property market recorded a strong start to 2020 with strengthening rental conditions and four consecutive months of price growth indicating signs of a more sustained recovery after a five year downturn, but recent events have understandably added new uncertainty as to what will happen within WA’s housing sector and economy,”
“Earlier this week, data from the Real Estate Institute of Western Australia (REIWA) showed a total of 179 sales and 239 leasing transactions recorded in a single day, so we haven’t seen that immediate drop in sales and leasing activity like the financial markets. However, this is likely being driven by buyers and renters who had already committed to transactions, and we are expecting a slowdown in activity in the shorter-term” she said.
Mrs Everett said while the property advisors are expecting a delay in rental and price growth in the shorter-term, the long-term outlook for Perth’s property market remains strong.
“Perth’s property sector is already recording a shortage of stock for sale and properties for lease, so while we anticipate that the current environment will delay activity, there is still a strong underlying demand for housing. This places WA in better stead than markets such as Sydney where high levels of investor participation and oversupply could increase susceptibility to price fluctuations,” she said.
Perth recorded a total of 12,691 properties for sale (REIWA) in the week ending 22ndMarch – nearly five thousand less than the 17,288 properties recorded during the same period last year.
“While we will no doubt see a reduction in transactions as people deal with the uncertainties, the long-term fundamentals we are seeing in terms of tightening supply, limited oncoming stock and increased mining investment set the market in strong stead to resume its recovery once certainty is restored, and this will be supported in turn by easing credit conditions and government stimulus” Mrs Everett said.
Property a long-term asset
Mrs Everett said buyers and sellers should apply any decisions in the context of a longer-term outlook.
“While the impact of this is going to be short and sharp, we know from previous trajectories recorded during events such as the GFC that we will recover and property will show long-term resilience, so it’s important that sellers in particular don’t make any rushed decisions that could compromise their long-term property goals.”
“A lot of buyers will undoubtedly be holding off on investment decisions, but certainly in the next six months we are expecting to see some great buying conditions as competition reduces, so those who do have high levels of income security could find themselves in a strong buying position,” she said.
