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Double-digit growth boom for Australia’s regional housing markets

Cheap access to credit, a newfound popularity of working from home and an affordability advantage has contributed to Australia’s 25 largest non-capital city regions achieving a record increase in house values in the past year.

CoreLogic’s latest Regional Market Update, released today, shows of the 25 regions analysed, 24 recorded double-digit annual growth for house values while more than 50% of the regions recorded an annual rise of more than 20%.

Incredibly, seven regions recorded a lift in house values of more than 30% for the year to 31 October 2021.

CoreLogic’s Research Director Tim Lawless said localised factors influenced each region but common key drivers included a shift away from capitals to regional areas, low interest rates and access to credit, higher household savings and relatively affordability housing values compared to capital cities.

“There has been a broad demographic shift where more Australians are prepared to consider housing options outside of the capital cities, which has seen net internal migration rates to regional Australia reach record highs,” he said.

“Working from home looks to have some degree of permanency post-COVID and is one of the catalysts of this trend, with more people basing themselves in regional locations to work remotely or balancing office work with home working.”

The best performing regional area was the Southern Highlands and Shoalhaven region in NSW, recording an annual growth rate in house values of 35.9%, followed by the Richmond – Tweed region in northern NSW (32.8%) and Queensland’s Sunshine Coast, which recorded an annual growth rate of 32.3%.

“The top performing regional areas were all coastal or lifestyle markets generally within a two-hour commuting distance of a capital city,” Mr Lawless said.

“These areas fit within the broad trend where demand has surged for lifestyle properties that offer a blend of liveability and commutability.”

At the other end of the scale, Queensland’s Townsville region saw the lowest yearly growth rate for houses, increasing by just 8.0%, despite moving through the strongest housing market conditions since 2007.

Across the regional unit market, 18 of the 22 regions recorded at least a 10% rise in values, while 12 regions saw unit values rise more than 20% over the year.

Queensland’s Wide Bay region recorded an annual growth rate of 29.2%, making it the best performing unit market, followed closely by the Sunshine Coast region (29.1%).

Houses on the Gold Coast in South East Queensland were the quickest to sell with a median time on market of 18 days in the 12 months to October 2021 compared to New England and North West in NSW where houses took around 62 days to sell during the same period.

Days on market and vendor discounting rates both fell substantially, a reflection of tighter stock levels compared to strong buyer demand. Mr Lawless noted advertised listings across regional Australia were currently 37% below the five-year average compared to the number of home sales, which sits about 24% above the five-year average.

“This mismatch between available supply and demand has created a heightened level of urgency amongst buyers, generating strong selling conditions where homes are snapped up quickly with minimal levels of negotiation,” he said.

The longevity of regional Australia’s boom will largely depend on affordability Mr Lawless said, although as more companies formalised hybrid working policies those areas within practical commuting distance of the major capitals are likely to remain the most highly sought after.

“If housing values across regional parts of the country continue to outpace the capitals, the obvious outcome will be that regional markets lose their affordability advantage,” he said.

“We can already see this trend taking shape in some of the most popular regional coastal markets such as Byron Bay where median house values are $1.7 million and Noosa on the Sunshine Coast in Queensland, where median house values are $1.2 million, much higher than comparable capital city values.”

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Sydney home buyers face a record 16 years to save a deposit

Nila Sweeney Nov 26, 2021

The time it takes to save a house deposit has blown out to a record 10.8 years Australia-wide as prices increase at a rate 8.1 per cent faster than household income, the ANZ CoreLogic Housing Affordability report shows.

Home buyers on an average income now need to use 39.3 per cent of their household income to service a new mortgage after house prices rose 24.2 per cent nationwide over the past year.

Home buyers in Sydney are now taking 16.6 years to save a 20 per cent deposit to buy a house – also a record, following a 30.4 per cent rise in prices over the past 12 months.

New homeowners then need to spend 60.4 per cent of their household income to repay their mortgage, which is also a record high.

First home buyers in Melbourne were no better off. With house values rising 10.5 times faster than income, home buyers need to spend more than half (50.8 per cent) of their household income to service their new home loan.

It will take buyers 14 years to save the 20 per cent deposit, but first home buyers Brianne Keogh and Angus Mills are not waiting.

Determined to break into the housing market sooner rather than later, the couple took drastic steps to come up with a deposit and compromised on the location and type of property they were after.

“We had to make a lot of sacrifices including moving back home with my parents and forgoing holidays and going out on weekends to save faster,” Ms Keogh said.

“We wanted to buy closer to the city and get an existing home that we can renovate, but that would have taken us so much longer to save the deposit, and we’re not prepared to wait.

“So we decided to buy a house and land package in Doreen in Melbourne’s outer ring. It took us more than three years of fiercely cutting down on expenses to save the 5 per cent deposit we needed.”

ANZ senior economist Felicity Emmett said the pandemic and some government housing policies had exacerbated the situation.

“We’re now in a situation where the gap between those who’ve already achieved homeownership and those who haven’t has really widened, and I think for many people, they will never be able to bridge that gap,” Ms Emmett said.

“This is a situation that’s been getting more and more difficult over the past 20 years or so and, with the large increases in home prices over the past year, it makes housing very inaccessible.

“We already have cases in Sydney, and probably in Melbourne too, where essential workers can’t find affordable housing near where they work.”

Ms Emmett said affordability could worsen further in the year ahead as prices continue to rise, albeit at a slower pace.

“The main issue is that house prices have been growing so much faster than incomes – now 12.5 times the average household income in Sydney,” she said.

“Even with sharp moderation in growth, we’re still going to see a 6 per cent rise in home prices next year.

“It’s unlikely that household incomes are going to rise by the same amount as wage growth is still stuck in the low 2 per cent [region]. So, we really need house prices to grow at a slower pace than household income for an extended period to improve some of these affordability measures.”

Eliza Owen, CoreLogic Australia head of research, said even with house price growth slowing, affordability remained a challenge.

“If house prices slow, then affordability won’t deteriorate as rapidly, but even if property prices drop by 10 per cent or 20 per cent or something really dramatic, it doesn’t make that much of a dent for people who have seen relatively low-income growth and whose employment has been disrupted by COVID-19 as well,” she said.

“At the same time, when we start to move into the downswing, this is likely to be off the back of higher interest rates. And so we will probably see a greater jump in the portion of income required to service a mortgage, which will also worsen affordability.”

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The powerful role of colour in the home

Colour is one of the most important of the myriad factors that go into creating a home’s decor and styling.

Far from just adding to a home’s character, colour can influence moods, indicate a clear purpose, increase productivity and even evoke fond memories.

Despite these known benefits, many feel daunted or overwhelmed by the prospect of introducing bold colour into their homes.

From creating a focal point to selecting mood-enhancing shades, learn how to effectively apply colour in your own home with the following expert advice.

Set the mood

One of colour’s most powerful, yet often underestimated, qualities is the ability to influence moods.

3 Bluestone Way – the latest address in the sustainability-focused East Brunswick Village (EBV) community by Banco Group – recognises this, featuring interiors specifically curated to enhance the mood of visitors.

In line with the ethos of the building – which features colour-driven architecture, interiors and public art designed to uplift and calm – interior designer, trend forecaster and stylist Bree Leech designed the colour-rich display suite that uses bold furniture pieces, a hero artwork by Atong Atem and a turquoise feature wall to inspire future residents.

“We were very much going for an uplifting, happy space. There’s a casualness to the colours – it’s not taking itself too seriously,” Leech says.

Rachel Rimmer, colour designer at Hello Colour, is a fellow advocate for the meaningful role colour plays in facilitating spaces that reflect and reward their inhabitants. Specific colours she recommends include muted greens for restorative bedrooms and earthy-toned shades of terracotta for relaxed communal areas.

Interior decorator Katie Riddell’s favourite mood-enhancing colours are violet – “Generally associated with spirituality and can be a calm colour,” she says – soothing and nurturing shades of soft pink, and happy and friendly yellow.

Boost productivity

With more people working and learning from home than ever before, utilising saturated colour can be a valuable means to bolster productivity.

If you have a designated study, office or work zone, try incorporating shades of vibrant yellow or rich blue into the space to signify its purpose.

“Associated with calm and confidence, rich blue tones encourage deep thought and limitless ideas,” Rimmer says.

Riddell has similarly observed the power of deep blues for promoting an engaging work environment. “Recently, I’ve used blue on the background walls for my husband’s Zoom calls,” she says. “He said that his clients and colleagues have commented that the colour blue is calming, and it has drawn them in to engage with the conversation.”

Inviting elements of the outdoors into your workspace can also encourage focus and alertness in home work environments, as interior designer and decorator Becc Burgmann explains.

“Too much white in an office can look and feel clinical, making you counterproductive,” Burgmann says. “There is nothing more reinvigorating than getting outside for fresh air and a walk, especially for clarity, so bringing some of that greenery from outdoors in can create a more productive space.”

Add unique character

Styling with colour is the simplest way to add character that is reflective of your personality and taste.

This doesn’t have to be a major commitment, as showcased in the 3 Bluestone Way display suite that features pops of colour for maximum impact.

“We selected one section of the display suite and created a block of colour on the wall,” Leech says. “It’s a really great example that you don’t need to paint every wall in the house; you can actually create a focal point with colour.”

3 Bluestone Way, which has been designed for the apartments to be operationally carbon-neutral, also features pops of colour on the front of the building, with three maroon-hued panels providing an earthy aesthetic. On the rooftop, residents will be able to take in 360-degree views among a maze of colourful, LED-lit garden beds, portable seating, art displays, pergolas and barbecue spaces.

To ensure the longevity of your colour palette, Burgmann recommends choosing neutral shades for investment pieces such as sofas, while being more playful with accessories and smaller furniture pieces.

Still can’t decide on an appropriate colour palette? Throw the rulebook out the window and reflect on the colours that truly speak to you.

“You don’t need to think about what everyone else says,” Leech says. “What would actually make you feel good in the space?”

CategoriesNews

Australian housing market set to peak in early 2022 before prices fall

Australia’s white-hot property market is set to reach its zenith by early 2022, according to a new report.

SQM Research’s Christopher’s Housing Boom and Bust Report 2022, released on Thursday, forecasts that dwelling prices across the nation will then drop in the second half of next year, most likely as a result of further intervention by the Australian Prudential Regulation Authority (APRA) banking regulator, which could happen as soon as December this year.

“Our expectation is that the serviceability buffer rate will go from three per cent, maybe up to 3.5 per cent,” said Louis Christopher, managing director of SQM Research. “And/or APRA will announce some specific actions specifically targeted towards investors, because at the moment it’s the investor market which is largely driving prices up.”

The report said the biggest price shrinkages would be felt in the Sydney and Melbourne property markets, which Mr Christopher believed were the most overvalued and, historically, the most susceptible to home lending restrictions.

While Australia’s first and second-most populous cities will witness the greatest cooling and regression in prices, it is Brisbane that is forecast to dominate dwelling value growth in 2022. The city is tipped to increase by eight to 14 per cent.

Mr Christopher said Brisbane would also be affected by APRA intervention, but to a lesser degree.

“There still will be a slowdown, but Brisbane is roaring ahead at the moment with 22 per cent growth at this point in time,” he said. “So Brisbane will be impacted by APRA intervention, but not to the extent that Sydney and Melbourne houses will be. “And the reason why we say that is for two specific factors: firstly, Brisbane house prices, while being overvalued by our measurements, are nowhere near as extremely overvalued as Sydney and Melbourne at this point; and secondly, we’re expecting ongoing migration outflows from Victoria and, to a lesser extent, New South Wales, into Queensland all through next year, and that will create an increase in underlying demand.”

While interstate migration away from Sydney and Melbourne could impact its real estate sectors well into next year, Mr Christopher said, it could be slightly offset by overseas migration.

“While there will be negligible increases in underlying demand in Victoria and New South Wales, there will be a pick-up from an increase in net overseas migration, which typically goes to Sydney and Melbourne first,” Mr Christopher said.

The return of international migration, coupled with relative affordability and supply compared to houses, would translate to more significant price growth of units and apartments in Sydney and Melbourne, he said.

Interest rates are also predicted to remain unchanged until at least until the end of 2022, which is in line with the recent decision by the Reserve Bank of Australia (RBA) to keep the cash rate at 0.1 per cent, and a recent statement that the RBA’s board “will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range”.

But Mr Christopher was quick to point out that any serious increase in inflation next year could result in the RBA lifting interest rates sooner than expected.

“We’re very confident inflation is going to rise next year,” he said. “If the headline inflation rate stays within three to five per cent, perhaps the RBA will try and hold, but if it heads towards six per cent, I think the RBA will be forced to move.”

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How much could borrowers save on their home loan when interest rates rise by making extra repayments now?

Home borrowers facing the prospect of higher interest rates could cut their future repayments by paying off more now, with new figures revealing the savings on offer.

Fixed mortgage rates have already started to rise from their historical lows as the Reserve Bank unwinds its emergency stimulus measures. While the central bank expects to be patient on any change to the cash rate, economists are tipping a slightly faster increase.

Borrowers have flocked to cheap two or three-year fixed-rate loans, which leave customers paying a higher revert rate when the term expires unless they refinance – likely to be at a higher cost anyway.

For a borrower who takes out a $500,000 loan now, on the average two-year fixed rate of 2.32 per cent, repayments would be $1929 a month, modelling by comparison platform Canstar found.

After two years, they would be charged a revert rate of 3.35 per cent and pay $2187 a month.

If the same home owner made an extra monthly repayment of $150 over the two years, they would trim their outstanding balance enough to reduce their future monthly repayments by $17.

An extra monthly repayment of $250 cuts future repayments by $28, while savings are larger for someone who can make a substantial top-up of $500 a month now ($56 discount later) or $1000 a month ($113 discount).

“It doesn’t look that startling, but it is,” Canstar group executive of financial services Steve Mickenbecker said, noting the saving is for every month for the 28 years remaining on the loan.

“Fifty-six dollars a month doesn’t sound so life-changing, but over the life of the loan, it does make a big difference.”

Many borrowers have never been in a rising interest rate environment and could get a shock once the cash rate increases, he said, but those who have built up a buffer may be able to use redraw or offset facilities to help meet higher repayments later if times get tough.

Without forecasting the likely path of future interest rates, the revert rate of 3.35 per cent in this hypothetical could offer a rough guide to the kinds of cheap deals that might be on offer in two years, especially for someone planning to fix again, he said.

So, adjusting to extra repayments now offers the benefit of lower costs in future.

“It’s very similar to what you’ll be asked to do in two years’ time,” he said. “But doing it now puts you ahead.”

Many fixed loans allow borrowers to make a capped amount of extra repayments, but the limit can vary between lenders.

It comes as bank economists have been warning of a slowdown in house price growth as affordability constraints start to bite, more homes are listed for sale, and repayments start to get more expensive.

Westpac on Tuesday warned of early signs of a moderation for housing, with its key Westpac-Melbourne Institute survey finding a fall in consumer expectations for house prices, albeit still at high levels. Its measure on whether now is a good time to buy a dwelling is down heavily compared to a year ago, signalling poor affordability, although up a touch since August.

Westpac forecasts Australian dwelling prices to rise another 8 per cent next year and fall 5 per cent in 2023. CBA expects a 7 per cent gain in 2022 followed by a 10 per cent fall the next year, while ANZ expects a 6 per cent rise next year and a 4 per cent fall next.

New borrowers have been asking about the prospect of interest rate rises, Andine Mortgage Brokers’ Andrew Kostanski said.

“I keep telling them, if we look historically, interest rates have never been lower,” he said.

Nonetheless, he is in conversations with customers about their repayments if interest rates rose three percentage points, in line with the bank regulator’s requirement that banks allow a buffer for future rate rises.

He said it is still quite common for buyers to want to borrow their maximum amount, especially first-home buyers.

“I tell them, just remember you’ve still got to eat,” he said. “Try to have some money left in the bank when you borrow.

“I’m always trying to talk people off that precipice.”

Rob Lees, principal of Mortgage Choice Blaxland, Penrith, Glenmore Park, has seen some new borrowers picking variable rates as the banks have started to offer better deals at the same time as lifting fixed rates.

Although borrowers had been concerned about rising rates and whether they would qualify with new rules making it harder to get a loan, he said the 3 per cent buffer was offering peace of mind.

“With a 3 per cent buffer built in, that alone makes people feel a bit more secure – they know they’ve been qualified on a rate that has a 3 per cent buffer built in,” he said.

Some first-home buyers are still stretching themselves and wanting to get pre-approval for their maximum budget, he said.

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