New February 2021 Newsletter
There’s some big property and tax news around right now, including:
- Positive conditions for borrowers
- ATO issues tax scam warning
- Property investors smiling
- Mortgage deferrals keep falling
- The economic outlook going forward from COVID-19
Interest payments reach 25-year low
Record-low interest rates are helping drive strong buyer interest and surging prices in many property markets throughout Australia.
The share of income that households are devoting to mortgage repayments has fallen to its lowest level since the mid-1980s, according to AMP Capital chief economist Shane Oliver.
“There is no denying housing affordability is poor, debt is high and some households are suffering significant mortgage stress. But most borrowers appear to be able to service their mortgages,” Dr Oliver said.
“In the absence of an unexpected renewed economic downturn, it’s hard to see much rise in distressed sales. It’s also easy to see from this chart, when combined with home buyer incentives, why home borrowing and buying is surging again.”
Home loan applications reached record levels in January, according to the most recent data from the Australian Bureau of Statistics.
In other words, buyers are out in force. So if you’re planning to buy in 2021, don’t delay, because waiting could potentially cost you tens of thousands of dollars.
ATO warns Australians about fake calls demanding money
Beware: there has been a spike in automated scam calls impersonating the Australian Taxation Office. Scammers are calling people to claim the ATO has suspended their tax file number due to suspected fraudulent activity.
Targets are then asked to transfer their money to ‘the ATO’ (i.e. the scammers) so the tax office can protect their money while the matter is resolved.
The ATO said that while it does call taxpayers, it would never:
- send unsolicited pre-recorded phone messages
- use aggressive behaviour or threaten you with arrest
- suspend your TFN
- request direct transfers of money to a personal bank account
- project the ATO’s number onto your caller ID
The ATO said that if you receive a call, email or SMS and aren’t sure who’s contacting you, “it’s OK to hang up or not respond”.
Instead, phone the ATO’s dedicated scam line 1800 008 540 to check if the contact was legitimate.
Balance of power tips further in landlords’ favour
It’s a great time to be a property investor, with vacancy rates falling throughout Australia.
Vacancy rates fell in six capital cities between December and January, and held steady in the other two, according to new data from SQM Research.
Sydney and Melbourne are currently tenants’ markets, even though vacancy rates are falling. However, the balance of power favours landlords in the other capitals. If you’re a property investor and there’s a limited supply of rental accommodation:
- it’s easier for you to find tenants
- it’s easier for you to raise rents
Another reason it’s such a great time to be a property investor is that with interest rates at record-low levels, there’s a good chance your property’s income (rent) will exceed the expenses (mortgage payments, property management fees, maintenance and insurance).
For tips on increasing your rental income, click here.
Mortgage deferrals keep falling
The vast majority of borrowers are now paying their mortgages, with only 2.4% of home loans on pause at the end of December, according to new data.
Banks allowed Australians to pause their mortgages repayments in March 2020, at the start of the Covid crisis. The share of deferrals peaked in May and has been falling since:
- April = 9%
- May = 11%
- June = 10%
- July = 9%
- August = 9%
- September = 7%
- October = 4%
- November = 3%
For information on the support options available to you with the wind-down of mortgage deferrals, click here
The Economy Going Forward
The end to this COVID-19 mayhem is potentially in sight with the vaccine rollout underway. Creating a more positive economic outlook for the remainder of 2021. Commodity prices are set to rise, employment levels are slowly recovering, and the Australian economy as a whole is performing better than original forecasts.
Australia is tracking pretty-well relative to the rest of the world, we ranked 8th out of 100 countries in a study oriented around the handling of the pandemic – of course New Zealand ranked number 1. We placed above both the USA and UK.
Economists predict we have already experienced the worse for unemployed, with a peak of 7.5% occurring in July 2020. Forecast indicate by the end of 2022 the unemployment rate will be 5.4%, narrowing in on the pre-pandemic rate of 5.1%.
The Department of Agriculture estimates the national winter crop production (2020-2021) to be 89% higher than the previous year (2019-2020), making it the second biggest on harvest record. Providing a well needed boost for the drought-stricken industry – particularly in NSW and WA.
Commodity prices are booming as global economies start to get back on their feet. China is back-up and running with higher-than-expected growth levels, driving up Iron Ore prices – one of Australia’s largest exports. Australian commodity exports are nearing record highs, delivering strong income streams that are supporting domestic jobs and the economy’s recovery.
2021 is shaping to be a good time to buy property with interest rates a record lows. Industry experts are predicting house prices to return (reduce) to pre-COVID levels in the back half of 2021, assuming the state and federal governments keep tight COVID-19 precautions in place. There is also a variety of home-buyer schemes in place easing the financial impact of buying.
What Should We Watch Out For?
A lot is riding on the COVID-19 Vaccine rollout; slower-than-anticipated progress, resistance and unequal distribution of the vaccine could ack as a barrier to the end of the pandemic. During this process there is still potential for short, snap lockdowns and a strong focus on social distancing measures.
The premature end to Government welfare schemes could also complicate the recovery causing a rise in unemployment and reduction in income levels for many households. JobKeeper is planned to end next month (28th March) and the extent of impact is unknown. There are concerns for vulnerable borrowers (households and business) and employment levels as businesses are likely to experience the true hit of COVID-19.
The global economy is set to recover from COVID-19 at very different rates due to factors such as vaccine access, the severity of the health-crisis and government policy support. Consequently, economic activity, including the flow of goods and services across economies, is likely to remain well-below pre-COVID levels for the foreseeable future. Prolonging the negative impacts the pandemic has brought.
Vision Property and Finance hopes you have a great March! Are you looking to have a chat about what financial possibilities are available to you? Click below to arrange a free consultation with our award-winning mortgage broker and financial planning team!