APRA removes cap on IO loans
From 1 January, the 30 per cent cap on banks and other lenders offering IO loans ceased to be in effect. APRA also removed the 10 per cent growth cap on investor lending. The cap on IO loans made a noticeable impact on the investor market in 2018. According to CoreLogic’s Property Pulse report, in the 12 months to September 2018 housing credit grew by just 5.2 per cent, the slowest increase since November 2013. IO mortgages made up only 28.8 per cent of total credit by June 2018. Investors also accounted for 33.1 per cent of total credit, the smallest share since June 2012.
Foreign investor tax scrapped
As part of the Federal Government’s mid-year economic and fiscal outlook, the plan to tax foreign investment in the student accommodation sector was axed. The concessional rate of 15 per cent for foreign investors into the residential and agricultural sectors has been doubled. Initially, the intention was to include student accommodation under the increased 30 per cent rate but this has been revised.
Mortgage stress rises
Digital Finance Analytics’ data revealed mortgage stress rose in November 2018, with 30.9 per cent of owner-occupiers (1,015,600 households) in stress, with a further 22,500 in severe stress and 61,000 households at risk of 30-day default in the next 12 months. NSW had 281,275 households in stress (272,536 in October), Vic had 283,395 (281,922), Qld had 181,156 (178,015) and WA had 132,135 (132,827). The probability of default over the next 12 months rose: with around 11,560 in WA, around 11,300 in Qld, 15,300 in Vic and 16,200 in NSW.
ATO forces sale of properties
Between 2015 and 2018, the Australian Government forced the sale of 316 properties, valued at $381 million, which were owned illegally by foreign nationals. The majority were in Victoria (144 properties valued at $162.67m), NSW (73 / $131.69m), Queensland (64 / $36.86m) and WA (30 / $47.6m). Since 2015, the ATO has issued more than 1,500 notices to foreigners who have not obtained FIRB approval before purchasing property and/or have breached a condition of previously approved applications.
Mortgage competition stifled
The ACCC’s Residential Mortgage Price Inquiry has found the unnecessarily high search costs or effort required by borrowers to find better prices reduces their willingness to shop around, but that many borrowers who negotiate with their bank can get a much better price. The report noted that the opaque, discretionary pricing of residential mortgages by banks makes it difficult and time-consuming for borrowers to shop around and stifled price competition. As at 30 June 2018, an existing borrower with an average-sized mortgage could initially save up to $850 a year in interest if they negotiated to pay the same interest rate as the average new borrower at the five banks (ANZ, CBA, NAB, Westpac and Macquarie Bank) under review.
Tenants with disability more likely to be evicted
A report by Choice, National Shelter and the National Association of Tenant Organisations found renters with disability faced a range of barriers that prevented them getting into or staying securely in rental accommodation. This included difficulties getting timely repairs, facing additional expenses when moving in and out, and people with disability were also almost 2.5 times more likely to experience issues with home inspections from their landlord than other renters. The survey also revealed 16 per cent of people with disability have been served with a no-grounds eviction, compared with 9 per cent of other renters.
Build-to-rent model launches
Kanebridge Property Group has launched a build-to-rent model across three of its developments in Greater Sydney. Based on models in operation in the US and Europe, the concept provides affordable modern housing for those unable to purchase a property of their own and after three years tenants will qualify for finance to enable them to buy an apartment if they want to.
1 in 3 first homebuyers are ‘rentvesters’
PIPA’s 2018 Investor Sentiment Survey revealed 36 per cent of first homebuyers were looking to invest in property rather than purchase a home for themselves. The survey also found 83 per cent of first-time buyers were purchasing established property, despite grants being available to purchase new dwellings.
ATO catching out dodgy property claims
The ATO’s data-matching program enables the agency to automatically scan and analyse publicly available data as well as data from third parties like banks, financial institutions and both state and federal regulators to help identify taxpayers doing the wrong thing. As part of the program, the ATO has access to rental bond data and has caught out operators who are claiming expenses for properties they don’t own, or that don’t exist.
SMSFs left exposed
ASIC’s latest report into member’s experiences found that more than 60 per cent of SMSFs have no proper arrangement in place for the control of their SMSF in the event of incapacity – including death, dementia or divorce. Out of the 457 funds surveyed, 30 per cent said they had no existing arrangement, 25 per cent of members said they had an existing arrangement with their financial adviser to take over the running of the SMSF, and 16 per cent said they had already outsourced most of the running of their SMSF. Of particular concern to the SMSF Association was the perception that the responsibility of the SMSF would be outsourced to a financial adviser if incapacity should occur, and members’ misconceptions about their legal responsibilities, including the need to allocate an individual(s) to take over the running of the SMSF, needs to be addressed.
AMP predicts 20% fall in housing prices
AMP Capital expects house prices in Sydney and Melbourne to decline 20 per cent by 2020. Their chief economist noted that the decline in prices is being driven by tighter credit conditions, poor affordability, rising unit supply, reduced foreign demand, the switch from IO to P&I mortgages for a significant number of borrowers, fears that negative gearing and capital gains tax concessions will be made less favourable if there is a change in government, falling price growth and “FOMO (fear of missing out) risking turning into FONGO (fear of not getting out) for investors”. Weak auction clearance rates and auction sales volumes in the two capitals were also cited as factors, along with Comprehensive Credit Reporting kicking in, making it harder to get multiple mortgages.
Airbnb to build homes
Airbnb has announced they will begin building their own prototype homes this year. Through the Backyard project, the short-term letting platform will “endeavour to design and prototype new ways of building and sharing homes”. As yet, Airbnb hasn’t confirmed exactly what Backyard will build, but it is expected that it will be units aimed at short-term leasing and the rental market which will be adaptable to each occupant.
Tech watch: latest apps and platforms
Realestate.com.au has added Agent Ratings and Reviews to its site. The reviews service is free of charge and all reviews are vetted by the website to ensure they are from real clients who have purchased or sold a property in the past 12 months. The website’s 1form has also introduced Tenant Verification where the tenant can instantly purchase a report to verify both their identity and credit worthiness in minutes.
Legal corner: Former agent jailed for fraud
A former director and licensee-in-charge of NSW-based CLB Property Group Pty Ltd was found guilty of misusing more than $124,000 that was supposed to be held in trust after the sale of two homes. Christopher Black was sentenced to 18 months imprisonment after pleading guilty to fraudulently appropriating the money from the trust account for personal use and to also failing to keep deposits for another two properties, worth more than $158,000, in a trust account.
CBA: borrowers should pay mortgage broker fee
CBA’s chief executive told the Hayne Royal Commission that mortgage borrowers should pay a fee to a broker for their service rather than the broker being paid a commission by the lender. Broker-originated loans account for around 55 per cent of all mortgages, with growth in this channel credited with driving competition in the mortgage market.