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EXPERT INSIGHT

Australia’s housing market recorded respectable growth over 2020 and with limited stock and strong demand, 2021 should see further price increases.

The winding back of Jobkeeper and Jobseeker may see temporary issues for tenants in some capital cities but the trend to relocate to the regional areas currently being experienced is likely to gain further momentum.

Traditionally there is a reduction in the number of house sales over the holiday period due to buyers going away for the festive period but due to the current restrictions people are taking advantage of the market conditions whilst they are unable to travel and looking to buy while they can. 
The property sector has been crucial to Australia’s economic performance, adding that Government stimulus measures and continued low interest rates have been, in part responsible for the resilient demand for residential property. 
Even though growth in new dwelling investment is unlikely in the 2020/21 fiscal year, given the lags between building approvals and construction activity, the forecast for dwelling investment has been revised from -4 percent in the Pre-election Economic and Fiscal Outlook to -3.5 per cent in MYEFO. 
With the possibility of a Federal election being called as early as August 2021 it was critical policy makers make measured commitments for property policy for all players in the real estate industry from first home buyers to investors. 
In May just prior to the 2019 election, house sales were the lowest in two decades across Australia which was largely attributed to election commitments from the Federal Opposition to abolish negative gearing and Capital Gains Tax (CGT) in their current form. 
Given the major role investors played and continue to play in providing housing over the pandemic, it is critical that in the run in to the election that policies from all sides of politics work for all players in real estate. 
Overall, the real estate industry looks forward to a positive year for the Australian property market with the promise of an Australian Covid-19 vaccination program allowing life to resume to a new normal. 
For customers, whatever your objective is for this year, whether you’re downsizing, investing or making a lifestyle move – talk to your local agent about your options for 2021.

Adrian Kelly is the president of the REIA.

 
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Overall, the real estate industry looks forward to a positive year for the Australian property market

Joel Robinson

2021 should see further house price increases: REIA president Adrian Kelly

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EXPERT OBSERVER
A message to tenants who have lost or are facing losing their job.
There is so much information swirling around out there that it is difficult to understand where to turn. We get that.
There is state and federal government assistance out there but when you have to wait on hold to Centrelink just to get your ID number, that’s frustrating. We get it.
I said last week that our industry wants to help you. That’s our role. Looking after tenants who have lost employment is nothing new to us. What is new is the scale of the problem, but we will help you get through this. 
You need to continue to pay your rent if you can afford to do so. If you don’t it creates a problem for you down the track and also creates problems for the owner of the property in which you live, many of whom have also lost their jobs and have families and children to feed. 
If you can’t afford to pay your rent, we understand. Don’t bury your head in the sand and think that the problem will go away because it won’t. TALK TO US! We will sort something out for you. We encounter this scenario all the time. 
For example…Mary rents a home and pays $250 per week in rent. Mary’s work hours have been reduced by half. Mary comes to us, tells us her story (and shows us a letter from her employer) and says that she can now only afford to pay $150 per week for the next three months. NO PROBLEM! We speak with the owner who is understanding and agrees to reduced rent payments of $150 per week for the next three months. It’s that simple. 
Another example…John and his three mates rent a share house for $400 per week. Two of John’s mates lose their jobs. John talks to the agent to seek a short-term rent reduction to $250 per week until his mates get back on their feet and the owner agrees. A simple outcome. 
In both of the above commonplace examples everybody wins. Everyone keeps a roof over their heads (which everybody needs and will get right at the moment) plus the property owner can brace themselves for lower rental income. It’s not difficult but COMMUNICATION IS KEY.
Last message to tenants. Yesterday the Prime Minister offered you a monetary lifeline. Talk to your employer and go and get it. There is your rental assistance and cash for other expenses right there. Go find it. 
TO STATE GOVERNMENTS 
I’m assuming that all state governments would prefer a soft landing at the other end of this crisis than a hard one. 
The real estate industry stands ready to assist as we always have. Note the examples above. This is our forte and we are ready to do whatever we need to do to make sure that our tenants and property owners suffer as little damage as possible. 
Your governments need to step up and reach a unified position on this and that position must be to keep the cash flowing through the economy. We have all been offered a lifeline yesterday by the federal government in the form of wages assistance so that everyday Australians can continue to pay their bills including rent. 
The rent cash flow ensures that everyone wins and I unashamedly include the real estate agent in that. We need income in order to continue to employ our property managers who are at the coal face of looking after both tenants and landlords. Leaving tenants and landlords to sort out their own mess will end in utter anarchy. 
For example, what about the case of a tenant who lives in a rental property in Melbourne but the owner of that property lives in Brisbane. They have never met. How will that negotiation end up?
 TO PROPERTY OWNERS 
We know that this is a stressful time for you, particularly for those of you that just like your tenant, have also lost employment. 
We are here for you as we always have been and we will help you and your tenant get through this. We are all in this together. 
But, I have heard stories of some property owners, particularly those managing  their own properties trying to take advantage of the situation we find ourselves in. For those owners who do this, you are nothing short of greedy and pathetic. Just stop it and show some compassion.
 TO TENANT LOBBY GROUPS 
You need to understand that our industry wants the same outcome as you; to keep everybody housed and feeling secure at this time, but we all need to play our part. Simply calling for free rent for everybody just doesn’t cut it. You need to be more socially and financially responsible than that and perhaps once and for all finally understand that money doesn’t grow on trees. 
Tenants who are still in employment need to continue to pay the rent and you need to be supportive of this because it is the right thing to do. 
For those tenants who have lost employment or have had their hours reduced, let our industry work through those issues. You simply calling for everyone else to “suck it up” is utter nonsense given the mess that we are all in. You need to show some true leadership for all Australians because that is the only way that we will all get through this. 
TO OUR INDUSTRY 
Thank you for the leadership that you are showing during these trying times. We will get through this but there will also be casualties. 
Above all else, please continue to look after your tenants, even including those who are trying to abuse the system. Now is not the time to be petty. We all need to step up and get on with it.
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A message to tenants from REIA President Adrian Kelly

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EXPERT OBSERVER
The March 2020 Lending to Households and Business figures released today by the Australian Bureau of Statistics show the value of loans for housing continued to increase, albeit at a slower rate, with the increase being driven by owner occupiers, according to the Real Estate Institute of Australia (REIA).
Overall the figures for March 2020 show, in seasonally adjusted terms, that the value of owner-occupied finance commitments, excluding refinancing, increased by 0.2 per cent for the month and 17.5 per cent for the past year,” said Adrian Kelly, president of the REIA. 
Whilst the value of new loan commitments for owner occupier housing has grown in ten of the last twelve months, the March loan commitments reflect loan applications submitted in February, or the first half of March before restrictions were introduced across Australia in response to the Covid-19 pandemic.
The number of owner occupier first home buyer loan commitments increased 1.3 per cent in seasonally adjusted terms for the month and 21.3 per cent for the year and can in part, at least, be attributed to the introduction of the First Home Loan Deposit Scheme in January 2020. 
The number of owner occupier first home buyer loan commitments is up 24.7 per cent from the most recent low point in December 2018.
Owner occupier first home buyer loan commitments accounted for 31.8 per cent of all owner occupier commitments, excluding refinancing.
With lending institutions reporting a considerable slowdown in new loan applications from the end of March, as both restrictions on movements and caution about the economy impact on activity in the housing market, we may find the March finance figures will be a high point for some months to come.
ADRIAN KELLY is the President of the REIA
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March housing finance numbers a high tide mark: REIA's Adrian Kelly

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The April 2020 Lending to Households and Business figures, released by the Australian Bureau of Statistics, show the value of loans for housing fell by 5.0 per cent (in seasonally adjusted terms), with the decrease being driven by owner occupiers purchase of existing dwellings, according to the Real Estate Institute of Australia (REIA).
“The value of new loan commitments for both owner occupiers and investors displayed the largest fall in twelve months and the purchase of existing dwellings experienced the largest fall in over a decade,” said Mr Adrian Kelly, President of the REIA.
“Not surprisingly ABS reports that lending institutions have indicated that COVID-19 impacts were being seen through both reduced demand from borrowers and tighter lending criteria. What is more sobering is that ABS says COVID-19 operational impacts experienced by some lending institutions resulted in a backlog of March housing loan applications being processed in April, which moderated the April fall in loan commitments.”
The total number of owner occupier first home buyer loan commitments dropped by 3.8 per cent in seasonally adjusted terms but the proportion of first home buyers, as part of the total owner-occupied housing finance commitments was 36.7 per cent. 
Despite the fall in new commitments for first home buyers, the series is 20.2 per cent higher than the most recent low point in December 2018.
“Feedback from agents suggests that worse is yet to come on housing finance figures as restrictions on movements throughout May and caution about the economy impact on activity in the housing market,” concluded Mr Kelly.
 
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Value of loans fell by 12 month high: REIA

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The Real Estate Market Facts quarterly report has shown an impact on prices from the COVID-19 pandemic, but it has not been as dramatic as some have predicted.
“In the March edition I flagged that June quarter 2020 will reflect the impacts of the start of the COVID-19 pandemic on both the sales and rental markets,” said REIA president Adrian Kelly.
“Whilst there has been an impact on prices it is relatively modest and has certainly not been the doomsday prophesies some commentators expected.
“Nor has the impact been uniform across Australia with local market conditions varying, resulting in a range of outcomes.”
This REMF edition shows in the June quarter 2020 the weighted average median price for houses for the eight capital cities decreased by 2.2% to $770,359, with only Darwin having an increase and Adelaide remaining stable.
This is the first quarterly decrease since March 2019. For the year the weighted average median price for houses for the eight capital cities increased by 5.9%.
The weighted average median price for other dwellings also decreased by 1.9% to $592,415 over the quarter, with only Adelaide and Hobart recording increases.
For the year the weighted average median price for houses for the eight capital cities increased by 4.8%.
Over the quarter, the median rent for three-bedroom houses decreased in all capital cities except for Canberra, where there was a marginal increase, and Sydney where the rent remained stable.
The decrease in median rents for 3 bedroom houses, over the quarter, was 1.6%. There is a consistent pattern for June quarter median rents to decline and the 2020 decline cannot be attributed entirely to the impact of COVID-19. Indeed the quarterly decline is below the June 2018 decline of 2.5%.
The median rent for two-bedroom other dwellings decreased in all capital cities except Darwin, which had a 1.7% increase. The largest decline was in Melbourne, and at 8.7% it's the largest decline in the past 10 years.
The weighted average vacancy rate for the eight capital cities decreased to 3.0% during the June quarter, which shows a loosening in the market compared to last quarter.
“A factor contributing to the market stability is the decline in the number of listings for sale,” said Mr Kelly.
“In all capital cities except Perth the number of houses and other dwellings for sale declined compared to the June quarter 2019.
“The biggest declines were in Hobart where the number of houses for sale declined by 33% and the number of other dwellings by 26%.
“The market is holding up better than many expected with the Government’s initiatives of JobKeeper and JobSeeker as well as the banks loan deferrals playing their part in stabilising the situation.
“With extensions to these having been announced we expect continued stability in the market,” concluded Mr Kelly.
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Rents across most categories have seen drops across Australia with few exceptions: REIA

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Property Observer <a href="/news/28536-real-estate-institute-urges-government-to-allow-fhbs-to-dip-into-superannuation-for-a-home" target="_blank">previously reported about the REIA's proposals for the 2014/2015 federal budget</a>.
Here are the 10 wishes they look to see fulfilled next week.
The REIA’s 10-item pre-budget submission wishlist:
<ol>
<li>Ensure the availability of reliable data on housing demand and supply to formulate appropriate policies and to monitor their effectiveness. 
</li>
<li>All states and territories uphold the initial intent of the Intergovernmental Agreement in Federal Financial Relations Schedule A, that assistance to first home buyers will be “uniform” and that “an eligible home will be new or established”. 
</li>
<li>Review the amount of the First Home Owner Grant annually to maintain relativity with house price movements. 
</li>
<li>Allow first home buyers access to their superannuation for the purchase of a home. 
</li>
<li>Retention of current arrangements for negative gearing of property investments. 
</li>
<li>No increase in capital gains tax on property investments. 
</li>
<li>Abolish stamp duty on property transactions in favour of an efficient source of revenue for states and territories. 
</li>
<li>Improve the supply of housing for social housing tenants transitioning to private rental by utilising private investment. 
</li>
<li>Monitor Housing Affordability Fund (HAF) and National Rental Affordability Scheme (NRAS) to observe its effects on housing supply and to conduct a review which  considers additional measures to bridge the demand-supply imbalance. 
</li>
<li>Ensure the Australian Skills Quality Authority (ASQA) funding is adequate to ensure nationally approved quality standards are met for vocational education and training. It is also imperative that outcomes be assessed by government around how well the Authority has ensured the integrity of the VET sector.</li>
</ol>
Source: REIA Budget submission. You can <a href="https://reia.asn.au/wp-content/uploads/2014/03/REIA-Pre-Budget-Submission-2014-15.pdf" target="_blank">read it in its entirety here</a>.
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The REIA's 10 point wishlist for the federal budget

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First home buyers saving for a deposit have lost an incentive with the abolition of the First Home Savers Account (FHSA) scheme in the federal budget, the Real Estate Institute of Australia (REIA) president, Peter Bushby says. 
It has created greater concern as the cessation of Government co-contributions for existing account holders will hurt those relying on them to bolster their savings.
“We would like to have seen the scheme reviewed and improved rather than simply thrown on the scrap heap because of an initial low uptake.”
“With home ownership in Australia declining and first home buyers finding it increasing difficult to enter the housing market, this will not help the situation.”
Bushby noted "by contrast" the government has indicated that the National Rental Affordability Scheme (NRAS) would be reviewed, "an action REIA supports”.
“With budget forecasts of moderate growth, a slight increase in unemployment and inflation well within the RBA’s target zone, interest rates should remain low for some time and that is good news for home owners and prospective buyers,” concluded Bushby. 
The REIA had previously compiled a 10-point wishlist for<a href="/expert-insights/investing/31066-the-reia-s-10-point-wishlist-for-the-federal-budget" target="_blank" style="line-height: 1.3em;"> what it hoped to see in the federal budget</a>.
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FHSA scheme needed review not scrapping: REIA

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Record low interest rates have failed to ease housing woes, with New South Wales leading the decline in affordability across all states in the December quarter of 2016, according to the Real Estate Institute of Australia.
The proportion of income required to meet loan repayments rose to 30.4 per cent, an increase of 0.9 percentage points over the quarter but a decrease of 1.9 percentage points compared to the corresponding quarter of 2015, according to the Adelaide Bank/REIA Housing Affordability Report.
REIA president Malcolm Gunning said historically low interest rates and modestly rising incomes were unable to offset the increasing size of mortgages, increasing the proportion of the median family income required to meet monthly loan repayments.
“Over the December quarter, affordability declined in all states with New South Wales the least affordable, while Tasmania had the smallest average loan size,” Gunning said. 
"The proportion of first home buyers on the owner-occupier market was the largest in Western Australia.”
Rental affordability also fell during the fourth quarter of 2016 with the proportion of median family income required to meet rent payments increasing 0.2 percentage points to 24.4 per cent. 
Whilst rental affordability declined for the quarter, it was up for the 12 months to December, the report showed. Since mid-2012 rental affordability has been showing a trend improvement, reflecting the pick up in investment in housing from the end of 2011.
Rental affordability for the quarter declined in New South Wales, Victoria, Western Australia, Tasmania and the Australian Capital Territory but improved in Queensland, South Australia and the Northern Territory.
The number of first home buyers increased in all states and territories over the quarter. First home buyers now make up 13.8 per cent of total owner-occupied housing. This rate has been dropping steadily over the past 5 years.
However, the size of the average loan for first home buyers increased by 1.3 per cent over the December quarter to $323,633, but below the peak in the December quarter 2015.
“While the modest increase in first home buyers is welcome news, the increase in the average loan size is concerning. If this trend continues, then the proportion of first home buyers in the market will continue at low rates,” Gunning concluded.
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Housing affordability falls despite record low interest rates: REIA 

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The median house price across Australian capital cities has increased by 4.1 per cent for houses and 2.1 per cent for other dwellings, according to the latest data from the Real Estate Institute of Australia, adding to the debate about housing unaffordability.
The weighted average median house price for the eight capital cities was $743,496, according to the REIA Real Estate Market Facts for the December quarter 2016. 
The REIA had recently said that record low interest rates have failed to ease <a href="https://www.urban.com.au/news/66715-affordability-declines-despite-record-low-interest-rates-reia" target="_blank">housing woes</a>, with New South Wales leading the decline in affordability across all states in the December quarter of 2016. The RBA has voiced its concern several times, while the NSW Premier Gladys Berejiklian has said housing affordability is "the biggest issue people have across the state".
REIA president Malcolm Gunning said over the year, the median house price increased in all capital cities except Perth and Darwin, reflecting the differing fortunes of state economies. 
“At $1,134,075, Sydney’s median house price is the highest among the capitals whilst Hobart retains the lowest at $430,000 - the figure is 42.2 per cent lower than the national average,” Gunning said.
“The median price for other dwellings increased to $572,254 as median prices increased in Sydney, Melbourne, Hobart and Darwin.
While Hobart and Adelaide had the lowest median prices over the quarter, Hobart had the largest increase in both the median price for houses at 6 per cent and 11.7 per cent for other dwellings.
Both investor finance and owner-occupied housing finance (excluding re-financing) also showed strong increases of 8.8 per cent and 11.1 per cent respectively, after small decreases in the previous quarter, said the REIA.
“The level of investor activity is not unexpected when you consider that 10-year average annual returns for residential investment property range from a low of 6.5 per cent for houses in Perth to 10.5 per cent for two-bedroom units in Sydney with most returns being around 8 per cent. 
“This tells us why property is favoured above other forms of investment,” Gunning said. 
Median rents for houses during the quarter remained steady or increased in all capital cities except Darwin.  Median rents were steady in Brisbane, Adelaide and Perth. Canberra had the largest increase at 9.5 per cent followed by Hobart with a rise of 6.1 per cent. Median rents for other dwellings remained steady or increased in most capital cities except for Sydney, Perth and Darwin. In Melbourne and Canberra, median rents for other dwellings remained steady.
“The weighted average vacancy rate for the eight capital cities decreased to 2.9 per cent during the December quarter, a decrease of 0.2 percentage points. In most capital cities, the vacancy rates dropped by between 0.1 to 0.2 percentage points. In Hobart, the vacancy rate remained steady while in both Darwin and Canberra it increased. Darwin and Perth continue to have the highest vacancy rates at 7.8 per cent and 6.4 per cent respectively.
 
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Median house prices across capitals up 4 percent in December quarter: REIA

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The Real Estate Institute of Australia in partnership with the Institute of Public Accountants (IPA) has launched a new training course for real estate agents providing advice regarding property as an investment.
REIA President Malcolm Gunning said the RG146 Advice in Real Estate Course designed by IPA and provided through Mentor Education will allow property investment advisers, mortgage brokers, accountants, real estate agents and property developers to discuss the general drivers and considerations associated with a property investment decisions.
“Offering this course to agents is part of a broader strategy to professionalise the industry and to provide clients the level of advice they desire from agents providing a comprehensive service.
“Upon completion of the course, agents will have satisfactorily fulfilled ASIC’s RG146 requirements and will be able to offer general advice on financial products and services.
This will also allow them to provide factual advice on what the products are and what they do,” Mr Gunning said.
Agents undertaking the course will gain a nationally recognised competency to provide factual advice on financial products and services.
Factual advice is defined by ASIC as “objectively ascertainable information whose truth or accuracy cannot be reasonably questioned”.
This compares to general advice which ASIC defines as “advice prepared without taking into account the client's objectives, financial situations or needs.
“ASIC have indicated that successful completion of the RG 146 course would allow agents to conduct seminars, presentations, office and sales meetings and to discuss in general terms other such as Self Managed Superannuation Funds.
However, an agent would need to need to be authorised by an Australian Financial Services licensee to provide this advice or alternatively obtain an AFS licence themselves,” Mr Gunning said.
REIA commenced discussions with IPA regarding the establishment of a tailored course for Real Estate professionals in regard to property advice following a Supreme Court of NSW decision in October 2015 against Park Trent Properties Group Pty Ltd regarding advice real estate agents give particularly as it relates to SMSFs.
An outline of the course together with enrolment details can be found at <a href="https://www.publicaccountants.org.au/reia" target="_blank">https://www.publicaccountants.org.au/reia</a>.
Members of REI’s that are part of REIA will receive a 10 per cent discount.
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