Urgent property sales have dropped back to pre-pandemic levels in most cities, with ongoing government support measures and extended mortgage holidays providing a buffer for those facing financial difficulty.
Despite a weakening of economic growth in Australia, Domain data has shown distressed listings in October were at their lowest level since the coronavirus pandemic hit, in all capital cities except Hobart, with some sellers in a better position than in February of this year. The short window between the first economic impacts of Covid-19 and the introduction of government support measures and mortgage deferrals had curbed urgent sales. While repayments resumed on almost half of deferred mortgages by mid-October, according to the Australian Banking Association, there were still some 270,000 deferred home loans. Domain’s senior researcher, Nicola Powell, reported that any increase in distressed sales would only occur when those deferred home loans resumed, suggesting the regions that would be potentially most affected would be parts of WA, QLD and NT, as they have higher levels of negative equity.
Whilst the news may come as getting back to normality for the property market, the recent NSW decision on ending stamp duty on property purchases and transitioning it to land tax has brought about the question of whether this will cause a short term hit to property demand. Many buyers can be put off or unable to buy because of stamp duty, particularly first home buyers, as they have to have the money available in their pocket upon purchasing. This implementation is designed to stimulate the economy as it recovers from the Covid-19 recession, however, economist Shane Oliver suggests that people planning to buy may hold off doing so until given the change the avoid the up-front stamp duty hit. But while plans to give buyers the choice of paying stamp duty upfront or take on a higher land tax every year could take the edge of current demand in the short term, it would also likely boost sales once the policy came into play, allowing people to save tens of thousands of dollars. The development industry, however, did not see this as such a positive. With the reforms scheduled for late 2021, homebuyers may hold off on purchasing until they have more certainty, which could effectively stall the development industry. The policy is likely to also have a significant effect for those who have retired and no longer receiving in income, potentially put off downsizing and the prospect of paying hefty stamp duties.
With the surge in new home loans and the activity we are seeing in the market place, it is expected that the property market will continue to strengthen between now and the festive season with, in many cases, buyer demand outweighing supply. If you would like help with putting together your property plans for early 2021, reach out to us!