The spring auction season in Australia is historically one of the busiest times of year in real estate. Unfortunately, this too has felt the undeniable impact of the COVID-19 pandemic that is sweeping across the globe.
During the 2019 season,, national clearance rates rose as high as 74% while Sydney and Melbourne had rates of 76.6% and 77.8% at one point, respectively. Flash forward a year and it was expected that a quarter of households in Sydney, Melbourne and Brisbane alone would see a fall in equity of 10% or more as a result of the virus.
So while this is certainly unfortunate news, the outlook isn’t entirely pessimistic with regards to this year’s spring property forecast. There are many positive things happening from a property market and economic perspective across Australia right now. The Australian government has announced updates to the JobKeeper scheme, interest rates are expected to remain low to boost the economy, and the HomeBuilder scheme has been deemed one of the most successful stimulus packages in a decade.
The JobKeeper scheme was created by the Australian government as a temporary subsidy for businesses who have been significantly impacted by the COVID-19 pandemic. If eligible, employers and other business owners can apply to receive $1,500 per eligible employee each fortnight.
With a second wave of the pandemic looming, a sense of greater financial strain has once again set in on individuals and their families. But the good news is that the government has responded in kind, by injecting an additional $15 billion into the program, but whilst tightening eligibility requirements. This comes at a time of critical importance, as Stage Four lockdowns are in effect in Melbourne and some estimates say that the unemployment rate will rise to 10% by the end of the year. Thankfully, the JobKeeper scheme is here to ease some of that burden, and the program itself will now cost the government an estimated $101.3 billion.
Likewise, it’s equally optimistic that the federal government in Australia has raised the prospect of spending more on income support in the future if needed to deal with this second wave. The retail sector in particular has been hit hard, so this will all come as good news to small business owners everywhere. Not only can more people take advantage of JobKeeper than ever before, but if the government chooses to lend more income support it will continue to provide an invaluable lifeline – this despite the fact that an eventual end to the pandemic is still an uncertainty around the globe.
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As stated, the unemployment rate in Australia is expected to rise in the not-too-distant future – but implications for the property sector aren’t all negative. The RBA has held interest rates at a historic low of 0.25% as a means to boost the economy, which is actually a very good sign for first-time home buyers, investors and even owner-occupiers across the country.
Low interest rates are a great way to encourage people to invest in the real estate sector, something that is itself a core part of the country’s economy. Even for owner-occupiers who already own property, this is a perfect time to refinance and save a tremendous amount of money over the lifetime of their loan on interest payments alone. With access to lower, more predictable payments, budgeting will be easier for millions of people – thus providing another opportunity to ride out the COVID-19 pandemic financially.
Note, however, that the RBA has already said that it is against negative interest rates despite the rising unemployment levels.
Originally started as a way to stimulate the residential construction market during COVID-19, the HomeBuilder scheme provides eligible owner-occupiers (including first-time home buyers) with a grant of $25,000 to either build a new home or to substantially renovate their existing one.
More than 40,000 people have already registered for the program since it was launched earlier in the year, exceeding even the Treasury’s already optimistic forecasts. Experts agree that the HomeBuilder scheme is the single most effective stimulus in Australia in a decade or more, as it has already returned activity in the sector to pre-COVID levels. Likewise, without its creation, half a million jobs would have been lost – something that undoubtedly would have worsened economic pressure and anxiety across the country.
So while it’s fair to say that the impact of the COVID-19 pandemic is still being felt across Australia, it’s clear that the government is taking actionable steps to help people as much as possible during these troubling times. With the JobKeeper program being significantly expanded and extended, interest rates at an all-time low and the successful HomeBuilder scheme reinvigorating activity in the sector to pre-COVID levels, one thing is certain: Australia can weather this storm.
If you’re wanting to take advantage of historically low interest rates, or want to know more about the HomeBuilder scheme, reach out to Shore Financial today. We’re trusted experts when it comes to making your next property decision.
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