Political certainty good news for NSW property markets

The electorate has spoken, and already property markets across NSW have enjoyed an uptick in activity, a situation boosted by an announcement by banking watchdog APRA to loosen the reins on mortgage lending. 

APRA has proposed removing its guidance that lenders should assess whether borrowers can afford their repayment obligations using a minimum interest rate of at least 7%. Instead, lenders can now review and set their own minimum interest rate floors when assessing a customer’s ability to service a mortgage.

Peter Diamantidis, Sales Manager, Raine & Horne St Marys said his office in south west Sydney was flooded with request for one-on-one property appointments in the week after the election.

“We sold seven properties last week. It was lucky if we sold ten properties a month before the election,” Peter said. “Our buyers are being contacted by their brokers in the wake of APRA’s new rules with many trying to finalise a purchase just in case the regulator changes the rules again.”

To demonstrate the post-election effect and the immediate impact of the relaxation of 7% interest rate test, Raine & Horne St Marys sold a two-bedroom apartment in St Marys for $309,950. “The property only listed on Tuesday 21 May and it sold for the asking price four days later,” Peter said. “We haven’t seen this level of activity and buying since 2016.

To highlight further illustrate the benefits of the APRA announcement and the outcome of the election, Raine & Hone St Marys sold a two-bedroom apartment at 15/52 Putland Street St Marys for $285,000 in March, which had an original asking price of $309,000.

Angus Raine, Executive Chairman, Raine & Horne, commented, “There is nothing worse for property markets than political uncertainty as consumers no matter what side of the fence they sit on, don’t respond to doubt.

“Now buyers and investors can plan their future property requirements and they appear to be doing this is droves.”

The political fence-sitting has contributed to many buyers, and investors shelving property plans. “Due to tighter lending requirements demanded by the banking regulator APRA, many Sydney buyers have been sitting on the real estate fence too due to concerns about the strength of the market.

“Consequently, the demand bucket has been filling up over the past three years, and with the prospect of a rate cut in early June along with the First Home Loan Deposit Scheme, announced in the last week of the Federal Election campaign, we are confident the real estate market in Sydney and regional NSW has turned a corner.”

The First Home Loan Deposit Scheme is for first-time buyers struggling to piece together a 20% deposit. In turn, they will be allowed to apply for a home loan with a deposit of just 5%. Moreover, first-time buyers won’t be required to pay Lender’s Mortgage Insurance, which adds many thousands of dollars to an average first loan.

“These new first home buyers’ incentives will bolster the market,” Angus said. “It’s all positive, positive now thanks to these inducements rather than the negative news investors were subjected to before 18 May.”

Angus is predicting the rebound will start in the entry-level markets of western Sydney. “Usually the property cycle starts in the inner-city and moves out to the middle and outer-ring suburbs,” he said. “It’s like throwing a pebble in a pond. However, with the last cycle that started in June 2012, it was the reverse, with the activity starting in the entry-level markets in outer western suburbs such as St Marys, Liverpool, Wetherill Park, and Penrith and came in. This trend appeared to be repeating this time too.”