Buying A Property During The Coronavirus Outbreak

personOtto Dargan access_timeMarch 17, 2020

Buy now or wait?

Nobody can be sure what will happen with the Australian property market in the next year. What is likely is that the coronavirus will have significant economic impacts that will affect almost every industry.

In the past, where unemployment rates have increased significantly this has caused property prices to fall. However, in many past crises, the effect of interest rate cuts and government stimuluses have caused property prices to rise.

Who shouldn’t buy now?

We believe that for some people it may be risky to buy a property now. This is a decision for you to make after considering the risks.

  • People with irregular income types such as casual, overtime, contract, commission or bonuses.
  • Business owners that are likely to be significantly affected by a lockdown or supply chain disruption.
  • People who may need to look after sick relatives or children.
  • People who work in healthcare or who are likely to be exposed to the virus.
  • If you plan to use a bridging loan to buy a property before you sell your current home. It’s better to sell your home first before buying a new home.

If you’re unsure if buying a property would be a risk for you then it’s best to wait a few months before proceeding.

Prepare now, to buy soon

If you’re concerned about your situation or the property market then you can obtain a pre-approval from one of our mortgage brokers and then wait to see what happens.

When the time is right you can act quickly while other buyers are disorganised. This will be a welcome relief to buyers in markets such as Sydney and Melbourne which have been a seller’s market for the last six months.

Be patient, the disruption to everyday life won’t be over quickly and there will be opportunities to buy for many months.

Will property prices fall?

AMP Capital’s Shane Oliver recently predicted that if unemployment rises to 7.5% then there will likely be a 5% fall in property prices. If unemployment rises to 10% then he is predicting a 20% fall in prices.

Mr Oliver said that low supply and high demand for housing in recent years would help to cushion the blow.

“[The] property market has been chronically undersupplied. Annual population growth since mid-last decade has averaged 373,000 people compared to 217,000 over the decade to 2005, which requires roughly an extra 75,000 homes per year,” he said.

Why do you need to get pre-approved now?

There’s a short window of opportunity to take action because there are a cascade of effects that the coronavirus will have on our economy and lenders.

  • Bank valuers will likely be more conservative a few weeks from now. This reduces what you can borrow against your existing property but is unlikely to affect purchases.
  • Bank valuers may refuse to visit properties, making lending impossible for lenders that require a bank valuation.
  • Banks look at your two most recent payslips if your casual, overtime, commission, bonus or other variable income type drops then you may not get approved.
  • Most lenders have their staff working from home, inevitably there will be delays.
  • Lenders will prioritise loan applications to buy a property, which means your refinance may be delayed.
  • Australia is likely to go into a total lockdown which may cause lenders to stop lending.
  • Some lenders require face to face meetings to identify borrowers, which may not be possible.

For these reasons, we strongly recommend that you refinance your existing properties now and obtain a pre-approval ready to buy when the time is right.

How can we help as mortgage brokers?

Our mortgage brokers are working from home for their safety, however, they will be working overtime to help our customers.

Our team is constantly monitoring the position of lenders to ensure we can avoid lenders that are unable to approve loans during this time.

Email your Home Loan Experts mortgage broker, call us at 1300 889 743 or fill in our free assessment form if you’d like our assistance.

Why is a bridging loan a bad idea?

A bridging loan is used when you sign a contract to buy a new property before you you sell your existing home. A large loan is used to cover the purchase and then it is paid down when you sell your existing property months later.

If the property market freezes up then you will be unable to sell your current property, leaving you at risk. If the property market falls then you may end up with a larger final loan size that you may be unable to afford, forcing you to then sell the property that you just purchased.

It just isn’t worth the risk! We have a page on selling and buying a new home which explains other options available to you.

Email your Home Loan Experts mortgage broker, call us at 1300 889 743 or fill in our free assessment form if you have further questions about this.

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