There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.
Each Saturday morning I like to share some of the ones I’ve read during the week.
The weekend will be over before you know it, so enjoy some weekend reading.
A look at what supports the Australian property market amid fears of a collapse
How is COVID-19 impacting the property market? And what is supporting the market?
This article on Realestate.com.au looks at the factors we need to know.
It has been more than three months since the coronavirus crisis wreaked havoc on the Australian economy, and while we are yet to see the full impact on the property market, cracks are appearing in its foundations.
But whether or not a property market collapse is on the cards depends on three key drivers – employment, population growth and consumer confidence – all of which have taken a hit amid the pandemic.
Protecting these three pillars is therefore vital in preventing a property market crash, but the ability to do that largely depends on how quickly Australia rebounds from the health crisis.
Here is a closer look at how COVID-19 is impacting the three pillars of the property market.
The three pillars of the property market
How COVID-19 is impacting the property market
From a housing market perspective, employment is essential in terms of home buyers securing finance and home owners continuing to repay their mortgages.
While there are still currently more Australians in work than out of work, COVID-19 is having a heavy impact on the country’s labour market.
New figures from the Australian Bureau of Statistics revealed Australia’s unemployment rate jumped to 7.1% in May from 6.4% in April – its highest level since October 2001. However, the unemployment rate would have jumped much higher without another big fall in people looking for work.
To be counted as unemployed by the ABS you must be actively looking and available for work – the latest figures showed the participation rate slumped to its lowest level since January 2001, at just 62.9%.
The JobKeeper wage subsidy is likely contributing to lower participation rates but with the scheme set to expire in three months’ time, unemployment could soon shift higher as people start looking for work again.
History tells us that following a recession it takes a long time for unemployment rates to return to pre-recessionary levels.
Before the Global Financial Crisis in 2007, Australia’s unemployment rate was 4.0% and has remained above 5.0% ever since. Similarly before the early 1990s recession, the unemployment rate reached a low of 5.8% and didn’t return to that rate until August 2003.
Therefore, it’s almost certain the current unemployment rate will not return to pre-COVID-19 levels for some time.
Importantly, an increase to the unemployment rate will not necessarily lead to property price declines.
2. Population growth
Population growth is integral to the stability of the property market as it it the main driver of demand.
However, ABS demographic data from the December 2019 quarter, released last week, showed that the rate of population growth in Australia was already slowing before COVID-19 hit due to the dwindling rate of net overseas migration.
The population increased by 349,833 people in 2019 – its smallest annual increase since the 12 months to December 2015 and its slowest rate of growth since June 2006.
With international borders now closed due to COVID-19, population growth will likely be hampered even further, which will likely lead to reduced overall housing demand in the coming months.
The impact of this is likely to be more acute for the rental market and the new housing sector because most overseas arrivals don’t own property before arriving in Australia. If new arrivals do purchase a home before they gain citizenship, they usually have to purchase a new property.
The federal government’s new HomeBuilder scheme aims to offset reduced demand for new homes by migrants, but the incentive is only available until the end of this year and it’s still unclear when international borders will re-open.
Additionally, HomeBuilder does not address the lack of rental demand caused by closed international borders, which could lead to financial woes for landlords.
3. Consumer confidence
Purchasing a property is one of the biggest decisions most Australians will ever make, and therefore their confidence in the state of the economy plays a big part in their decision to take the plunge – or not.
It goes without saying that prospective home buyers are far more likely to transact on property if they feel confident about their overall financial position, which for many might now be in a precarious position as a result of the health crisis.
Consumer confidence fell dramatically as Australia entered COVID-19 lockdowns, but according to the ANZ-Roy Morgan Weekly Consumer Confidence Index, confidence has rebounded significantly since the introduction of the JobKeeper program and mortgage repayment holidays from the banks – now sitting slightly lower than it was before COVID-19 lockdowns began.
This marks a rapid recovery in consumer confidence, especially when you consider how quickly the virus was spreading as the country entered lockdowns.
Read the full article here
Job vacancies up 31pc, but…
Jobs are beginning to rebound, so what does this mean for the market?
Jobs rebounds begins
Job vacancies jumped by 31.1 per cent or +21,700 in May 2020, which is the good news.
The bad news is that this is still -49 per cent or -87,800 down from a year earlier.
All states bumped off their lows in May, with the big four states bouncing by 30 to 40 per cent.
Read the full article here
Melbourne COVID-19 outbreak: Auctions to go online in hot spot areas
Auctions in Melbourne’s coronavirus hot spot areas are set to go online.
This article from Domain.com.au explains all the details.
Read the full article here
Some Australians have been trying to use their early super withdrawals to get onto the property ladder, mortgage brokers say
Some Australians withdrawing early super are using it to enter the property market.
An article from Business Insider looks at what’s going on.
Never ones to let a pandemic go to waste, some Australians have been trying to exploit the government’s flawed super withdrawal scheme to get onto the property ladder.
While the early access to super scheme was intended to allow those hardest hit by the COVID-19 pandemic to survive financial hardship and make ends meet, some see it as an opportunity to get ahead.
There’s been no shortage of Australians who have taken advantage of the scheme to cobble together a home deposit as the scheme fails to properly vet applicants.
Mortgage brokers have confirmed to Business Insider Australia that they are receiving loan applications, some daily, in which a $10,000 or $20,000 deposit has been withdrawn from a superannuation account.
“Over the past two weeks, myself and other brokers I work with have interviewed many prospective buyers who have accessed the $10,000 – [or] $20,000 if a couple – to use as the deposit for a home, when their income has been unaffected,” one broker said, asking for their name not to be published.
Several brokers who spoke to Business Insider Australia shared similar experiences, saying applicants coming from all walks of life, including mining, manufacturing, transport and even government employees.
Most applicants reported their income and hours hadn’t suffered at all during the pandemic but had chosen to use the superannuation scheme to top up their deposits in an effort to secure a loan.
“I have even seen one case where the pandemic resulted in an increase in income and super funds were still accessed to use as a home deposit,” one Queensland-based broker said.
Such reports are yet another indictment of how poorly the superannuation scheme has been administered, with applications approved without due scrutiny.
As many as 40% of withdrawals have been made by Australians whose finances have been unaffected by the pandemic, according to economic consultancy firm AlphaBeta.
The figure suggests nearly 850,000 of the 2.1 million withdrawals made so far have not met the government’s own criteria.
While the horse may have bolted, the Australian Taxation Office (ATO), which has overseen the scheme, says it is now investigating.
Earlier this week, the ATO said it will add any illegitimate withdrawals to people’s taxable income – effectively taking back around a third of the sum – and has threatened hefty fines.
“If you provide false or misleading information you could face penalties of more than $12,000 for each false and misleading statement,” the ATO said.
Actually getting a mortgage approved is still a major hurdle
For those whose goal is the real estate market, the first true obstacle they have met actually appears to be in using their retirement savings as a deposit.
While the pandemic may have seen superannuation funds lower the drawbridge, banks and lenders are more vigilant than ever as concerns grow over the possibility of an explosion in bad debts.
Whether or not these applicants are getting approved is a point of contention, with brokers reporting different experiences.
“As far as I’m aware, [no lender] will accept any of it as the deposit. You need to have your deposit from other sources,” one said.
“Some lenders have advised they will decline the application as soon as they see the super money, even if it isn’t needed in the transaction.”
Some brokers argue that by accessing their super, applicants have declared themselves to be in financial hardship.
Responsible lending laws should, in theory, automatically bar them from getting a mortgage.
“If the borrower later claims the loan should not have been approved due to them not being able to afford it without hardship, it would be almost impossible for the lender to defend their case,” one said.
It stands to reason that those who are unemployed or have lost a significant proportion of their income probably would not be lent hundreds of thousands of dollars.
The disconnect has produced something of a catch-22.
Those who withdrew super within the constraints of the scheme probably won’t be approved for a mortgage.
Those who get mortgage approval probably shouldn’t have been able to get their hands on their super in the first place – at least under the government’s guidelines.
There are a small number who have successfully used their super as a home deposit
Nonetheless, some appear to still be getting the green light.
“Some lenders have a blanket ‘no’ policy for those kinds of applicants but some are definitely getting through,” Mortgage Choice franchisee Caroline Jean-Baptiste told Business Insider Australia.
“They tend to be the ones who would have been strong applicants in the first place, with lenders determining they can in fact service the loan.”
While there aren’t many places in Australia where $20,000 would even pay stamp duty, a potential exists to combine different government schemes to get a foot on the ladder.
Read the full article here
Working From Home Indefinitely? Here’s How To Keep Some Work-Life Balance
It looks like working from home is set to be the new norm – but how can you keep things balanced?
An article on Huffingtonpost.com.au lists ways to make sure you still have a work/life balance.
For those fortunate enough to be working remotely during this crisis, three months of work, life, pyjamas and Zoom calls have whizzed by.
When it feels as though we are living in an ′infinite present’, it’s no wonder many of us are missing aspects of our former work life – from face-to-face social interactions with colleagues at the coffee machine to simply being in a buzzy office environment (yes, really). Or using the lift.
There are perks to working from home, of course – bye bye, stressful commute! – but while we may have gained an hour in bed, that hour can be eaten up worrying about job security or stressed by the increasingly blurred lines of work and home life.
Add childcare into the mix and it’s hard to stay level. We know we need work-life balance, but what does that actually look like now?
One size doesn’t fit all
The challenge of remote working has taken its toll on some more than others.
That’s as true of the aches and pains we experience at our desk / kitchen table / ironing board as it is of our relative levels of productivity and procrastination during the work day. We are no longer occupying the same office, and even when we were, everyone’s preferred work style was different.
Now we can recognise those differences, there’s an opportunity to cater for them.
“Businesses should step up and provide tools and training for their employees during this difficult period,” says Ritam Gandhi, founder and director of London-based tech developer Studio Graphene.
“Importantly, they cannot treat their entire workforce the same, with each member of staff having unique needs and circumstances that they must support.”
Set your own boundaries
Working from home has its positives and negatives.
Many people are finding the lack of commute, slower pace of life, fewer distractions and being away from a stressful – even toxic – work environment is better for their mental health. Others may be feeling lonely, lacking in motivation, and missing the pace.
It’s good to be as productive as possible – not to be a slave to the man, but so that our work time is work time, and our free time ours to reclaim.
“Because work is spilling into home life I think it’s important to have some boundaries,” says Chloe Brotheridge, hypnotherapist and Calmer You coach.
“That might be around when you answer emails or phone calls, your lunch break, what time you start and finish work. Remember, you set the expectation to others about what is and isn’t okay with you – if you’re answering work emails at 10pm they may come to expect that.”
Boundaries also apply to your physical space – most of us don’t have the luxury of a home office, but it helps to impose clear divides in your home so you have a place where you psychologically feel that you’re ‘at work’.
“The more that you move around, the more your home and work boundaries blur,” occupational psychologist at Affinity Health at Work, Rachel Lewis tells HuffPost UK. “Try to keep a routine, so you aim to have as similar a day in the office as possible.”
And when it comes to the weekend, clear your workspace to clear your mind.
Turn on. Tune in. Log out
Maintaining a good work-life balance not only helps you work better, it’s fundamental to looking after yourself, preventing burnout in the workplace. Feelings of stress, boredom, anxiety and uncertainty are completely normal during this time.
One way to counteract them is to reduce your screen time.
“There’s a lot of online activity going on. We’re probably less critical of it than we were before,” explains Martin Talks, founder of Digital Detoxing.
“Building in digital detoxes in your life is a good idea.
We’re straining our eyes with backlit screens, stressing ourselves over work emails and disappearing down a rabbit hole on social media, so clear your mind and keep technology outlook to a minimum.”
Does that meeting really need to be on video? Try calling them instead.
Working towards a better future
Working from home has become an organisational necessity. We’ve seen that for many people it’s possible to work remotely and, for many companies, it’s now seen as a realistic – even positive and productive – way to operate.
“The more control we can have about the way we do our work could impact how we do our work better,” says Talks.
“It should be less about location and more about what the output is.”
Read the full article here
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