Why 2020 is the right time to buy a home: Big banks predict houses will be the most affordable they've been for more than a decade - and paying off loans will be cheaper too
- Westpac is forecasting the best housing affordability since the GFC in 2008
- Mortgage repayments as proportion of pay tipped to fall below 30-year average
- Double-digit property price plunges are predicted for Sydney and Melbourne
- Here’s how to help people impacted by Covid-19
Australian properties are set to be the most affordable since the Global Financial Crisis more than a decade ago as house prices plunge by double-digit figures.
The weakest immigration pace in more than 100 years, as a result of the COVID-19 border closures, is also set to make mortgages easier to service than usual for those who buy in a few months.
By late 2020, Westpac is forecasting a couple will only need to spend 19 per cent of their after-tax pay on repaying a loan for a median-priced home.
That's the most affordable level home loan repayments have reached since the height of the GFC in late 2008 as interest rates were slashed, only for property prices to surge again later.
Mortgage service levels in 2020 would also be at levels last seen in the late 1990s, before governments from both sides of politics ramped up immigration - causing strong population growth to supercharge demand for housing.
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Australian properties are set to be the most affordable since the Global Financial Crisis more than a decade ago as house prices plunge by double-digit figures.
Westpac, Australia's second-biggest bank, is forecasting a ten per cent plunge in Sydney property prices in 2020 and an even steeper 12 per cent plummet in Melbourne as COVID-19 stops immigration.
'Our estimates suggest a ten per cent fall in capital city prices should provide enough of an affordability improvement to start supporting demand, comparable to the correction during the GFC,' senior economist Matthew Hassan said.
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Westpac noted owner-occupiers were the key to a housing market price recovery.
'The housing market is driven by owner occupiers, where affordability and expected affordability are key, and by investors where confidence dominates,' it said.
Unlike previous housing market downturns, the 2020 plunge is being sparked by a health pandemic and not financial market or lending rule factors.
After the GFC, between 2012 and 2017, house prices in Australia's two biggest cities surged with Sydney values rising by 68 per cent as Melbourne's median price climbed by 54 per cent, Australian Bureau of Statistics data showed.
By late 2020, Westpac is forecasting a couple will only need to spend 19 per cent of their after-tax pay on repaying a loan for a median-priced home. That's the most affordable level of home loan repayments since late 2008 during the height of the GFC, before prices surged again
During the recent 2017 to 2019 downturn, Sydney's median house price plunged by 17.4 per cent before soaring by 21.3 per cent in the period until April 2020, CoreLogic figures demonstrated.
Capital city house prices last month dropped by 0.5 per cent with Sydney suffering its first monthly decline in a year.
The two previous housing market recoveries of the past decade coincided with Australia's net annual immigration pace climbing above 200,000.
With Australia's national borders shut to non-citizens and non-residents since March 20, 2020, the government is expecting the pace of net annual immigration to dive from 170,000 this financial year to just 35,000 in the next financial year.
AMP Capital chief economist Shane Oliver said the coronavirus crisis would see 'big negatives' for home prices as population growth halved to 0.7 per cent in 2020-21, the lowest since 1917.
During the late 1990s, when Australia had a net annual immigration pace of 70,000, mortgage repayments consumed 18 per cent of household income, compared with 22 per cent now.
Affordability deteriorated from 2002 onwards, with home loan repayments taking up more than 20 per cent of disposable income, as net annual immigration levels climbed above 100,000.
Consequently, Australia's household-debt-to-income ratio of 186.5 per cent is the second highest in the world after Switzerland.
In a bid to spur home building activity, Treasurer Josh Frydenberg this week launched the $680million HomeBuilder program, giving all eligible owner-occupiers and not just first-home buyers grants of $25,000 to either build a new home or renovate an existing one.
It will be available for newly-built homes worth up to $750,000 and existing homes worth up to $1.5million.
Westpac, Australia's second biggest bank, is forecasting a ten per cent plunge in Sydney property prices in 2020 and an even steeper 12 per cent plummet in Melbourne as COVID-19 stops immigration
Home owners will need to spend $150,000 to $750,000 on renovations to qualify.
It will be available for singles earning $125,000 a year and couples on $200,000.
Daniel Walsh, the director of the Your Property Your Wealth buyers' agent, said the stimulus would most likely benefit affordable areas in Sydney's south-west, Melbourne's west, Brisbane's outer south and regional areas like Newcastle and Geelong.
'With the maximum price point for the HomeBuilder program set at $750,000, I believe it will be the more affordable areas that will benefit the most,' he told Daily Mail Australia.
Daniel Walsh (pictured with wife Sophie), the principal of the the Your Property Your Wealth buyers' agent, said the stimulus would most likely benefit affordable areas in Sydney's south-west, Melbourne's west, Brisbane's outer south and regional areas like Newcastle and Geelong
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