Time is running out for large numbers of buyers and sellers who set a Christmas deadline to sell their property and move into a new home for the summer break.
Property specialists say potential delays in financing, lawyers winding-down operations by mid-December and the traditional four-week January break across the real estate industry will create challenges for those rushing to seal a deal.
There’s the added risk that undue haste to buy might mean skipping proper due diligence or relying on inadequate disclosure about serious defects.
National property listings last month rose nearly 12 per cent, to about 240,000 from the previous month but are still down more than 22 per cent from the year-earlier period, says SQM Research, which monitors property markets.
Easing of lockdown restrictions, spring sales momentum, strong price increases and record low-interest rates have helped drive the turnaround in demand, SQM analysis shows.
There has also been a sharp increase in the number of auctions with more than 3500 last week (or about 17 per cent higher than the previous week and more than double the same time last year), research house CoreLogic says.
Medical practitioner Eric Richman and his wife, Leah, who runs a not-for-profit, are empty nesters planning to sell their six-bedroom, two-storey home set in four hectares of bush, garden and orchards in Kholo, about 50 kilometres west of Brisbane.
Richman, who has already had four offers for the property, says his two adult sons and daughter have left home and that he and his wife are too busy to make use of the property’s entertainment facilities.
“The big rooms, bedrooms and ensuites no longer make much sense,” he says. “I want to sell it to a family who can make use of it in the way it was intended.”
Ray White Real Estate, which is handling the sale, says it is expecting offers over $1.99 million.
For Matt and Kirrily Bevan the Christmas rush is to “escape” Melbourne and head to the Sunshine Coast in southern Queensland for the warmer weather, fewer lockdowns and better lifestyle.
Cabinetmaker Matt says he’s hoping to exchange their four-bedroom home in Sunbury, 42 kilometres northwest of Melbourne, for a new property with a view of the Pacific Ocean. The property is on the market for between $1.3 million and $1.4 million.
“The kids are excited, and it’s something my wife wanted to do about 10 years ago,” he says.
Industry specialists say many buyers and sellers are pushing to have their property deals completed in the countdown to Christmas. “Particularly families,” says James Kirkland, sales director of Upside Realty, a real estate agency. “But it gets trickier the longer you leave it,” he adds about the need to finalise financing and legal issues. “You’d need to get it started in the next two weeks if you are going to meet the Christmas deadline,” Kirkland says.
Cate Bakos, a buyers’ agent, adds: “Buyers and sellers know the process is punctuated by the summer break. If they cannot settle early, there is the chance of massive delays that could create funding issues.”
Macquarie Bank and ING typically lead the field for the fastest average turnaround time from loan application to initial credit decision, delivering three or four times faster on average, says analysis by Broker Pulse, which monitors lenders.
A survey of the 12 largest lenders between August and September found ING and Macquarie could typically deliver in four to six days compared with between seven and 16 days for majors such as CBA and ANZ.
ING and Macquarie do not run branch networks and distribute loans almost entirely through brokers.
CBA and NAB were the fastest top four banks at seven days followed by Westpac and ANZ at 11 and 16 days respectively.
Most lenders say they can approve a “vanilla” (or simple) home loan for an existing customer within a couple of days. Applications for new customers, or those with complicated finances that need checking by the lender, take longer.
Many lawyers are warning they will start winding down their practices between December 13 and January 17, which could create delays for buyers settling and completing loans.
Buyers could consider a bridging loan, particularly when they have purchased a new property before selling the old. Interest rates on bridging loans are substantially higher than standard loans and there could be the additional financial stress of paying two mortgages.
A buyer requiring $1 million in bridging finance could expect to pay nearly $4000 a month plus set-up fees and other lender charges, online comparison site Canstar says.
A six-month, interest-only bridging loan is likely to cost about $22,000 with average lending rates around 4.45 per cent (more than 50 per cent higher than a basic variable, principal and interest, owner-occupier loan). This is based on a 20 per cent loan-to-value ratio with average upfront costs of about $590. The cost for 12 months would be about $44,500, or $45,419 if interest was capitalised.
For those willing to hold out for a few months, there is the possibility that increased supply, the prospect of rising interest rates and tougher lending conditions imposed by the prudential regulator will cool market conditions.
Cameron Kusher, director of economic research at REA Group, said the Reserve Bank of Australia’s announcement on November 2 “suggests more significant increases to fixed rate mortgages are on the horizon”.
This year, house prices have increased more than 23 per cent in Sydney, 18 per cent in Brisbane, 9 per cent in Melbourne and an average of 16 per cent across the nation’s capital cities, SQM research shows.
But market specialists say “gathering storm clouds” suggest that a smarter strategy than racing to complete by Christmas might be to wait until next year.
“We expect a further slowing in price gains ahead of falls from later next year,” says Shane Oliver, chief economist for AMP Capital.
“Listings are on the rise; poor affordability is pricing more borrowers out of the market; a rotation in consumer spending back towards services as reopening occurs may reduce housing demand; fixed mortgage rates are on the rise; and the RBA is expected to start raising interest rates from late next year,” Oliver says.
Bakos urges buyers to take their time completing due diligence and finance to reduce the risk of potentially expensive shortcuts.