Melbourne’s housing market has been the target of a lot of negative talk in the first half of the year. But recent signs have indicated things are set to turnaround.
Government party certainty
The lead up to the election put a lot of housing activity on hold as buyers and sellers waited to see which party – and therefore policies – would come out on top. With the re-election of the Liberal Party, negative gearing policy will remain unchanged, giving confidence to property investors that their current investment strategy is secure.
Interest rate cuts by the RBA
The Reserve Bank’s decision in June to cut the official interest rate by 25 basis points to 1.25 per cent is designed to stimulate economic growth. Many of the major banks have flagged their intention to pass on at least some of the interest rate reduction if they haven’t already.
Lending restriction lifted by APRA
Likewise, the Australian Prudential Regulation Authority (APRA) has lifted lending restrictions, changing the way banks will assess a borrower’s capacity to repay their mortgage. Until now, the banks have had to base their borrowing capacity on an assumed interest of 7 per cent. APRA has now said banks can make their calculations on a 2.5 per cent rate buffer. Combined with the rate cut, this will bring a whole new cohort of buyers into the market.
First Home Loan Deposit Scheme
And for first home buyers, the First Home Loan Deposit Scheme will mean first home buyers won’t have to save the full 20 per cent deposit to avoid paying Lender’s Mortgage Insurance (LMI). Instead, borrowers will only have to save a minimum of 5 per cent deposit, with the government guaranteeing the difference. This could save borrowers around $10,000, based on an average mortgage amount. The scheme starts on 1 January 2020, giving even more buyers a step-up into the market.
With all this in mind, it’s clear that there are plenty of opportunities for investors and home buyer’s alike to enter the Melbourne property market.
For more information on how you can make the move to a better lifestyle in Melbourne’s northern suburbs, download our free guide to everything you need to know before buying to live or invest.