Although it has been hard to be optimistic at times in 2020, there is some good news ahead for property investment in Australia, despite the coronavirus crisis.
Most importantly, it is expected that borrowing money and getting a mortgage will be made easier as a result of lending reforms to be introduced by the federal government. These measures are part of series of changes designed to free up credit and fuel the recovery post-Covid 19, and are expected to be of particular assistance to anyone looking at real estate investing in the short or medium term.
Federal Treasurer Josh Frydenberg, speaking about the reforms, said that given the current coronavirus pandemic, “It is more important than ever that there are no unnecessary barriers to the flow of credit to households and small businesses. Maintaining the free flow of credit through the economy is critical to Australia’s economic recovery plan.”
Reforms to Australian credit laws
Expected to come into effect in March 2021, there are a number of underlying factors driving the reforms, as well as some significant key outcomes:
- The federal government has been motivated by the need to revise current credit laws, which it says are now outdated.
- From January 2021, mortgage brokers will operate under a best interests duty (BID), which requires a higher duty of care than is currently required under responsible lending rules.
- Verification procedures are to be reduced, so that borrowers will not need to provide as much information to lenders.
- This also means that borrowers will be more accountable for providing accurate information.
- A Borrower Responsibility principle will replace the current Lender Beware practice.
- It is anticipated that this will decrease the amount of time it takes to secure a
- Overall, these reforms mean that it will be easier to obtain a mortgage or to refinance your home.
- The changes are being backed by the housing industry, including Master Builders Australia.
- Mortgage brokers and property advisers will continue to play an important role in helping borrowers to obtain finance for buying an investment property.
- This is because brokers have brought greater competition to the market, giving property investors greater choice when it comes to obtaining finance.
- Consumer protection measures will remain in place under BID, with credit providers required to comply with existing licensing obligations to act efficiently, honestly and fairly.
Other financial reforms will also make it easier for small businesses to get access to finance, while regulations covering debt collectors will also be changed to allow borrowers in dispute with debt collection agencies to appear before the Australian Financial Complaints Authority. Changes will also be made to laws governing personal loans, credit cards and payday lending.
What will be the impact on property investment in Australia?
It is expected that these reforms, combined with sustained low interest rates and an overall economic recovery across the country, will see a significant surge in house prices starting in mid 2021, and continuing to rise until 2023.
Westpac Bank senior economists are predicting a price surge in capitals across the country, with analysts anticipating that prices could rise by as much as 20% by mid-2023 in Brisbane and 18% in Perth, with major rises in all other capital cities as well.
This data would seem to suggest that now is the ideal time to invest in property, in order to get ahead of the anticipated rise in prices across the country.
Talk to High Income Property about real estate investing
High Income Property specialises in helping property investors in Australia to find the best areas in which to invest in order to obtain ongoing income and long term growth.
Call us on (02) 8007 4001, send us a message or email us at firstname.lastname@example.org to find out more about property investment strategies and how you can make the most of the changes to Australian credit laws and the expected rise in house prices.