Non-major's head of home loans says there are a range of factors to consider
It’s no secret the pandemic has seen many Australians re-evaluate their priorities. A combination of new remote working arrangements, the risk of infection from high density living and unaffordability in Australia’s major metro centres has had many city dwellers considering a sea change or tree change. According to ME Bank head of home loans Andrew Bartolo, there are a range of factors for brokers to consider when lining up finance for tree-changers. MPA spoke with Bartolo for some tips on how brokers can best help these clients.
Buyers are escaping to the country
In the last few months, Zain Peart has seen a surge in client activity at his Lennox Head brokerage. Situated on the far north coast of NSW, Peart says the property market is pumping; ZEP Finance already writing 50% of last year’s numbers in just three and a half months.
“This area is going ballistic at the moment.”
“You can’t find a rental – and rental prices are going up by $100.”
“People are coming in and properties are selling unseen – it’s really, really crazy.”
Wollongong broker Paul Wright tells a similar tale. The MoneyQuest finance specialist says in the last 18 years of his career he has never been so busy, with the majority of new business coming from first home buyers looking to take advantage of the Government stimulus currently on offer.
He is also seeing more clients move to the Illawarra to buy a property.
“We’re getting people moving out of Sydney.”
“They’re moving to places like Wollongong because of lifestyle.”
According to recent data from CoreLogic, property prices in regional NSW and regional QLD have increased by 6% and 5.1% in the 12 months to October 31.
“The new-found popularity of working from home is only one factor helping to support regional home prices,” says head of research Tim Lawless.
“More affordable price points, lower densities and lifestyle factors, are also underpinning the relative strength across many regional areas of the country.”
Factors to consider when lining up finance
But, moving from the city to the country may not be all roses and peaches when it comes to lining up finance.
According to Bartolo, there are several rules of thumb for brokers and their clients to use when buying in regional areas.
“Consider factors that can influence the local market, particularly if it’s for investment purposes,” he says.
“One factor is the nature of the local economy.”
He says if this is dominated by a single industry, property prices and rental yields may fluctuate depending on the town’s fortunes. Mining towns give a good example.
“Banks will be more wary of investments in these types of towns.”
On the other side of the coin, areas with greater economic depth and breadth are more likely to stay resilient to industry change.
“Another factor is infrastructure, such as roads and rail.”
“Road improvements between a regional area and a nearby city can shorten travelling time and increase the desirability for tree changers. Rail service changes can have similar impacts.”
He says the selling period in regional areas tends to be longer than that in major centres – sometimes lasting as long as two years.
“This can be an issue if an investor needs to exit quickly.”
“Selling periods can be much longer in towns with smaller populations due to the depth and quality of the buyer market.”
“Banks will require lower loan to valuation ratios for properties that are particularly isolated or below a certain size.”
