Attwood Marshall Lawyers Property and Commercial Special Counsel Barry van Heerden rounds up April’s biggest news including the RBA shake-up, the link between property prices and population growth, and how the bank of mum and dad continues to be the ninth-largest residential mortgage lender in Australia.
Introduction
The Reserve Bank of Australia had a particularly busy month in April – first announcing that it will be breaking its habit of rising interest rates and then that it would undergo significant internal changes to meet the recommendations of a Treasury-appointed independent review. There was also a flurry of statistics at the start of the month revealing that house values rose for the first time in eleven months while the number of those entering the market for the first time fell.
Here is more detail on these and some other big news stories for the real estate market:
RBA pauses interest rate hikes and set to undergo major structural overhaul
The Reserve Bank of Australia halted interest rates at the start of April after 10 consecutive rate rises, leaving the cash rate target at 3.60 per cent.
The governor Philip Lowe said he wanted to wait and see how the previous increases will impact the economy, considering the significant cost-of-living pressures and declining housing prices that have slowed household spending.
The RBA dominated the business pages on Thursday 20th April when the Treasurer announced a major shakeup to the way the central bank is run, based on recommendations from an extensive independent review.
The review, which analysed RBA’s performance over the past 30 years, came up with 51 recommendations, largely focused on creating more accountability and greater transparency on central bank decisions.
The RBA confirmed its board will be split into two so that there is a separate board to handle interest rates and other monetary policy matters. A new governance board, meanwhile, would be responsible for overseeing the management of the RBA. This mirrors the structures of central banks in the U.K. and Canada, and will also mean more appointments from a broader range of disciplinary backgrounds to contribute to interest rate decisions and general oversight.
The RBA is expected to keep its flexible inflation targeting of 2 – 3 per cent, but the review said there needed to be more clarity on the central bank’s framework and internal decision-making process. The annual inflation rate for Australia is currently sitting at 6.8 per cent.
Whether this “shake-up” is a good thing or not is open for debate. Is this not just a further layer of bureaucracy and red tape? Who will (next) oversee the new governance board? If the members of RBA are not trusted, why not appoint new members? Or is this just a stunt (at tax payers costs) to satisfy the sensation created by public media?
The link between property prices and population growth
It’s easy to associate movements in property prices solely with the rise and fall of interest rates. But there are other factors at play too.
A new Domain report published in March found that in the longer term, greater population growth could have more of an impact on property prices than interest rates.
According to the findings, a 1 per cent increase in the mortgage rate leads to a 1.34 per cent fall in house prices over a quarter. But a 1 per cent increase in population equates to a rise in long-term cumulative house prices by 8.18 per cent.
The findings are a reprieve from the more doom and gloom updates that usually capture the media’s attention in our new world of higher interest rates.
The report concluded that even while mortgage rates are increasing, house prices can still be propped up by population growth, over time.
Several migration statistics were cited to show that Australia’s population is rebounding after the dip seen during the Covid-19 pandemic and the country’s strict international border closures. Population figures are also expected to continue growing after the government announced in the last budget that it will be lifting the migration cap for 2022-23 and spending $36 million on fixing the backlog in processing skilled worker visas.
Increase in enquiries about the bank of mum and dad
Here at Attwood Marshall Lawyers, we’ve noticed an uptick in the number of enquiries we’re getting from parents who are willing to loan their adult children funds to help them secure their dream property. The “Bank of Mum and Dad” – i.e. when a parent or grandparent assists a first time buyer financially when entering the property market, is not a new concept, for many years the bank of mum and dad has been one of the top ten biggest mortgage lenders in Australia!
While there has anecdotally been more interest in how such agreements would work in practice from a legal standpoint, the overall number of those being able to secure enough lending has experienced a decline.
Data from the Australian Bureau of Statistics released in early April showed that the number of first-home buyers entering the property market fell nationally by 3.5 per cent in February to 7,022. That followed a 4.6 per cent decline in January.
The main challenges for first-home buyers are related to tightened lending conditions and high property prices.
Also, at the start of April, CoreLogic’s National Home Value Index recorded a 0.6 per cent month-on-month rise in the price of houses being sold across Australia, after 11 months of declines. The rise was largely associated with the high-end market of the biggest capital cities, where investors and international migrants are purchasing a home instead of finding a rental first.
Despite this, the message must be clear, anyone considering guaranteeing the loan of a loved one, or forking out the funds to help their child enter the property market, should understand the risks associated with these types of arrangements and what safeguards should be put in place to ensure your best interests are also protected.
Read more:
Parents going guarantor on home loans
The bank of mum and dad – Australia’s 9th biggest mortgage lender
REIQ launches best practice guidelines
On April 3 the Real Estate Institute of Queensland (REIQ) launched its Best Practice Guidelines, setting out standards for legal compliance as well as for the behaviour and professional conduct expected of its member agents.
REIQ, which represents real estate professionals across Queensland, said that the guidelines are aimed at giving consumers greater confidence in their real estate agents. It wants the guidelines to be seen as the ‘playbook’ for accountability, professionalism and integrity.
“The vast majority of real estate agents are hard-working and compliant, and they themselves are frustrated by the poor perceptions about real estate agents,” said Antonia Mercorella, REIQ’s chief executive, in the announcement.
“As the state peak body for real estate professionals, one of our key commitments is to raise professional standards and community perceptions because we want a strong and sustainable real estate sector.”
The 99-page booklet covers topics including disclosure requirements, auctioneer responsibilities, handling of body corporate relationships, how to secure commissions and fees, as well as when to refer clients to seek financial advice for selling a business, among other subjects the peak body said its members have been asking about.
The guidelines are organized into seven different sections, with the first focused on general agency practice. The remaining six chapters are broken up by specialisms, with guidance for: residential sales agents, property managers, auctioneers, buyer’s agents, business brokers and commercial & industrial agents.
Attwood Marshall Lawyers – an experienced team ready to help facilitate successful property transactions
Our experienced property lawyers enjoy working with real estate agents, investors, buyers, and sellers to make sure their property goals are achieved and that transactions progress without any unexpected issues. We offer free pre-signing advice on Queensland contracts and can assist with drafting special conditions and conducting negotiations between parties to help property transactions proceed seamlessly.
If you know someone eager to buy or sell who would benefit from expert legal advice and support throughout the conveyancing process, contact our Property and Commercial Department Manager, Jess Kimpton, on her direct line 07 5506 8214, mobile 0432 857 300, or email jkimpton@attwoodmarshall.com.au
Our lawyers are available for appointments at all our conveniently located offices at Coolangatta, Robina Town Centre, Southport, Kingscliff, Brisbane, Sydney, and Melbourne.
We also offer extended trading hours at our Robina Town Centre office, which is open until 9pm on Thursday nights and from 9am to 12noon on Saturdays.
