Finals, fascinators and finance approvals
7 min read
Even if the weather doesn’t turn it on, there are 3 things that happen in Melbourne around this time of year that remind you it’s spring:
- Demons fans wonder what it’s like to be part of finals week;
- Milliners and tailors around South Yarra and the CBD are already taking orders ahead of the annual racing carnival;
- There’s the rush of borrowers wanting to knock-out the competition at an open home or auction this weekend.
Last spring, Point 3 went AWOL. With the Hayne Royal Commission stirring uncertainty in the marketplace and lenders taking an overly cautious approach to applications, potential buyers put their property goals in the ‘too-hard’ basket.
But, this year, borrowers are back in season.
Borrowers are on the rise
The number of Entourage Finance clients with pre-approval has increased 80% compared to mid-September last year. And the determination to purchase is represented in the weekend auction activity.
On Saturday, Domain reported the auction clearance rate hit 79% in Melbourne from a reported 672 results. There was a good volume of properties going under the hammer last weekend to avoid this weekend’s AFL Grand Final.
The clearance rate has now been sitting above 70% for the last couple of months.
They say a week is a long time in politics. A year in property is an eternity.
That conversion rate is a massive turnaround from mid-2018, at the height of the Hayne Royal Commission hearings, when every second property was passed in.
It’s been interesting to see where the borrowers are focusing their efforts.
Where doing a lot of applications for people wanting to get into areas like Northcote, where the median unit price ($560,000) has increased 6.7%, and Hawthorn, where unit prices have held steady (0.6%) with a healthy 200 sales over the last year for a median of $528,000.
First Home Buyers (FHBs), in particular, have been proactive in lining up approvals.
According to the latest Australian Bureau of Statistics data, the number of FHB loans had risen 8% in Victoria in July (3,241 vs 2,994) compared to the same month last year.
Based on the foot-traffic into Entourage Finance, I’m confident the September figures will be considerably higher, again.
Interest rates, elections and APRA
It’s not so much the change in seasons that has increased the volume of activity in the market. May’s Federal Election, the RBA’s consecutive interest rate cuts and APRA’s easing of the threshold for loan serviceability have all combined to wake borrowers from a prolonged hibernation.
Punters were betting on the RBA cutting the official cash rate only hours before the Melbourne Cup. But sluggish economic data has now shortened the odds of it happening at the board’s October meeting.
Irrespective of whether another cut comes in the first week of October or four weeks later, the volume of borrowers lining up for pre-approval is swelling registrations at auctions around Melbourne and creating competition.
Auctions are an unconditional sales process. If you’re the winning bidder, you’re going to be the owner.
Holding the winning paddle at the end confirms you have the finance to go through with the purchase.
How to get pre-approved
At Entourage Finance, we can help you get auction fit.
We can analyse your situation: your earnings, typical expenses – go easy on the Uber Eats for your waistline and your application process – the value of existing assets to your name and how much you owe. We also analyse your credit history. All of this helps frame your ability to service a loan.
From there, we can make an estimate of your borrowing capacity and use our knowledge of lenders and their products to propose a strategy for pre-approval.
From thorough market research, attendance at other auctions and open homes, and liaison with the prominent real estate agents in your marketplace, you’ll have developed an understanding of what you need to pursue your property goals. Remember, just because you can be approved for a certain amount, it doesn’t mean you have to sign up to that amount of debt.
Be part of the spring property season
Spring is the peak property season. The sun comes back out, making the prospect of heading outside to an open for inspection or auction a little more appealing. And after the bite of winter, gardens and backyards come back to bloom.
And the buyers are back, as well. If you want to be amongst the activity this season, you need to partner with a finance team – an entourage – that can put you in the best possible position to compete.
So, don’t be left out like a Demons supporter in spring – talk to Entourage Finance about getting pre-approval, today.