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COVID-19 and the property market

As the COVID-19 outbreak continues to affect our communities and the broader Australian economy, we aim to bring you unique insights into how the pandemic is impacting Australia’s housing sector and lending environment.

Over the coming weeks, we will be sharing a number of resources covering topics such as the latest government and lending initiatives impacting Australian investors and tenants, the effects we are seeing throughout the residential and commercial property markets, and advice on preparing for the changes ahead.

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Latest Videos

22/05/2020

What does a good buying opportunity look like in the current market?

As buyers begin to re-enter Perth’s property market following continued signs of market resilience, our Client Advice Manager, Emma Everett, caught up with our Managing Director, Damian Collins, to discuss current opportunities for buyers and investors, why buyers shouldn’t always focus on the ‘bargain’ deal and what the future could look like for property in Perth.

08/05/2020

Important change in lender response to COVID-19

With a number of lenders implementing increasingly stricter policies and processes in response to the COVID-19 pandemic, Momentum Wealth’s Finance Team Leader, Caylum Merrick, joins Client Advice Manager, Emma Everett, to discuss how this impacts borrowers, applications, and advice for investors to take advantage of the current opportunities.

24/04/2020

What does the new tenancy legislation in WA mean for landlords and tenants?

Our Property Management Team Leader, Amanda Kroczek, joins Emma Everett to discuss the new Residential Tenancies (COVID-19 Response) Act, what it means for landlords and tenants, and advice for owners on managing their property effectively during the COVID-19 health crisis.

17/04/2020

How is COVID-19 impacting the development sector?

Our Manager of Developments, Philip Anderson, discusses how the COVID-19 pandemic is impacting WA’s development and apartment sector, including the latest initiatives announced by the Minister of Planning, changes in market activity and which projects will be better placed when the market rebounds.

03/04/2020

Coronavirus and the lending market: how can you protect your financial position? 

Momentum Wealth’s Finance Team Leader, Caylum Merrick,  joins our Client Advice Manager to discuss the initiatives we are seeing in the lending sector in response to COVID-19, and the steps investors/homeowners can take to strengthen and protect their financial position during times of uncertainty.

26/03/2020

COVID-19 and WA’s residential property market: what are we seeing? 

Momentum Wealth’s Managing Director, Damian Collins, joins Client Advice Manager, Emma Everett, to discuss how COVID-19 is impacting WA’s residential property market, including the changes we’ve seen so far, which restrictions are affecting the real estate sector, and the initiatives in the pipeline for tenants and landlords.

Key Stimulus Updates

(PDF version available here)

Fast-tracking of proposed planning reform package – State Government

Proposed planning reform

In a bid to support economic activity in the lead-on from the COVID-19 pandemic, the WA Government announced it has fast-tracked the implementation of its proposed planning reform package, aimed at streamlining planning approval processes for households, small businesses and larger-scale developments. The changes include the removal of requirements for planning approval for smaller home projects such as patios and pergolas and the abolishment of the small business change of use approval, as well as proposed measures to streamline the development application process for “significant, job-creating” projects over the next 18-month period. This would include projects valued at $30 million or more, residential projects of 100 homes or more, commercial developments sized at a minimum of 20,000 sqm, and any regional or tourism projects considered to support the COVID-19 recovery. If passed through Parliament, the reforms will help to support WA’s economic resurgence post COVID-19 by assisting the creation of jobs in the State’s construction sector, supporting households and businesses in adapting and getting projects underway, and helping to build a stronger pipeline of projects for local developers.

On 30th April, the WA State Government announced it had approved new measures to fast-track up to $140 million of road and maritime projects across WA as part of its efforts to stimulate economic activity and create local job opportunities in the wake of the COVID-19 health crisis. The measures include a streamlined process for the awarding of contracts for transport and construction projects up to a value of $20 million, designed to support small to mid-sized contractors through the impacts of the COVID-19 pandemic. It’s expected that more than 1,000 local jobs will be brought forward across the 24 projects expedited. In addition, Main Roads is fast-tracking the tendering process for $2.37 billion worth of major road projects, estimated to create up to 13,000 employment opportunities. For more information, including a list of the expedited projects, read the Government’s media statement here.

$140 million of transport construction projects fast-tracked – State Government

Transport constructuion

Residential Rent Relief Grant Scheme – State Government

rent relief

In addition to the temporary legislation set out in the Residential Tenancies (COVID-19 Response) Act 2020, the WA State Government has committed $30 million for grants of up to $2,000 for residential tenants who lost their job on or after 20th March 2020 and are facing financial hardship as a result of COVID-19. The assistance package, which opens for applications from May 1st 2020, is aimed at helping to preserve tenancies by assisting eligible tenants in continuing to pay rent while also reducing the risk of exposing landlords to financial hardship.

The assistance will be available to tenants or sub-tenants who meet the following criteria:

  • They have lost their job on or after 20th March 2020;
  • They have applied to Centrelink for income support;
  • They have less than $10,000 in savings;
  • They are still paying at least 25% of their income in rent;
  • They have agreed to a rent reduction with their landlord OR have engaged in the Residential Tenancy Mandatory Conciliation service through Consumer Protection.

How much is the grant?

The grant will be equivalent to the difference between the tenant’s normal rent and the newly negotiated rent rate for a four-week period, and will be capped at a maximum of $2000. For instance, in a situation where an eligible tenant usually pays $400 and has agreed with their landlord to a rent reduction of $200, the difference of $200 per week multiplied by four would result in a grant of $800.

The grant will be directly paid to property owners (through their property manager where applicable). However, in order to qualify, landlords must agree not to seek to recover this rent relief from tenants at the end of the period.

For more information, including more details on eligible criteria, visit the Government website.

Following several amendments to earlier proposals, the Residential Tenancies (COVID-19 Response) Act 2020 was passed through the WA State Government on 21st April, outlining legislative modifications to support landlords and tenants during the COVID-19 pandemic. The finalised legislation, which applies retrospectively from 30th March and currently has a termination date of 30th September 2020 (subject to change if the emergency period is extended), includes State implementation of the moratorium on rent evictions (previously announced at a Federal level), as well as a number of other support measures:

  • Tenants facing financial hardship as a result of COVID-19 will be able to give 21 days’ notice to end a fixed-term tenancy prior to its end date without incurring break lease fees;
  • Landlords will not be able to implement rent increases while WA remains in a State of Emergency (currently until 1st October 2020);
  • Landlords will not be able to enforce that a tenant vacates when a fixed-term lease expires during the emergency period, unless the tenant decides to not extend or renew their lease agreement. Owners and tenants can still agree to renew the lease agreement or extend the terms of the existing lease. If an agreement can’t be made, the tenancy will temporarily continue as a periodic agreement;
  • Lessors will not be obliged to conduct routine repairs if the reason they cannot do so is due to COVID-19 related financial hardship or a lawful restriction on movement.

Moratorium on rent evictions

While the initial proposal stated that the six-month moratorium on rent evictions would apply to all tenants excluding limited circumstances, the Government revised this approach in the finalised legislation to exclude cases where the tenant’s failure to pay rent is not due to COVID-19 related financial hardship. The Government also explicitly stressed that tenants who are in a position to do so must continue paying their rent, and that those who fall into rent arrears or have had payments deferred will still be required to recoup these payments at a later date once they regain financial stability. For more information on this, including further exclusions to the moratorium and FAQs for landlords and tenants, view REIWA’s fact sheet here.

Residential Tenancies (COVID-19 Response) Act 2020

Residential Tenancies Bill 2020-2

Exemption notice for local planning approvals – Planning Minister

Approvals

Following regulatory changes introduced in response to the State of Emergency for the COVID-19 pandemic, the Planning Minister for WA has exercised new State of Emergency powers to release a range of temporary exemptions for local planning requirements. The changes aim to remove barriers within the planning system to support the ongoing operation of local governments and businesses through the COVID-19 health crisis and stimulate economic activity. As part of the measures, a Notice of Exemption has been issued providing a blanket two-year extension for all current development approvals. The Notice also identified a number of other matters that no longer require planning approval across a range of community services, including:

  • Medical or health-related facilities required in response to the COVID-19 pandemic;
  • Truck and logistic companies needing to deliver goods but currently impacted by restricted loading and unloading times;
  • Businesses seeking to adapt by changing their current approved use;
  • Restaurants and cafes required to sell takeaway in contravention of current planning conditions;
  • People operating their businesses from residential zones;
  • The parking of commercial vehicles on residential properties;
  • Businesses needing to change signage; and
  • Provision of temporary workers’ accommodation.

Under the Notice, local government authorities will only need to advertise planning proposals on their websites.

These exemptions apply to temporary situations only, and (with the exception of the two-year extension of approvals) the usual proposals will need to be sought in most cases within 90 days of the lifting of the State of Emergency. For more details on the planning exemptions, visit: https://www.dplh.wa.gov.au/notice-of-exemptions

On 6th April, the Australian Securities and Investments Commission (ASIC) advised lenders that they would not be breaching responsible lending rules if they switched customers’ principal and interest loans to interest only without full documentation. ASIC stated that a switch of product that does not increase debt does not fall within the responsible lending obligations. While lenders are yet to respond to the revised advice, the easing of scrutiny surrounding the switch to interest-only repayments could help households and investors whose income and cash flow has been impacted by COVID-19 by reducing their repayments in the shorter-term and helping them avoid the inflation of loan debt that occurs when deferring principal and interest repayments.

Revised advice on interest-only repayments - ASIC

Revised advice on repayments

$1 billion Economic and Health Relief Package - WA Government

State econ & health relief pack

In addition to an initial $607 million in relief stimulus, the WA State Government revealed a $1 billion economic and health relief package on 31 March to provide further support to WA businesses, households and communities impacted by the COVID-19 outbreak. Some of the new measures include:

  • An extension of the Energy Assistance Package aimed at assisting households experiencing financial distress due to COVID-19.
  • No WA households experiencing financial hardship as a result of COVID-19 will have their power or water disconnected, and no interest will be charged on deferred bill payments for those experiencing financial difficulties (applies to Synergy and Horizon Power customers).
  • Households impacted by COVID-19 can apply for an interest-free payment arrangement and for late payment penalties to be waived for transfer duty, landholder duty, vehicle licence duty or land tax.
  • Keystart customers facing financial difficulty due to COVID-19 can apply to defer principal repayments and waive interest costs for a period of up to six months, assessed on a case-by-case basis.
  • Payroll tax will be waived for a four-month period for SMEs with Australia-wide annual wages less than $7.5 million in 2019/20 (this replaces the deferral already announced).

The initiatives will be in place until September 30, 2020, subject to ongoing reviews. For full details, see the Government media statement.

On 30th March, the Federal Government announced a new $130 billion wage subsidy package to support the retention of employees in businesses substantially affected by the coronavirus outbreak. The Job Keeper Payment Program will see eligible businesses receive a fortnightly wage subsidy of up to $1500 per employee, and will help minimise the fallout to Australia’s economy and real estate sector by ensuring recipients can continue to pay outgoings such as bills and rental payments. Subject to meeting the criteria, eligibility extends to:

  • Employers with an annual turnover below $1 billion that have experienced a 30 per cent drop in revenue since March 1
  • Companies with an annual turnover above $1 billion that have experienced a 50% fall in revenue
  • Sole traders, the self-employed, partnerships and trusts who meet the criteria

Eligibility will not extend to businesses subject to a major bank levy. For more details, see the Government website.

Job Keeper Payment Program – Federal Government

Job keeper

Moratorium on rental evictions

Rental eviction

While the initial proposal stated that the six-month moratorium on rent evictions would apply to all tenants excluding limited circumstances, the Government revised this approach in the finalised legislation to exclude cases where the tenant’s failure to pay rent is not due to COVID-19 related financial hardship. The Government also explicitly stressed that tenants who are in a position to do so must continue paying their rent, and that those who fall into rent arrears or have had payments deferred will still be required to recoup these payments at a later date once they regain financial stability. For more information on this, including further exclusions to the moratorium and FAQs for landlords and tenants, view REIWA’s fact sheet here.

The Residential Tenancies (COVID-19 Response) Act 2020 applies retrospectively from 30th March 2020, and the provisions of the Act currently have a termination date of 30th September 2020. However, this may be subject to change depending on whether the emergency period is extended.

A number of lenders (including all four major banks and a large proportion of non-majors) have announced they will extend the ABA’s Small Business Relief Package to distressed home loan customers, enabling borrowers facing financial difficulties as a result of the coronavirus pandemic to defer mortgage repayments for a period of up to six months. This comes amongst a raft of support initiatives adopted by individual lenders, with many banks enforcing additional measures such as reduced interest rates and increased rates on term deposits.

Deferral of mortgage repayments

Deferred mortgage

Small Business Relief Package – Australian Banking Association

Small business

As part of a Small Business Relief Package aimed at supporting businesses through the economic fallout of the coronavirus outbreak, the Australian Banking Association (ABA) announced that its members would defer principal and interest loan repayments for six months for small businesses facing financial hardship as a result of the pandemic. This has since been extended to include businesses with total loan facilities of up to $10 million, up from the original $3 million threshold.

The Package will see 98% of all businesses with a loan from an Australian bank included, and will cover around 90% of commercial landlords on the premise they do not terminate leases or evict current tenants for rent arrears resulting from the COVID-19 outbreak.

The Reserve Bank of Australia has established a $90 billion term funding facility (TFF) aimed at supporting the flow of credit to small and medium-sized businesses financially affected by the coronavirus outbreak. The TFF offers three-year funding to eligible lenders at a fixed rate of 0.25%, with the following objectives:

  • To reinforce the benefits of the low cash rate by reducing funding costs of authorised deposit-taking institutions (ADIs), in turn helping to reduce interest rates for borrowers.
  • To support businesses through the period of economic uncertainty by providing eligible ADIs with access to additional low-cost funding if they expand their lending to businesses (particularly small and medium-sized enterprises) in the coming months.

Term Funding Facility - Reserve Bank of Australia

Term Funding Facility

RBA rate cut & quantitative easing

Cash rate cuts 2

After cutting official cash rates by 25 basis points in early March, the Reserve Bank of Australia (RBA) announced a second out-of-cycle cut in an emergency response to the coronavirus pandemic on March 19th, taking official cash rates to a record low of 0.25%. In addition, the central bank announced the commencement of quantitative easing in a bid to combat the ongoing economic uncertainties triggered by the global pandemic.

On 16th March, the Western Australia State Government announced a $607 million stimulus package aimed at assisting households and businesses impacted by the COVID-19 health crisis. Measures included:

  • A freeze to household fees and charges including electricity, water, motor vehicle charges, the emergency services levy and public transport fares. The freeze is effective until at least July 1, 2021.
  • Doubling of the Emergency Assistance Payment (EAP) to $600 for eligible concession cardholders.
  • A one-off grant of $17,500 for eligible small businesses with a payroll between $1million and $4 million, in addition to an increase to the payroll tax threshold and deferred payroll tax payments for 2019/20.

For details on the relief package, visit the WA State Government website.

$607 million stimulus package – WA State Government

WA stimulus

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