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.
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.
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.
Key Stimulus Updates
$1 billion Economic and Health Relief Package - WA Government
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
Six-month moratorium on rental evictions – Federal Government
On 29th March, the Federal Government announced a temporary six-month moratorium on eviction for non-payment of rent for commercial and residential tenancies facing financial distress as a result of coronavirus. The policy has been put in place specifically for tenants whose job or income has been directly impacted as a result of COVID-19, with those who remain financially unaffected expected to continue paying rent as per their lease agreement. It’s anticipated that the Government will be releasing more information in due course regarding a rent assistance package for tenants in financial distress.
For more information, read the Government’s full media statement here.
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
Small Business Relief Package – Australian Banking Association
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
RBA rate cut & quantitative easing
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
In the Media
Investors advised to review credit options amid health crisis
Perth boasts sustained growth trajectory as virus crisis