In the first Property and Mortgage Insights (PMI) report from e-conveyancing platform PEXA, it was found that while property settlement volumes crashed from 20 per cent year-on-year growth in January to negative territory in May and June during the COVID-19-related lockdowns, the recovery has since been picking up – largely driven by refinances.
Pulling on real-time data from the 20,000 property transactions settled on PEXA’s platform every week – as well as some land services data – the report outlined that refinancing of mortgages soared from approximately 20 per cent growth in January to more than 70 per cent in June.
PEXA noted that borrowers were “shopping around for the best deals as interest rates fell to record lows”, contributing to a 27 per cent increase in total refinances in the first nine months of 2020 (compared with the same period in 2019).
Overall, there were 216,000 external refinance settlements in the first nine months of 2020 in the five major states, the report found.
The report also showed that the major banks had overtaken smaller lenders for refinancing activity from May 2020, buoyed by large cashback offers.
It highlighted that June was the first month in more than two years in which the major banks outperformed smaller lenders in refinancing.
WA in particular was seeing a marked divergence away from non-majors to majors for refinancing.
“The non-majors had been steadily chipping away at the majors’ refinancing share for at least two years but that was lost with the advent of COVID-19,” the PEXA PMI report says.
“As is the case for new mortgages, the majors’ growth in refinancing share may be attributable to competitive offerings and responsiveness to market conditions throughout 2020.”
Property settlements remained above 2019 levels from July through to September 2020, with the trend forecast to continue in October, PEXA added.
Total sales settlements for the nine months to September 2020 were up 8 per cent on the same period of 2019.
However, the report also reveals pressure on property values, which for the first nine months of the year are down 9 per cent in NSW and 14 per cent in Victoria.
While NSW values showed a small improvement in the September quarter, values in Victoria declined by almost 5 per cent as the state suffered a second wave of the pandemic.
Commercial property has fared worse than residential property, with values down 14 per cent in NSW for the first nine months of the year.
PEXA’s analysis suggests the property sector will remain subdued. Consumer sentiment and online property searches fell sharply at the outset of the pandemic but have since shown signs of recovery.
“Analysing previous housing cycles and key economic drivers suggests that in the medium term, house prices and new loan commitments will decline further,” the PEXA PMI report says. “Even after recovery in the key drivers of housing activity, there is likely to be a lag before any increases in property values and sales emerge.”
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Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.