How GPs can stay ahead of the property market

To provide GPs with easier, faster and more cost-effective access to the residential property market, CommBank has recently introduced a new lending package for medical professionals.
 
‘The vital role that GPs play within Australian communities has come into sharp focus over the past 18 months,’ Albert Naffah, CEO of CommBank Health, said.
 
‘We want to actively support practitioners in any way we can, whether personally as they buy a home, accessing finance to establish or grow their practice or to enhance the patient experience through digitally-enabled payments and claims processing.
 
‘When it comes to home lending, we understand that doctors are in a growing industry and have a job for life. As such, we have developed a specific offer allowing eligible GPs to access home or investment property loans up to a 95% LVR [loan-to-value ratio] and without lenders mortgage insurance.
 
‘GPs are also among the busiest professionals in Australia right now, so our offer is designed to take the hassle out of the process and save them a bunch of time to allow them to focus on what they truly love doing.’
 
In the short-to-medium term, CommBank will be the first bank to leverage open banking to, upon receiving consent, collect and analyse information from other financial institutions required when taking out a loan.
 
‘We are intent on using technology to decrease approval times and remove friction and admin from the application process, allowing GPs to focus on what really matters – their patients’ wellbeing,’ Mr Naffah said.
 
Outsized growth in premium properties
Growth in the value of Australian residential property shows little signs of slowing after experiencing outsized growth over the past 12 months. Over that period, data sourced from the September CoreLogic Report shows that residential property values have risen by 20.3% – the highest level of capital appreciation since 1989.
 
While most properties have benefited from a rising market, Australia’s premium homes are leading the growth charge. The data reveals that in the three months to September, the top 25% of homes by value have appreciated more quickly than the lowest 25% across every capital city.
 
The rise in nationwide housing values is largely a consequence of demand outstripping supply.
 
‘There are far fewer properties coming to market than there are eager buyers. That is even more pronounced for top-end properties,’ Chris Moldrich, Commonwealth Bank General Manager, Business Home Lending, said.
 
‘We have seen the time on market continue to decline as properties trade quickly, and the number of advertised listings is well down from last year.
 
‘However, with restrictions easing significantly in Australia’s two most populous states, there is every likelihood that vendor comfort levels will rise, and sellers will return.’
 
Looking closely at the market fundamentals reveals a range of drivers, which can help buyers navigate current and emergent conditions. Whether you are looking to purchase a family home or investment property, understanding these dynamics is crucial.
 
The great regional migration
One of the big trends the pandemic has accelerated is the movement of people from capital cities to regional areas. This is impacting capital growth and rental yields for in-demand locations.
 
The latest Regional Movers Index from CommBank and Regional Australia Institute (RAI) tracks these migratory flows, showing that in the June quarter of 2021, there was an 11% increase in people leaving capital cities for the regions compared to the same quarter in 2020.
 
In turn, elevated demand is putting upward pressure on housing prices in regional locations. And with limited supply coming to market, conditions are expected to remain favourable for sellers in the near term. This movement is also driving a wave of development to support demand and a swelling population.
 
‘As demand strengthens for housing in certain regional destinations, we expect to see an increase in residential and industrial development follow,’ Mr Moldrich said.
 
Capital growth compresses yields
Sharply appreciating asset values are drawing significant attention from property investors.
 
However, that has also pushed average yields nationally to a record low of 3.3%. While residential rents have tracked higher over the past year, rising an average of almost 9%, they have lagged the uplift in asset values.
 
With demand for housing in regional areas particularly buoyant, rental prices have moved higher in these areas compared to capital cities. When combining the capital cities, rental growth has increased an average of 7.5% in the past 12 months. In contrast, regional areas have experienced 12.5% rental growth in that time.
 
‘Buyers need to ask whether they are focused on capital growth or yield and consider the different conditions across locations and property type,’ Mr Moldrich said.
 
‘Our healthcare lending team is fielding an increasing number of enquiries from GPs seeking to better understand the areas they are looking to invest in and the return outlook.
 
‘For example, currently units may attract a higher rental yield, but houses are experiencing relatively more capital growth.
 
‘But while units haven’t climbed as quickly in value, the opening of borders and associated uplift in foreign buyers and students can change that which is important to factor in.’

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This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information. The information in this article and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its publication but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made in this article. Commonwealth Bank of Australia ABN 48 123 123 124. AFSL and Australian Credit Licence 234945.

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