How will JobSeeker changes impact the property market?

author-avatar By on February 25, 2021
How will JobSeeker changes impact the property market?

With the temporary supplement to JobSeeker payments set to finish in March, what impact could this have on the housing market?

This week, the Federal government announced a permanent increase to the JobSeeker base rate by $50 a fortnight, effective from 1 April, taking the total fortnightly rate to $615 from the current $565.70 figure, or $43.57 a day. 

The $3.57 daily increase is lower than the current payment that includes the temporary $150 a fortnight 'coronavirus supplement', which is set to cease on March 31. 

The JobSeeker coronavirus supplement was introduced in early 2020 in response to the COVID-19 pandemic for new and existing welfare recipients, set at an additional $275 per week, which virtually doubled payments for some recipients. 

The recent $50 increase came under fire, with welfare recipients $250 worse off compared with what they were receiving at the onset of COVID-19.


Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you.


How could this impact the housing market?

CoreLogic's Head of Research Eliza Owen said it's important to acknowledge that the JobSeeker supplement has already been significantly reduced in recent months with no apparent negative impact on the housing market.

"In late March 2020, the original JobSeeker supplement was set at an additional $275 per week. In late September, the supplement was reduced to $125 per week, and it was reduced further to $75 per week through the first quarter of 2021," Ms Owen said.

"However, housing market momentum has increased from September to January, amid the reduction in the supplement.

"Between the end of September and January, the CoreLogic national home value index rose 3.2%, and rental values increased 2.5%."

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The housing market has been picking up speed, with house prices rising by 0.9% in January marking the fourth consecutive month of increases according to CoreLogic.

The momentum in the housing market has led experts to make optimistic house price prediction forecasts.

Westpac recently forecast a 20% rise in property prices over the next two years, while Commonwealth Bank predicted prices to lift 16% by 2022.

Ms Owen said another positive sign is that even as the JobSeeker coronavirus supplement has been wound back, fewer Australians have been reliant on welfare payments. 

Recent data released by the Australian Government Department of Social Services (DSS) suggests there were 11.7% fewer JobSeeker recipients toward the end January 2020 compared with the end of September.

Now, about 1.2 million Australians are still on the payment. 

Meanwhile, data from the Australian Prudential Regulation Authority (APRA) released in January shows that at the end of December, the value of deferred home loans fell by $7 billion to $43 billion.

That's a significant drop from May when home loan deferrals peaked at $192 billion, and the current value of deferred housing loans is over 80% down since then. .

ANZ data shows 84% of deferred home loans have rolled off with 98% returning to repayment, with only 1% of its home loan customers still receiving COVID support.

Despite this, Ms Owen said there is "still a heightened risk to wider-spread housing stress, as the number of JobSeeker recipients in January was still 55.9% higher than at the onset of COVID-19 in March 2020".

Ms Owen said the recent changes to the permanent rate of JobSeeker payments are unlikely to have a direct impact on house prices, as most lower income households receiving JobSeeker are more likely to be renting.

"This would imply an indirect impact on housing prices, where reduced rental return could impact an investor’s willingness to pay for a property," Ms Owen said.

"However, even looking at regions with the highest proportion of JobSeeker recipients in Australia relative to the local population, rental outcomes have been mixed since the significant reduction of the Jobseeker supplement in September."

This can be seen in the table below which looks at changes in rents since September 2020 through to January 2021 in property markets that have the highest proportion of JobSeeker recipients.

core123

Despite high portions of populations receiving JobSeeker payments, rental values only declined in one region while all other areas saw an average increase in market rents of 4.2%.

This is above the 2.5% increase in rent values nationally over the same period

"What this data does highlight is that the impending changes to JobSeeker could create increased divergence between incomes and housing costs for some of Australia’s most vulnerable households," Ms Owen said.

"While these rental markets may be increasing in aggregate, housing stress, and even homelessness, may be faced by individuals whose livelihoods have been impacted by COVID19.

"While changes to JobSeeker are unlikely to impact the housing market, the welfare reduction could greatly disrupt housing situations for many."

The Anglicare Rental Affordability Snapshot in September last year found if the unemployment payment was cut to the old rate ($40 per day), then just 13 properties (0%) would be affordable to rent nationwide for those on it. 

Given the daily increase is just $3.57, that number is probably very similar now. 


Photo by Patrick McGregor on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's passionate about empowering people to make smart financial decisions and improve the financial literacy of Australians by translating complex finance topics into understandable, relatable content.

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