š·COVID-19, real estate, banking + morešµ - What you need to know!
As the coronavirus spreads, and we distance ourselves from one another, including plugging in from home, we focus this month on the inevitable impacts this pandemic may have on real estate, our banks and the broader economy.
A quick message regarding COVID-19ā¦
Before we delve into the main topics of this monthās blog, weād like to take a quick moment to let you know weāre here to support you through this uncertain time.
Like many of you, weāve been following the progress of the pandemic known as COVID-19 and its global effects on us. We understand it can affect many both directly and indirectly and so weāre dedicated to providing the best experience for all our clients, as well as doing so in a safe environment.
This said, we will be conducting the majority of our interviews and meetings over the phone so as to minimise risk but should the need for a face-to-face arise, we can come to you (once all other options have been exhausted).
Some ways our lenders are helping:
Deferral of payments for home loans, cards, and vehicle finance products.
Reduction in credit card interest rates for an agreed period.
A range of emergency assistance measures to support clients with urgent needs, including business clients.
For any of our clients who feel they have been affected by or feel they may be impacted in the future, please donāt hesitate to get in touch so we may discuss how to help you.
Weāre already seeing an increase in the number of home loan refinances, with new to Black & White Finance clients asking us to help them restructure their home loans to help meet the potential financial challenges they may face ahead.
Stay safe, be sensible and we will all get through this!
How COVID-19 may affect the Australian economy
We all now understand how COVID-19 has serious health implications, especially to those who are sick or elderly, but what exactly is in store for the Australian economy?
Iām sure weāve all experienced the shortage of staple home necessities and the restrictions that many supermarkets have now put into place as a result ā Toilet paper, anyone?
The Australian Stock Market has seen a massive drop in recent weeks with the Australian dollar also diving to new 12 year lows.
There are definitely positives here though, now could be an ideal time to get into the stock market if you havenāt done so alreadyā¦ but itās not easy for anyone to decide on.
How long will the downturn last? Where is the bottom and best entry point?
The truth is, no one really knows.
What about real estate and small business?
There is no doubt uncertainty exists around the future of the real estate market. There will be negative impacts on employment which will maybe flow through to some being challenged to meet mortgage repayments.
There are those who are wanting to sit on the fence now and there are those who feel this is an opportune time because rates are super low, banks are relatively lenient and the sentiment is low. Living out the Warren Buffet mantra of, āgreedy only when others are fearfulā.
Most economists are suggesting this economic downturn will be short-lived and there will be a significant rebound in 2021.
In last month's blog, we reported on the recent RBA rate cuts to an all-time low of 0.5% and now leading economists are predicting yet ANOTHER rate cut, by the end of this week maybe. Which would be well ahead of the typical first Tuesday of every month announcement. How much our banks pass on though will be closely monitored by us here at Black & White Finance.
In addition to rate cuts, the Australian Government announced last week it is injecting a further $17.6 Billion to support our economy, specifically Australian small businesses in this trying time. There are 3 main small business benefits to note:
The $30,000 asset write off has been increased to $150,000. Any assets you buy in a small business, up to $150,000 until the 30th of June, is immediately deductible so you can use this to reduce the income you have to pay tax on at the end of the current financial year.
$25,000 cash back on withholding tax for Employers ā so if small business pays withholding tax, then they have the ability to get 50% of this amount back in cash, up to a maximum of $25,000 into their bank accounts. If a Business Activity Statement or Instalment Activity Statement will cost the small business $10,000, this is what the small business is paying, they get $5,000, and so on and so on.
Apprentice & trainee rebate of 50% - so if a small business has employed trainees or apprentices up until 1 March 2020, between now and September, they will get 50% of the wage back. Only applies to current trainees or apprentices.
- See here for more information or speak to your accountant.
https://www.pm.gov.au/media/economic-stimulus-package
Although the effects COVID-19 will have on the economy as a whole are unknown, we are sure these low rates which could go lower, and the economic stimulus, are steps in the right direction to help provide that much needed economic stability.
Itās inevitable this change to our economic stability will ripple for some time.
How we manage ourselves now is vitally important, our businesses, our households, if we can reduce costs (mortgage repayments in particular) then letās do that.
For our existing clients whoās loans we are reviewing on a frequent basis, you donāt have much to be concerned about. If you have friends or family that you feel we can help, then maybe you can pass on our details to help them too as we go through these challenging times and make some savings.
Clearance rates remain high - unlike our likelihood of shaking hands in the near future
Despite the times, clearance rates of 76% for the week that just passed shows that even though lower than the last few weeks or months even, thereās still positives in the market.
Some economists believe that as the share market continues to get battered, bricks and mortar may continue to be a safer place to put investors money.
With low interest rates, low supply, and the notion that this could be a good time to get into the market, then we could see clearance rates maintain their heights which is what some other property experts are suggesting.
This data (available from realestate.com.au) also indicates that 1392 homes were bought as private sales as of Mon 16th Mar ā A figure higher than the previous month.
Final Thoughts
Thereās a lot to be said about what weāve endured as a country over the last few months.
Bushfires, floods, infectious pandemics, you name it ā but throughout it all weāve endured and stood strong, that wonāt change now.
Our economy is still one of the strongest in the developed world and the future ā at least from a property standpoint remains bright.
From all of us at Black & White Finance, please stay safe and know that weāll be here to support you should you need it.
See you in next monthās blog!
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