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While an industry peak body has said that frontline workers are unable to afford a home in Queensland, brokers have revealed how they are still supporting clients.
The Property Council of Australia (PCA) revealed research on Monday (24 June) and found that frontline workers have been priced out of the market as house prices have soared beyond the reach of a median income for a frontline worker.
The PCA compared the average household incomes for childcare workers, teachers, nurses, police, and public servants against the median price for new and established homes and apartments.
The research ranked areas of Queensland into three categories: unaffordable (if the proportion of income to repayments was more than 30 per cent of a frontline worker’s average income), beyond reach (if the proportion of income to repayments was more than 50 per cent), and beyond hope (if the proportion of income to repayments was more than 100 per cent).
PCA’s research revealed that frontline workers looking to purchase a home by themselves would be unable to afford repayments, with most areas of Queensland ranked in the ‘beyond reach’ category.
For frontline worker couples with a gross annual income of $150,000, affordability improved according to the PCA; however, many buyers are still locked out of the South-Eastern Queensland market despite the increase in income.
PCA Queensland’s executive director Jess Caire said that the report’s findings “paint a grim picture” for buyers in frontline roles.
“Most of South-East Queensland is a ‘no go zone’ for frontline workers hoping to get their foot on the property ladder,” Caire said.
Speaking with The Adviser, Tommy Anderson, mortgage and finance broker from Social Financial in Queensland, said that he had noticed a trend of frontline workers being excluded from the market due to their annual income. Anderson said that those earning under $100,000 are struggling to enter the market.
However, Kylie Charles, a mortgage consultant from Cube Loans, said that frontline workers have not been completely priced out of the market. She said that house prices have been continually increasing and have affected borrowing capacity, but that frontline workers are still able to enter the market in some capacity, such as purchasing a smaller home.
David Wang, a mortgage broker from Mortgage Choice in Sunnybank and Mt Gravatt, said that he has not noticed frontline workers being excluded from the market and that, generally, his clients seem to be “performing well”.
How can brokers support frontline workers to secure a loan?
Charles said that she is supporting frontline workers by ensuring that her clients have a strong savings plan that she can check on regularly to make sure clients are on track to get their finances in a comfortable position.
Wang echoed similar sentiments, stating that “having a sufficient amount of savings is the key to getting into the market”.
Clients may not be able to purchase the homes that they want straightaway due to borrowing constraints, so Charles recommended that clients start with a smaller home and “work their way up”.
Wang recommends to his clients that they don’t use the maximum loan size they are approved for so that they leave “room for improvement in the future”. The Mortgage Choice broker also said that his team completes a review of their clients’ pre-approvals after two or three weeks to make sure that their clients are updated on their current loan capacities.
Wang said: “At the moment, a lot of the offers they’re making are conditional offers, which means most of them require you to put down no finance clause. It’s just [about] keeping the clients constantly informed.”
Anderson said that he has noticed an uptick in clients taking up ‘rentvesting’ options because they are unable to secure a loan.
He said: “A lot of people aren’t taking up the grants or stamp duty waivers, because they have to get into the market by either living with parents whilst they are claim boarding expenses, buy an investment property, and then eventually move into that investment property once they’ve paid that debt down.”
Anderson said, however, that rentvesting can set people up to fail because they may believe they are ready to move into the home before they are able to afford repayments.
He said: “There’s nothing regulating whether or not they move into the property too soon. There’s nothing to govern that.”
Anderson said that he was having ongoing conversations with his clients to mitigate those risks and ensure they are well informed on their serviceability.
[Related: Brokers are helping FHBs find new ways to enter the market]
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