Welcome to 2021. We have all read, seen, lived and heard about 2020, the challenges continue, hopefully with the roll out of vaccines, we can see some glimpses of light this year.
As each economy struggles with the issues COVID-19 has brought, from an expat perspective we saw the AU$ drop massively against the US$ and currencies pegged to it. We are seeing a rebound, the AU$ is currently up 35% from its low point in March 2020.
From a borrowing perspective this can be an issue. The amount you can borrow is based on your surplus income, while that real figure may not have changed, when we convert the surplus to AU$ it’s now 30% less than it would have been in March 2020.
In addition to that, if you are considering buying a property in Australia and your savings are currently in US$, then the value has effectively reduced by 35%.
While this does not mean that the loan amount you can borrow has just reduced by 35%, it probably means it has reduced. There are many factors in the calculation, rental income for the property would be in AU$, so unchanged, so it is definitely worth asking us to calculate this for you.
I wanted to touch on the locations where or clients are/were in 2020, many have bought homes in Australia rather than an investment property, having the security of being able to relocate home to Australia has been at the forefront of many client’s minds. Historically a large portion of our clients were Hong Kong based, however, in 2020 we saw quite a change.
Over the course of the year, we assisted clients based in Hong Kong, Singapore, USA, UAE, UK, Switzerland, Cambodia, Thailand, Indonesia, Malaysia, Bahrain, Saudi Arabia, Qatar and obviously Australia.
So, what changes may come in 2021. One of the most significant changes will be the overhaul to the Responsible Lending rules, it will be fascinating to see how this affects lenders policies and requirements.
The new rules will be implemented from the 1st March 2021, however, we are still waiting on the legislation to pass before we know exactly what rules will be implemented.
The changes came after Treasurer Josh Frydenberg said that the principles-based responsible lending framework had become “an overly prescriptive set of obligations” which had stifled the flow of credit, he also noted the current rules had “given rise to almost a hundred pages of ASIC regulatory guidance” which had “led lenders to become increasingly risk-averse and conservative for fear of falling foul of the guidance”.
Broadly, the proposed changes have four key aims:
- to simplify existing legal requirements thereby reducing the time and costs of credit assessments for consumers and businesses
- to reduce ‘red tape’ for consumers when applying for credit
- to improve competition by making it easier for consumers to switch lenders
- to enhance access to credit for small businesses.
Watch this space. If you’d like to have a face-to-face chat via Whats App, Zoom, Team Meets, Skype let me know and I will be more than happy to discuss your options with you.