Have lawyers been more likely to buy property in wake of COVID-19?
A combination of being “credit-worthy”, having consistent work and a greater capacity to save has meant that many lawyers have been able to forward plan and purchase housing, says one home loans specialist.
When the coronavirus pandemic hit earlier this year, Legal Home Loans director Andrew Johnson presumed there would be a “large increase” in refinancing applications and that housing purchases would drop off a cliff.
However, “it just wasn’t the case at all,” he reflected.
Lawyers are well placed to buy
Speaking recently on The Lawyers Weekly Show, Mr Johnson said that in the age of coronavirus, lawyers have shown themselves ready and willing to buy homes, whether it be first home buyers or those looking to expand their portfolios.
“We saw more purchases than we’ve ever seen, and I think that’s because there was scope for negotiation on those property prices and people were buying. As a cohort, the legal is credit-worthy and still remains what the banks would consider a ‘low-risk’ group of applicants, and therefore have still been getting approvals and they were ready to buy. That was where we actually saw most of our business coming from throughout the pandemic, interestingly enough,” he said.
For a short period, there was a drop-off in the number of criminal law practitioners who were making inquiries about financing for housing, given that courts across the country were closed and there was widespread concern, Mr Johnson explained, about their income over the course of the pandemic.
However, this cohort has regained its confidence, he continued, and for the most part, “self-employed lawyers, PAYG lawyers, partners, and barristers were all saying, ‘I’ve got more work on than I know what to do with. I’ve become more efficient because of the pandemic, and I’m still making a lot of money’. It was almost surprising”.
“It was very positive that they could be so forward-looking. As such, it is a good time for lawyers to start looking at their finances and putting plans in place,” he said.
Lawyers should not be afraid to look ahead as such, Mr Johnson noted, given that this cohort of professionals has the ability to buy with just a 10 per cent deposit and not pay lenders mortgage insurance.
“That’s huge,” he advised.
“That’s still on the table for lawyers throughout the pandemic and remains in place with some lenders. One thing we also saw throughout the pandemic is that everyone was sitting at home not spending money. And if incomes weren’t cut, or they were staying the same or at least similar to what they were, savings balances were increasing quite quickly. The combination of having increased savings and less than need for a deposit resulted in more purchases from the legal cohort.”
The idea that prospective home owners and those looking to expand their property portfolios can be taking advantage of professional and economic marketplace conditions is not unique to lawyers.
According to findings from ING in its Future Focus: Homeownership Report, nearly half (46 per cent) of Australian Millennial home buyers say COVID-19 has made purchasing a home more achievable and just under one-third (32 per cent) say they will do so within two years.
According to ING, younger Australians have used lockdown to get on top of their property goals by moving travel budgets to a home savings account (59 per cent), taking on a side hustle (37 per cent), and moving back in with their parents (36 per cent).
“[The report] suggests many people, especially millennials are being savvy by taking advantage of record low interest rates, government assistance and a weakened housing market to get on the property ladder,” surmised ING head of home loans Julie-Anne Bosich.
With lawyers and non-lawyers alike looking ahead to the future, it will be critical, Mr Johnson stressed, that legal professionals get organised sooner rather than later.
“Since the pandemic has hit, bank processing has blown out astronomically, to the point where it can take three months to get a pre-approval. So, if you’re thinking of purchasing property in the new year, it really is something that you need to start organising now, because if you do need a product that is niche and that relates to your professional or to your individual circumstances, it may be that you can only apply at the bank that’s going to take three months to give you that approval letter,” he said.
“We’re seeing a lot of lawyers come to us and saying, ‘I want to buy next week’. However, their approval is going to take many months. That can create, really, a big sense of unease and stress. Much like everything has changed since the onset of the pandemic, organising your finances, you need to organise it well ahead of time.”
Cast the location net wider
Moreover, an increasing number of legal professionals across the country are looking at purchasing property outside of the major cities, Mr Johnson said, given that the “new normal” means that more lawyers will be able to work from home rather than travelling into a physical office.
“Just this week, I’ve had a few conversations with a few clients of mine who are looking to buy in the Blue Mountains [in NSW] for that very reason. They’re realising that they no longer need to be in the office every day and making a commute from the Blue Mountains or from the Central Coast or from any regional area. Two days a week [of travel into the city] is much less intense than five days a week,” he said.
There is also elevated confidence, he added, “emanating from the self-employed, boutique, sole practitioners and barristers” to take advantage of evolving workplace conditions and client expectations.
“They’re no longer seeing the need to be in their office every day, which is similar to the way that we’re interacting with a lot of our clients. A lot of the travel has dropped off, which is great,” he said.
Ultimately, Mr Johnson concluded, there is scope for lawyers of all stripes to have greater freedom to look further and wider for house purchases: “Living by the beach in Sydney will cost you a couple of million dollars, but there’s areas outside of the metropolitan that have become much more affordable and [in the ‘new normal’] you can have that lifestyle. There’s certainly opportunity there for lawyers.”
To listen to the full conversation with Andrew Johnson, click below: