On the 8th of May, the Australian Government announced the 3-step Framework for a COVIDSafe Australia, outlining the easing of restrictions in a three-phased approach. In recent weeks, State Governments have adhered to these recommendations with many businesses, particularly in the hospitality sector, returning to work.
Since our last update, the number of active cases within Australia has continued to fall, with less than 500 active cases across the country. This demonstrates the effectiveness of the Australian Government’s response to COVID-19 and indicates that the further easing of restrictions will likely continue throughout June as planned.
Throughout this period, loan arrears across our funds have been at the lower end of historical averages which is encouraging and we continue to monitor arrears closely. We have also had over $9.5m of loans either repaid in full or partially over the last 3 months indicating that credit markets and property transactions continue to operate within normal parameters.
Data from CoreLogic shows continued improvement in auction clearance rates across capital cities with continued growth for the month. The week ending 24th May saw weighted clearance rates reach 62.7%, the highest since the week ending 15th March. Interestingly, the CoreLogic RP Data Home Value Index across 5 capital cities in Australia for the month of April showed an increase of 0.19% month on month albeit on lower transaction volumes than usual. We are monitoring property prices across the country but at this stage, there appears to have been little change.
We continue to receive a number of high-quality loan applications, with borrowers seeking short-term financing, predominantly driven by continued long processing lead times by the banks as borrowers scramble to take advantage of historically low lending interest rates.
The unit prices across all of our funds remain stable at $1.00 per unit and the average weighted loan to valuation ratio in each fund remains low.
We intend to maintain a strong cash position and a conservative approach to lending with a view to deploying the funds as the economic recovery from the easing of restrictions becomes more evident.
This article appeared in our May 2020 Investor Newsletter – download the full newsletter here.