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It’d seem the stars are aligned: low rates, population growth, low vacancy rates, strong rental market and a shortage of housing in the majority of capital cities.
Since the latter 2008, the number of loans to first home buyers has outweighed substantially those to existing owner-occupiers and investors as first-time buyers rush to take advantage of the increased government grant. These numbers are set to surge in the next two months after the Prime Minister indicated that the increased grant will end June 30. In previous interest-rate cycles, lending to investors and existing home buyers increased alongside that to first-home buyers.
Partly, the reason is that investors aren’t getting the first-home-owner grant, and when you’re laying your own money down instead of the governments’, you tend to think more carefully before deciding to take the plunge. Unemployment concerns and fears about how the economy will evolve this year are also reasons why investors aren’t yet entering the market.
Consumer sentiment figures released earlier this month by the Westpac-Melbourne Institute Survey found pessimists still outnumbered optimists and, with the prospect of more unemployment, that’s unlikely to change anytime soon.
Interest rates are one of the crucial aspects investors consider. During the past month or so, several of the big banks have increased their fixed mortgage rates, even though variable rates are expected to go even lower.
Banks say it’s due to an increase in the rates in the wholesale market where they access funds. Not everyone accepts that that is the reason, but most acknowledge it’s a signal borrowing costs are near their lowest levels!!
Some economists believe fixed rates will continue to rise as banks manage their risk, and it’s just a matter of the speed at which it happens. Of course, fixed rates are not popular at the moment even with investors who traditionally use this option.
That’s not a surprise, given the cash rate is expected to fall to 2 per cent by the end of the year.
But fixed rates are a bit of a barometer of the longer term trend in interest rates, so they’re worth watching. It also pays to remember that just because the Reserve Bank of Australia cuts rates’, that doesn’t mean banks have to follow suit.
Only time can tell, whether or not property buying will be better next year!
Maybe investors are waiting for a sign that unemployment will stop rising, or for first-home buyer activity to dry up!
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The value of Aussie homes increased in the first quarter of the year, bucking a global trend downwards!
House and flat prices in Australia increased in value by 1.6% in the first three months of the year, helped by a scarcity of supply, lower interest rates and incentives to first-home buyers.
The slight recovery in Australia “has been driven by the 40% fall in home loan rates down to 5.7%, which are now at their lowest levels since July 1968!”
March’s three-month gain follows a 0.1% rise in the three months to February in the RP Data-Rismark’s national dwelling value index, and a 3% fall in the value of “cap” city homes in 2008.
The strength of Australian housing prices is a world away - so far - from the 2.7% drop in British home prices over the first quarter, capping a year to March 17.5% plunge.
US housing didn’t fare too much better either, with prices in the top 20 cities sinking 1.9% in February, which brought the 12-month fall to 18.6%, according to the most recent S&P/Case-Shiller index, a widely followed measure.
RP Data-Rismark said the first-home buyer’s grant, ending June 30th, has acted like a catalyst for new home buying in Australia, but lower interest rates are sustaining the market’s growth.
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The rich list has been announced and the top performers for both houses and units were areas of NSW.
RP Data released its top price growth suburbs, recording the greatest increase in median house and unit prices during the 12 months to December 2008.
North Sydney suburbs were the standout performers for both houses and units with median house prices appreciating 47.4 per cent in McMahons Point and unit prices growing 49.8 per cent in Greenwich.
The NSW list comprised mainly areas outside of Sydney including Dubbo, Jindabyne, Queanbeyan East and Brunswick Heads.
Victoria was a different story with just one area outside of the metro area making the list. Irymple in Mildura was the regional victor experiencing a median unit price increase of 35.3 per cent.
The Victorian results mainly comprise of areas in the Melbourne Statistical Division with both the top performers – Portsea’s median house price increase was 38.6 per cent to $1,455,000 and Dallas’ median unit priced leaped to $222,500, that’s an increase of 48.3 per cent!!
The QLD market showed many areas outside of the Brisbane area as strong performers in capital growth.
Their state’s top performers are houses in River Heads at Hervey Bay with prices increasing 43.1 per cent and units in North Lakes increasing by 47.3 per cent.
South Australia’s winners are dominated by areas of Adelaide with only Port Hughes, Roseworthy and Owen outside of the capital city location.
The standout performers for houses is Teringie (49.5 per cent) and for units Underdale (47.8 per cent).
The strong growth results around Adelaide aren’t a surprise given that it remains mainland Australia’s most affordable capital city market and has been an excellent performer throughout 2008.
Perth dominated the WA list. Which is surprising given the poor performance overall of the Perth market during the last 12 to 18 months.
Homes in Coolbinia stood out, with a median price increase of 43.1 per cent. Units, the port side suburb of South Hedland saw the greatest increase jumping 44.4 per cent to $455,000.
Outside Perth, the list is exclusively populated by areas linked to the mining and resources sector.
For Tassie, the top performer for houses is Campania, recording a 46.3 per cent growth, and units saw Hobart taking top spot with 35.7 per cent!
Northern Territory winners are almost entirely located within Darwin, with Virginia recording the strongest growth in houses (30.9 per cent) and The Gardens topping the list in units (39.0 per cent).
Throughout ACT, the strongest performing suburbs were within close proximity to the city centre – Franklin’s houses recorded a 25.6 per cent increase and Campbell’s units 49.7 per cent!
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Times are tough but some experts believe we’re through the worst of it.
Can you hear it? It sounds like a distant ring, a peal of bells, not of Yuletide bonhomie but of changed fortunes in that most solid of staple investments, bricks and mortar. Shares are so yesterday. Stockbroking is a dirty word. Nobody’s talking margin loans. But could the property market be a bellwether of better times?
At least some of the notes are on song. The Reserve Bank dropping the cash rate to 4.25 per cent and perhaps going even lower. Figures this week from the nation’s largest mortgage broker, AFG, indicate NSW first-home buyers are back in the market, with November’s loan approvals up 113 per cent on August. And Sydney house prices - despite all the doomsday scenarios - actually gained 0.51 per cent in the October quarter. There was also a 1.6 per cent increase in the number of loans for established homes in October.
"The property market has moved through the bottom of its cycle," says RP Data’s head of research, Tim Lawless.
Read the full article here:
http://www.domain.com.au/Public/Article.aspx?id=1228585093137&index=NationalIndex&headline=Long%20daze%20on%20market
Paul Castran
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Here’s a list of ideas to make your place look great this summer for the festive season:
1 Wallpaper is hip. Everything old is new again and a quick, neat way to brighten up a wall or even just a strip of wall is to get on to the new generation of wallpaper design. Retro shops often have pristine rolls of old paper too, boasting those sunny oranges, greens and yellows. Don’t be afraid: this is a great way to make a small wall interesting, and if you tire of it, peel it off and paint.
2 Paint, paint, paint. Speaking of paint, get out and have a look at the kaleidoscope of colours on offer, from ginseng to mountain fire. Sure, the names don’t bear much relation to the colours but this is a quick, cheap way to brighten up a room, wall or just a bit of window trim.
3 Colourful glass bottles. These are a great idea to bring a bit of life into a home. Get an instant stained-glass effect by positioning two or three different colours near a natural light source. Don’t use them as vases; they look better when the light can shine through unencumbered.
4 Clean out the shed. Not only will you get kudos from significant others for finally doing something in that black hole, you might just find something in there worth reclaiming - an old chair, plant stand or simple timber box might be cleaned up and become a cool interior feature.
5 Tablescaping. A slightly grand appellation for the meeting of interior design and craft. Use a table (or any flat surface) to create a tableau or simple display using flowers, knick-knacks or fabrics. A current American craze.
6 Handle it. Make over a kitchen or a bathroom with something as simple as changing the door handles. You can go for bling at designer shops or check out the local hardware stores for a more economical selection.
7 One giant green leaf. While it might seem as if everything is withering and brown in your garden, you’ll always be able to find some hearty old souls still shining verdantly. Pluck them out (large palm, monstera, lily leaves) and pop a couple in a large vase to create a cool, serene feature, particularly soothing in summer against a crisp white wall.
8 Get rid of the stuff. Summer is a time to enjoy your home so let the light in. Look at peeling the kids’ pictures off the fridge and storing them. Take away the bits and pieces that accumulate around windows and near doors as these can block the flow of light through the home. If you have a little unused corner consider installing a small desk with drawers to stash bills, paperwork and miscellaneous items.
9 Rearrange. It’s hot outside, baseliners are dominating the tennis, even looking at cricketers standing out in 40-plus degree heat makes you feel slightly woozy so turn off the box and start rearranging the furniture. You’ll be amazed how you can give your home a fresh new look by moving or even removing a few key pieces of furniture.
10 Herbs. Simple, beautiful and useful. A window box full of summer flavour looks great against a kitchen window and there’s nothing like the satisfaction of snipping off the basil and sprinkling it in the salad. They smell fantastic, too.
You can find the remaining 10 ideas from author Lou Sweeney of The Age, by going here: http://www.domain.com.au/Public/Article.aspx?id=1228585111557&index=NationalIndex&headline=To%20great%20effect
Paul Castran
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Wizard home loans have produced a list of 12 mortgage myths that are of concern to Australian home buyers, here are the first six:
Myth 1
A bad credit history doesn’t matter if you eventually pay it off
Your credit history records any missed or defaulted payments on things such as credit cards, interest free contracts, and mobile phone plans. A patchy credit history can haunt you – even if it is very old or just a one off small amount. There are two major credit reporting agencies that record all of these debts and lenders consult these agencies before they complete your loan application.
Myth 2
Assets are the same as income
No matter the strength of your assets, what really makes the difference is your capacity to repay the loan through a regular income. When it comes down to servicing, a lender will only lend as much as people can afford to repay. The amount of income earning capacity you have will ultimately determine how much you are able to borrow.
Myth 3
It’s the credit card balance, not the limit that counts
When it comes to credit cards it’s not all about the balance on your card, or cards, it’s the total available credit that counts. Having a large range of credit does not necessarily equate to a good credit history.
Myth 4
You need a 20 per cent deposit to get started
Not true. These days, you can borrow up to 97 to 100 per cent of the property value, which is proving to be an attractive option for many cashed up first home buyers who often wonder whether they’ll ever get their feet onto the property ladder. What’s important to remember is a lower deposit may mean a higher interest rate and fees.
Myth 5
Cheapest is the best
A ‘cheap as chips’ interest rate may be a good incentive to sign the dotted line, but beware – in many cases these loans may have higher fees and less flexibility, costing you more money over the life of your loan. A standard variable loan at a slightly higher rate with flexible features, such as the ability to make additional and lump sum repayments, can save you more money in the long run.
Myth 6
A fixed rate is always safer than a variable rate
Every home loan is different – so too are your home loan needs. What’s important to remember is that fixed rates are calculated by the capital markets over the period you sign-on for, whether that be for three, five, or seven years. If variable interest rates go down during this fixed period, you could end up paying a higher interest rate than compared to the standard variable rate.
Get the full 12 mortgage myths here:
http://www.realestate.com.au/doc/Resources/Buy/fhbg/mortgage-myths.htm
Paul Castran
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Two of Australia’s biggest residential developers have called the bottom of the housing market, saying some life should return to the troubled sector next year.
Billionaire apartment developer Harry Triguboff and the listed Mirvac Group said signs of growth in demand were emerging.
It runs counter to a report this week from AMP chief economist Shane Oliver, who said Australia’s overvalued house prices could fall 10-15 per cent next year.
Mr Triguboff, founder and owner of the country’s biggest apartment builder Meriton, completed and sold 1000 apartments this year, well down on the 3000 a year built during the boom in 2002, The Weekend Australian reports.
Next year, he hopes to build 1500.
While Mr Triguboff said he “always met the market” when conditions cooled, he expected Meriton’s prices to rise 10 per cent next year underpinned by the government stimulus of rising rents and the lack of supply.
“I don’t think we have to worry, we have such help from the Government,” he said, referring to Canberra’s $14,000 grant for established homes and $21,000 for newly constructed homes announced in October.
“Petrol has come down, income tax has come down. Some people will lose their jobs, sure, but let’s talk about the ones who won’t.”
AMP’s Mr Oliver said an increase in unemployment posed a significant threat to house prices. AMP forecasts the jobless rate will rise from 4.3 per cent to 6.5 per cent in 2010.
Mirvac Group chairman James MacKenzie said the company was starting to see “what we hope are early signs that the residential market, and consequent demand for Mirvac product, being stimulated”, though he was cautious, given the state of the market.
He also cited the Federal Government’s boost to the first home-buyers grant, the cuts in interest rates and measures in the NSW Government’s mini-budget as factors.
Read the full article from Jessica Irvine and Turi Condon of Perth Now here:
http://www.realestate.com.au/doc/Resources/News/market-going-up.htm
Paul Castran
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More than 40,000 unlucky people have been caught out in a fixed mortgage rate trap, having taken out their loan at the highest fixed interest rates in a decade, denied any saving from the recent cuts and confronting costly break fees if they decide to refinance.
Figures from the Bureau of Statistics show 43,632 borrowers signed on to new fixed home loans between March and September, when lending rates were at a decade high. The official cash rate has since fallen by a full 3 percentage points.
According to the research group Infochoice, someone who took out a fixed loan of $500,000 in March would now be paying $800 more a month than if they had opted for a variable rate.
But borrowers looking to refinance face a difficult choice: continue to pay a higher interest rate, or incur thousands of dollars in penalty fees for breaking their fixed contract.
“It’s not just all about the rate,” the head of Infochoice, Shaun Cornelius, said. “There are all sorts of conditions attached to the exit fees. They can be quite expensive.”
While fees vary, borrowers who cancel their loan within the fixed period are typically forced to compensate their lender for the “economic cost” of breaking their contract. This is the difference between the interest the borrower would have paid the lender and the prevailing interest rate. As interest rates fall, this gap is becoming ever wider, meaning it may already be too late for fixed borrowers to save by refinancing.
On top of the economic cost fee, all four major banks also charge an upfront fee, ranging between $300 from ANZ and $900 from NAB, for breaking a fixed loan. Administrative and establishment fees are also charged by the new lender.
Read the full article from Jessica Irvine and Ehssan Veiszadeh of the Sydney Morning Herald here:
http://www.domain.com.au/Public/Article.aspx?id=1228257193360&index=NationalIndex&headline=Fixed-rate%20trap%20snares%2043,000%20home%20owners
Paul Castran
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This week’s interest rate cut is expected to lead to an investor resurgence.
With the arrival of spring, they started emerging from their winter bunkers, scouring every neighbourhood, on the prowl for the easy kill. As December broke and interest rates fell again this week, they became bolder and began pacing, waiting and watching for their weakened prey.
And now, finally, they’ve begun to pounce. “Yes, at last we’re seeing evidence of investors returning to the apartments market,” says John Edwards, managing director of residential property researchers Residex. “There’s real activity now from the investment community and we’re predicting we’ll soon see that translated into a lot more sales.”
The latest rate drop in the cash rate this week, a further 1 percentage point to 4.25 per cent, is expected to further lure the investment hunters. “It will have an effect over time, especially if the rates stay permanently down,” says Australian Property Monitors’ senior economist Liam O’Hara.
It’s amazing to see them stalk in terrain that otherwise looks so parched and barren but the experts are adamant: with falling interest rates, rising rents and the continuing sharemarket volatility, the conditions are perfect for the lean and mean to make an absolute killing.
Read the full article from Susan Wellings of the Sydney Morning Herald here:
http://www.domain.com.au/Public/Article.aspx?id=1228257280539&index=NationalIndex&headline=Back%20on%20the%20prowl
Paul Castran
