RBA cuts cash rate in further boost to property market
Posted on Tuesday, August 06 2013 at 2:50 PM
The Reserve Bank of Australia (RBA) has cut the cash rate to 2.5 per cent – its lowest level since 1959.
It’s a win for investors, with those who have an average loan of
$300,000 now likely to save at least $50 per month.
RP Data’s national research director Tim Lawless says the amazingly low
interest rates aren’t only helping investors, they’re even adding cash to their
hip pockets. He says it now means many residential properties have switched
from being negatively geared a couple of years ago to neutrally geared and in
some cases, even positively geared.
“With the average discounted variable mortgage rate now approaching the
five per cent mark, they’re more likely to find more and more properties are
approaching a cash flow neutral or cash flow positive yield,” he says.
“Anecdotally, more and more investors seem to be focusing on rental
yield and positioning for long-term capital growth.”
Raine and Horne chief executive officer Angus Raine says the interest
rate cut is likely to give the spring selling season an extra kick, especially
in the Sydney market.
“With historically low sales volumes and 25 to 30 per cent fewer homes
for sale than previous years, the rate cut will flush out vendors who have been
sitting on the fence,” Raine says.
Real Estate Institute of New South Wales president Christian Payne is
also optimistic about the latest cut. It’s confident the decision will help
boost consumer sentiment and the economy generally.
“We have already seen an increase in consumer confidence, following the
decision to cut interest rates in May and this reduction will further improve
that confidence, providing flow-on effects to the property market,” Payne says.
Lawless adds the further reduction in the cash rate comes at a time when
the housing market is already responding to the low debt-servicing environment.
“Since the housing market reached a recent low point in May last year,
we have seen dwelling values rise by 6.5 per cent based on the RP Data-Rismark
combined capital city index,” Lawless says.
“That equates to a gross profit of around $30,000 for the average
homeowner. Transaction numbers are up by almost 18 per cent compared with the
same time last year, which highlights that homebuyers, particularly investors
and upgraders, are moving off the sidelines and into active buying mode.”
However, the difficultly for the RBA going forward will be how to keep a
lid on what may be viewed as excessive housing market growth, while also
providing a sufficient level of stimulus, Lawless says.
He believes lower interest rates might not benefit everyone either –
it’s likely first homeowners will now find it harder to enter the market as
more investors decide to enter the market and competition increases.
“It’s going to be more difficult for prospective owners, particularly
those without equity behind them, to come up with a deposit,” he says.
“This affordability challenge is likely to be most felt by the first
homebuyer segment and it may be a factor that continues to prevent prospective
first-time buyers from entering the housing market.”
But Belinda Williams, Mortgage Choice head of corporate affairs, says
those already in the market can now pay off their loans faster.
“Now is a great time for clued-in and prepared buyers to consider
entering the property market, to get in ahead of the rising trajectory of
property prices and to take advantage of the historically low interest rates,”
she says.
“The good news for those who already have a mortgage is that these
currently low interest rates pose the perfect opportunity to repay their home
loan faster and look to achieve their next financial goal sooner.”
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Housing picks up where mining leaves off
Housing picks up where mining leaves off
Posted on Thursday, August 01 2013 at 3:58 PM
According to one leading economist, the housing market is set to take over from mining as Australia’s primary economic driver.
In his latest release of the
CommSec Economic
Insights report, chief economist Craig James says real estate is
poised to lead the fiscal way.
“The housing sector is the sector most likely to take the baton from
mining and drive the economy forward over the coming year,” he says.
“Home prices are lifting at the fastest annual rate in more than two and
a half years with prices at the top end of the market now rallying and Sydney
home prices at record highs.”
The report goes on to say populations are rising in capital cities but
new home construction isn’t keeping up, which is resulting in generally tighter
vacancy rates.
“New construction will need to respond to the demands of owner-occupiers,
while investors will be enticed to shift funds from cash into property
ownership.”
The report sights RP Data-Rismark analysis which shows capital city home
prices rose by 1.6 per cent in July with house prices up 1.7 per cent and
apartment prices up 0.6 per cent.
Home prices are higher now than they were a year ago in seven of the
eight capital cities with Perth, Sydney, Melbourne and Canberra all up by more
than four per cent.
“Housing has more significant multiplier effects across the Australian
economy than the mining sector, so stronger construction and purchase activity
will be important in providing fresh momentum to economic growth.
“With the cash rate poised to fall to 2.5 per cent and with returns on investment
properties currently running at a 9.4 per cent annual rate, more budding
investors are likely to be enticed to shift funds from cash into residential
property,” James says.
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Homebuyer confidence hits record highs
Homebuyer confidence hits record highs
Posted on Thursday, August 01 2013 at 5:08 PM
Homeowner sentiment is at record levels, thanks to expectations about less mortgage stress.
New figures from an independent survey commissioned by lenders mortgage
insurance company Genworth reveal homebuyer confidence is back – and in a big
way. The confidence index jumped from a record low of 93.4 in March to 100.1 at
the end of July. The 7.2 per cent increase saw the index reach its highest
level since it was first calculated in 2007.
“It appears that consumers are becoming more confident about making
repayments, with the index showing that 29 per cent of homeowners expected
interest rates to decrease over the next 12 months, compared to 12 per cent who
held this expectation in March,” chief commercial officer Bridget Sakr says.
Survey participants were asked about the proportion of their monthly
income used to service debts, the maximum loan-to-value ratio they were
comfortable with, their repayment history over the past 12 months and whether
they believe now is a good time to buy.
The index also suggested that for those looking to enter the property
market, housing affordability and saving for a deposit are the biggest
barriers.
“Research showed that 80 per cent of non-property owners considered it
unrealistic to save a 20 per cent deposit,” Sakr says.
“Homebuyers realise that current market conditions, particularly
historically low interest rates, make buying property and servicing a mortgage
a more attractive proposition than it’s been for a number of years. However,
affordability remains a challenge for those yet to enter the market, with 70
per cent of non-property owners believing the dream of homeownership to be
unrealistic.”
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Report defines Australian city trends
Report defines Australian city trends
Posted on Wednesday, July 31 2013 at 3:38 PM
State of Australian Cities 2013 is designed to present a comprehensive snapshot of the nation’s 18 major centres with more than 100,000 residents each.
Speaking at the report’s launch,
Deputy Prime Minister Anthony Albanese says the report provides an invaluable
resource for business people and government authorities.
“The structure of our cities has an enormous effect on
productivity,
“Access to transport links, the changing structure of
employment, settlement and mobility all play a part in determining how well our
cities function economically.”
According to
the report, Australia’s three largest
cities – Sydney, Melbourne, and Brisbane – were all net losers of domestic
migrants despite high overall population growth rates.
“Sydney has increased its
population by 6.6 per cent since 2006 but saw a net loss of 20,249 domestic
migrants – almost four times greater than the next highest net loser of
domestic migrants – Melbourne.
“Overall, Melbourne has
increased its population by 9.7 per cent, however it lost 5540 domestic
migrants to other parts of Australia.
“Perth gained more
domestic migrants than any other city with 4977 more people moving there than
departing during the 2010/11 period.”
The next highest net
gainers of domestic migrants were the regional cities of Newcastle, Gold Coast/Tweed
and the Sunshine Coast.
The difference in house
prices between the inner and outer areas of Australia’s capital cities is large
and continuing to grow, according to the report.
“Given that real estate
markets are affected by population growth, high levels of in-migration (people
moving to the city), the growth of the mining sector and an already low supply
of houses, there will continue to be strong demand for housing and,
potentially, a smaller pool of affordable housing as competition becomes greater.”
Other key report
findings include:
- Australia
has one of the highest population growth rates in the Organisation for Economic Cooperation and
Development (OECD). - In
the 2011/12 year, the larger capitals grew almost 50 per cent faster than the
rest of the country. - The
manufacturing and retail sectors, which once drove jobs growth, are now
employing a smaller proportion of Australians. - An
increasing number of people are living further away from city centres in major
cities while higher-skill, higher-paying jobs are becoming concentrated in
central areas. - The
median incomes of households in Australia have risen substantially in real
terms, with particularly strong growth between 2003/04 and 2009/10.
The online report also
includes approximately 600 interactive maps with nearly 50 layers of
statistical information such as where employment is growing or which parts of
cities are being most affected by the ageing population.
State of Australian Cities 2013 can be viewed at http://www.infrastructure.gov.au/infrastructure/mcu/soac/index.aspx
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First offers yield the best results for sellers
First offers yield the best results for sellers
Posted on Wednesday, July 24 2013 at 3:12 PM
Homeowners are achieving their best sale outcomes by selling in a shorter timeframe, according to RP Data.
The
market analyst looked at the level of list-price discounting applied for
properties to achieve sale over the past five years.
Cameron
Kusher, a researcher with RP Data, says sellers applying the right value at the
time of listing have better results.
“Getting
the price right in the first place is imperative – you can sell quicker and
move on to your next property. Holding out for a better price tends to
ultimately result in a greater level of discounting.”
RP
Data analysed national sales across monthly time bands starting with properties
sold within the first 30 days of listing, and up to those sold at 120 days or
more.
Over
the past five years, homes selling in less than 30 days have recorded an
average vendor discount of 3.9 per cent on a monthly basis.
In
comparison, homes selling between 30 and 60 days have recorded an average fall of
5.2 per cent with 60 to 90 days reflecting a 6.5 per cent drop.
Ninety
to 120-day sale periods see a reduction of 7.6 per cent and sales taking more
than 120 days have the highest discount rate at 10.1 per cent on their list
price.
“In
my opinion, if vendors need to ask whether or not they will get a better price
by keeping the property on the market, or give consideration that an initial
offer may be the best one, this week’s analysis suggests that the latter is
generally the better option,
“If
the vendors set a realistic price, they are more than likely to sell the home
quickly and with a relatively low level of discount.” Kusher says.
Brad
Munro, head of residential sales at Position Property, says sellers need to
avoid burning off early buyers.
“You
do find once you’re out in the marketplace at the right price, there’s a
captive audience already there because there are people in the marketplace who
have been actively looking to buy and missed out on other properties who will
come about relatively soon after it’s listed.
“You’re
dealing with someone who’s had enough of looking or finally found the one they
want, and that’s where I’ve found, in most cases, the best people (buyers) to
work with… those that have seen it early on in the process.”
Munro says sellers
can spend time and money with no end gain if they aren’t careful.
“You
don’t want to go to the marketplace and waste two or three months, and you will
do that, getting to the price point it needed to be in the first place.”
Ben Anderssen, owner
of buyers’ agency Property Chase, agrees initial offers usually yield the best
result for a seller.
“The oldest
saying in the world is that, invariably, the first offer is the best one – not
necessarily that the monetary value of the offer is the best, but that if negotiation
then takes place with the party that made the initial offer, a sale will
result.
“It’s possibly also why the majority of properties I buy for
clients at good value are the ones that have been on the market for a
while,” Anderssen says.
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Three-year record growth for property markets
Three-year record growth for property markets
Posted on Thursday, July 25 2013 at 2:11 PM
The numbers show real estate is on the rise, according to property research firm Australian Property Monitors (APM).
In their latest data release, APM says the national
housing market has recorded its strongest gain in more than three years with the
majority of capital city markets at or near record price highs in the June
quarter.
National median house prices rose 2.8 per cent over
the quarter to $564,325, which is up 5.4 per cent for the year since June 2012.
This is the third consecutive quarterly rise in the
national house price and reflects the market’s best growth since March 2010.
National unit prices also rose solidly over the
quarter, up by two per cent, and were 3.2 per cent stronger for the 12-month
period.
APM senior economist Andrew Wilson says the market is
reflecting other positive news.
“Buyer activity has increased significantly over the
first half of 2013 with the rise in house prices in nearly all Australian
markets being propelled by the lowest interest rates in decades, rising
confidence and continued generally solid economic performances.”
Melbourne recorded the strongest gains of all the
capitals over the June quarter with houses up five per cent to $553,447 and
units rising 3.7 per cent to $411,714.
Sydney’s prices increased too with housing 2.7 per
cent stronger to $690,064 and units showing a gain of 2.4 per cent to $491,845 over
the June quarter – both all-time highs for the city.
Perth and Canberra also recorded their highest ever
median house prices over the June quarter.
“The results in the major markets of Sydney and
Melbourne are not surprising and is in line with forecasts made earlier in the
year on these markets’ performances – of particular note the correlation over
the quarter with the strong auction clearance rates, proven to be an accurate guide
to the general level of house and unit prices growth.
“The patchiness that has characterised market activity
over 2012 is diminishing and we are seeing the fastest prices growth since the
government-stimulated house price boom of 2009/ 2010 with most capital city
markets and market segments at or near record levels and rising,” Wilson says.
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Loan arrears continue to fall
Loan arrears continue to fall
Posted on Thursday, July 25 2013 at 2:36 PM
The level of overdue repayments on loans tied to prime residential mortgage-backed securities (RMBS), a type of investment deriving cash flow from home finance debt, continues to fall.
Standard and Poor’s (SP) says arrears on loans underlying prime RMBS
decreased two basis points to 1.31 per cent in May, compared with a month
earlier.
Subprime RMBS arrears fell 16 basis points to 5.57 per cent over the same
period, while low-documentation loan arrears decreased four points to 5.4 per
cent.
“This is the second month to record declines across both prime and subprime
sectors,” SP credit analyst Narelle Coneybeare says.
“The decrease in arrears in both the subprime and low-doc sectors was
small, however we’re seeing declines in the proportion of arrears greater than
90 days, indicating that the proportion of borrowers facing severe arrears is
easing.”
RMBS investments took a battering in
Australia in the aftermath of the global financial crisis. It has continued its
slow recovery in recent years.
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Spike in loans from non-major lenders
Spike in loans from non-major lenders
Posted on Tuesday, July 23 2013 at 4:06 PM
The home loan market has seen an increase in activity from non-major lenders due largely to property investors and refinancing, according to recent figures.
The Australian Finance Group
competition index revealed the overall share of loans processed by non-major
lenders rose to 24.8 per cent in June, up from 20.6 per cent in March.
Meanwhile, the overall loan
share for major lenders fell from 79.4 per cent to 75.2 per cent over the same
period.
The index showed the increase
for non-major lenders was largely due to business from investors and borrowers
refinancing.
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Borrowers debt free almost 10 years earlier
Borrowers debt free almost 10 years earlier
Posted on Monday, July 15 2013 at 3:42 PM
A whole new generation of homeowners and investors could be mortgage free a decade sooner, thanks to the low interest rates on offer at the moment.
A new study by
RateCity shows the majority of borrowers with a variable home loan are keeping
their repayments at the November 2011 levels, before rates began to fall.
The average
standard variable home loan rate has fallen by 1.62 percentage points from 7.31
per cent in November 2011 to 5.69 per cent in July 2013.
Variable
borrowers with a typical $300,000 home loan who keep their monthly repayments
at the November 2011 level of $2509 are adding more than $300 per month to
their mortgage. If borrowers continue this trend and add an extra $300 to a
$300,000 mortgage each month, they’d potentially save more than $151,000 and
shave nine years and five months off a 30-year home loan.
RateCity
spokesperson Michelle Hutchinson says the results of the study prove borrowers
should take advantage of the home loan market and accelerate their repayments.
“Even though the
cost of a mortgage rises when rates increase, it’s worth adding as much as you
possibly can to your mortgage, particularly when rates are low,” she says.
“Borrowers who
don’t have the extra money to add to their home loan while rates are low could
be in the wrong home loan, so it’s worth comparing deals now and considering
refinancing.
“By finding a
0.25 percentage point discount for a $300,000 home loan, it’s worth about $50
in savings per month. Add this to your mortgage and you could potentially save
about $36,000 and cut over two years off your loan.”
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Housing market expected to grow in coming months: RBA
Posted on Tuesday, July 16 2013 at 4:26 PM
Conditions in the housing sector have continued to improve, according to minutes from the Reserve Bank of Australia’s July meeting released today.
Although the
board noted overall dwelling investment was flat in the March quarter due to
lower spending on alterations and additions, figures showed an increase in
investment in new dwellings.
The number of
building approvals increased strongly in April along with loan approvals for
new dwellings, indicating some improvement in the building and construction
industries.
The RBA also
noted dwelling prices had increased over the June quarter and auction clearance
rates remained high.
Combined
with the effects of lower interest rates it is expected the housing market will
experience further growth in the coming months.
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