Investors pounce on NSW and Queensland as first homebuyers retreat
Posted on Tuesday, December 04 2012 at 12:29 PM
Since the $7000 first homebuyer grants have been withdrawn from New South Wales and Queensland, first homebuyer finance demand has plummeted, however investors are living it up, according to the Australian Finance Group (AFG) Mortgage Index.
In Queensland last month AFG
arranged only 96 home loans worth $31 million for first homebuyers, compared
with 265 mortgages worth $79 million the month prior.
In NSW over the months of
October and November AFG arranged less than half of the 219 home loans worth
$83 million in September.
AFG general manager of sales and
operations Mark Hewitt says the trend is significant and is of great concern
for the overall property market given that first homebuyers are “the lifeblood
of the property market”.
“When activity
stagnates at the entry level, it affects
everyone up the property chain. By contrast, both New South Wales and
Queensland are enjoying strong support among property investors right now,” Hewitt says.
“We could be seeing the
transition to a generation of renters unless more is done to
help people onto the property ladder.”
In property investor
demand terms, NSW leads the nation with 41.1 per cent of all loans in the state
arranged for property investors; in Queensland the figure is 33.4 per cent.
First homebuyer
demand for finance in November was strongest in Western Australia, where 23.6
per cent of new home loans were arranged for this market segment, higher than
NSW’s 5.4 per cent proportion and Queensland’s 5.5 per cent.
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Conveyancing made easier
Conveyancing made easier
Posted on Thursday, November 29 2012 at 2:42 PM
Investors who buy in Queensland will be able to access more affordable conveyancing, after legislation to join a national electronic conveyancing system was introduced into Queensland State Parliament.
Natural Resources
and Mines Minister Andrew Cripps says the Electronic Conveyancing National Law (Queensland) Bill 2012
will mean reduced costs and greater certainty that settlement will take place.
“The costs for
solicitors and financial institutions to use the electronic lodgement network
will be less than the cost of existing charges such as bank cheques and fees
for couriers and settlement agents.
“E-conveyancing
avoids delays in settlement due to errors in documentation, saving time,
inconvenience and additional costs of removal, storage and accommodation.
“In some cases,
settlement delays can result in the forfeiture of deposits.”
Cripps says
Queensland’s legislation mirrors that of New South Wales.
“New South Wales
has been established as the host jurisdiction with other participating states
and the Northern Territory adopting nationally consistent legislation,” he
says.
“The proposed
legislation doesn’t change Queensland’s substantive land laws, as the system
relates only to the settlement and lodgement aspects of conveyancing.
“Use of the
system will be completely voluntary and the paper-based process for
conveyancing transactions will continue to be available.
“National
e-conveyancing will be implemented gradually, commencing in Victoria in about
April 2013 and is expected to be available in Queensland in late 2013.”
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NSW property owners given back choice on heating systems
Posted on Thursday, November 29 2012 at 4:28 PM
New South Wales investors and homeowners will no longer be forced to ditch their electric hot water systems, according to the NSW Energy Minister Chris Hartcher.
The Minister announced today
that the previous government’s policy to begin phasing out electric hot water
systems from December 2010 was canned, and that property owners would no longer
need to replace existing hot water units with new systems.
“Consumer choice should dictate
water heating options and the price of the fuel, whether gas or electricity
should guide that choice, not the government,” Hartcher says.
The NSW Government states that
two-thirds of the state’s households don’t have the option of gas hot water
from a reticulated system and only seven per cent have solar heating, meaning
these householders were forced under the previous government’s policy to invest
around $4000 on alternatives including heat pumps or solar heating.
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Cheaper housing starting to stir buying activity
Cheaper housing starting to stir buying activity
Posted on Tuesday, November 27 2012 at 3:56 PM
Cheaper buying opportunities have arisen for investors as housing affordability continued to improve in the September 2012 quarter across Australia, according to the Housing Industry Association (HIA).
The HIA-CBA (Commonwealth Bank of Australia) Housing
Affordability Index reports a housing affordability jump of 5.3 per cent in the
September quarter compared to the previous quarter, and a 15 per cent surge
when comparing the September quarter to the same quarter 12 months ago.
HIA chief
economist Harley Dale says the September quarter is the seventh consecutive
quarter that the headline affordability index has seen improvement.
“The run of
consecutive improvements in some regional indices is even longer, in some
instances showing affordability has reached levels not seen since the early
2000s,” Dale says.
Steadily growing
incomes, falling interest rates and easing dwelling prices are the drivers of
the nation’s improvement in housing affordability, he says.
“At the same
time, however, transactions volumes have remained historically low as economic
uncertainty has weighed heavily on households’ willingness to engage in the
residential property market.”
But with signs
of a housing transaction recovery under way, Dale says a December interest rate
cut would only accelerate this.
“An increase in
homebuyer action can occur without generating undue inflationary pressure and
would assist a much needed recovery in new residential construction activity.”
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Know the value of your reno before the lender does
Know the value of your reno before the lender does
Posted on Thursday, November 22 2012 at 10:23 AM
As the renovation market booms across much of the nation in the lower to mid price range of housing, many investors and homeowners who bought in the past year or two are wondering if they’ll be considered for finance given they’ve achieved little or no equity in the property since. But they shouldn’t throw in the towel on the renovation finance idea, according to finance experts.
The way around the finance obstacle is as simple as
extending the mortgage – also known as a ‘variation’ – and seeking an
independent valuation prior to application stage. But just how flexible are
lenders towards this practice? API experts offer some tips on getting the most
favourable valuation to succeed in finance.
Finance specialist David Thomas of Trilogy Investment
Property Funding says if investors are seeking a variation on their home or
investment loan, they first must be able to prove that the added value of the
proposed renovation exceeds the cost, because the lender wants to know their
investment in your property is a safe one.
While there are plenty of good sources and seminars
one can turn to for tips on adding value, or what their property may be valued
at with a specific renovation, Thomas says these sources don’t work with
lenders and won’t tell you what the added value means to your individual
property in a particular geographical area.
“It’s the independent property valuer that will make
or break your chance of seeking finance. He or she is the one who provides the valuation
report to the lender,” he adds.
“The valuer can come out and give you a consultation
and report on what value your proposed renovation can add to your property
value, they can even tell you where you’re best off spending your $40,000 to
$50,000.”
Depending on the valuation firm, a consultation and
report can cost from around $250 to $500, he says.
The benefit of contacting an independent valuer for
this consultation and report is that once the property owner is satisfied with
the proposed renovation and estimated added value, this report can be lodged
with the finance application and will put the property owner in a more solid
position for achieving the finance.
“In many cases the lender will base their decision on
the valuation report provided,” he says.
Finance broker Lisa Sanders of Your Future Strategy
agrees with the idea of engaging an independent property valuer prior to
lodging an application for a variation to an existing home loan.
“The valuer will consider what the current value is, then
what the scope of works is and what the added value will be,” Sanders says.
She adds that engaging an independent valuer before
the lender even knows about your application is a clever way to take more
control over the process simply by not being left in the dark on what a
lender’s valuer will determine your added value to be.
“From this point on the lender may only verify the
valuer’s report with an online valuation of their own, while others may send
out another valuer,” Sanders says.
At least it puts the property owner in a clearer
position from the start, she adds.
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Strata law changes will force owners out: NSW Opposition
Posted on Thursday, November 22 2012 at 3:58 PM
Apartment owners in New South Wales could be forced to sell up and move on if the majority of other owners in the strata scheme want to.
That’s the warning from NSW Shadow Minister
for Fair Trading Tania Mihailuk, who describes the government’s proposed
changes to strata legislation as “radical”.
At present, strata schemes can only be
terminated with the consent of all owners. The proposed reforms could see that
requirement changed to a 75 per cent agreement.
“Developers who want to buy an entire
building would only need the agreement of (the majority) of owners, but
everyone else would be forced to sell,” Mihailuk says. “You could lose your
home without having any say in the matter.”
Public response to the discussion paper
closes today and about 1000 submissions have been received already.
Fair Trading Commissioner Rod Stowe insists
feedback received by the strata community will play a role in “informing the
issues covered”.
The government will listen to concerns
raised and ensure the issues affecting strata owners were addressed by the
review, Stowe says.
The review covers a number of areas and
submissions so far have made recommendations covering governance, anti-social
behaviour, dispute resolution and the more effective enforcement of bylaws.
But it’s the dissolution changes that have
Mihailuk worried. If introduced, there could be wider consequences for
owner-occupiers and investors who buy into strata schemes, she warns.
“Why would anybody want to live in a strata
scheme if it means they could potentially lose their home?”
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SMSF property investments will be monitored: ATO
SMSF property investments will be monitored: ATO
Posted on Tuesday, November 20 2012 at 3:26 PM
The Australian Taxation Office (ATO) says it’s aware of property investors using self-managed superannuation funds (SMSF) to deliberately skirt around the law and it will come after those doing the wrong thing.
ATO acting commissioner Bruce Quigley says
some don’t fully understand their legal obligations while others are “seeking
to take advantage of certain types of arrangements”.
“We’ve observed that some arrangements are
deliberately entered into to get around the law, which can result in the fund’s
trustees being disqualified, facing civil penalties or even facing criminal
charges,” he says.
“The fine details are important and
trustees need to be sure property is the right investment for their SMSF and
that the arrangement is legal.”
In some cases, SMSF holding trusts hadn’t
even been established when a property purchase contract was signed, he says.
“In other instances, the title of the
property is held in the individual’s name rather than the trustee of the
holding trust. Another common mistake is gearing in a related unit trust, which
isn’t allowed under the law.”
Fixing an incorrectly structured investment
isn’t simple, he warns. The only option could be to unwind the arrangement and
sell the assets involved.
“This could be very expensive for the fund,
with potential stamp duty and tax consequences. I urge trustees to get
reliable, independent advice when making investment decisions and to obtain
advice from (the ATO) if they’re contemplating these sorts of arrangements,”
Quigley says.
Companies marketing properties to SMSF
trustees with the express intention of exploiting loopholes could be referred
to the Australian Securities and Investment Commission.
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Browse gas project given State Government approval
Browse gas project given State Government approval
Posted on Monday, November 19 2012 at 4:39 PM
A multi-billion dollar gas project given State Government approval in Western Australia could benefit the Broome and Perth property markets, according to Gavin Hegney of Hegney Property Group.
The $30 billion
project, which will see gas pumped from the Browse gas field in the Kimberleys
to a processing hub at James Price Point 60 kilometres north of Broome, has
been given environmental approval by the WA Government.
WA Environment
Minister Bill Marmion says the $30 billion Browse liquefied natural gas (LNG)
project now has the green light, following consultation with a number of other
ministers and authorities.
The project had
previously been appealed, but Marmion says a review of the Environmental
Protection Authority’s report allowed him to implement 29 ‘strict conditions’
to better protect the environment.
The Federal
Government still has to finalise the environmental and heritage assessment,
however Hegney says the latest step is a positive one for the WA economy and
will also be a positive for Broome “because of the intensity of labour that’s
required to construct a project of this magnitude”.
“People should
view it not so much as an LNG project, but more like a construction project,”
Hegney says.
“A lot of people
will be required to build it and it will be good for Broome. The Broome market
has tended to be a tourism economy but at the moment Broome is suffering.
“This will put
more money into the Broome economy.”
So what does this
mean for investors? Hegney says whether or not investors should actually buy in
Broome comes down to their appetite for risk. Of course, it would also be wise
to wait for federal approval, he says, but the news is likely to drive more
demand and could see prices increase in the short term.
Broome also has
adequate land to cater for an increase in demand, Hegney warns.
“It doesn’t
justify taking on the extra risk of investing in Broome, rather than a capital
city,” Hegney says.
“That doesn’t
mean people won’t make money short term, because people will buy into the
story. This is good for investors already in the market. But does it justify
stepping into the market? I don’t think so.”
Hegney adds when
it comes to LNG projects, the ratio of people required to build it compared to
the ratio of people needed to run it is about 15 or 20 to just one person.
This means when a
project goes from construction to operation, investors could find their
investment property suddenly falls in price.
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Lenders not automatically passing down variable rate cuts to interest-only consumers
Posted on Friday, November 16 2012 at 9:59 AM
Just because lenders announce rate cuts doesn’t mean these cuts are automatically passed on to interest-only mortgage holders, as one property investor discovered recently.
Twelve months since signing up for her investment
loan, one investor, preferring to remain anonymous, told Australian Property Investor she
only recently discovered the variable rate cuts announced by her lender
following official cash rate cuts weren’t translating to a reduction on the
variable component of one of her interest-only loans.
Since recently contacting her lender to request the
announced rate cut be applied to her loan, her weekly repayments have reduced
by $50 per week.
While the investor has missed out on the savings from
rate cuts over the past 12 months or so that she’s held the loan, she admits to
feeling a little relieved that only 20 per cent of the loan was variable
otherwise the lost savings would have added up to so much more.
Finance broker Lisa Sanders of Your Future Strategy
is “mortified” that investors are being put into the situation of phoning their
lenders to request the rate cut be passed on to an individual loan after it
being announced in the media.
“How appalling is it that lenders are letting their
clients slip through the cracks? Though I’m also not surprised,” Sanders says.
“What’s happening is a lot of lenders are now tiering
their rate reductions – so they’re picking and choosing who they’re giving
reductions to.
“When the Reserve Bank announces a cash rate cut it’s
usually the Big Four banks who make their rate cut announcements first. The
smaller banks and non-bank lenders usually wait for the Big Four rate cut
announcements then generally take an average of the four. Then all lenders
decide what to pass on to their new and existing clients.”
So even though rate cuts are announced in the media,
they sometimes come with conditions and often are only intended for new
customers, though lenders won’t announce this, she says.
Usually in a competitive market most lenders will
pass on a rate cut to clients, however the full rate cut may only be extended
to new clients, she says.
Existing clients, particularly those perceived as
‘higher risk’ are more likely to take the back seat, Sanders adds.
For example, low doc loan clients (self-employed
mortgagees unable to produce sufficient financial paperwork) may not receive
any discount because the lender knows they’re unlikely to be able to refinance
with another lender, she says.
Borrowers with a loan-to-value ratio of 90 per cent
or higher are also more likely to draw the second straw because they’re
perceived to be a higher risk to lenders and are also less likely to refinance
elsewhere, Sanders adds.
David Thomas of Trilogy Investment Funding says it’s
usually the smaller lenders which are less likely to pass on the rate cut to
clients and are more likely to be selective about who gets the rate cut.
“This is often because the smaller lenders are under
less media scrutiny than the Big Four banks,” he says.
Sanders says what these lenders are trying to do is
claw back their losses made in the GFC.
Just because a borrower is perceived as a higher
risk, it doesn’t mean he or she shouldn’t pick up the phone to ask for the rate
cut; quite the opposite, Sanders says.
“Borrowers need to be aware this is happening and
check statements regularly,” she adds.
“If rate cuts aren’t being passed down then they
should be getting on the phone to their existing lender and asking for it
rather than expecting it to just happen.”
Pushing aside the rate cuts made in line with the
Reserve Bank’s cash rate movements, Thomas says borrowers should also pay close
attention to the rates being offered to attract new clients, particularly if
the criteria is the same as the loan an investor may have taken on 12 months
prior.
“Investors should be getting on the phone telling
lenders their loans met the same criteria as the advertised rate being offered
to new clients and ask the lender to match the rate,” he says.
First homebuyers not rushing this year
First homebuyers not rushing this year
Posted on Thursday, November 15 2012 at 2:09 PM
First homebuyers are ageing and saving longer, according to the 2012 Mortgage Choice Future First Homebuyer Survey.
Of 1000 Australians who plan to buy their first home
in the next two years, 41 per cent will be aged between 30 and 39 years, 39 per
cent will be 18 to 29 years of age, and 14 per cent will be aged over 50 years,
the survey reports.
The increase of first homebuyer numbers aged over 30
years has increased by a staggering seven per cent, from 54 per cent last year
to 61 per cent this year.
The survey also found that first homebuyers intend to
save longer before making a first purchase – up from 1.8 years last year to two
years this year.
Job insecurity also ranked higher in this year’s
survey, with almost one in five (18 per cent) upcoming first homebuyers
claiming this is their greatest concern, the survey found.
On the other hand, fewer buyers are concerned about
missing the boat in rising house price terms – 22 per cent this year compared
to 31 per cent last year. Even fewer first homebuyers are concerned about the
potential for rising interest rates to impact borrowing power – eight per cent
this year compared to 14 per cent last year.
“While many of the economic
indicators such as rate cuts, lower house prices and improved affordability
might suggest now is a good time to buy, people are still nervous about their
ability to sustain employment,” Mortgage Choice spokesperson Belinda Williamson
says.
“Home ownership is still
the dream for many Australians, however it is important to feel confident in
your financial future before taking on the commitment of a property purchase.”
Fifty-seven per cent of first homebuyer survey
respondents claimed that their decision to purchase property was to set
themselves up financially for the future by getting their foot in the door, 49
per cent said it was for family lifestyle reasons, and 42 per cent said it was
to avoid rising rent.
“The overall cost and
financial benefits of home ownership are going to add weight to the decision
but as our survey results show, the more emotional factors such as where you
envisage bringing up your children is very high on the influencing stakes,”
Williamson says.
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