RBA cuts interest rates
RBA cuts interest rates
Posted on Tuesday, October 02 2012 at 2:50 PM
The Reserve Bank of Australia (RBA) has cut the official cash rate by 25 basis points to 3.25 per cent.
If passed on in full by lenders, today’s
reduction would save homeowners about $50 a month in repayments on the average
mortgage.
It’s unclear how much of the cut banks will
pass on.
This is the third official reduction in
2012. Most economists expected the RBA would sit tight once again this month,
believing movement in November was more likely.
The decision was based on factors such as
continuing lackluster global economic conditions and a fall in Australian
commodity exports in the past quarter.
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Greater confidence that now is the time to buy
Greater confidence that now is the time to buy
Posted on Thursday, September 27 2012 at 9:02 AM
Improved affordability in housing is returning confidence to buyers, with nearly half of Australians surveyed believing now is a good time to snap up a property, the highest level since before the global financial crisis, according to September’s Genworth Homebuyer Confidence Index (HCI).
The Reserve Bank of Australia’s cash rate drop to
3.5 per cent has only helped improve affordability and buyer confidence, a rate
that’s now 50 basis points below the 15-year average, says Genworth.
According to Genworth chief
executive officer Ellie Comerford, the HCI reveals that homebuyers are far more
positive than the mass media discussions centred on the grey economy.
“Australia has some
compelling economic indicators and a low cash rate that is making many
potential homebuyers believe that now is a good time to be considering home
ownership. However concerns remain around the global economy and the future
impact this might exert on Australia.”
The September HCI also indicates
that mortgage stress fell for the second consecutive survey, from 22 per cent
in March this year to 18 per cent in September, says Comerford.
She adds the proportion of
borrowers expecting difficulty meeting repayments in the coming year fell from
22 per cent to 19 per cent over the same period.
Comerford says this drop in
mortgage stress has most likely been driven by falling interest rates easing
the pressure on households, combined with improved housing affordability.
Cost of living stress
appears to have softened a little due to the lowered cost of mortgages,
allowing Australians to save more and improve sentiment and perception of
greater financial security.
Tasmania was the only state
that didn’t demonstrate a surge in sentiment, according to the HCI.
Victoria saw the greatest
spike in sentiment, up 7.7 per cent from a low of 92.3 in March 2012, leading
New South Wales and Queensland. The HCI translates this as Victorian borrowers being
among the least likely to feel mortgage stress, and the most likely to believe
that now is a good time to buy a home.
The Genworth HCI reports
that South Australia saw a 3.3 per cent increase in confidence, the second
highest among the states, to 99.4. This is translated to mean that South
Australians are among the least likely to have experienced mortgage stress in
the past year, at 17 per cent (down from 23 per cent in March).
Over to Western Australia,
where the smallest increase in confidence was noticed, yet still giving it the
lead, with WA the least troubled state in meeting mortgage repayments.
The highest debt levels and
the highest expectation of difficulty meeting repayments was in Queensland,
with one-third of survey respondents spending more than 50 per cent of their
income on servicing debt, reports the Genworth HCI.
Despite Queensland’s higher
mortgage stress levels, it was also the state where the highest proportion of
survey respondents (54 per cent) believe that now is a good time to buy a
property.
Matching Queensland’s
sentiment figure, 54 per cent of first homebuyers across the nation claim that
it’s currently a good time to re-enter the property market, a figure that has
more than doubled over the past two years.
However the mortgage
servicing ability concern for first homebuyers in the coming 12 months (a rise
of two per cent) told a slightly different story compared to the mortgage
stress experienced in the past 12 months when figures fell from 16 per cent in
March 2012 to 13 per cent in September 2012.
“Despite a slight fall in
first homebuyer confidence, this segment of the market remains more optimistic
that now is a good time to buy a home,” says Comerford.
“What is more heartening is
that first homebuyers are increasingly confident they can save the deposit
necessary to buy their first home.”
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Great buying opportunities in Tasmania as Gunns hangs its hat
Posted on Thursday, September 27 2012 at 10:56 AM
As Gunns Limited hangs its hat on its timber processing dominance in Tasmania, the state’s housing market faces further downward pressure on sales transactions and rental occupancy, however Michelle Williams of Launceston-based At Home Property Management believes this means great buying opportunities for investors.
Williams says the impact of job losses on the state’s housing market
will mostly be felt in the Launceston region as a result of the majority of job
losses likely to happen around the pulp mill in the Bell Bay region in the
north.
“It certainly won’t have a positive effect on our market,
particularly as vacancy rates are almost double of what they were last year and
rents have come back by up to 10 per cent, but sales prices have come back as
well so it’s all relative to what you’re paying.
“It’s certainly a good buying
market for investors right now with a large number of opportunities available.
Where else can you buy a CBD property for around $200,000?”
Meanwhile, Damien Taplin of TPC
Valuers says the announcement of Tasmania’s pulp milling and wood saw mill
enterprise Gunns Limited going into voluntary administration was just more bad
news the state’s economy and certainly the housing market didn’t need.
While Gunns Limited is
scrambling around for a buyer, Adrian Kelly of the Real Estate Institute of Tasmania says the project is still
“potentially viable”, particularly with the approvals in place and the
infrastructure set up, however he doesn’t hold much hope of a resurrection. “If
you’re a betting man it doesn’t seem likely.
“Gunns employs around 600 people in Tasmania, Victoria and Western
Australia, but the majority in Tasmania. So what this means is there will be
600 more people in the dole queue and people losing their jobs means less
people buying and selling,” he says.
Looking at the bigger picture,
Williams says that while the Tasmanian economy is struggling at the moment, the
positive about owning an investment property in the state is that it doesn’t
experience the big booms and busts like other parts of the nation that are
being pumped up by the mining sector.
“Tasmania remains relatively
steady compared to other places, something a long-term investor would
appreciate,” she says.
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Calls for LMI to be portable gain momentum
Calls for LMI to be portable gain momentum
Posted on Tuesday, September 25 2012 at 12:57 PM
There have been renewed calls from the finance brokerage industry for lenders mortgage insurance (LMI) to be portable in some circumstances.
Borrowers who refinance
a mortgage and switch lenders should be able to effectively transfer the LMI,
it’s argued.
Such a move would make
it easier to change between home loan providers and getting a better deal.
According to a news
report today, the Finance Brokers Association of Australia (FBAA) has called on
the government to consider the idea of portable LMI.
In a letter to the
Senate Economics Reference Committee quoted by The Adviser, FBAA president Peter White says LMI should be
portable if the debt size, security property and repayments are unchanged.
It’s a sentiment echoed
by a number of brokerage firms, consumer advocates and other finance industry
associations.
At the very least, the
FBAA argues there should be an appropriate refund or rebate if the LMI policy
is terminated at any time and not just in the first couple of years of the
loan.
Joe Sirianni is the
executive director of Smartline Personal Mortgage Advisers and says the basic
concept of portability sounds good in theory.
“I don’t know how
practical it would be, though. I doubt it’s as simple as it has been made to
sound. Circumstances change. When a client wants to switch between lenders, the
variables of the loan are no doubt different to when it was first established
and a review would be required.
“The loan balance would
be different, for one. The client’s personal and financial circumstances
might’ve changed, the property value might’ve changed (and) the loan term
would’ve certainly changed.”
While it would make it
easier for people to switch lenders and get a better deal, it would be “pretty
difficult to execute”, he says.
There are two main
providers of LMI in Australia – QBE and Genworth. When the portability debate
has emerged in the past, Genworth warned that such a move would see premiums
increase.
The idea gained
momentum after Treasurer Wayne Swan raised it as a possibility and a way of
reducing the “double-handling” of LMI.
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Wait any longer and you could miss out
Wait any longer and you could miss out
Posted on Monday, September 24 2012 at 2:42 PM
Hesitant property investors should buck up and buy before it’s too late, according to a national accounting and wealth advisory firm.
Chan Naylor director Ken Raiss says
there’s little chance of a major housing market downturn in Australia and
believes now is the time to invest.
“Potential investors sitting tight for a
bubble to pop could be waiting a long time,” Raiss warns.
“High living standards, low and controlled
interest rates, relatively high population growth, undersupply and a health
banking system are only a few reasons why buying property in Australia is an
attractive option for personal occupancy of investment.”
Despite market jitters in the wake of the
global financial crisis and sluggish price growth in the period since, Raiss
says values remained mostly steady and are back on a largely upward trend after
only “modest corrections within a cycle”.
And he predicts demand is about to boom.
There are numerous drivers contributing to
a rise in housing demand, including the retirement of baby boomers and the
widening skills gap, which will see a growth in migration numbers, he says.
Generation Y will also drive demand, with
the steady entry of five million of them into the market in coming years. The
Australian Bureau of Statistics says that’ll bump up housing demand by 15 per
cent more than the previous generation.
As Raiss points out, there’s also a
dwindling amount of available land for development in city hubs and governments
across the country aren’t adequately addressing the shortage supply.
The sum of these factors, as well as the
healthy state of the national economy, will keep the value of housing high.
Those younger buyers holding out for the
property of their dreams or a more confident marketplace run the risk of
missing out altogether, he says.
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Lenders become more cautious in resource towns
Lenders become more cautious in resource towns
Posted on Thursday, September 20 2012 at 1:12 PM
Some financiers have this month reviewed risk ratings of mining towns, meaning that investors are likely to need larger then average deposits to purchase in these areas, according to finance experts.
With the many recent announcements of deferred
resource projects and blanket statements from politicians and mining moguls
about the state of the sector, it’s not only investors feeling uneasy about
borrowing to buy in resource towns at the moment, but also some lenders,
according to Michelle Hutchison of RateCity.com.au.
Hutchison has noticed some lenders reviewing their
lending criteria for certain areas they feel are higher risk.
“For instance, Police and Nurses Mutual Banking
(formerly Police and Nurses Credit Union), which is based in Perth, has dropped
some of its home loan loan-to-value ratios from 95 per cent to 90 per cent this
month. This means borrowers need a minimum 10 per cent deposit as opposed to
five per cent previously for some of their home loans.”
Lenders that are adjusting their lending criteria are
likely to be looking at mining areas where property values have escalated
recently and are concerned that if property values drop suddenly their
borrowers will be faced with negative equity, adds Hutchison.
“So increasing the minimum deposits provides greater
security for both lender and borrower when investing in mining towns.”
Based on recent conversations with her franchise
owners located in and around resource towns, Belinda Williamson of Mortgage
Choice says often smaller towns don’t have enough available property stock to
support growing mines, so to house the increase in local population, new
properties must be built.
“The cost to buy land to build on may be less
expensive than in regional or metro areas, however the cost to build is often
much higher, pushing up new property prices in the area,” she says.
“This is a concern to property buyers, particularly
those who have deposits of less than 20 per cent of the property’s value and
are in need of lenders mortgage insurance (charged by a lender when property
buyers wish to borrow more than 80 per cent of a property’s value) to get them
over the line.”
Williamson says many mortgage insurers haven’t adapted
to boom cycles in mining towns, possibly due to the unsustainable nature of
higher property prices in these markets given the expectation that if or when
the mine dries up, property demand will ease and prices will fall.
“The mortgage insurers have capped amounts on what
they’re willing to insure and often the amount is considerably less in smaller,
regional areas including mining towns.
“With a shortage of available stock it’s also assumed
that the rental vacancy rate would be low and that rental income to investors
would be high.”
She adds that lenders may choose to factor in a more
sustainable, long-term rental income when determining a borrower’s ability to
service a loan.
“For example, if a property is rented in a mining town
for say $2000 per month, property valuers may note this but advise that a
realistic expectation of long-term rental income is more likely to be $1500 per
week. A lender would then only take into consideration the lower rental
income,” she says.
“Another factor when determining loan serviceability
is the percentage of rental income taken into consideration. In most metro or
regional areas, lenders will take into consideration 80 per cent of the rental
income when considering a borrower’s ability to service a loan. However, we
have heard of some instances, particularly in mining towns, where some lenders
have reduced this to 60 per cent.”
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Coroner calls for greater protection from rental dangers following infant’s death
Posted on Wednesday, September 19 2012 at 3:55 PM
An inquest into the death of a seven-week-old baby in Queensland two years ago could drive significant change in the state’s real estate industry.
Isabella Diefenbach died in May 2010 after
falling from the balcony of her parent’s rental home in Yeppoon on the state’s
central coast.
The infant was being held by her father at
the time, when his foot suddenly broke through a rotted wooden plank of the
house’s deck.
The family had complained several times
about the state of the deck to their landlord and property manager.
Rockhampton Coroner Annette Hennessy today
handed down a series of findings, which lawyers say might have wide-ranging
ramifications.
Gino Andrieri, principal of Maurice
Blackburn Lawyers in Rockhampton, represented the family at the inquest and
says today’s outcome is significant.
“The Coroner has outlined that major
changes are needed within the real estate industry to protect the safety of
tenants and to ensure a tragedy like this can never happen again,” Andrieri
says.
The Corner recommended an overhaul of
legislation to ensure mandatory inspections are undertaken on decks more than
10 years old, and that these checks are carried out before a property is rented.
Hennessy also called for tenants to have
greater access to information about rental properties, including previous
inspection reports, so they can make informed decisions about a home’s safety.
“In addition, the Coroner called on the
real estate industry to ensure wood rot is classified as an emergency repair,
meaning any time this is identified in a rental property it must be acted on as
an immediate priority,” Andrieri says.
“Nothing can bring Bella back, but we hope
today’s findings will help the Diefenbach family with the healing process after
everything they’ve been through.”
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First homebuyer comeback
First homebuyer comeback
Posted on Monday, September 17 2012 at 4:45 PM
First homebuyer finance proportions are trending back to normal levels experienced prior to the global financial crisis (GFC), and according to the RateCity.com.au First Home Buyer Index for the Autumn quarter 2012, the next wave could be building.
RateCity.com.au’s Michelle
Hutchison says the index reports that improved affordability has been a trigger
for first homebuyers to re-enter the market, largely due to lower interest
rates.
The Australian Capital Territory
was the most affordable state for first homebuyers, according to the index,
largely due to having the highest average household income in the nation and
relatively low first homebuyer average loan size.
In contrast, New South Wales
recorded the highest income to repayment ratio, due to it being one of the
pricier states to buy property.
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House prices up 1.4 per cent across capitals
House prices up 1.4 per cent across capitals
Posted on Thursday, September 13 2012 at 1:14 PM
Median house prices have climbed 1.4 per cent across the nation’s capitals for the June quarter, according to the Bendigo Bank/REIA Real Estate Market Facts report.
The report, prepared by the Real Estate Institute of Australia,
demonstrates that solid returns can still be found in the capitals and regional
centres, says Bendigo and Adelaide Bank retail executive Dennis Bice.
Also detailed in the report is
the surge in first homebuyer mortgages across the nation, increasing by 5.9 per
cent to 25,101 over the June quarter this year, up from the June quarter of
2011 by 11.8 per cent.
“People have been putting the big decisions, such as upsizing or
downsizing their housing preferences on hold for some time now but there is
evidence to suggest that activity in the property market is beginning to build
again,” says Bice.
“Investors are also seeing strong demand for rentals in the major
centres with tight vacancy rates.”
The positive impact these tight
vacancy rates have on rental returns, coupled with lower borrowing costs,
should stimulate the spring real estate season, says Bice.
“The report also finds that around Australia, residential investment
property returns for three-bedroom houses and two-bedroom ‘other dwellings’,
such as apartments and townhouses, show an average annual return over the
past five and 10-year periods in the range of 6.6 per cent to 16.2 per cent.”
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Red tape cut for retail leases in Victoria
Red tape cut for retail leases in Victoria
Posted on Thursday, September 13 2012 at 2:52 PM
The Real Estate Institute of Victoria (REIV) has welcomed the move by the State Government to cut red tape by removing the requirement for retail leases to be lodged with the Small Business Commissioner.
REIV chief
executive officer Enzo Raimondo says this requirement was an unnecessary cost
to both REIV member agencies and landlords.
“The government
required details of retail leases be provided to the Small Business
Commissioner but then nothing was done with those details,” Raimondo says.
“There seemed to
be no point to the law and it’s a clear example of unnecessary red tape.
“The REIV argued
for this change on behalf of our members and we welcome the introduction of the
Bill to parliament.
“By removing this
requirement our commercial and industrial members will be able to transact
leases more efficiently, saving both time and energy.
“This is a good
example how by reviewing the myriad of requirements government can cut business
costs and make the economy more efficient.”
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