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AUSTRALIA WIDE HOMELOAN BROKERS
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THE LAST 12 MONTHS HEADLINES AND NEWS STORIES ON INTEREST RATES & ECONOMIC NEWS FROM MAJOR INDUSTRY SOURCES.The following is provided for your information and research. All views expressed are those of the source and we do not necessarily agree with those views. All investment decisions made by you should be thoroughly researched from many sources, and are at YOUR risk entirely.The various articles and videos below, present various views from respected industry sources. Sometimes these views are conflicting, but it is always worthwhile listening to those with education and experience in the industry. At the end of the day it is up to you to determine whether or not to make a house or investment property purchase, and the value of that purchase should be seen as a long term investment and not as a short term profit making venture. Whilst that can happen, the best results are generally achieved in the long term. Update April 2010 After waiting for almost 9 months to see what changes occur in the housing industry we can tell you the following changes have taken place: Melbourne in particular has seen gains of around 12% per annum, follwoed by Sydney with annual gains of around 8%. No city has seen falls, although house prices in holiday areas like the Gold Coast remain soft. Interest Rates are on the rise - borrowing rates are around 6.35% at the time of writing. Any prospectice homebuyer should do their research on the area that they are buying into, and the actual property that they are buying.
Watch this space for more information. You can download our Home buyers Guide HERE
JULY 2009 Fixing my home loan for a set term, How do I do that? - I am often asked about fixing rates, so here are some ideas and helpful tips to guide you through the process. Every bank has a different requirement, but basically they will either accept an alteration (switching) over the phone. or commence the process and then need a written and signed form to complete the process. I will supply a list of major bank phone numbers later on, but the correct phone number will also be supplied to you on every bank statement and on the lenders website if you are not using one on the major banks or lenders that I have supplied. We are currently living through economic conditions that are more extreme than anything most of us have experienced. With that in mind I thought that I should take the time to provide some practical information, that may help explain strategies that can be adopted to limit future interest costs on your home loan. I have been actively talking to a number of economists who all have varied views on the economy, and in particular interest rates. Firstly I need to point out that I do not have a crystal ball, and I can't give you an accurate prediction of what rates may do in the future. In fact anyone who claims that they can should be treated with caution. We are all benefiting from the Credit Crisis because of the low interest rates, and it would be nice to see that continue for a few years regardless of what may happen. Who said a recession was all bad? I will suggest a strategy that you should consider to reduce future interest costs over the next 2 or 3 years. In the past I have not been a strong advocate of fixing interest rates, but as we seem to be at or close to the bottom of the interest rate cycle, fixing a rate looks like an attractive option. We now have rates that have not been seen in 40 years, therefore fixing your loan now may lock in a low interest that will keep your repayments low for some years regardless of what happens in the market. Your natural question will be either "Will the rates now go up?" or "Will the rates go down further?" To both questions my best answer is - possibly. It is not possible to give you an absolute answer to either of those questions. This is a market that is constantly surprising everyone. Therefore the best advice that I can give you is that it is now time to consider fixing all or a portion of your home loan. It is up to you to decide when and at what rate to fix at. To do that I have made a list of things that you will need to do, as well as a few suggestions and explanations of the advantages and disadvantage of fixing a rate on your loan. My suggestions are: -
You would need to call your bank and tell them your intentions. When calling you will need your loan number, and no doubt they will ask you some security questions such as your date of birth etc. to ensure that they are talking to the right person. They need to do to protect your privacy. You will find the phone number on a bank statement, or you could visit the banks website and obtain it there. Note that if the loan is in joint names, you are both required to be present during the phone call. Just so that you are fully informed I should point out the following: -
Note that as previously stated I do not have a crystal ball and cannot predict what rates will do in the future, but we are either at the bottom or close to all time lows, so a future increase is possible in fixed rates, although as at today most economists are predicting another fall in variable rates. That does not mean that long term rates will also fall. Any decision to fix your rate or otherwise is entirely your decision. We are merely bringing this strategy to your attention as you may find it useful for future decision making. Major Bank phone numbers are: -
As stated earlier, if you are using a lender other than one of the above, a visit to their website will give you their contact number, or it will be displayed on their your latest home loan statement. If all this sounds complex then please call me and I will explain it further, but I wanted you to know the basic rules before doing anything. I also wanted to let you know that it is possible to alter your loan in most cases. Like investments you loan can be adjusted to suit different requirements. However once you fix a rate it is important to see the term out as costs will be incurred if you break that term. The bank may also be able to switch your variable loan facility to a better one to give you a better discount on your variable portion. Ask about that when you call them. Call me on 0438 242 147, or 1300 309 656, or email at peter@rescueme.com.au. if you want this explained further.
JULY 2009 Options for First Time Homebuyers - We have told you that you need 5% genuine savings to access bank home loans at 90% or higher. However we also have access to homeloans of 90% LVR at slightly higher rates that do not require genuine savings. The 10% deposit may be made up of the First Home Buyers Grant, Family Assistance, Sale of a car or boat etc. Note that if you only need an 85% home loan then the genuine savings requirement does not apply with most banks, and so you will have access to the very best home loans available on the market. Other matters to take into consideration are past defaults or other credit issues. Make sure that your credit cards are paid up to date and they are not over the card limits. Banks also ask to look at the account that your salaries are credited to. Ensure that those accounts do not overdraw, or have any adverse notations on them when you apply for your loan. If you do have credit issues then the bank may refuse your loan, and a more expensive non-conforming lender may be your only option. That can be expensive, so pay attention to the little things such as well conducted credit cards, ensure that you don't get silly small defaults for late payments on phone accounts etc. and keep your savings accounts clear of overdrawings. Whatever your situation, you may have options that you had not considered, so please call on 1300 309 656 during office hours, or email at peter@rescueme.com.au. JUNE 2009 BIS Shrapnel Report signals gains in the Australian Property Market over the next 3 years - Read this report to fully acquaint yourself with the current state of the property market. CLICK HERE where you can read the basic details of the report as well as some comments by noted property commentator Chris Joye. There are also comments by other interested parties, and you too can make a comment or ask a question about the current property market. JUNE 2009 Where is Real Estate headed and what are the new rules of the game - Home prices have started to increase marginally in most states except Western Australia after losing ground very slightly in the last half of 2008. However those price increases have only been at the entry level and we are now beginning to see some firming of prices above that level. If you are one of the lucky few who can afford a house valued at $600,000 or over you will still have some bargains to choose from. Only time will tell if prices in that range start to head upwards as well. The world is gradually coming out of the economic crisis according to most commentators, but it will take a few years to recover. The resources boom that we enjoyed in Australia may come again, but certainly not yet. However confidence is gradually returning to both the stock market and property prices across the globe. Lenders are getting increasingly difficult to deal with as they become more particular. The 5% genuine savings is being demanded by most lenders, and those savings need to be in a bank account in your name. Money held in trust or held by a parent/guardian etc. is not acceptable. We can still offer very competitive loans of 90% LVR without savings, but the very best interest rates are only available to applicants with savings, unless you only need an 85% loan. Our advice is to keep saving and contact us regularly for an update. Call on 1300 309 656 during office hours or email me at peter@rescueme.com.au and I will reply. MAY 2009 Buying your house - Tips on negotiating - I'm often asked what are the important things buyers should know when they purchase a home. Many commentators talk about research, know the area, know the market, get a building inspectors report, etc etc etc. MAY 2009 Lenders getting tough - Savings required - We are entering a new regime where lenders are now insistent on borrowers having some savings apart from just the First Home Buyers Grant. There are of course good reasons for this change. Lenders understand that if you have the ability to save money regularly as well as cover all of your normal living expenses, then you have demonstrated that you are financially responsible and manage money well. The other main reasons are that, the more money that you put into the house the lower the lenders risk, and the more you will value that house as a valuable asset that you have a substantial stake in. For most lenders you will now need savings of 5% accumulated over a 3 month term or longer. If you want the best available interest rates, then it will be only weeks before this requirement is universal, so you need to start saving now. In addition to this, most lenders are moving to a maximum loan of 90% of the value of the house being purchased. Therefore if you are buying for $400,000 then they would like to keep the loan to $360,000. You can see from that example, that the $40,000 required plus other costs really mean that you now need good savings to be able to purchase your first home. For anyone selling and buying again to upgrade their housing standard, then you will need equity of at least 10% in your new home to qualify under the new rules. Exceptions - Yes there are always some exceptions to these new rules, but they are difficult to explain fullly in a few paragraphs. If you don't quite fit the new rules then it will still be beneficial to you to call us on 1300 309 656 during office hours to make some enquiries, or to plan when you may be able to qualify. APRIL 2009 Where are we going - House prices continue to hold and even gain some modest ground in many areas across Australia, but by no means will property prices surge under the current economic conditions. In fact many higher priced house have either fallen or will fall in the next 12 months. FEBRUARY 2009 Where is the housing market now - 19/02/09 - The economists and commentators were surprised at the increase in new home buyers recorded in December. Loan approvals were up by 6.4% over November. We were not at all surprised, in fact we predict that the January stats when they are released in a few weeks will be an even bigger surprise, with large numbers of new home buyers coming into the market. February so far is also very bouyant, and may be our best month for some years. Clients across Victoria, NSW, ACT, and QLD are reporting strong buying competition for housing in the below $400,000 price range. This will shore up the bottom of the market, and although we expect to see some price easing in the medium price range, and even greater easing in the high end. we don't expect median prices to fall in blue collar/middle class suburbs close to transport, jobs, and amenities. We do expect to see a soft market on the Gold Coast and significant falls in areas that experienced illogical gains such as WA and small mining towns in Qld. With the resources boom coming to an end the demand for housing in mining towns will fall away and many previously lucrative housing investments will become liabilities. Where should we buy houses? - Stay away from small low population country areas, holiday home areas, and other "discretionery real estate" spending for now as further falls are expected, but capital and major regionals should fair quite well. Also be careful in centres such as Townsville and to some degree Cairns as ex Storm Financial clients drop houses to repay margin calls. If you are inetersted in these more negative areas, the bonus is that at some point in 2009 very good buys will be available for anyone needing housing in those areas, or for anyone willing and able to sit out the downturn. Otherwise we are slightly bullish on housing, but don't expect a boom, just a firm market in the right areas. With a generous First Homebuyers Grant, low interest rates, and in some states low or nil$ stamp duty rates up to $500,000 the home loan affordability equation has tipped in favour of the first home buyer. January 2009 AN ARTICLE BY CHRIS JOYE - 14/01/2009 The Australian THE economics of Australia's $3.3 trillion housing market are widely misunderstood, with sensationalist claims that a housing bubble caused the global credit crisis and that Australian house prices will fall by 30 per cent to 50 per cent. In fact, the latest RP Data-Rismark Index results show that Australian house prices declined by just 0.8 per cent in the 12 months to October this year, and increased during the most recent three months. The primary cause of the global credit crisis was a prolonged period of relaxed lending standards across asset markets, which led to excessively high levels of debt. This was further propelled by the US Federal Reserve's maintenance of unreasonably low interest rates in response to the 2001 tech wreck. In the US, the crisis was exacerbated by poor regulatory practices in which lenders had no recourse to borrowers if they defaulted (which is not the case in Australia) and the presence of two quasi-government agencies that crowded the private sector out of the prime lending market. Subsequent damage has been wrought by the tendency of today's highly interconnected financial markets to wildly overreact to positive and negative events. As the inevitable unwinding of debt takes place, almost all asset prices have declined, especially in the US and British housing markets, where the coincidence of very high default rates, bank failures and severe credit rationing has precipitated price falls. According to the Case-Shiller Index, US house prices are off 21 per cent. (This data is arguably biased downwards given that distressed sellers account for 40 per cent of all sales even though they represent only 3 per cent of homes.) In comparison, the S&P 500 has fallen by 43 per cent since its apogee in October 2007. The contrast is more striking in Britain, which does not suffer from the US problem of overbuilding. According to the FT Index, which importantly captures all British sales, house prices have fallen by just 6 per cent from their peak. Yet the FTSE All Share Index has contracted 39 per cent. Indeed, the FTSE has fallen more on individual days than the British housing market has from peak to trough. If one wants to talk about bubbles, the most credible conclusion is that the biggest bubbles were in shares. In Australia, the hyperbolic predictions of economists Steve Keen and Gerard Minack that house prices will fall by 30 per cent to 50 per cent have been relentlessly recycled in newspapers and purportedly credible programs such as 60 Minutes and The 7.30 Report. The doomsayers' claims are based on the assumption that housing affordability is at an all-time low. They dismiss the fact house prices are determined by supply as well as demand (affordability is a demand-side factor) and conclude that prices must fall by some arbitrarily large margin. Keen likes to shock by quoting statistics about the rise in household debt without acknowledging that debt-servicing ratios have remained unchanged thanks to vastly lower real interest rates, the emergence of two-income households and higher real incomes. Recent analysis by the Reserve Bank of Australia has comprehensively demonstrated that housing affordability is not at an all-time low. According to one of the Reserve Bank's benchmarks, the representative household in June 2007 had more real disposable income left over after purchasing a home and servicing a 90 per cent mortgage than at any other time since June 1982. The bank also found that the representative household could afford to buy 33 per cent of all homes in June 2007, which, although less than the historical average of 45 per cent, was markedly better than the 13 per cent of homes available to it in June 1990. Importantly, the Reserve Bank's present 4.25 per cent cash rate is considerably lower than the 6.25 per cent rate that existed in June 2007. Since mortgage rates peaked at 9.6 per cent in August, the Reserve Bank has pushed them down to about 6.7 per cent, with markets predicting that they will be less than five per cent by mid-2009. At the same time, house prices have not appreciated. These improvements in affordability have been augmented by the Government's $10.4 billion spending package, which has focused on supporting incomes and boosting the first home owners grant. Thus, despite assumptions of rising unemployment and slowing wages growth, ANZ and Westpac believe that Australian disposable incomes will grow solidly by eight per cent or more during the next year. Perhaps the best insight into mortgage stress is default rates. Only 0.4 per cent of all home loans on Australian bank balance-sheets were delinquent in August 2008, a fraction of equivalent rates in the US (more than 2.5 per cent) and Britain (1.3 per cent). The Reserve Bank has noted that although August was the peak of its recent monetary policy cycle, Australian delinquency rates were still materially lower than levels experienced in the mid-1990s. Australia also benefits from the fact we don't really have a sub-prime market, which accounts for 15 per cent of US loans. And in contrast to the US and Britain, where most loans are fixed for years, about 85 per cent of all Australian mortgages are variable so Reserve Bank rate cuts immediately benefit borrowers. The biggest risk to Australian house prices is a credit squeeze. Yet, unlike the US and Britain, which have suffered multiple bank failures, there is no evidence of Australian banks systematically denying residential credit. Since the crisis began the big banks have profited immensely from a decline in competition and tremendous deposit inflows. While the banks are restricting credit to businesses, they are happily investing in the home loan market, which attracts a much lower risk-weighting from the regulator. Today, high-quality borrowers have no difficulties getting 95 per cent loans. Indeed, Australia's largest mortgage broker, AFG, reported that approvals in October were the strongest since November 2007. The main reason most forecasters believe Australian house prices will rise in the medium term is because of enormous excess demand. Treasury projects that housing demand is growing at more than 190,000 properties a year compared with housing starts of 145,000 homes each year. Building approvals in NSW, our largest state, are at a 23-year low. This had led to a severe housing shortage, which Westpac and ANZ estimate at more than 120,000 homes and growing. ANZ forecasts that Australia's housing supply deficit will rise to 200,000 by 2010. When the demand for an asset exceeds supply, prices rise as the market seeks to stimulate new production. This is why, despite the prophets of doom, and the five rate hikes borrowers endured between late 2007 and mid-2008, house prices have remained largely unchanged. The Reserve Bank believes Australia's housing market is leading the US by three years, having entered into its downturn in 2004. There is also a consensus between the Reserve Bank and most economists that the doomsayers' predictions will be proven wrong. A striking counterfactual is the 1990-92 recession, when unemployment hit 10.9 per cent yet house prices rose by two per cent a year according to the Australian Bureau of Statistics. The media would do well to interrogate sensationalism. JANUARY 2009 BUY PROPERTY NOW - 12/01/2009 - If you are a first home buyer, you will not have a better opportunity than right now to get into your own place courtesy of the Federal Governments generous grant, and low interest rates, with the prospect of more rate cuts in February and March. Most experts are predicting borrowing rates to reduce to about 4.5% variable and in the low fives for fixed rates of 2 to 3 years. I am now seeing strong demand for low priced homes, and many are selling within a few days. Result - prices will increase although probably by only $20,000 or so. But still by buying now that is an extra $20,000 that you won't have to pay for your house, and with lower repayments for the next 30 years. Calculate what repayments would be, and compare that to your rental now, and then add an extra 10% to your rent to allow for increases over the next two years. How does it compare? If your rent is more or much the same as the repayments, then what are you waiting for, grab a house now. If renting is still much cheaper than perhaps you should wait for now, but these market conditions won't last forever. The good times don't last forever, and neither do the bad times. Plan ahead for the next 10 years now. MAKING MONEY IN THE CREDIT CRISIS - 05/01/2009 - Now don't get me wrong, you probably won't make a motza overnight in the current credit crisis, but by using good sound strategies, common sense, patience, and the current economic conditions to your advantage, then money will definitely be made by many over the next few years. The time is ripe to invest in property and selective shares to build a safe secure portfolio now that will earn you good returns in the future. Read the details in my blog by clicking here. December 2008 AND NOW THE SCAMS - 16/12/2008 - One good thing this credit crisis has done is flush out the scams as investors try to move funds out of these schemes only to be told that really there is no money there at all. Often investors are long term and have received excellent returns for many years, all funded by new investors who also want higher than normal returns. Whilst they will be horrified about their money, at least by finding out the truth earlier the damage will be limited. With the Madoff "Ponzi style scheme" in New York to cost investors in excess of $50 Billion, and many other scams and frauds in the UK, Australia and elsewhere, the overall figure will be much higher that people realise. What can we learn from this experience. How many times have you heard the saying "If it sounds too good to be true, then it is too good to be true" There is no way that you can earn more than other investors without taking a higher risk, or worse still investing in something that later turns out to be illegal or a scam. Scammers rely on one ingredient, and that is the greed of the investor overriding common sense. That coupled with some charm and an air of "trust me" and your hooked. Always remember that the return of your money is more important than the return on your money. Read more on our Blog THE CREDIT CRISIS - 10/12/2008 - Read our discussion paper on the Credit Crisis and how it will affect you here. It is important that you understand what is happening in our economy so that you can take advantage of opportunity, as well as guard against possible difficult economic issues. This crisis will play out over 2009 and probably beyond, be informed now. Anyone who keeps their job will in fact be better off in this credit crisis, and in fact may be able to take advantage of once in a lifetime opportunities that will appear over the next 12 months or so. Change always brings opportunities to those who are ready to take advantage of that opportunity. Get yourself in position now for that chance. INTEREST RATE REDUCTION OF 1% - 02/12/2008 - The RBA has today given the economy a full 1.00% reduction in the official interest rates. This will save a borrower with a $250,000 home loan $2500 per annum in interest which is over $200 per month extra cash they will have in their pocket. We are now getting to a point where potential new home buyers really should look at their options to purchase instead of renting. We have been predicting a surge in new home buyers coming onto the market ever since the two pronged stimulus of interest rate reductions and very generous first home buyers grant of up to $21,000 With variable rates at 6.00% and the likelihood of more rate reductions in February and March 2009 then I can't remember a better time to buy that first home. Don't forget that the First Home Buyers Grant will reduce back to $7000 on 30/06/09 and if it the government choose to maintain that grant, then it will give a stimulus to the market and increase home values across the board. Either way you really can't afford to miss out on that grant if you are eligible for it. Log onto our Google Blog and have your say on this rate reduction. Tell us how it will affect you, and are you going to buy a house shortly. November 2008 DOW UP FOUR DAYS IN A ROW - IS THIS THE START OF A TURNAROUND? - 27/11/2008 - What a difference four days can make. Since Obama announced his team of economic advisors and administrators, and with the Citigroup bailout, the market has responded positively. Such is the perceived quality of the team that Obama has put in place. Unlike Paulson who has yoyo'd on key measures to the point that the market had all but lost faith in the Bush administrations ability to control the future of the US economy, the market can now see that a team with the right experience and skills has been assembled by Obama, and that team will take over the economy in January 2009. As long as the now discredited Bush team don't fumble too much between now and 20th January next year, things may just hold up ok. We now need a reasonable Christmas sales period in the US especially for this Friday (called Black Friday because that is the day when most stores actually start making a profit and move from the red into the black). That will set the trend for the next 12 months, and will either signal a prolonged deep recession, or if sales are seen as good in this climate, then the stock market will move higher. You may ask what does this mean to an average Aussie paying off a home and working 40 hours a week. Well the stock market predicts the future, and will rise or fall on what is about to happen. So even if things are a bit tough on the ground, if the market is rising then better times are ahead. Conversely if the market is falling as it has for the last 14 months, then bad times are ahead. Our stock market runs parallel to Wall Street because we are just a minnow in the real world, and whatever happens in the US will happen to our market as well. Interest rates are predicted to decrease again in December, perhaps by 1% again, and further decreases will probably happen next year after January. This will be a good time to either re-visit your home loan to see if a better deal can be arranged, and/or aggressively look to see what bargains are out there in both real estate and shares. Those with courage and intelligence will make money in these situations. DOW JONES DOWN 445 to 7552 - MORE PAIN ON OUR MARKET PREDICTED - 21/11/2008 We expect more selling pressure on the Australian stock market today after a day of pain on Wall Street. Government changes to the TARP (Bailout Package) has already led to a serious loss of confidence in the political leadership in the States where George Bush is a lame duck President unable to take decisive action, and Barack Obama not yet inaugerated as President is also unable to take a firm rein on the action needed. When this is added to the further inaction on the Big Three Automakers financial plight, investors ran away from risk and in many cases put money into treasuries at zero percent interest. In other words they are prepared to cover the cost of that exercise and lose some money just to safeguard their cash. We really won't see an upside to this until the government start some decisive action to fix the many problems. Until investors can see what is happening they really can't allow for it in the stock prices. We are probably going to see an upside in February 2009 if we see some decisive leadership from Obama. INTEREST RATES TO REDUCE AGAIN IN DECEMBER - 19/11/2008 Interest rates are expected to fall another 0.75% in early December . If you are a home loan borrower you need to make a strategy right now regarding the savings that are now coming by way of reduced homeloan payments and fuel costs. Don't foolishly spend this extra money, use this opportunity to make extra payments on your loan and get ahead. Remember both good and bad times don't last forever, and you need to provide for all occasions before they arise. Download our free calculator and see what a difference small extra payments will make over the term of your loan. You now have the ability to make quite large extra payments and save a huge amount of money, don't waste this opportunity. SAVED BY THE FINANCIAL CRISIS - 12/11/08 - One lesser talked about result of the financial crisis is that many borrowers who until recently have been facing ever increasing mortgage payments, are now looking at substantially reduced home mortgage payments because of the lower interest rates that are now in effect. Those who have been struggling to hold onto their homes, may contact their lender to see if they can convert home loans to interest only for a year or two to reduce total commitments. Debt consolidation is increasing as borrowers look to place expensive credit card debts against their homes at much lower interest rates. We are getting reports of many borrowers looking to fix rates for terms from 1 year to 5 years at the lower rates now on offer. We suggest that borrowers take care as rates are expected to reduce further. Consult a quality broker to get some guidance on future rate movements. We can be reached on 1300 309 656. INTEREST RATES TO AGAIN REDUCE TOMORROW - 03/11/08 - When the RBA meet on Melbourne Cup day, the tip is that rates will be reduced by 0.50% and that the banks will pass all or most of that reduction onto their borrowers. That will be a much bigger win for most of the punters than any that they may get at the track. Housing is starting to look very attractive again. BIS Shrapnel Report predicts rise in property prices in 2009 - 03/11/2008 - Leading economic forecaster and industry analyst, BIS Shrapnel expects that residential property prices will rise over the course of 2009, following a weak performance in 2008. The company says it is likely that residential property prices declined in most cities in the September quarter of 2008, following on from a marginal fall in the previous quarter. Australia’s mortgage market is less dependent on international funding sources and availability of finance is solid, in contrast to the UK. In Australia, there is a clear undersupply of housing and an environment of housing shortages provides fertile ground for interest rate cuts,” says Mellor. “Recent Government policy moves, like the boost to the First Home Owners Grant, are likely to be successful because of the current housing shortages. BIS Shrapnel believes the global credit crunch will actually support Australian residential property prices in 2009, as financing constraints are reducing the pipeline of new rental developments. National starts of new medium and high density dwellings are forecast to plunge by 18 per cent in 2008/09 and, as supply declines, the rental markets in all cities will tighten further, which will support property prices. "For example, in Sydney, the number of new medium and high density dwellings being completed is forecast to fall to a 20 year low in 2009, pushing the vacancy rate to below one per cent,” explains Mellor. “Rental properties will remain in short supply, and the national average rental growth is forecast to rise to 10 per cent in 2009, up from the current rate of 8.2 per cent, according to the Australian Bureau of Statistics rental index.” BIS Shrapnel forecasts further turbulence in property markets as unemployment rises. The national unemployment rate is expected to rise to six per cent by the end of 2009 and employment growth is expected to be very low. However, an outright decline in the total number of persons employed is not anticipated. Mellor says it is important to note that increases in unemployment in 1997 and 2001 did not lead to sustained decreases in property prices. “There may be unfortunate home owners who lose their jobs and may need to sell their properties, but at the moment there are many renters who will be seeking to buy,” he says. “Interest rate cuts and the increase in the First Home Owners Grant are providing motivation for these people to buy before the end of 2008/09, and this outcome will support growth in property prices.” In addition, BIS Shrapnel expects a return of investors to the market by the latter part of 2009, which will also help to support modest price growth. Overall, residential property prices are expected to gradually recover in 2009, with growth of between zero and three per cent across the capital cities of Australia as the market strengthens in the second half of calendar year 2009. WHAT ARE THE DIFFERENCES BETWEEN AUSTRALIA AND THE USA OR THE UK? - 01/11/2008 - Four important points to consider.
October 2008 HOUSE PRICES SET TO RISE 7% PA OVER THE NEXT TEN YEARS ACCORDING TO CHRIS JOYE OF RISMARK - 31/10/08 Actually we agree with that conclusion, albeit it won't be a uniform rise of 7% every year. We expect slow growth rising to a short lived peak late June 2009, and then it will depend on the Rudd governments response to the continuation of the higher First Homebuyer's Grant. Our tip is it will either be extended, or reduced to $10,000 for all new homes. We will be mid-term through the first Rudd government, and they will be very politically sensitive at that point. Anyone who has read the headlines lately could be forgiven for thinking that the property market was all doom and gloom, with falls of up to 40% likely. Actually that is simply rubbish and it is not borne out by the data. Sales are slow at this moment, but anyone looking for a bargain has until late November, and perhaps for a short period in January 2009 to nail that bargain, and then the opportunity will be lost. If you are a seller, just tough out the market or withdraw from sale until February/March 2009 when the market will start to rise. The ANZ have released their report predicting a massive shortage of houses by 2010. In fact we will be short 200,000 houses. I have seen these predictions from several creditable forecasters, and when the supply and demand factors in the market kick in, higher prices are inevitable. At the moment the housing market is only being held back by negative ill informed press, and the rub off from a depressed stock market. What you will not see are 20% gains in any one year unless we have depressed growth for a few years, and then the market corrects with a catch up rise. Don't listen to the media, look at the statistics. OK. SO WHAT NOW FOR HOME PRICES - 19th October 2008 - Now that we have had time to look at the governments package to stimulate the economy, lets look at the impact of what has already happened, and what we know is about to happen. Firstly lets look at the negative influences on our housing market. The resources boom will soften with demand from the USA for Chinese products expected to fall over the next 12 months. In fact demand has already fallen significantly, but we haven't heard the last of China and India yet. That will all start again in about 18 months. The global financial markets almost froze, and that will impact the supply of money via borrowings to Australian homeowners. We are insulated to some degree because we have very strong banks, and with the extra stimulus that the government has provided by the way of guarantees for both deposits, and mortgage backed securities, plus their direct investment in mortgage securities and the financial sector, this sector should hold up quite well. Aussie super funds are among the strongest in the world, and they can now invest in mortgage backed securities in Australia instead of going overseas. Nevertheless Australians are seeing what is happening abroad in property, and so have some understandable concerns. Interest rates - until recently this was a negative as we had high rates compared with the rest of the industrial world. Now that we have had 1.25% reductions in two months, and with another 1% reduction expected before Christmas, then this has now turned into a positive, or at least it is quickly becoming a positive. The official rate will fall below 5% by March 2009, leaving borrowing rates around 6%. As for the basic positives such as an undersupply of housing, and growing rents, well they are still with us and will continue to fuel the demand for housing. The reduction in interest rates and the increase in the First Home Buyers Grant are the real key issues here. With the FHOG increasing to $14,000 for existing homes, and $21,000 for new homes, this will provide a sudden increase in home prices between now and Christmas in the under $500,000 range. After Christmas the increased activity will be evident in the first quarter up to the $750,000 mark as new home buyers look beyond the $400,000 range as the supply of houses dry up. In the second quarter that activity will increase to a flurry as first home buyers rush to take advantage of the higher FHOG before it is taken away on 30/06/09 Looking past 30/06/09 is simply too difficult at this point as there are so many variables in both the domestic situation, and the overseas markets. However a way forward should be evident at that point, and whilst stock markets will still be weak, the worst of the crisis will be over, and the market bottom should be behind us. As Warren Buffet would say, be greedy when others are fearful. If you are buying property with a 5 year or more plan then right now is a good time to buy before the rest jump into the market. (It won't be long before the others get over their current fear and also become greedy) But don't leave in until June 2009 as stock will gone before then and you will pay higher prices. FIXED INTEREST RATES TO PLUNGE - Oct 13th 2008 - With interest rates set to reduce, and stay that way for some time, banks will now be looking to reduce their fixed home loan rates. We expect that will happen shortly, and be an ongoing process as global rates tumble. This will help stimulate the economy, stabilise home prices, and is many cases drive them up at a more modest rate that we have seen in the past. Really this is all guesswork at this point, but if we can get modest price growth of 2% to 4% then that gives the home buyer. How can this work to your advantage? Well, if you can set your home loan rate at 6% or below then that will shield you against any future interest rate spikes. Look closely at your personal situation, and see whether that will be to your benefit. This is not a blanket option that will suit everyone, but it worth examining. Keep your eye on future rate movements. AN INTEREST RATE CUT AGAIN FOR OCTOBER 06/10/08 -It is a foregone conclusion that we will get at least a cut of 0.25% tomorrow, and possibly 0.50%. In any case if we don't get the full cut of 0.50% this month, then it will mean a further cut next month of at least 0.25% again. Why you may ask is the RBA suddenly reversing it's stand of just a couple of months ago when it was so reluctant to reduce borrowing rates. The reality is we are on the edge of a financial meltdown in the USA and to a great extent Europe. The reason that we are much less affected is largely due to our strong resources growth, and partly due to our banks remaining conservative lenders in a world where bankers have become the new risk takers. I knew that we would eventually love our banks for being tight fisted with their cash, I just didn't expect it so soon. Now I don't want to line up with those predicting doom and gloom, but if you are looking at buying either property or shares at the moment my suggestion is wait, or if you must buy, make sure that you hammer out the mother of all deals. This is a moment of great change in markets around the world, and change brings opportunity for many, and financial loss for others. Make sure that you are on the right side of the situation. September 2008 WHAT DO ALL THE PROBLEMS ON WALL STREET MEAN TO ME, AND WHY HAS THIS HAPPENED? - 30th Sept 2008 - You could be forgiven for thinking that the absolute financial turmoil in the US was so far away that we in Australia are unaffected. Unfortunately we are affected. How did all of this happen? Well lets look at the total picture to see what led up to this scenario that last night brought down the Dow Jones index by a massive 777 points, which exceeds even the losses of the great depression in 1929. In the latter part of the 1990's the Clinton administration worked to loosen lending criteria to help many struggling American families buy their own home. There were a large number of families who just fell outside the square as far as the lenders were concerned, and so it was for the best of intentions that the administration changed the rules for Freddie Mac and Fanny Mae to allow them to lend to this group. This also coincided with very low interest rates due to a recession that the USA was experiencing in the early part of this century. That meant that suddenly a large group of people now qualified for home loans, so naturally when they started buying homes the price of houses started rising faster than ever before. As that price increase stayed around as long as interest rates stayed low, everyone including lenders began to think that prices would never fall. However when the Fed raised interest rates, suddenly many borrowers started struggling. In the States they also had many loan products that artificially reduced repayments for the first few years, so the adjustment to the correct repayment level was just too much for many homeowners, so they sold their homes to get out of debt. Gradually as home sales increased, prices started to drop. What started as a gradual increase in sales then turned to a flood of homes coming onto the market, to the point where prices had dropped to below the purchase price or even below the debt on the homes. At that point many disillusioned homeowners simply walked away from their houses and dropped off the keys to the bank. Now the flood of home sales turned into a deluge. Borrowers who had become used to borrowing against the ever increasing value of their home could no longer do that when they needed extra cash to help them through the tough times. Banks then found that not only did they have a high number of borrowers who wouldn't repay the loans, the security that they had to cover the loans wasn't worth anything like the amount owed on their loans. In Australia our arrears rate is around 2.5% on loans, in America it is now 30%. Banks are just being swamped by their bad debts. Investors then lost confidence in their bank shares and started to dump them onto the market, depositors who were worried about their savings withdrew their money from any bank that they heard rum ours about, and so the downward cycle continued. Banks who thought that they had massive assets now found that their assets were in fact worth far less than they thought in a fire sale situation. In short they were in trouble and it had happened so quickly that they didn't have sufficient time to react. The smart ones who did react just sold themselves for a song to a larger bank rather than lose everything. The rest just perished financially, and investors lost everything. Now we find ourselves with a failed US plan that Congress won't pass as members of that house play politics. The people of America are justifiably outraged that they will have to pay hard earned cash to bail out their financial system, but in the end they will either have to do that or face much greater consequences as a great depression scenario hits the USA and the world. The finger pointing is well underway, executives who were paid enormous salaries, regulators who failed to regulate, governments who did not act, mortgage introducers, banks, Wall Street, and of course borrowers who knew that they could not afford the loans that they took out. Who is at fault, well really, everyone is at fault, but in true fashion none is taking any responsibility. I watched as members of the Congress criticized regulators for not taking action, but said nothing about the occasion in 2004 when Alan Greenspan went to Congress asking for them to reduce the budget deficit as it would lead to economic problems, which he predicted would occur in 2008 as the first of the baby boomers looked to retire (read this story) and Congress turned him down. History will once again be written by the powerful few who will place all of the blame on everyone else, but really everyone has this mess on their hands. Was anyone telling us about this problem earlier? Well yes Read this article written in April 2004 What does this mean to you, well it means that although we live in Australia the value of your house will be about 5% to 20% lower, your retirement fund (superannuation) will be worth about 30% less, and things are about to get a lot tougher financially. I recommend that you reduce spending now, live within your income, start being smart financially by getting back to basics. As fuel and electricity prices rise we should be more conservative in their use. Pay as much as possible off your home loan and review your finances. All loans should be reviewed and wherever look to rewrite or switch to a better facility. Firstly contact your own bank to see what they can do, and if they can't assist contact us to see what we can offer you. Remember we will work through this situation, and things will get better, so don't lose heart. Just get a lot smarter and more responsible with the spending and management of your money. ANOTHER WILD NIGHT ON WALL STREET AS STOCKS AGAIN RALLY - 20/09/08 - Before you plunge more money into the share market it may be useful to heed the words of Kirby Daley as he explains the Feds rescue package in this video. Click Watch Video to view (Courtesy of CNBC). INTEREST RATE CUTS ON THE WAY? 18/09/08 - Glenn Stevens the Governor of the RBA has commented that Central Banks may have to act sooner rather than later to right the financial "ship" That is a strong hint that a rate cut in October rather than later in November is likely. We will watch this issue carefully over the next two weeks. WALL STREET FALLS AGAIN - 18/09/08 - Another bloodbath on Wall St overnight has seen billions of wealth eroded in just hours. Hardest hit were financial's but the market as a whole has taken a hit. Over 4% of the Dow Jones was lost, and the end is not yet in sight. Just yesterday it looked as if the bottom was in sight, but who knows where the bottom is at the moment. There is speculation that the Dow may need to lose another 1000 points (10%) before we reach it. The danger is that the sentiment is so negative we may go well below that point before gains are seen. BROKERS OFFER BETTER CHOICE THAN BANKS - This is an extract from a speech given by Raj Venga, Credit Ombudsman, to the
Parliamentary Inquiry into competition in the bank and non bank " Brokers are a significant feature in the Australian financial services landscape. A full account of this parliamentary address is on the COSL website FINANCIAL TURMOIL IN THE USA - 17th September 2008 - The fallout from the implosion of Lehman Brothers and the possible demise of AIG will certainly be felt in Australia as it will be across the globe. However we are not as badly affected as the States or even Europe where market conditions are quite different, and levels of investment interplay are much higher than in Australia. In fact the AIG problem won't be felt nearly as much because of regulations on the Insurance industry by APRA. Whilst it is not yet possible to accurately gauge the eventual outcome when it all unravels, the likely scenario is that credit will get harder to obtain for many borrowers as lenders struggle to raise capital in overseas markets. Interest rates on one hand will increase in overseas markets as investors factor in a higher risk than previously perceived, and on the other hand the RBA is likely to further cut rates to reduce fears in the market and consumers. This will offer great investment opportunities for the brave who will snap up bargain shares and perhaps property. However remain careful with investments until you can see the market bottom, which can't be far away. INTEREST RATES ARE HEADED DOWN - 9th Sept 2008 The RBA governor Glenn Stevens has advised parliament that he expects interest rates will drop over the coming months. Markets are expecting a drop of 0.25% in November if not before. If you have been waiting on the property market sideline, then right now may be a good time to make a move. After all we do have a market that is slightly in the buyers favour at present, but when it changes it will happen very quickly, and you may get left behind. BREAKING NEWS - 2.15pm 2nd Sept 2008 - The RBA has announced an interest rate cut of 0.25% to the official rate. Banks and Non-Bank lenders are expected to announce rate cuts within days to follow the RBA although there is speculation that not all banks will pass on the full rate cut because of increased funding costs.
September 01/2008 - Wizard has already cut its' variable rate by 0.25% ahead of the RBA announcement later this week. Undoubtedly an advertising coup for Wizard Home Loans it nevertheless illustrates the absolute inevitability of a rate cut this month, and further cuts later this year. We re-iterate our belief that with rates cuts and an undersupply of housing, both prices and rentals will increase broadly over the coming year, although there will be pockets of resistance where prices will remain static. August 2008 31st August 2008 - RBA to cut rates, watch for the growth in housing - It is now almost a foregone conclusion that the RBA will cut rates by 0.25% this week, and possibly 0.50%. Regardless, this rate cut won't be the last cut to official rates, and it will not only bring relief to homeowners, but it will allow many new buyers to get into the market before house prices rise again, as they inevitably will. We still have a chronic undersupply of housing in this country, and with record immigration, plus a continuing strong resources sector supplying the growth markets such as India and China, further wealth growth for this country is practically inevitable. If you are a homeowner or prospective homebuyer make sure that you can work yourself into a position to take advantage of any great property buys that may come your way. 21st August 2008 - NAB Rate Cut - The NAB has indicated that it will pass on all of the September RBA rate reduction, assuming that reduction will happen. The CBA and other banks have been vague on this issue, and have said that they may not be all able to pass on the full rate cut. That will no doubt many of their clients and the current government, especially so soon after the CBA announced another record profit approaching $5 Billion Aussie Dollars. Most banks have reduced their fixed rates for loan with rates fixed between 1 year and 5 years. This is tangible evidence that the banks do expect a rate reduction. BIG RATE REDUCTION REQUESTED BY WESTPAC CHIEF ECONOMIST - One the country’s major banks believes the official interest rate must be slashed by half a percentage point next month to have an immediate impact on economic growth. Money markets are fully pricing in a quarter of a per cent rate cut following the Reserve Bank of Australia’s September 2 board meeting and a further reduction before the end of the year after a series of strong hints by the central bank that lower rates are needed. Mr Evans expects the RBA to cut rates by a full percentage point by early 2009. RATE CUTS LIKELY IN SEPTEMBER. Will the RBA cut rates by 0.25% or 0.50% seems to be the question at the moment. That there will be a rate cut seems to be taken for granted by the market. The RBA is expecting the economic slowdown to continue and unemployment to rise. If we get rate cut of 0.50% then this would decrease payments on the average $300,000 loan by $125 per month which will help struggling families. Banks have already reduced fixed term rates, so it will be interesting to see whether they reduce variable rates by the full RBA decrease or just pass on a portion of that cut. Politically they will be very unpopular if they don't, however they do raise money overseas and rates in Australia don't affect the global market. We expect that interest rates and the broader economy will remain volatile and difficult to predict for at least until early 2009. July 2008
Property Perspectives Rod Cornish and Angela Galvin with regular real estate updates Economists suggests RBA is at end of hiking interest rates New home sale slump in NSW as Reserve Bank meets RBA leaves key rate unchanged at 7.25 per cent - In an accompanying statement with the rate decision, RBA Governor Glenn Stevens said considerable uncertainty remained about the outlook for demand and inflation. June 2008 ANZ says August rate rise still on the cards More than 400 real estate industry players have been indicted since March, including dozens over the last two days, in a crackdown on mortgage fraud stemming from America's housing crisis. 19/06/08 - We have received two troubling reports from major global players about the state of the credit market and worldwide financial system. We suggest that you read these two reports and make up your own mind as to the accuracy of the predictions. MORGAN STANLEY REPORT - Warns of Catastrophic Event. ROYAL BANK OF SCOTLAND - Global Stock and Credit Crash Alert. .................................................................................... First fall in jobs in 19 months takes pressure off RBA Odds of another interest rate shortens as GDP climbs to 3.6% The Reserve Bank of Australia may have put another interest rate hike on hold, but the odds of another interest rate rise in the near-term just got shorter. Most Australians believe they are worse off since election More than 50 per cent of Australians believe they have become worse off financially since the Rudd government swept to power last November, a new survey shows. more ANZ senior economists tell - "the hold on interest rates is a momentary reprieve." Home borrowers may be breathing a little easier today following the Reserve Bank's decision to keep interest rates steady at 7.25% for the third consecutive month but ANZ senior economist, Katie Dean told Lending Central that she expects another rise in August. .................................................................................... Home loan market under renewed scrutiny RBA keeps rates on hold but another rise possible, economists The federal government has proposed a shake-up of financial services regulation it says will protect consumers from rogue mortgage and finance brokers. You can rate this as well as have your say on this subject. BREAKING NEWS 3rd June 2008 - The RBA has left rates on hold this month. Property Perspectives We are currently seeing some softening in real estate yields as a result of financing costs. At the same time we are still seeing rising rents due partly to very low vacancies. This is quite different to previous cycles where softening real estate yields were accompanied by falls in rents. Rod Cornish, Head of Research, Macquarie Real Estate Group discusses this issue. (Video link) Note the actual video can be a bit difficult to locate, but it is on the site that you will be re-directed to. CLICK HERE TO ACCESS FINANCE NEWS ARTICLES PRIOR TO JULY 2008
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