First homebuyer grants, interest rate cuts boost house sales

As expected the sale of new homes rose in October, at the first blush as Government assistance to first time owners was tripled and interest rates cut further.
But we have discovered the initial sales increases for new homes, were not built on as the reality of the financial crisis began to be realised.

The housing industry believes that a sustained recovery in the sector is still some way off.
New home sales rose by 6.7 per cent in October, the Housing Industry Association's (HIA) New Home Sales Report, shows.
The report was compiled from a sample of the largest 100 residential builders and showed that total residential sales (including new home sales and apartments) rose 4.5 per cent in October.
HIA chief economist Harley Dale said despite the better monthly performance, a recovery still eluded the industry.
"It will be a long road back, but it is hoped that an improvement in new home sales in October could mark the beginning of a stabilisation followed by improvement in leading housing indicators over 2009,'' Mr Dale said.
The rise in home sales follows the tripling of the first home owners grant to $21,000 for the purchase of new homes in mid-October.
Grants for first home buyers who purchased established homes were doubled to $14,000.
The Reserve Bank of Australia (RBA) cut interest rates by one per cent in October following a cut of 25 basis points in September.
The RBA has since cut rates by a further 75 basis points this month, to 5.25 per cent.
The HIA survey showed detached house sales increased by 6.7 per cent, although the sale of apartments dropped by 8.6 per cent in October.
Overall residential sales in Queensland increased by 24.9 per cent and 20.3 per cent in Victoria.
Sales in South Australia gained just 0.5 per cent, while sales in Western Australia fell by 12.9 per cent and New South Wales experienced a 14.7 per cent drop.
The varied results showed it would take more than just further cuts in interest rates to fix the industry, Mr Dale said.

Mortgage brokers rejoice as new commercial mortgages for Real estate trusts

Mortgage brokers have taken heart at the recent capital raisings by many of Australia's commercial mortgage funders.

Debt refinancing using commercial mortgages will be available real estate investment trust sector soon.

High borrowings were the main source of problems that caused the collapse of the property market in late 2007. Despite this concern, recent successful raisings by trusts indicate that credit markets don't see a problem.

Analysts say the attraction of commercial mortgage-backed securities (CMBSs) for the REITs is that they allow a diversification for refinancing.

The downside is that they are secured against the assets. That has been reflected by the debt stalemate of the past year, as the trusts had to sell assets to unwind the CMBSs. But this was impossible, given the falling value of the underlying assets.

The head of real estate investment banking at Citi, said the recent issues demonstrated the continuing easing of restrictions in credit markets and provided good diversity from the traditional, and expensive, bank debt, which remains mostly frozen.

Macquarie CountryWide Trust has just completed the first Australian issue of CMBSs in two years, selling $265 million of notes.

Strong investor demand resulted in $225 million being issued at a margin of 410 basis points, together with a further subordinated tranche of $40 million.

The securities have a three-year term, with an option to repay after two years.

As a result, the trust has fully repaid the 2006 Australian dollar CMBS notes, using proceeds from the new issue, cash from recent asset sales and funds drawn from a debt facility.

The new securities, arranged by National Australia Bank, will have a AAA rating assigned by Fitch Ratings and Standard & Poor's.