First Time Home Buyer

First homebuyer grants, interest rate cuts boost house sales

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 16 Nov 2009 01:41:00 +0000

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

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Tue, 29 Sep 2009 23:02:00 +0000

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.

Are mortgage Brokers honest with first time home buyers?

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Fri, 24 Jul 2009 20:52:00 +0000

First home buyers are using mortgage brokers and as a first home buyer you need to know if the mortgage broker is acting your best interest or not.
Mortgage brokers are in the firing line of late, and now Westpac bank and the Commonwealth bank are putting pressure on accredited mortgage brokers, telling them that if they don’t have a certain number of loans settle with them within a 6 month time frame, they will lose their accreditation with the lender.
The mortgage brokers have responded by saying that their “Independence” is in jeopardy, because many brokers will bow to the pressure and set loans for clients for the first time home buyers with these lenders, rather than the best loan for the customer.
In my prior article I was a little harsh on these brokers, and this brought up the question of honesty of the Mortgage brokers.
So here is my revised take on this important topic.
The Mortgage Brokers Intent indicates his or her honesty.
Honesty should not be taken on a legal or literal definition of the relationship between the mortgage broker and the lender and the first home buyer in my view, but on the intent of the mortgage broker when they are helping their customer select the best loan for them.
If the Mortgage Broker has the intention of always selecting the very best mortgage lender and mortgage loan product for their customer, then its obvious that the mortgage broker can be considered an honest mortgage broker.
If the Mortgage broker explains to the first time home buyer that they are offering a no cost loan service to them, because the lenders are paying them a commission for introducing the loan to the lender, they are being honest in my view.
If on the other-hand the mortgage is selected favours the mortgage broker and his or her own personal interest, then the mortgage broker would have to be considered dishonest in my opinion.
Banks and other mortgage lenders that offer lenders inducements to put loans through them, compromise the brokers’ impartiality. So do lenders that force lenders to have sales targets. Doing so it seems to me makes mortgage brokers appear commission representatives of the lender.
That has to be a bad thing for the mortgage broker industry and the first home buyer that places their trust in a Mortgage Broker to do the right thing by them according to Mr Mortgage.

First Time Home Buyers make new home sales sag

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sat, 04 Jul 2009 05:50:00 +0000

As First time home buyers retreat to the sidelines sales of new homes have sagged, breaking a four-month streak of gains in Australia's housing industry.
Figures from the Housing Industry Association (HIA) show total sales of new homes dropped a seasonally-adjusted 5.7 per cent last month.But sales in the apartment sector rose 6.1 per cent in May, reversing a fall in April.
Overall, sales were still up 15 per cent from their low point in December. The association says some of the reduction in new home sales could have been linked to negative speculation about the Federal Budget.
It is expected to convert to a recovery in home building activity from the June quarter of 2009 HIA senior economist Ben Phillips says the combination of low interest rates and the $21,000 first home boost lifted prospects for the industry. "The vast majority of the housing recovery has been at the first home buyer end of the market," he said."As that segment inevitably slows over the remainder of 2009, it's vitally important that the much larger trade-up and investor segments return to health."
Mr Phillips says first home buyers cannot fill the hole in home building on their own."There are other markets - mainly the change-up market and the investor market, which are the majority of the residential new homes market, and they're still running at really just a trickle," he said."So as the first home buyer grant cools over the coming six to 12 months, we're likely to see some poorer numbers start to flow through."

First home buyers buy as rents rise

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Thu, 21 May 2009 05:10:00 +0000

First home buyers in NSW jumped by 50 per cent between February and March compared with existing home owners.Federal Government figures show that NSW remained the nation's home buying hot spot, with 6084 first-time buyers in March.The jump was expected and in part due to the Rudd Government's $21,000 First Home Owners Grant Boost was to expire in June, but has now been extended as announced in the May budget. The total number of home buyers across the country rose from 12,664 in February to 17,265 in March - an increase of more than a third.Housing Minister Tanya Plibersek has welcomed the six-month extension of the Home Owners Grant Boost, saying it would help more Australians realise their dream of home ownership."People who have been finding it difficult to get into the housing market are now seeing it as more affordable," she said. "By extending the grant, we are giving people more time to make a sensible decision."There would be long-term benefits for the economy, predicting a "flow-on effect" into the early part of next year as new homes are completed and home buyers require soft and hard furnishings to complete their new homes.A 12.3 per cent drop in the median house price in Sydney over 2008, and other drops before 2007 according to Housing NSW figures, could also be fuelling the buying boom.As house prices fell, rents increased. The median rent for NSW dwellings was $325, up by 8.3 per cent over the year. In Sydney, the median rent rose $5 to $390 in the March quarter.Some have predicted a minor reduction in first home buyers with the announcement after the extension.A Real Estate Institute of NSW spokesman said that, with tough times forecast to continue next year, the grant had not been extended long enough."We believe the additional incentive should run until at least July 2010," he said.

First home buyers look to Dubai for a bargain

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Thu, 30 Apr 2009 10:36:00 +0000

The Dubai property bubble has burst with residential property prices falling over 40%' as speculators flee the market.
This is just the latest indication of the extent to which Dubai's property boom of recent years has come to an abrute end with the worldwide recession.
Because finance has dried up and job opportunities in Dubai have declined investors got out anyway they could.But that leaves the market to anyone who has a job and steady income to get a home at knockdown prices.
The chances are that waiting for the right property will be fruitful as prices are expected to fall even further.

Australian housing market has little sub-prime downside

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Thu, 16 Apr 2009 05:40:00 +0000

First home buyers should buy low, buy used and only buy if they have secure incomes streams.
There is talk of an Australian Subprime Fallout about to happen in Australia. This is just not true.
The current finance crisis was made in The USA and mostly on the back of bad lending practices that caused millions of Americans to lose their homes. A lot of these toxic debts were on sold to British Banks and Aussie banks found them irresistible too.
Australia however does not have that problem to anywhere near the extent that the US has.
Yes we did have subprime loans made to people that did not verify income or credit standing. But these loans were to a less risky borrower than the US model allowed. They had money or equity, were largely self employed and enjoyed tax advantages that left more in their pockets. They weren't penniless people without a plan on where the next dollar was coming from. And they didn't constantly eat into their home equity to sustain themselves when the markets were rising, unless they had 20% net in equity after redraws. Australian subprime were also buying quality housing stock. Enough said about that.
Yes we are now seeing low-paid first home buyers given too higher loans whilst the mortgage interest rates are so low, but at least these people have clear credit and regular jobs.
Yes some or even many of these people will be caught when the rates rise to levels they cannot manage, but they will be able in most cases to sell their homes should the worst happen, unlike in the US where not one was buying because the homes were aver priced, and no one was lending because the funds weren't there to lend out.
Right now first-home buyer end of the market has been booming due mainly to the first home buyers subsidy, which in my view is far too low, and for new home buyers may not even cover the interest charges whilst there home is being build [do the math and include the land purchase value and you will see its a joke].
The problem is many jobs are not secure and house prices are too high .
In Sydney, the average property already costs nine times the average household income, while the UK and US reached a peak of only seven times average income before their markets crashed on this delusion.
Buying a new home in this market and in this cycle may get the economy rolling, but the downside may be nasty for those that lose their income streams, regardless of income levels. Its a risky proposition. So you need to be smart and buy low, buy used and don't buy if your incomes stream might run dry.
The news of Qantas layoffs shows that even if you are in profitable iconic companies there is no secure paycheck you can count on.
Job security is the prime danger and the secondary one being house price stability. If that does not hold, then many more will be in danger. But that again has nothing to do with the loose lending practices that was used in the US for the last ten years.
For me the bottom line is that a trade qualified blue collar worker, and an office or health care or retail shop worker are good bets to find work if their employer goes belly up.
To suggest that these people are "subprime" is just plain wrong. They are not and neither is lending to them.
These low income earners are a better bet in my view than many of those swanning around in their leased BMW's checking out the canal backed homes on the Gold Coast.

Residential housing developers offer first home buyers deep discounts

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Fri, 06 Feb 2009 21:29:00 +0000

Residential house and land developers are offering first time home buyers cash incentives to first-home buyers to fill the hole in the residential property market left by second and third home buyers who can't sell their existing homes to move up.
Land developers are also moving to cut the size of their lots and change their housing designs to a more affordable product as they move to capture demand in the only area of the housing market showing signs of life. Many see this as a strange move considering that the natural flow of first home buyers buying used homes to start where land is expensive, so that second home buyers can move to a better house and land has been broken only temporarily due to lack of buyers for their existing homes and the short window for the increase in the the first home owners grant, which ends in June 2009.
It comes as figures from the Australian Bureau of Statistics released this month show the number of first-home buyers seeking loans increased by 17.8 per cent in November, the highest level since 2002.
Queensland general manager of Brisbane-based developer and builder Devine, Paul Nash, said second-home buyer demand has been sluggish, but when the $21,000 first-home owner's grant was introduced in October, there was a pickup in first-home owner inquiry.
One swallow does not make it springtime
"We had a spike, but the activity was flat in November and December," he said. "As a result, the company has been making its lots and housing designs smaller and more affordable.
" We are offering to top up the grant. We will make up the extra from the $21,000 to take it to about $30,000," Mr Nash said.
Chris Lamont from the Housing Industry Association said there were other developers offering similar discounts, which was a popular move by developers when GST was being introduced about nine years ago.
First Home Buyers growth
Mr Nash said in the past year, first-home buyer sales had doubled from about one-third to about two-thirds of the company's business.
Three-bedroom houses started in price at $299,000 in Caboolture in Brisbane's Northern corridor, while prices started at about $219,000 in Pakenham on the outskirts of Melbourne and $209,000 in South Australia about 30km north of Adelaide CBD.
The sales manager of the Cornish Group in Sydney, Colin Lake, said the company had about 17 house and land packages that sold in the past month to first-home buyers, starting from $350,000 at its Spring Farm development in Sydney's Camden.
"Before October, we were doing about four or five a month, now we are doing about 30 a month," he said.
Last month, the company saw a change in the market and cut blocks to smaller sizes and reduced the prices by up to $50,000. He said the company had so far sold 120 blocks.
"We decided to just slash and burn, cut the prices and get the market running."

Home builder developments offer massive rebates to First Home Buyers

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Fri, 06 Feb 2009 10:28:00 +0000

Residential land and home construction developers are offering big rebates to first-home buyers to secure a bigger slice of the shrinking residential property market.
Residential developers are pursuing first home buyers by moving to cut the size of their lots and change their housing designs to a more afforable product as they move to capture demand in the only area of the housing market showing signs of life.
It comes as figures from the Australian Bureau of Statistics released this month show the number of first-home buyers seeking loans increased by 17.8 per cent in November, the highest level since 2002. Second and third home buyers markets are shrinking, making the total pie smaller.

Devine Homes gets traction with first home buyers.
Queensland general manager of Brisbane-based developer Devine, Paul Nash, said second-home buyer demand has been sluggish, but when the $21,000 first-home owner's grant was introduced in October, there was a pickup in first-home owner inquiry.
"We had a spike, but the activity was flat in November and December," he said. "As a result, the company has been making its lots and housing designs smaller and more affordable.
" We are offering to top up the grant. We will make up the extra from the $21,000 to take it to about $30,000," Mr Nash said.
Chris Lamont from the Housing Industry Association said there were other developers offering similar discounts, which was a popular move by developers when GST was being introduced about nine years ago.
Mr Nash said in the past year, first-home buyer sales had doubled from about one-third to about two-thirds of the company's business.

First home buyers homes for $209,000 to over $350,000
Three-bedroom houses started in price at $299,000 in Caboolture in Brisbane's Northern corridor, while prices started at about $219,000 in Pakenham on the outskirts of Melbourne and $209,000 in South Australia about 30km north of Adelaide CBD.
The sales manager of the Cornish Group in Sydney, Colin Lake, said the company had about 17 house and land packages that sold in the past month to first-home buyers, starting from $350,000 at its Spring Farm development in Sydney's Camden.
"Before October, we were doing about four or five a month, now we are doing about 30 a month," he said.
Last month, the company saw a change in the market and cut blocks to smaller sizes and reduced the prices by up to $50,000. He said the company had so far sold 120 blocks.
"We decided to just slash and burn, cut the prices and get the market running."

First home buyers dream market as house prices continue to fall

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Tue, 03 Feb 2009 20:40:00 +0000

First time home buyers have a dream market and finance situation, if they are in a position to take advantage of it.
Firstly, the first home buyers grant has been doubled to $14,000 for established homes and trebled to $21,000.
Then the interest rates have fallen 4 percent in six months.
The icing on the cake for first home buyers is that house prices are continueing to fall as home for sale stay unsold.
In fact house prices and have have fallen for the third successive quarter.
The national house price index fell 0.8 per cent in the December quarter, the Australian Bureau of Statistics said.
This compares with a downwardly revised 2.4 per cent fall in the September quarter, and a 0.8 per cent fall in the June quarter.
In the year to December, the house price index decreased 3.3 per cent, compared with an annual rise of 1.6 per cent in September.
Economists had expected a fall of 1.0 per cent for the December quarter.
Prediction: House prices to fall 10 per cent in 2009
JPMorgan economist Helen Kevans said the Federal Government's boost to the first home buyer grant had slowed down the pace of house price decline in the December quarter.
First home buyers are the growing market segment in a shrinking market
"First home buyers accounted for 23.6 per cent of all home loans in November, well above the 19.5 per cent recorded in October, and the highest level since early 2002," Ms Kevans said.
"This may have provided some support for house prices late in 2008."
Ms Kevans said Australian house prices would fall by 10 per cent in 2009.
This would be a lower pace compared with other countries because of Australia's housing shortage and growing intake of skilled migrants.

Simonds Homes goes belly up in Queensland, but says it is not going into Liquidation

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Fri, 23 Jan 2009 02:23:00 +0000

Melbourne home builder has gone to water in Queensland's tough housing market after over three years of failure to get traction in Queensland, but say they will honour all maintenance and warranty claims for hapless Queensland client home buyers who put their faith in them.
Simonds home announced the immediate closure of its Queensland Office and building operation, saying it will keep a skeleton staff on to finish all home contracts they have in hand.
Dozens of contract workers, including estimators, draftsmen and sales staff, were today told to stay at home amid growing speculation the business had "gone under".
Managing director Gary Simonds rejected suggestions of financial trouble and assured existing customers their homes would be built. Others believe that the Simonds Homes Queensland operation never made a profit and was propped up by Simonds Homes Victoria, a financial burden, Simonds Homes could do without in the current market they find themselves in.
Mr Simonds said the shock decision was based solely on dwindling demand for new homes and the forecast for continued economic uncertainty. Others believe that the sales of Simonds Homes was disastrous in Queensland due to many management failures and lack of planning for the Queensland market, including trying to recycle old Golf buddies to run the operation in a tough competitive and to Simonds Homes Management, an unknown market.
Sales of new homes in Queensland dropped by 10.1 per cent in November, despite the $21,000 first-home buyers' grant the Federal Government is offering for new properties until June 30.
But as in every tough market the home builders who know their market and their customer profile do well and come out the stronger when markets improve. This will not be Simonds Homes mantle. Their plans and some would say pricing, was out of kilter with the market, and other mistakes were made and not corrected in other areas.
The rest of Simonds Homes, a Victorian company only now, will continue to operate as normal, Mr Simonds said.
"We have decided not to take anymore orders in Queensland and we are scaling back our business there because of economic times," Mr Simonds said.
A small skeleton staff will complete work on the last of Simonds contracts in the south-east in the next six to nine months.
"We will (also) be there to service the maintenance of the warranties for the periods we are obligated to," he said.
Mr Simonds admitted he had considered withdrawing from Queensland for some time, but defended the short notice given to contract staff. This news to others on the staff, as they tried several management changes, plan changes in its frenzied attempts to turnaround the fortunes of Simonds Homes Queensland.
Simonds Homes appear to have Little regard for their loyal staff, giving it seems little regard for the welfare of sales staff and others who suddenly found themselves unemployed.
Others believe that many of these may not be paid their full entitlements.
Queensland's economic outlook is unlikely to improve in the short term, the ageing Mr Simonds said, and the company may never return.
Housing Minister Robert Schwarten said the Building Services Authority had contacted the company and been assured it was not entering into administration.
"The company directors advised the BSA that they plans to complete all existing building contracts and honour ongoing contractual warranty obligations," Mr Schwarten said.
Simonds Homes told the BSA its product did not suit the Queensland market, he said.

First home byers need to hhave a "take no prisioners" mind set when buying a home.

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 15 Dec 2008 11:26:00 +0000

First home buyers that are buying their first home need to leave the emotions at the door when going to negotiate a property purchase in this market.
You have an obligation to yourself and your family to drive a hard bargain and get value.
For one thing we don't know where the bottom is.
Home prices may seem low to you now, but what will they look like in 18 months time? A bargain, or an overpriced millstone. We simply don't know and can't tell till we arrive there.
Whether you intend to live in it or rent it, you owe it to your future financial well being to pay the lowest price possible.
The first rule is to know that your friendly real estate agent is not your friend. He or she is working for and being paid by the seller.
Real estate agents love the inexperienced who have not heard their lies before.
Don't rely on anything they say about the value of the property, and how many buyers they have lined up.
The old rules of buying property don't apply to this market. We may have missed thus far the worst of what has happened in the US home market, and what is happening to the UK market, but I know that in the past we have followed those markets by about 18 months.
Unless you are buying an outstanding home in a great area, expect that tomorrow's price will be lower than today's bottom price.
Here's a few rules to stick by.

Don't be in a hurry. Let time work in your favour.
Know your needs and the area you need to buy in. Buy needs values not wants values.
Know your future needs and how this purchase will deliver those needs for you.
Know your budget. Ensure a buffer should the worse happen.
Work on the valuation of an independent valuer for the real value of the property as these will be factoring in falling values that are yet to be seen.
Don't get emotionally involved with the seller or the property.

Do these things and as a first home buyer you will buy value and even if the price goes lower you will be able to weather the storm.

First home buyers get a triple Christmas gift as home sales slump, bigger buyer grants are offered with low mortgage rates

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Fri, 12 Dec 2008 22:14:00 +0000

Its looking a look like the best Christmas ever for first time home buyers in Queensland Australia.
Firstly, first home buyers are about to enjoy the lowest mortgage rates ever if recent mortgage predictions are correct. The constant deep slashing of interest rates is set to continue, witha whatever it takes [to avoid a recession] attitude driving the RBA and Federal Government decisions.
Secondly the offer was sweetened somewhat with the double of the first home owners grant for buying an estatblished home, and thripling it for new ghome contruction.
ANd now we are are getting a reports that in Queensland their is a mass movement of sales people away from Real estate sales to other areas as the property market and sales slump. This can only mean that the price being asked by real estate agents and expected by property owners is not in accord with true market values and that has to mean a big shift downward in property prices.
So if you are lucky enough to be in a position to buy a home right now you will do very nicely if you drive a bargain.

Mortgage rate prediction for first home buyers

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 08 Dec 2008 08:24:00 +0000

Mr Mortgage has made his biggest mortgage rate prediction yet for first home buyers.
He says that mortgage rates are on there way down to the lowest levels, possibly in Australia's history. If a first home buyer couple who have stable jobs, and the ability to get another job should you lose the one you have, or if you are in a job the is recession proof [like food services or repairs, or budget gear] then now may be your greatest time to buy you first home that you will ever see.
The rule of buying is buy in a buyers market and buy distressed stock. When buyers go to water and sellers are desperate to sell, you have the recipe to get a bargain.
And Australia's in a great financial position to weather the storm because the Reserve Bank has plenty of rate reduction it can use to bolster the economy if it needs to, unlike some European nations and Japan and the US who has little to play with as interest rates are already low in those countries.
Author: Mr Mortgage

First Home Buyers Guide to buying in this market bricks and mortar fire

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Wed, 26 Nov 2008 04:23:00 +0000

If you are a first home buyer you are in a very good position right now, so don't blow it.
Government grants, falling rates and economic woes - there are a lot of pitfalls in the property game.
So there's no danger of property prices plunging, at least if you believe the Reserve Bank's deputy governor Ric Battellino.
"Some commentators" like Mr Mortgage"who have looked at the US housing market feel they have seen the future for [Australia]," he said.
Five days later the Australian Bureau of Statistics said home prices dropped at an annualised rate of almost 8 per cent in the September quarter.
There's no reason to believe there's been any turnaround since then.
Truth be told he didn't quite rule out the 30 per cent to 40 per cent plunge many areas in the US are experiencing; he just said our problems wouldn't be on the same scale.
More worrying is the reason he gave. It's not so much that our housing market is in bad shape; it's just that in the US it's even worse than we've been giving it credit, er blame, for.
Unlike Australia, the US has one year's supply of housing that cannot be sold.
This suggests property prices still have further to fall in the US, which, don't forget, was the start of the sub-prime lending crisis.
Australian Ecomony should hold up.
Agreed, the Reserve Bank slashing interest rates can only help our property market.
But don't forget it was lifting them as recently as March and held them there until September, so the impact of that is still flowing slowly through the system.
A property specialist at Macquarie, Rod Cornish, says: "The employment situation and the economy will have an overriding influence."
The 1.75 percentage point cut in rates will boost the market eventually but it will take time.
In fact it will be a bigger cut by the time the Reserve is finished.
Since it sees an official cash rate of about 5 per cent as being neutral, and it wants to err on the side of an easing, it will need to bring this down to about 4.5 per cent.
That leaves at least another 0.75 of a percentage point in the pipeline.
Then there are the first home owner grants, which go by the descriptive acronym of FHOG. As in, we could finish up anywhere.
There's no doubt these will boost the lower end of the market in the sense they'll probably stop prices dropping further. But that's about as far as it will go.
It may be the case they just slow the rate of decline, come to that.
Either way the impact will mostly be confined to the outer areas of Sydney and Melbourne, says Cornish.
The trouble is that while the $21,000 new-building grant will stimulate demand, developers are having a hard fist of it getting finance in the first place.
The Housing Industry Association says it's "concerned that restrictions on the availability of capital are placing additional constraints on the supply of new housing, particularly for higher-density development".
Besides, it's not the lower end of the market that's struggling the most. It's anything priced over $300,000.
Indeed it's the top end that's in trouble, says Cornish.
That's a direct consequence of the credit crisis and the squeeze on jobs in the finance sector, which will especially hit the money capitals of Sydney and Melbourne.
There is a Global game afoot to soft the landing.
But back to the problem of the US being worse than we thought.
Remember this is a globalised economy. Just as it's more than coincidence that sharemarkets around the world march to the same drum - in this case a cacophony from Wall Street - the same goes for property, if in a more convoluted way.
Sharemarkets directly pull money from each other as prices move.
Thank goodness property can't be traded every few seconds, because it doesn't bear thinking about how much home prices would fluctuate with a continuously running auction such as the sharemarket. So I won't.
But changing things like the value of the dollar sets off a chain reaction; if it's a bad one and causes unemployment, that eventually influences property prices.
And who could deny the credit crisis has had a direct impact on real-estate prices, affecting property trusts as well as housing?
So another drop in property prices next year can't be ruled out.
Still, there's a convincing case to say that we're not staring into some kind of abyss. Even in the US there are pockets of strength to be found in the property market.
For the record, the Reserve Bank is saying "the next couple of years will be noticeably more subdued than the past five".
Does that sound like an imminent property boom? I don't think so.
This is a buyers' market, pure and simple. Mind you, the risk is that as interest rates fall they all get in each other's way.
The idea that falling interest rates aren't as good as they seem for home buyers is gaining traction.
After all the reason rates are falling in the first place is because the Reserve Bank is desperately trying to prevent a recession.
If you're worried about your or your partner losing your job, the benefits aren't so clear-cut.
Buy now or wait and see?
"From now until the end of January is the best time to buy," says Peter Kelaher, director of PK Property, is a broker for buyers and is therefore different to real-estate agents, who look after vendors, .
"The market is in cleansing mode," he says.
It's a seasonal phenomenon that real-estate agents try to move unsold properties before the year ends and within a couple of weeks the auction cycle stops, which Kelaher calls "scavenger time".
This produces bargains and is likely to be far more marked this year because of the uncertainty about the economy, a notion neither the Reserve Bank nor the Government has done much to disabuse.
"There's a window of opportunity before interest rates drop and the volatility settles," he adds, predicting property prices will stabilise next year after this year's falls.
He says in "blue ribbon" areas where stock is tight prices could rise 3 per cent to 5 per cent.
In Sydney's struggling western suburbs, which have borne the brunt of the fall in property, prices could rise "a little bit" but the most obvious impact will be that houses are sold more quickly.
Real estate agents report that inquiries in the area for properties under $300,000 have doubled thanks to the extra FHOGs.
But in the medium price range nothing's happening.
"Buyers are trying to pick the bottom but we're probably at it now," says Kelaher.
So where does that leave us?
No rapid pick-up in prices but by the second half of next year property should be looking up.
But that's only if the US economy, and so the global credit crisis, doesn't deteriorate further.
And since it fell the most, and has been in a slump for four years, expect Sydney to show the way.
Buy quality areas.
In property, where you buy is more important than what you buy.
Over time the amount of dirt you have counts for more than the building that's on it.
But get both right and you're probably set for life.
Director of Easy Living Finance, Tony Harris, agrees that "the value is in the land".
He says apartment blocks with swimming pools, lifts, gyms and other luxuries that must be maintained will have large corporate body fees.
"When you're only getting a 2 per cent to 3 per cent yield, corporate body fees can be a killer."
Investors should choose somewhere they could live in themselves.
"That way if it doesn't work out you can move in there yourself. It's a fallback position," he says.
And buy where you can add value.
"It can be as simple as a new coat of paint, carpet or replacing the grouting in the tiles. This can add $5000 to $10,000 to the value, or $20 to $30 a week in rent, despite spending next to nothing," Harris says.
He warns the days of sitting back and watching the market appreciate are over.
"It's not going to happen for some time," he says.
Kelaher says the ideal property investment is a three bedroom (all the same size) brick house that has two bathrooms. And on a decent block. "Make sure the block is the same size as others in the street and isn't, for example, a cut-off corner block."
Access to transport and the quality of the local infrastructure are critical, and getting these generally means a property is closer to the city.
The national research director at RP Data, Tim Lawless, says in the outer suburbs "often the best areas for investors will be located close to large working nodes such as office-market precincts or where there is a large captured rental population such as near universities or hospitals."
He says some outer suburbs that look affordable lack basic requirements such as transport infrastructure, shops and other amenities such as schools, health care and social facilities.
Another consideration, which is especially important for younger buyers, is mobility.
"You need to be able to easily let your home if you move," says Cornish, who points out the best price rises are where owner-occupiers and investors are competing for places.
For long-term capital growth it's worth bearing in mind that most additional demand for housing comes from immigration.
"Australia is taking more very highly skilled migrants and they want to live closer to the city," Cornish says.
For risk and return, te renovator's dream is the challenge to take.
The best property for investors is one that can be renovated, which means value can be added.
If you already own your home and want to upgrade, is renovating or buying the best option?
The short answer is renovating.
The long answer is it depends on where you are and where you would like to buy.
The closer you are to the city, the less danger there is of overcapitalising.
For example, a $250,000 renovation on a $1 million property will probably add up to another $1 million in value over time. That's likely to generate a bigger capital gain than buying a new house for the same amount in the outer suburbs of Sydney or Melbourne, especially as the trend toward living in the inner city by Gen-Y and Gen-X intensifies.
In calculating whether a renovation is going to be worth it, don't forget to take into account the extra interest you'll be paying. Also get the opinion of a valuer.
Top of the list of value-adding renovations are kitchens (which can cost from $10,200 to $30,5000, says Archicentre) and bathrooms (from $9200 to $24,000).
As a rough rule of thumb, Archicentre says a new laundry will cost between $4000 and $9500 and adding an extra room of 20 square metres will cost $16,900 to $36,700.
Remember a fixed-price contract with your builder is more essential than ever.
Australia goes into the slowdown with a high inflation rate and a skilled labour shortage that will be exacerbated by the weak dollar, none of which bodes well for building costs.
By the way, there's a handy primer for renovators at archicentre.com.au.
Above all else though, don't forget it's the dirt rather than the building that appreciates over time.
The renovation might improve your lifestyle but the real capital growth will come from where your property is located.
Is the Location right for you?
* Vacancy rate in area
* Jobs in area
* Population growth
* Infrastructure
* Transport
* Schools and social amenities
* Health facilities
* Affordability
* Size of land
* Proximity to city

First home buyers are faking contracts to get extra grant money

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sun, 23 Nov 2008 22:21:00 +0000

First time home buyers are faking contracts to illegally claim the boosted first-home grant it has been reported.
And here's the problem. Some desparate real estate agents and mortgage brokers are encouraging the fraud, suggesting buyers change the date of existing contracts to fall after October 14 so they qualify for the latest lucrative federal government grants.
Forward-dating contracts could net first-home buyers $14,000 instead of $7000 under the old grant system, and $21,000 for new home construction contracts.
In Victoria, a surge in first-home buyers saw Victorian mortgage sales soar by 25.1 per cent in October from a low base.
With house sales drying up as the global financial crisis hit home, developers had slowed building new homes.
Nick Collishaw, head of Mirvac, said some of its projects had been put on hold for three to six months.
But early this month it sold 36 homes, mostly to first-home buyers, compared with 15 the week before.The grant increase has sparked a sales boom in regional Victoria.
Villawood [my old employers] said sales at the company's Bendigo estates had skyrocketed 300 per cent.

First Time Home Buyers in no hurry to claim first home owners grant

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Wed, 12 Nov 2008 21:22:00 +0000

The federal Government's bait to lure first time home buyers into their first used or new home has had little response so far.
Potential first home buyers seem to have other things on their minds, like job security right now, and that problem won't go away any time soon.
Housing clearance rates of used homes remained soft in auctions across the country.
And homes that do sell fetch far less than expected.
First home buyers have to be patient and the problem of over priced land development and Local Government over charging of services to developers, and the dependence by State Governments on Stamp duty revenues on property transfer to remain solvent all point to the need to create a new deal for first home buyers.
The other concern is the banks tardiness in passing on rate reductions in official rates, not only to first time home buyers, but to business and credit card holders too.
This is breeding a new lack of trust in our banking system.
I believe that the first time home buyer will not return in numbers to the new home market till the banks are legislated against and forced to stop treating the fall in official rates as a profit windfall.
Rick Adlam, is the founder of the Australian Mortgage Exchange and Mr Mortgage

First time home buyers get new grant deal to boost home construction

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Tue, 14 Oct 2008 06:30:00 +0000

First time home buyers will be eligible for grants of up to $21,000 in a new economic package annouce bt Kevin Rudd today.

The extra cash for first home buyers will be only available for a short time. All contracts entered into by June 30 next year will be eligible for the new assistance.

The first home owners grant will be doubled from $7000 to $14,000 for first home buyers buying an established home.

However first time buyers who buy newly-constructed home or enter into a construction contractor with a builder will receive an extra $14,000. This will take their total grant to a massive $21,000.

The Federal Labor Government will invest about $1.5 billion in the housing market over 2008/09 and 2009/10 through this initiative, and the flow on effect will be felt in the retail sector that supply home based goods and services from insurance to pool and spa builders, electrical and furniture retailers and carpet and curtain suppliers and manufacturers.

Australian Government to compete with banks for home loans

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sat, 11 Oct 2008 05:52:00 +0000

Australia plans to set up a financial arrangement similar to Fannie Mae in the US and will use the AAA of the Government to raise mortgage funds for non bank lenders.
The step was announce last week as Wayne Swan announced that the Federal Goverment invest $4 billion to revive the non-bank mortgage market and boost competition in the mortgage lending sector against the banks.
The aim of the unprecedented action is to give borrowers more options than the five major banks now dominating the market.
This could start a price war, which the Government hopes will keep interest rates low and stimulate the flat housing market.
Non bank mortagge lenders have relied on overseas money to service customers, but the supply has dried up with the credit collapse in the US. What they can get is at a higher premium and this means that the banks effectively have little competition.
Lenders who rely on wholesale funding such as Macquarie and Challenger and the mortgage managers who are supplied by them have either not been lending at all or have seen volumes plummet.
This has allowed banks to dominate low-risk lending, taking as much as 90 per cent of new loans, because they have been able to use the reliable turnover of funds in their deposit accounts.
The Australian Office of Financial Management (AOFM) would buy mortgage-backed securities from smaller lenders, non-banks and building societies.
There would be two tranches of $2 billion each, possibly more.
Part of the money would come from the 2007-08 Budget surplus, which came in $2.9 billion higher than expected at $19.7 billion.
John Symond of Aussie Home Loans, one of the first companies to introduce competition in the banking sector in the 1990s, said: "It's a very positive step and means that competition could return to the banking market after a year when there has been no competition at all.
"Consumers will be the winners at the end of the day."

For first home buyers now is the time to buy your home

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Wed, 08 Oct 2008 21:38:00 +0000

First time home buyers are in for a golden opportunity in Queensland's property market as cracks in the property market appear.
Unit prices are falling in the Gold Coast according to Mr Mortgage, and so are land prices. Just about the only thing that is rising are the special offers from new home builders.
Mr Mortgage says first home buyers should look for distressed property owners and make low offers to save even more.
Some locations 15km to 25km away from the Brisbane CBD had registered falls of 5 per cent.
Forecaster BIS Shrapnel predicts fewer interstate movements as families come to terms with the changing economy and it expects demand for housing will decline this financial year.
This should see fewer blocks of new land produced in the short term.
"Brisbane and Queensland are well below 12-month averages," Mr Kusher said.
There are 9458 properties listed for sale in Brisbane and houses are now taking an average of 47 days to sell.
As conditions for sellers of investment properties were still tough, with increasing stock and a decrease in demand from investors, now is the time for first time home buyers to show no mercy and grab a bargain..

Real estate body likes Labor's plan to help first time home buyers

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sat, 10 Nov 2007 21:01:00 +0000

The Real Estate Institute of Australia has welcomed a savings scheme proposed by Labor to help first home-buyers, but warns it will take years before the plan translates into an improvement in housing affordability.
Borrowers and potential first home-buyers took another hit this week after the Reserve Bank of Australia, citing concerns over inflation, raised interest rates by a quarter of a percentage point, to 6.75 per cent.
On top of the rise in rates, figures released this week by the Australian Bureau of Statistics showed house prices had risen across the country by an average 10.6 per cent over the past year.
And with further interest rate rises forecast, meaning housing affordability is set to worsen, REIA president Graham Joyce said the Labor plan was welcome, but he also called for more immediate action to tackle the housing crisis.
Under the Labor scheme, a couple on average earnings and saving 10 per cent of their income could accumulate about $64,000 in five years - about $14,500 more than if their money was deposited in a normal savings account.
Anyone aged over 18 would be eligible to take part in the scheme in which they would be required to contribute a minimum of $1,000 a year but could deposit up to $5,000 of pre-tax and $5,000 of post-tax income annually.
The deposits will be treated in the same way as superannuation contributions with pre-tax amounts attracting a tax rate of 15 per cent.
Deposits must remain untouched for a minimum of four years and can only be released tax-free as a deposit on a home.
The scheme will cost the Commonwealth an estimated $600 million in foregone tax receipts.
Mr Joyce said the first home saver account scheme would help first home-buyers kick-start their savings for a home deposit, by providing favourable tax treatment under the auspices of current superannuation arrangements.
"This is an initiative that promises additional help for first home-buyers to put together a deposit and as such, is welcome," he said.
He said Labor should be commended for a policy which emphasised the important role that home ownership played in the economic and social wellbeing of Australian families.
"Promoting a culture of saving and investment for young people is also valuable, noting that home ownership and individual wealth creation are keys to successfully self-funding retirement," Mr Joyce said.
"Positioning the scheme within existing superannuation funds will provide access to higher rates of return through diversified investment opportunities, and will use existing administrative structures to make the scheme work."
But the scheme would not result in an improvement in first home affordability until at least 2012, Mr Joyce said, "because that's how long today's savers will have to wait to be able to access their money.
"First home buyers presently only make up 17.1 per cent of all dwellings financed, therefore the immediate problem is not being addressed.
"Moreover, capital growth in property over the next four years will erode savings."
Mr Joyce suggested that, instead, first home buyers be allowed to access their voluntary contributions to superannuation, taking advantage of favourable tax treatment of their existing savings, rather than postponing the benefits for another four years.
"This approach also would have provided more administrative efficiencies, because there is no need to create a separate account in superannuation."
"As acknowledged by the ALP, the housing affordability problem requires more than one initiative in demand and supply ... (such as) lower stamp duties, improved development approval processes, lower costs for infrastructure development, and increased housing supply in areas where people can access their jobs."
Mr Joyce also called for the first home-buyers grant to be index-linked to median house prices and immediately doubled to $14,000.
"(This would) maintain the financial weight it had in contributing to a home purchase ... when it was introduced in 2000, when homes were around half the price they are today," he said.
©AAP 2007

Home affordability on agenda at Master Builders' conference

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sat, 10 Nov 2007 20:57:00 +0000

The effect of mortgage interest rate increases on home affordability will be among the topics under discussion at a gathering of housing industry representatives on the Gold Coast.
The Master Builders International conference begins today and chief executive Wilhelm Harnisch says housing affordability could be improved by a greater supply of housing and land.
"The Commonwealth needs to work very closely and cooperatively with state and local governments in dealing with this matter," he said.
"There is obviously an opportunity to have some other measures that are more demand-focused, but we're very concerned that there is more focus on supply, rather than just on demand.
"Demand can only just fuel and exacurbate the situation that we've got."
Source: ABC

Property values across Australia gather momentum with dire consquences for first time home buyers

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Sat, 27 Oct 2007 21:59:00 +0000

Property prices have continued to soar across the nation, putting further pressure on first time home buyers and renters already living under the thumb of a housing affordability crisis.
Australian Property Monitors (APM) says the already dire situation is set to worsen for many low and middle-income earner homeowners with interest rates tipped to rise again next month.
Figures released by APM showed house prices have continued to surge over the past 12 months with Melbourne home to the hottest market, recording house price growth of 19.5 per cent in the 12 months to September.
The Canberra property market also is booming, with house prices having jumped by 17.7 per cent over the past year, while Brisbane posted strong growth of 16.7 per cent.
In Sydney, Australia's largest property market, annual house price growth was a more modest 4.6 per cent.
Unit prices, meanwhile, posted strong gains in most capital cities with Sydney the only city where prices remained flat over the 12 months to September.
Adelaide posted the strongest growth in unit prices, with prices surging by 14.4 per cent.
And with prices continuing to rise, the housing affordability crisis already plaguing the nation looks set to worsen with inflation figures released this week strengthening expectations that the Reserve Bank will raise interest rates next month.
A rate rise of 25 basis points on November 7 would take the official cash rate to 6.75 per cent.
It would be the sixth rate rise since John Howard was returned to office in 2004, and the 10th since 2002.
Michael McNamara, general manager of APM, said the combination of strong growth in housing values and rising interest rates would deal a huge blow to would-be home owners and lower to middle-income mortgage holders.
"The spectre of the 10th interest rate rise since 2002 will cause further financial pressure to would-be home owners and struggling mortgage holders," Mr McNamara said.
"We anticipate that this expected rise in the cash rate will push additional mortgage holders against the wall, (while) a glut of properties at the lower end of all our capital city markets will deeply affect house values in those areas."
Mr McNamara said that while more affluent mortgage holders would cope quite well with another rate rise, for others, it would cause huge burdens on family budgets.
"Rising interest rates will affect, much more profoundly, lower to middle-income earners, as they tend to pay a greater proportion of their disposable income to service mortgage repayments," he said.
"In the property market this will mean that in an environment of tightening monetary policy, the rich will continue to get richer and the poor will continue to get poorer."Source: AAP

Housing affordability figures for first home buyers to hit renters

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Mon, 22 Oct 2007 20:54:00 +0000

A housing lobby group says today's record low in housing affordability figures is a tragedy for renters as well as home buyers.
The First Home Buyer Affordability Index by the Housing Industry Association and the Commonwealth Bank, is at its lowest level since it was started, and more than 8 per cent lower than a year ago.
Adrian Pisarski from National Shelter says the further deterioration and an increase of 1.7 per cent in the median first home price over the quarter will have an adverse flow-on effect.
"The real problem will be the knock-on effect in the rental market. We get a lot of frustrated potential first home owners who stay in the rental market," he said.
"Now unfortunately the lower income households either have to rent up and get into really unaffordable rentals, or they get displaced completely and end up homeless which is increasingly the case."
Mr Pisarski says rental stress and homelessness is the result of a decade of neglect by the Australian Government.
"The neglect has been a failure to recognise the inflationary impact of the Government's policies on home owners and potential home owners," he said.
"At the same time they've taken now something like $3.5 billion out of the public housing system over the last 11 years."

Housing affordability index hits 23-year low

radlam@mrmortgage.com.au (Rick Adlam, Mr Mortgage) — Thu, 18 Oct 2007 09:27:00 +0000

he housing affordability index is down more than 8 per cent on a year ago. (File photo) (AAP: Alan Porritt)A key measure of housing affordability has sunk to its lowest level ever.
The First Home Buyer Affordability Index, compiled by the Housing Industry Association and the Commonwealth Bank, has fallen 2.1 per cent in the September quarter.
The index is down more than 8 per cent on a year ago and the lowest level since the series was started in 1984.
The further deterioration is a result of the August interest rate rise and an increase of 1.7 per cent in the median first home price over the quarter.
HIA chief economist Harley Dale says it is the worst possible news for prospective home buyers, especially with another interest rate rise potentially on the way.
"It's providing a clear indication and I think an accurate indication that affordability has reached record low levels and it's getting ... increasingly difficult for aspiring first homebuyers to break into that housing market," he said.
Source: AAP and ABC