Business Spectator - Aust residential property values rise 1.1%

Australian residential property values have risen 1.1 per cent in the first two months of 2009, recovering from a three per cent fall last year, new data shows.

The RP Data-Rismark Hedonic Property Index released on Tuesday showed Sydney and Melbourne were the key drivers of the 2009 rebound, with dwelling values up 0.5 per cent to $509,900 and 1.9 per cent to $428,600 respectively. The research showed the market had been helped by lower mortgage rates - which are at their lowest point in nearly 40 years after peaking at 9.6 per cent in August last year, before dropping to 5.8 per cent currently.

Economists expect the Reserve Bank of Australia (RBA) to cut the official cash rate by at least 25 basis points when the board of the bank meets next Tuesday, April 7. "The recovery in prices over the last quarter has been driven by the 40 per cent reduction in mortgage rates, the boost to the first home owners grant, the government's fiscal stimulus and a significant housing shortage," Rismark International chief, Christopher Joye, said.

Mr Joye said the first home owners grant had been a successful policy, and the health of Australia's financial system meant the market had been more resilient than other countries around the world. "The resilience of Australia's housing market has also been underpinned by our robust banking system, which (sic) CBA (Commonwealth Bank of Australia) recently reporting that its 90 day mortgage default rate was a stunningly low 0.38 per cent," Mr Joyce said.

Business Spectator - Aust residential property values rise 1.1%


First Home Loan Specialists Comment

More evidence that the property market is in pretty good shape and that it is widely agreed that interest will cut further at RBA April meeting.

Greg Brierley
Principal
www.firsthomeloanspecialist.com.au

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Extend first home owner grant: Coalition

A third of the federal government's $6 billion spend on public housing should go to the private residential construction sector, the opposition says.

Data released on Tuesday showing a rebound in house prices is another sign that the more generous first-home owner scheme should be extended beyond June, housing spokesman Scott Morrison says. The government, as part of its first stimulus package last year, temporarily doubled the grant available to first home buyers of existing homes to $14,000 and tripled it to $21,000 for buyers of newly-constructed homes. It is leaving any decision to extend the stimulus measure to the May budget.

"Improved property values, together with rising house sales and easing mortgage stress, pointed to the private housing construction sector as a key to stimulating economic activity," Mr Morrison said. "At least $2 billion should be diverted from Labor's over-ambitious program to spend $6 billion on public (housing),"

Instead it should be diverted to the private sector through the first-home owner grant scheme, he said. Mr Morrison said it was "fanciful" that states and territories could spend $6 billion on public housing in less than two years."Last time it took more than eight years to achieve that result," he said.

© 2009 AAP

Extend first home owner grant: Coalition


First Home Loan Specialists

This is the start of the pressure for the First Home Owners Grant Scheme boost to be retained. I am not convinced in the current economic climate and the Goverment's need to control the deficit that they will continue the boost.

With interest rates tipped to come further in the next couple of months, I consider that now is the best time to go out and purchase your first home.

If you are a first home buyer then check out our free 8 part Specal report for First Home Buyer at www.firsthomeloanspecialist.com.au.

Greg Brierley
Principal
First Home Loan Specialists

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Business Spectator - More rate cuts likely after flat lending

More rate cuts likely after flat lending
AAP

Lending to the private sector was flat in February as personal and business loan volumes fell, supporting the case for further interest rate cuts central bank figures show.Total credit provided by financial intermediaries was unchanged, following a 0.6 per cent rise in January, the Reserve Bank of Australia said on Tuesday.The result took the annual growth rate down to 5.4 per cent, its slowest pace in 15 years, or since 1994.

RBC Capital Markets senior economist Su-lin Ong said the data support the case for a further interest rate cut after the RBA board meeting on monetary policy next Tuesday."At the margin, the data continue to support the case for lower cash rates in Australia, but the timing remains more debatable with the RBA continuing to hint at a reluctance to cut much further," she said in a statement."The disappointing domestic data since the March meeting and still challenging global backdrop suggest that the case for a cut next week remains compelling."We expect a 25 basis point move." The key cash interest rate was left unchanged in March at 3.25 per cent.

Meanwhile, lending for housing credit rose 0.6 per cent in February, and by 7.1 per cent over the year, seasonally adjusted, while other personal credit was down 0.8 per cent in the month, and six per cent in the year, the RBA data show.

Business Spectator - More rate cuts likely after flat lending

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The RBA's latest Position

Business Spectator 18 March 2009
Chris Joyce


The RBA Board’s recent summary of developments in Australia’s housing market, which were included in the board’s minutes (they appear to confirm a lot of what has been said previously here):



“In the housing sector, building approvals fell sharply in the second half of 2008, which implied that residential construction activity would fall during the early part of this year. Declines in house prices in the past few months had mainly been in the more expensive suburbs, with prices in other suburbs appearing to level out. In a sign of increased demand for housing, patterns of housing finance indicated an increase in housing loan approvals of about 10 per cent over the past few months, partly spurred by the increased incentives for first home buyers to enter the market.


However, credit growth had remained low as borrowers had evidently taken advantage of the extra cash flows created by lower lending interest rates to increase debt repayments. Further signs of an increased level of activity in the secondary housing market were significant rises in auction clearance rates in both Sydney and Melbourne in February, and a component of the Westpac-Melbourne Institute consumer sentiment survey indicated that current conditions were conducive to buying a dwelling.”





First Home Loan Specialists Comment


This article supports the claim that it is currently a great time to buy a property particularly your first home. The First Home Owners Scheme increased assistance runs out in a little over 3 months on 30 June 2009. Now is the time to get educated in the home buying process and buy that first home.




Greg Brierley
Principal

New housing boom tipped for second half of '09

AAP


Low interest rates, population growth and a shortage of new home construction is the perfect mix for a fresh house price bubble, says Firstfolio chief executive Mark Forsyth.
Australian might be on the brink of recession but Mr Forsyth believes a new housing boom could begin as early as in the second half of 2009. "If you combine the last rate decrease with news that there's going to be another decrease, rental yields going through the roof, shortage of supply of property and the first home owners grant, it's a perfect storm of a positive nature," Mr Forsyth told AAP. "We're creating the next housing boom, or bubble potentially."


After the Reserve Bank of Australia cut the overnight cash rate to a 44-year low of 3.25 per cent in February, traffic at Firstfolio's mortgage website eChoice more than doubled to 15,000 hits a day from 6,000, Mr Forsyth said. While the demand for loans had grown, especially among first home buyers, Mr Forsyth said he feared there weren't enough properties where people wanted to live - in transport corridors and close to employment centres. And building approvals for dwellings fell in January for a seventh consecutive month to the lowest level in eight years, according the Australian Bureau of Statistics.


The ABS also showed rents rose by 8.4 per cent for the year to December, the fastest increase since 1989, making property investment more attractive. The shortage wasn't likely to be solved soon as new developments took a long time from start to completion, and the population continued to grow, particularly through immigration, Mr Forsyth said. Immigration Minister Chris Evans announced last year that Australia would increase its annual immigration intake to about 300,000. "Unless somebody has it on tap now, we're not going to have any new development," Mr Forsyth said.



First Home Loan Specialists Comment:


The article above highlights that the property market has very good fundamental drivers going forward. These drivers should underpin housing prices in the longer term and provide some stability to the market. However, the short term boost for these drivers is the First Home Owners Scheme (FHOG) provided by the Commonwealth government.

Some evidence of the increase in the FHOG was reported in Weekend Australian Financial Review (March 14-15, Page 5, Scott Elliott & Michelle Singer) here it is reported that First Home Buyers are rushing to take advantage of generous government handouts before their June 30 cut-off. This rush was further supported by Queensland property developer, Devine reporting its best new-home sales in seven years after it agressively pursued the first home buyer market.

The article also reports that the Government will not commit to its boost beyond the 30 June 2009 cut off date.

So currently First Home Buyers have a little over three months to make their decision on whether they will climb onto the property ownership ladder. Now is the best time for a number of years to be buying their first home and make sure they take advantage of this current assistance package.

Greg Brierley
Principal

"First Home Buyers warned to be careful"

AAP

Recent first home buyers may be feeling pretty good right now but one mortgage provider says they could be in for a rude shock a year down the track. Declan Murphy, the chief executive of online home loan provider BidMyLoan, said the weakening local economy and rising unemployment would leave first home owners vulnerable to falling house prices.

Mr Murphy said the government needed to ensure there were measures in place to support those who found themselves on hard times. "If you create an initiative to put people in debt in this environment, you need to be responsible and prudent and looking forward," Mr Murphy said on Friday. "There is a potential risk and we need to be accountable for that risk."

Official statistics show the temporary boost, which formed part of the federal government's $10.4 billion fiscal stimulus package announced in October last year, had tempted first home buyers back into the market. First time buyers comprised 25.4 per cent of all home loans approvals in December, a seven-year high, according to the Australian Bureau of Statistics (ABS). It was the third month in a row the proportion of first home buyers in the housing market had increased.

The federal government doubled the first home owners' grant to $14,000 for existing homes, and tripled the subsidy to $21,000 for newly built dwellings. The temporary boost expires on June 30.

Mr Murphy said the latest jobs figures, which showed the nation's unemployment rate reached a four-year high of 5.2 per cent in February and was set to climb further, were a concern. "It doesn't actually matter that somebody has bought a house at a good price," Mr Murphy said.
"If you get to the point where you can't pay your mortgage, you've got a problem and if you don't have a job it's going to be a struggle."

Mr Murphy said he supported the temporary boost to the first home owner grant, but thought there were better ways of helping people get into homes and, importantly, supporting them once they were there. These included allowing first home owners a tax break on their interest payments; subsidising repayments for those in difficulty and adopting a scheme where the government matches dollar-for-dollar what the potential buyer can save for.

A research note from ANZ Banking Group said the national median house price had fallen by 3.9 per cent from its peak in early 2008, which was "the largest decrease since the 1940s".
"Weak sentiment, a deteriorating economic environment and rising unemployment present further downside risks," the note said. But ANZ said a US-style collapse in house prices was unlikely given lower interest rates and Australia's housing shortage.

Housing Industry Association (HIA) chief economist Harley Dale said there was some risk end of the temporary boost would result in house prices slipping back to levels before it came in.

But Mr Dale said the temporary boost for those purchasing or building a new home would continue to support building construction long after it expired. "We are still going to get stimulus to the new home building market from the boost and that's going to continue right through the second half of 2009," Mr Dale said on Friday.

First Home Loan Specialists Comment

This is timely advice in the current economic climate. However, there is no need to think this report applies to every First Home Buyer. If you work in a relatively stable industry sector then you should be able to, relatively easily, assess what is the likelihood of being retrenched.

Currently, employers are being encouraged to retain staff because when this economic cycle changes to an up-cycle then it is anticipated that the skills shortage that previously existed will return. Those businesses that retain their current staff will be in the best position to maximise their growth potential.

Greg Brierley
Principal