Young buyers wary as panic sets in | The Australian

FIRST-HOME buyers Lee Brown and Jessica Tompkins are desperately saving for their first home. So, at first glance, it seems odd that they are hoping Kevin Rudd does not extend the boost to the first-home owners grant in the coming budget.

But the Sydney couple say that rather than give young investors a much-needed leg-up in the property market, the grants - which are worth up to $21,000 for those wanting to build a new home - have driven up prices and created panic among those trying to beat the June 30 cut-off.

Prompted, perhaps, by speculation last week that the boost will not be extended beyond June 30, there was a marked increase in the numbers of people at auctions and home inspections in all capital cities over the weekend, despite the Anzac Day holiday.

Auction clearance rates were significantly higher than last weekend in Melbourne, Sydney and Adelaide.

But while there appears to be a last-minute rush among home buyers, the recently engaged Mr Brown and Ms Tompkins are determined not to get in over their heads. Since they began house hunting last October - when Mr Rudd announced the doubling of the $7000 first-home owners grant for established homes, and a tripling for new homes - the asking price of the house and land package they are interested in has risen by $44,000.

Now they hope prices will fall back to more reasonable levels once the boost ends, as property analysts predict. "A lot of young people are panic buying, that is what we have found, particularly in the last couple of months," said Mr Brown, 26, an environmental consultant. "We feel a lot of pressure to buy now or lose out on the $21,000."

Ms Tompkins, who works in marketing, said the couple had expected prices to fall as the global financial crisis took its toll. "We would be better off if they cut the grant because there won't be so many people out there trying to snap up houses," she said.

In Port Melbourne, Ana Laskova, 24, and Dean Pavlickovski, 31, attended an auction for a two-bedroom apartment yesterday, only to watch the property sell for a significantly higher price than they were prepared to pay. "We would like to buy given the extra stimulus, but the grant is not going to make the difference in our decision," Mr Pavlickovski said.

The home buyers have joined a queue of experts condemning the scheme as counter-productive and a waste of public funds. SQM research managing director Louis Christopher said there was a panicked rush of first-home buyers due to speculation the boost was unlikely to be extended.

He said couples such as Jessica and Lee should wait. "Now is not the time for first-home buyers to rush in. If they wait, demand will dry up and prices will fall," he said. "The first-home buyers grant doesn't help housing affordability at all."

Critics argue the grant has artificially raised prices for homes under $500,000, pitted investors against first-home buyers and disrupted the rental market.

"The first-home buyers grant has been counter-productive," said Kevin Lee, head of Smartline Mortgages.

Property analyst Michael Matusik said there were no more first-home buyers in the market than a decade ago and the boost had simply exaggerated prices."It should be called the vendor's grant," he said. "In the outer suburbs of major capital cities the prices went up between $7000 and $14,000 in a 24-hour period immediately after the announcement. There's anecdotal evidence that it has boosted housing construction, but over the longer term all it has done is bring forward construction."

However, Housing Industry Association senior economist Harley Dale said the tripling of the grant for new dwellings had been highly effective in boosting the property market. "It has done a lot to stimulate the property market and has been especially successful in driving first-home buyers to build their own homes," he said. "In the case of first home buyers who are building new homes it isn't just a situation where demand has been brought forward, demand has actually increased."

Open houses across the country have been inundated with potential first-home buyers eager to enter the market before the boost is shut down or decreased.

In Melbourne, real estate agents were surprised by the strong turnout over the weekend, as a higher than anticipated numbers of house-hunters braved heavy downpours and blistering winds to attend inspections. Real estate agent Craig Stephens said the Prime Minister's hints that the grant would expire had prompted a "massive spike" in numbers attending open-house inspections over the weekend.

Young buyers wary as panic sets in | The Australian

First Home Loan Specialists Comment

I find this an interesting article given the current situation. This type of lobbying is why I think the Federal Government will take the middle ground and the First Home Owners Grant back to $7,000 for established properties and take some of the heat out of this section of the market.

They will then cut the boost to $14,000 for newly constructed properties and continue this through to 31 December 2009. After that they will end the boost.

For what it is worth that is my opinion.

Greg Brierley
Principal
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E: greg@firsthomeloanspecialist.com.au
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Tanner under pressure on home buyers grant

The Federal Government is under pressure to reveal if it plans to make any changes to the first home owner grant in next month's Budget.The first home owner grant was doubled from $7,000 to $14,000, and tripled for those buying newly-built homes to $21,000, to help the housing sector through tough economic times.

Acting Treasurer Lindsay Tanner will not say if the Budget will include an extension or changes to the scheme, but he has warned prospective buyers the increased grant is limited.

"We're not going to have a first home owners grant at the level that it's been forever," he said.

Earlier this week Prime Minister Kevin Rudd kickstarted speculation on the grant's future when he said "all good things must come to an end." Ron Silverberg from the Housing Industry Association says the uncertainty could see people rush into buying to secure the extra assistance.

"It probably would be desirable that the Government clarify the situation," he said."It will be a very hectic weekend through builders' display homes and real estate agents' offices."

Shadow Treasurer Joe Hockey says there are problems with the current scheme. "The first home owners grant may be pushing up the prices of housing," he said.

The increased grant is currently due to end on June 30 and the Government says a decision will be announced when the Budget is handed down next month.

Tanner under pressure on home buyers grant - ABC News (Australian Broadcasting Corporation)

First Home Loan Specialists Comment

It looks like the debate will never end. Will they continue the first home owners grant?

No-one knows!

Greg Brierley
Principal
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First home owner boost 'should continue' - ABC News

Federal Opposition housing spokesman Scott Morrison has urged the Government to extend its increase to the First Home Owners Grant (FHOG).

Last year the Government doubled the grant for people buying their first home from $7,000 to $14,000 and tripled it to $21,000 for those buying newly-constructed homes. The extra grants are due to expire at the end of June.

Mr Morrison says the Government has the money to extend the increases."We do think the money should come from the social housing program - more than $6 billion that will simply not be spent in the timeframe the Government has provided for," he said. "So there is money there to enable the First Home Owners Grant and to end the confusion and end the delay."

But Prime Minister Kevin Rudd has again made it clear the boost to the grant is unlikely to be extended. He says it has served its purpose."[It's purpose was to] give a helping hand on the way through, add to confidence in the economy and on top of that boost jobs for our tradies," he said. "As I said, we've been very clear in our announcements about how long this program would last and, as I said before, all good things do come to an end."

Earlier the Master Builders Association (MBA) predicted there would be substantial job losses in Western Australia's economy if the boost was axed.

Last-minute rush

Developers are bracing for a rush of last-minute applications, but builders and banks are worried the buying will dry up after the June 30 end date.

Mortgage and Finance Association of Australia CEO Phil Naylor argues the property sector still needs to be propped up. "We think there is a good reason to extend it for a further period. Anyhow, we've never suggested there should it a permanent feature in the environment but because we're looking at trying to stimulate the economy, we think it's been a good move," he said. "Even if only the Government continued that part of the grant that related to new commencements. That in itself would be a welcome stimulus."

But some economists disagree. BIS Shrapnel senior economist Jason Anderson says first home buyers are flooding the market for other reasons, mainly low interest rates and cheaper houses. "We've got extremely attractive housing rates so part of the motivation for first home buyers is the relief that's coming through in interest rates and the boost has clearly created an extra impetus behind that," he said. "I think if we look at previous cycles, when we've had very substantial rate cuts, you're first home buyers numbers have tended to recover, but over a 12-month period, and clearly the rate of improvement that we've had in the last six months in particular, has been amplified by the boost scheme."

He says people wanted to get into the market before the grant boost expires should not rush in to a mortgage blindly. "I don't think that people should be acting in a fashion where they're not sitting down and doing their numbers properly," he said."It's always the best thing to work out what you think you can afford with higher interest rates in where we are today."

First home owner boost 'should continue' - ABC News (Australian Broadcasting Corporation)

First Home Loan Specialists Comment

The argument continues. The Prime Minister has now placed the Government firmly in the middle of the argument. They can now end the First Home Owners Grant boost and take the "I told you so" position or leave the boost in place and take "We are generous" position. It has been reported today that the Victorian Government will scrap all their First Home Owners assistance on established and it will apply only for new dwellings.

It may be that the Federal Government will follow suit. All will be revealed in the May budget.

Greg Brierley
Principal
T: 1300 884 809
E: greg@firsthomeloanspecialist.com.au
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Blog: www.firsthomeloanspecialists.blogspot.com

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Nation Building - Economic Stimulus Plan - Transcript of Tanya Plibersek video

The Hon Tanya Plibersek MP - Minister for Housing

Hi, I’m Tanya Plibersek, the Federal Minister for Housing. Thanks for your questions and comments.

The housing and construction sector is a big part of our economy. It accounts for almost 9% of all employment in Australia.That’s why housing has featured so strongly in the Nation Building and Economic Stimulus Plan.

We introduced the First Home Owners Boost in October to encourage building and give first home buyers a better chance to get into their own home.The First Home Owners Boost was designed to be a time-limited measure ending on 30 June 2009. It’s important that measures like this have a clear end date so that economic activity is brought forward, supporting jobs when we need them most.

Of course anyone thinking of buying a house needs to do their own sums. Buying your own home is a major decision and you need to be sure you can keep up the payments in the future, especially if your personal circumstances change, and when interest rates go up again.

We have also said the global financial crisis is changing and developing, and if it’s deeper or longer than originally thought, we stand ready to take further action in the area of housing construction.

Some people wanted to know how we are progressing on our commitment to build 20,000 new units of public and community housing. I’ve already approved funding to fully repair over 10,600 public housing dwellings and make minor repairs to an another 38 thousand. All States and Territories have started hiring tradies to do the work.

For example in NSW, they’ve already issued work orders of almost $100 million and 500 homes have been fixed up already. This work is spread throughout the state of NSW.

I have also approved funding for the first stage of new construction projects. Under the first stage over 2,600 homes will be built right across the country. I will be making decisions on proposals to build another 17,700 homes over the next few months.

Our aim is to support jobs in the housing industry through this measure as well as to build much needed housing for some of the most vulnerable people in our community, including aged and disability pensioners and people who have been homeless.

It’s estimated that this measure will support 15,000 jobs over the next couple of years. If you are a builder, developer or tradie looking to get involved in the building or repairing of these homes, you can find contact details for your state or territory on the Housing section of this website.

I have also received several questions about the Tax Bonus. If you’ve got questions about the bonus, please contact the Australian Taxation Office on 1300 686 636 or check out the Treasurer's comments on the video transcripts section of this website. Thanks again for visiting the website and submitting your questions and comment

Nation Building - Economic Stimulus Plan - Transcript of Tanya Plibersek video

First Home Loan Specialists Comment

It would seem pretty clear from this response that the boost will end on 30 June 2009. The Government consider that the other measures in the stimulus package will be take up the gap left by the First Home Owners Grant boost.

This probably means that there will a stampede of First Home Buyers trying to get the boost before it finishes. This will make buying an established home very competitive. So it could be an option to build a new home instead.

Greg Brierley
Principal

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Diving into the deep end | The Courier-Mail

ARE you fed up paying your landlord's mortgage and wondering if now is the time to dive in and buy your own place?

Rising rents and a lack of available rental properties means right now you could possibly afford to purchase a property with little or no change to your current expenses.

More than 42,000 Australians have taken up the first-home owner grant offered as part of the Federal Government's stimulus response to the global financial crisis. New South Wales has seen the highest uptake, with 14,404 first-home owners receiving the boost, followed by Queensland (9319) and Victoria (8632).

The grant sees first-home buyers given $14,000 (up from $7000) and first-home builders $21,000 (up from $14,000). It reverts back in July.

More than one third of Australian households are renting, the biggest age group being 35 to 44-year-olds. But before you make the leap to home ownership you should ask yourself how secure your employment is. You have to consider whether you have any concerns about the health of the business you work in and be careful about over-committing.

Suncorp wealth adviser Leanne Wilson says it is "most definitely" still cheaper to rent than buy when looking under $450,000."It works out that the rent is about 74-84 per cent of mortgage repayments, with a 20 per cent deposit and 6 per cent interest over 25 years," she says."And of course that doesn't factor in the cost of maintenance of the property and rates, body corporate fees. Obviously renting also gives you flexibility, especially when you are in a job where you move around a lot."

The attraction for a lot of people is also the lifestyle. If they can't afford to buy near the CBD, rent is an affordable option. "The median weekly rent for a two-bedroom house in inner northwestern Brisbane is $400 a week or about $1730 a month. A two-bedroom unit in the inner city will cost you $430 in weekly rent, or $1860 on average per month, according to December quarter data from the Rental Tenancy Authority.

In comparison, a $300,000 home loan with a basic interest rate of 5.91 per cent a year over 30 years would be $1782 a month in repayments. A $400,000 loan would see you paying back $2376 over the same term at that rate.

The number of first-time owners has risen by 18 per cent since the grant was increased. Builders such as Devine Homes, for which the low-income earner is a crucial target, hope the grant period will be extended. Devine has launched a campaign offering to double the first-home buyer's deposit on house and land packages bought before the end of June. Buyers will also receive free mortgage payment insurance for 12 months. Devine's house and land packages range from $299,900 to $419,000.

The Government has made it clear it will not offer open-ended incentives to any part of the economy, and it is not known how it regards the stimulus to one sector of the housing market when other markets such as investment property are plummeting.

However, there are signs the Government's increase in the first-home owner grant is having an impact on home building. Building approvals in February surged by a seasonally adjusted 7.8 per cent, the first increase in the monthly series since June last year.

But the Master Builders of Australia have a pessimistic outlook for their trade, saying there is likely to be significant job losses in 2009 and 2010. MBA chief economist Peter Jones wants to see the eligibility period for the $21,000 first-home builders grant extended.

But the real estate agents are laughing.Over at Ray White, a record $2.37 billion in sales were posted last month, thanks, in part, to the boost to the first-home owners grant. Ray White's Mark McLeod says it was the group's strongest sales month in 18 months and a 15 per cent improvement on the corresponding period in March, 2008.

While the grant has its critics, who suggest it artificially inflates residential property prices, it is clear the take-up rate is high and it will stimulate a housing construction cycle as existing inventory is cleared. First-home buyers are having other incentives thrown at them, too. If the first-home owners buy a property for less than $500,000 they do not pay stamp duty in Queensland. Similarly, many developers are matching the grant with cash, holidays or appliances.

But remember, first-home buyers should aim to pay no more than 30 per cent of their gross income in mortgage repayments. Also, they should factor in an extra 1 to 2 per cent on interest rates to take into account future rate rises.

Many people with a mortgage repaying 40-50 per cent of their income to the bank are in severe stress. Still, developers are reporting increased traffic through home display villages, while auction clearance rates are up sharply in existing homes under $500,000.

So far, variable mortgage interest rates have fallen by about 4 per cent since September and banks remain willing to lend for mortgages. While they do want more collateral, the major banks will lend over residential property.

Mortgage Choice senior corporate affairs manager Kristy Sheppard says renters should definitely consider moving into property ownership, whether to buy a home or an investment property. "At present, opportunities are fantastic for potential property owners who are confident of their job security and/or financial situation," Sheppard says."The historically low interest rates, government incentives such as the first-home owner boost, low rental vacancy rates and continuing high levels of population growth are all positive factors for Australians looking to buy a property."

Those who are currently renting are paying their landlord's mortgage repayments when in fact they could be paying their own.

Diving into the deep end | The Courier-Mail

First Home loan Specialists Comment

The message is loud and clear in this article. "This is a good time to buy into the property market as long as you do not overcommit yourself and have good job security." These risks can be managed and you should be helped with these decisions by a good mortgage broker.

Greg Brierley
Principal
T: 1300 884 809
E: greg@firsthomeloanspecialist.com.au
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Govt responds to land rent scheme questions - ABC News (Australian Broadcasting Corporation)

The ACT Government has rejected Opposition calls to release the name of the lending institution involved in its land rent scheme.

The Opposition says the Government needs to confirm whether the institution is still willing to take part so people considering using the scheme do not miss out on the increased first home buyer's grant.The Federal Government's first home buyers grant is due to expire on the 30 June, 2009.

The ACT Treasurer Katy Gallagher says she does not want to risk losing the lender's involvement by revealing its identity."The scheme is ready, it's there, we're committed to it," she said."And really it's about now for that financial institution to finalise their details. And that remains out of the Government's control but we are certainly working with them, talking with them, providing them with any assistance they need in order to fully commit to the project."

The ACT Greens say they will not be calling on the Labor Government to act before the end of the financial year.

Greens MLA Amanda Bresnan says calls for the lender to be identified are unhelpful. "For this lender to come out and say who they were might actually endanger the scheme," she said. "I guess in talking about housing affordability this is one of the things that will assist towards that. We do need a scheme along these lines to work, we think it's a good scheme and that's why we will stick to the 30th of June deadline which we gave the Government."

Govt responds to land rent scheme questions - ABC News (Australian Broadcasting Corporation)

First Home Loan Specialists Comment

This is a very innovative scheme if the ACT government can get it up and running. The ACT is very proactive in this area with a detailed Affordable Housing Strategy being implemented. The program that I like is the OwnPlace Program which sells 15% of all new land releases as house and land packages for under $300,000.00.

Check it out on the ACT Land Development Agency website. The link is below in this blog.

Greg Brierley
Principal
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E: greg@firsthomespecialist.com.au
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Low interest rates help ease mortgage stresses | The Australian

THE number of Australian families facing mortgage stress has fallen by 300,000 from its peak last August as lower interest rates and government stimulus packages ease the pressure on households.

But the respite provided by $52billion in government handouts and rate cuts totalling 400 basis points since September will be short-lived, as the number of families facing home loan repayment stress is set to skyrocket later this year as job losses bite. More than 1.2 million households could find themselves in some form of mortgage stress if unemployment reaches 7.5 per cent by December, with 460,000 families "close to the edge", said Martin North, managing director of Fujitsu Consulting.

Other figures released yesterday by researcher RP Data-Rismark show housing prices are bumping off the bottom, rising nationally 1.1 per cent in the first two months of the year, after falling 3 per cent last year. First-home buyers, who took advantage of the increased grants, and interest rates at 45-year lows of about 5.9 per cent, would be hardest hit, Mr North said. "If unemployment were to rise to 7.5 per cent by December, up to one-third of the 125,000 first-time buyers who entered the market in the last 12 months could find themselves in mortgage stress."

Mortgage stress is generally regarded as paying more than 30per cent of household income in home loan repayments. Fujitsu bases its definition on 13 survey questions asking about people's ability to repay their mortgage.

"Falling interest rates and government intervention have made a significant positive impact on mortgage stress," Mr North said."This is good news in the short term, and the additional government payments will reinforce this trend over the next couple of months."

Fujitsu's March survey found the number of households suffering mortgage stress fell 5.5 per cent compared with February, with 587,000 families in some degree of pain.In a survey of 2000 households, the consulting firm asked first-home buyers if they could afford to buy, with the number saying yes jumping from 21.5 per cent in June last year to 53.4 per cent per cent in March.When asked how important the first-home owners grant was, 56 per cent said it was vital or very important last June compared with 85.4 per cent in March.The survey found people's biggest worry in terms of servicing their mortgage was fear of unemployment, followed closely by the poor performance of their investments

Low interest rates help ease mortgage stresses The Australian

First Home Loan Specialists Comment

The advantage of using a Mortgage Broker is that loans are tailored to individual circumstances. Reputable mortgage brokers will ensure that rising interest rates are included in the loan analysis.

The other impact of unemployment can also be addressed through available loan products that allow for borrowers to have a "grace" period where the interest accumulates on the loan and no repayments have to be made.

So if your in a relatively stable job and use a repuable mortgage broker then the risk of mortgage stress should be minimised.

Greg Brierley
Principal

T: 1300 884 809
F: 02 6241 2545
E: Greg@firsthomeloanspecialist.com,au
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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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