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According to recent research by RP Data, property prices grew by 4.7 per cent over 2010, significantly lower than the 20 per cent achieved in 2009. These flatter property prices are likely to benefit investors who are looking to make moves during 2011.
But while the flatter prices will make for uninspiring capital gains, RESI’s chief executive officer Lisa Montgomery told Market Focus that investors will continue to benefit from a tighter rental market.
Nationally, gross yields for apartments and houses are 4.7 per cent and 4.0 per cent respectively.
First home buyers have well and truly pulled back from the market and are looking to rent, pushing vacancy rates lower.
“Investors are actually sitting in the wings right now. They are waiting to see what is happening with property prices and with interest rates,” she said.
“This year we will see an increase in rates, but those savvy property investors that have prepared themselves to get into the market, will take advantage of the flatter property prices.”
source: www.theadviser.com.au
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High LVR lending is making a welcomed return with three lenders announcing changes in their policy.
Last week, ING DIRECT and National Finance Club both announced plans to increase their maximum loan to value ratio to 95 per cent.
LJ Hooker is also getting ready to jump on the higher LVR bandwagon.
Speaking to The Adviser, LJ Hooker financial services general manager Peter Bromley said that this week the lender would be taking the necessary steps to implement changes that will increase the maximum loan-to-value ratio on its standard variable home loan to 95 per cent.
source: www.theadviser.com.au
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Despite the RBA’s decision to keep the cash rate on hold yesterday, the threat of higher interest rates is stopping Australians from purchasing property.
According to a new survey conducted by Homeloans Ltd, which surveyed 2000 Australian first home buyers, homeowners and investors, 45 per cent of Australian home buyers said they would put off purchasing a property this year. Of those who were planning to buy a property this year only 6 per cent would do so within the next six months, while 74 per cent have reconsidered how much they are able to spend.
Homeloans’ chairman and chief executive officer Tim Holmes said Australians continue to take a cautious approach to purchasing property.
“There are now so many variables which have a profound effect on the Australian economy and consumer confidence, such as the recent floods and the just-announced flood levy tax. These obviously create some uncertainty.”
“Although the RBA obviously made the decision to keep official interest rates on hold today, it’s difficult to predict what it will do in months to come, particularly in light of the recent disasters. However, it is clear that concerns about finances are keeping Australians on their toes.”
source: www.theadviser.com.au
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Economists remain confident that the Reserve Bank of Australia will not lift the official cash rate untill the second quarter of 2011.
According to AMP’s chief economist Shane Oliver, the nation’s economic data over the last couple weeks has been generally soft, with a slight fall in home sales and house prices, a fall in building approvals and continuing soft growth in private sector credit.
“As a result of this data, we remain of the view that tightening will not become aggressive,” Mr Oliver said.
Mr Oliver also said that the recent floods would further delay the next RBA tightening as Australia struggles to get its fresh fruit and vegetable industry back on track.
“While the floods will likely lengthen the soft patch in Australian economic growth and further delay the next RBA tightening, possibly to May or June, they are unlikely to have a significant impact on growth this year as a whole, which we expect to be around 3.5 per cent over the year to the December quarter. At this stage, we still see the cash rate rising to 5.5 per cent by year end.”
source: www.theadviser.com.au
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Higher interest rates and tighter lending practices are stopping first home buyers from taking the step to engage with the property market.
According to new research by Loan Market group, enquiries from first home buyers fell 15 per cent in the last six months of 2010. Loan Market chief operating officer Dean Rushton said monthly enquiries from first home buyers had dropped to 30 per cent of all enquiries received in December 2010, compared to 45 per cent in June of that same year.
“This is a far cry from 2009 when first time buyers dominated the home finance market due to boosted government incentives and interest rates at near 50 year lows. But a combination of factors, such as four interest rate rises last year by the Reserve Bank of Australia and the prospect of more this year, is squeezing these people out of the market” Mr Rushton said.
He went on to state that government incentives such as the $1.2 billion First Home Saver Accounts (FHSA) scheme had done little to encourage more first time buyers into the market. The scheme aimed to assist more than 700,000 people within the first four years but it has attracted nowhere near the amount of interest anticipated.
source: www.theadviser.com.au
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St George will now accept rental payments as evidence of genuine savings.
In a move that will help first home buyers all over the nation, St George has announced it will accept rent as a form of savings for a home deposit if there is evidence of a minimum of 12 months continuous satisfactory rental history and the property is leased through a property manager.
“This is a significant breakthrough for first home buyers and a move which could be a major boost to the home finance industry,” Loan Market chief operating officer Dean Rushton said.
“Higher interest rates, tougher lending conditions and the end of the boosted federal government grant at the end of last year have driven first time buyers out of the market.
“Another major restriction for them has been the difficulty in saving a deposit for a home loan, particularly in this economic climate with people having to cope with massive cost of living increases including rental payments.”
Up till now, all Australian lenders have required a percentage of the purchase price – normally five per cent minimum – to be saved for all loans.
“But if rental payments were taken into consideration as a factor in assessing genuine savings that would enable many people to pursue the dream of home ownership,” Mr Rushton said.
“St George has now moved to accept rental history as a form of genuine savings and they should be applauded for this decision as it will enable a lot more people to realise the great Australian dream of home ownership.”
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PRDnationwide has revealed its Queensland-based affordable property hot-spots for 2011. According to recent research by the estate agency, Stafford Heights, Lota, Northgate, Virginia and Mount Gravatt East in Brisbane are all expected to thrive in 2011.
Property researcher Josh Brown said the suburbs were all ideally located near amenities and employment. “When looking for a property with strong long term gains ensure the property is within close proximity to employment nodes; in an undervalued suburb – determined by price gaps between surrounding suburbs; general affordability; and within close proximity to lifestyle amenity and transport corridors,” he said.
Mr Brown said Stafford Heights was identified due to its affordability and location among key amenity hubs on Brisbane’s north, which will continue to drive growth.
Virginia and Northgate, located 10km to Brisbane’s north, will provide solid long term growth for investors and purchasers, while Lota is set for growth due to its waterfront location within an easy commute from the CBD.
“Brisbane’s sub $500,000 property market reflects a fantastic opportunity for potential purchasers to exploit their position in the marketplace and invest within this grade of real estate,” Mr Brown said. The research shows sales activity of Brisbane property priced under $500,000 has dropped 40 per cent over the first half of 2010.
“The stagnating sales activity in Brisbane’s affordable market, poses an opportunity for investors to capitalize on buyer favorable conditions,” Mr brown said.
“With 2011 likely to become the year of the buyer, investors and home owners should begin to gear up now if they want to capitalize on the attractive economic environment.
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The majority of lenders have increased their rates in excess of the official cash rate, a survey from financial research firm Canstar Cannex has revealed.
Only 10 lenders out of 99 remained silent on home loan rate increases after last month’s 0.25% cash rate rise. The rest increased their rates by an average of 0.32% – meaning home owners are now paying 1.34% more on average than they were 12 months ago.
“The high profile hikes of 0.45% we saw last year from Westpac and this year from the Commonwealth Bank certainly signalled a cutting of the umbilical cord from the Reserve Bank and bumped up the average overall figures from the banking sector,” Mitchell Watson, Canstar Cannex financial analyst said.
“However, mortgage originators, building societies and credit unions all increased their rates in excess of the official cash rate.”
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Almost 50 per cent of Australians won’t pay their mortgage off before retirement.
According to RaboDirect’s National Saving and Debt Barometer, 49 per cent of Australians would be 60 and over before their mortgage was officially paid off.
Of the 2000 financial decision makers surveyed, 980 said that they would be “beyond retirement age” before their mortgage debt was completely gone.
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Australia has suffered the largest annual decline in housing affordability since the beginning of the decade, according to the Real Estate Institute of Australia (REIA).
The REIA Deposit Power Housing Affordability Report released yesterday, has revealed that over the September quarter, the total number of loans (excluding refinancing) was down 2.9 per cent to 101,364. Housing affordability also declined 0.2 percentage points nationally in the September quarter.
Meanwhile, over the year, the total number of loans fell 28.3 per cent – the largest annual decline in Australia since March 2001, according to the report.
“The largest decreases were evident in New South Wales and Victoria where the proportions of income required to meet loan repayments increased 6.5 and 7.5 percentage points respectively,” REIA President David Airey said.
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