INTELLICHOICE FINANCIAL SERVICES

Your guide to the first home buyer's grants

2011-10-27T19:20:00.000+10:00

The good news for first home buyers is that there are still opportunities to take advantage of government grants.

The key is knowing exactly what you’re entitled to, and for how much longer.

The opportunities for gaining a first home owner's grant have been reducing in recent times, but there are still some decent-sized grants to help you get on the ladder. Here's a state-by-state guide.

New South Wales

Eligible first home owners can receive the First Home Owner Grant (FHOG) of $7,000 to assist them in the buying or building of their first home, regardless of income or the area in which they plan to buy or build.

A cap of $835,000 on the value of the home has been in place since 1 January 2011. Only one grant is payable per purchase, regardless of the number of eligible applicants involved in the transaction.

The First Home Plus Scheme, is a NSW Government initiative providing exemptions or concessions on transfer duty for eligible first home buyers.

Homes up to the value of $500,000 are exempt from the tax, while homes valued between $500,000 and $600,000 receive a concession. In total, First Home benefits of up to $24,990 ($7,000, plus a duty exemption of up to $17,990) are available.

From 1 January 2012, the First Home Plus Scheme will be replaced by the First Home - New Home Scheme. Under this, stamp duty concessions will only be available to first home buyers purchasing a brand new home or vacant land intended to be used as the site for a first home.

Buyers of established properties will no longer receive the transfer duty exemption or concession as of 1 January 2012.

For more information, visit www.osr.nsw.gov.au

Victoria

The FHOG scheme provides a $7,000 grant to first home buyers. A cap of $750,000 applies.

Until 30 June 2012 (contract date), you may also be eligible to receive the First Home Bonus, an additional payment of $13,000 for new homes only – a cap of $600,000 applies.

If you are purchasing a new home in a regional municipality in Victoria, an additional $4,500 Regional Bonus is also available (in addition to the $13,000 First Home Bonus) until 30 June 2012 (contract date).

On top of this, eligible first home buyers may also be in line for a reduction of duty, provided you reside in the property for a continuous period of 12 months, commencing within 12 months of settlement.

A 20 per cent reduction applied as of 1 July 2011, with additional 10 per cent reductions on 1 january 2013, 1 January 2014 and 1 September 2014.

For more information, visit www.sro.vic.gov.au

Queensland

The FHOG scheme provides a $7,000 grant to first home buyers. A cap of $750,000 applies.

Until 31 January 2012, the $10,000 Queensland Government Building Boost Grant is available to buy or build a new home.

The First Home Concession is available to help reduce transfer duty costs, but eligibility requirements are in place.

For more details, visit www.osr.qld.gov.au

South Australia

The FHOG scheme provides a $7,000 grant to first home buyers. A cap of $575,000 applies.

A First Home Bonus Grant provides an additional payment of up to $8,000 for eligible first home buyers who enter into a contract to purchase or build a new home before 1 July 2012, or an owner builder who commences construction before this date.

For more information, visit www.revenuesa.gov.au

ACT

The FHOG scheme provides a $7,000 grant to first home buyers. A cap of $750,00 applies.

The Home Buyer Concession Scheme is an ACT Government initiative that charges duty at a concessional rate. The rate depends on the date of purchase.

The HBCS must be lodged within 90 days of the grant, transfer or agreement, and applicants must satisfy previous property ownership criteria, as well as an income test.

For more information, visit www.revenue.act.gov.au

Western Australia

The FHOG scheme provides a $7,000 grant to first home buyers. A cap of $750,000 applies.

The Home Buyers Assistance Account provides first home buyers with a grant of up to $2,000 to assist with the incidental expenses purchasing an established or partially built home through a licensed real estate agent for the purchase price of $400,000 or less.

For more information, visit www.finance.wa.gov.au

Tasmania

The FHOG scheme provides a $7,000 grant to first home buyers.

A duty concession may be available to eligible first home buyers.

A concession up to $4,000 is available for the purchase of established dwellings up to the dutiable value of $350,000, or $2,400 for the purchase of vacant land, up to the dutiable value of $175,000.

For more information, visit www.sro.tas.gov.au

Northern Territory

The FHOG scheme provides a $7,000 grant to first home buyers. A cap of $750,000 applies.

The Northern Territory Government provides a stamp duty First Home Owner Concession (FHOC) for first home or land buyers.

From May 2010, FHOC is an amount up to $26,730 off the duty payable on the first $540,000 of the dutiable value of the property. The FHOC is not means tested, but the purchase price of the home or land must not exceed $750,000 or $385,000 respectively.

Where these thresholds are exceeded, the FHOC does not apply, but you may be eligible for the Principal Place of Residence Rebate of up to $3,500 off the duty payable.

For further information, visit www.revenue.nt.gov.au
This article first appeared on www.realestate.com.au

Spring selling season brings new property to the fore

2011-10-14T17:16:00.000+10:00

The current traditional property spring selling season this year has been all about brand new property, with more buyers considering new homes and off-the-plan property in favour of existing property.

As a result, the real estate industry will find that mortgage figures will increase but existing home sales and weekend suburban open homes won’t reflect this. Naturally, this all comes down to the temporary State Government incentive of $10,000 for the purchase of new property.

Literally as soon as the announcement was made, we started to receive enquiries from our clients, keen to discover what incentives they were eligible for and how to claim them. Buyers and investors from interstate as well as those who had been waiting to invest for some time are now actively signing contacts on a number of great new property opportunities in high growth areas.

Basically, investors and buyers of a brand new home (including an apartment bought off-the-plan) are eligible for the temporary State Government incentive of $10,000, available until the end of January next year. For a comprehensive home building project, building work must commence within 26 weeks of the date of the contract and be completed within 18 months of the work starting, whereas for homes and apartments bought off the plan, the building work must be completed by 31 July 2013.

Buying new has other advantages for the investor as well, including greater tax deductions, less maintenance issues further down the track and, all things being equal, a new property typically has a lower vacancy rate than an old one. Buying new is always going to be the preferable option to investors, even after the conclusion of the government incentive to build new.

Other factors contributing to a busy spring and summer selling season are interest rates remaining at an all time low, and the current down cycle in the property market. This of course means property is more affordable than it has been in years; there is a greater choice of property on the market, and sellers/developers are more open to negotiation.

Buying proeprty off the plan

2011-10-12T17:16:00.000+10:00

At the moment, most of Brisbane’s best opportunities currently available are for properties in high growth areas bought off the plan. Many buyers and investors find the process of buying an investment from a brochure, virtually sight unseen, a little confronting. But it shouldn’t have to be that way.

Basically, buying off the plan allows you to buy a property for the future at today’s prices. To put it simply, it is buying a property before construction has commenced, and the buyer purchases on the basis of developer’s floor plans and existing site.

In addition to capital growth, other advantages of this type of acquisition include:

Stamp duty savings – because you are paying the stamp duty based on the cost of property at time of purchase, rather than value at settlement
Lock in today’s price for the property
Delayed settlement gives you more time to save further deposits
Significant tax savings – as the property will be brand new and never lived in, the depreciation on it is higher
Building warranty - you will be provided with all building and appliance warranties
Time to sell your property – allows you more time to sell the property at a profit between signing contract and settlement (if you choose to sell on settlement, rather than renting it out).
Purchasing an off the plan project at pre-public release stages can offer further discounted prices or incentives to the buyer making this type of purchase even more favourable.

Investors only need to come up with the 10% deposit, and full payment is required on completion. A mortgage is only required to be taken out at settlement (on completion).

Some investors are afraid that they could lose their deposit during the time of construction. This is inaccurate. The worst that can happen if construction of the development does not go ahead as planned due to the developer going bankrupt or for another reason, you won’t lose your 10% deposit - it is returned in full, because it is held safely in the developer’s solicitors’ trust account and you will be released from your obligations under the contract.

If you would like more information on how an off the plan purchase could find into your strategy, please contact us on 1300 55 10 45.

Rent or buy, upsize or downsize, invest?

2011-10-06T16:45:00.000+10:00

Should you rent or buy? Should you upgrade to a bigger home or stay put?

Should you borrow against your home to buy an investment property - and when should you make your move?

Making your first home purchase, moving to a larger or smaller home, and investing in property – these are big financial decisions, and often emotional ones. Before you make them it pays to consider the issues.

1. Renting to buying
If you've been renting for a while and you're trying to decide whether to buy, you need to consider a key question: are you in a secure job?

If you're in a full-time permanent position, you're much more likely to get a loan than if you are in a contract or casual role.

If you believe there's a chance of losing your job, it may be wise to hold off buying a home until the situation stabilises. If you are financially ready to buy then it's vital to choose the right location.

Also it’s absolutely vital to make a good choice in property. Your first property is arguably the most important because, if you choose wisely, this asset is the one that will set you on your way to building substantial equity through capital growth.

Not all properties or locations grow at the same rate.

When affordability is a pressing concern, it's far better to buy a smaller property in a high capital growth area, than a larger property in a lower capital growth area.

Present market conditions are ideal for cashed-up first-home buyers because there is very little heat in the market.

This allows buyers to take their time and wait for the right opportunity to arise.

2.Moving to your next home
There are two situations when you may need to move on to your next family home.

The first is when you're thinking of upgrading to a larger and more expensive home because you're planning or expanding your family.

The market conditions are ideal for people who are looking to upgrade because although you may not maximise the sale price of your existing property you will benefit from any downward adjustment in price on the new purchase.

Because the value of the new property is greater, so will be the financial benefit to you.

The second situation is when your children have flown the coop and you need to downsize to a smaller and less expensive property.

In this case, it's to your advantage to delay moving on until the market has moved into a strong growth phase.

3. Leveraging against your home to invest
Before you consider buying an investment property, make sure your family home will be adequate for your lifestyle for another seven to 10 years or the full duration of a property cycle.

There's no sense buying an investment property, then realising a couple of years later that you need to upgrade your family home. Very few people can afford to do both at the same time.

If your present home won't last the distance, it's probably better to upgrade to another home first, then buy an investment property later.

This article was authored by Mark Armstrong, an independent property analyst, and first appeared in Domain.

Massive housing shortfall predicted

2011-10-06T16:41:00.000+10:00

Australia's housing supply could be short by half a million homes within ten years.

Changing this requires reform to reduce the tax burden on new housing, speed up land release, and improve the approvals processes.

The Housing Industry Association (HIA), the voice of Australia’s residential building industry, has just release a report showing a critical shortage of new homes building over the next decade unless action is taken.

The HIA - JELD-WEN Housing to 2020 Report provides projections of the underlying demographic demand for housing and the number of dwellings to be completed over the next nine years at national, state and local government levels.

Announcing the release, HIA Senior Economist, Andrew Harvey noted that the report's projections highlight just how large the aggregate housing supply challenge facing Australia has become.

"HIA estimates that Australia will require in the order of 1.6 million homes over the nine years to 2020, but if we build at the average rate of the last 20 years many areas of the country will have a critical housing shortage by 2020.

"Under such a scenario the cumulative national shortage could approach 500,900 dwellings.

"Clearly that situation can't be allowed to happen and it doesn't have to happen.

"Substantial policy reform is required, and can be achieved, to ensure Australia begins reducing its shortage of dwellings, rather than accumulating a larger one."

State-by-State Analysis

The greatest housing supply challenge is in New South Wales, which could reach a dwelling shortage of 155,700 dwellings by 2020.

Under the same scenario, the projected dwelling shortages at 2020 in the other states and territories are:

104,200 dwellings in Victoria;
112,000 dwellings in Western Australia;
91,800 dwellings in Queensland;
24,600 dwellings in South Australia;
12,500 dwellings in the Northern Territory; and
1,400 dwellings in the ACT.

On the flip side, Tasmania could reach a projected surplus of 1,300 houses by 2020.
What needs to be done

To reverse the existing housing shortage as well as meet annual demand from now until 2020 would require an annual build rate in excess of 204,000 dwellings.

HIA believes that we cannot achieve even close to annual home building levels of this level.

However, they do feel that the country can and must do much better than the 148,800 new dwelling average of the past twenty years, and indeed the sub-140,000 dwellings HIA estimates were completed in 2010-11.

Andrew Harvey is clear on what needs to be done:

"Improving Australia’s housing supply requires serious reform to reduce the substantial tax burden on new housing, speed up land release, and improve zoning, planning and approvals processes.

Without this reform the challenge of overcoming the housing shortage, and the subsequent avoidable pressure on prices and rents, will only intensify."

Western Australia and Queensland.

2011-10-03T19:26:00.000+10:00

As a result of the strong population growth in Western Australia, HIA estimates that as at June 2011, Western Australia’s cumulative housing shortage was 32,600 homes.

In order to house the additional population as well as eliminate the already existing housing shortage, Western Australia will need to build approximately 31,700 homes per annum in the years to 2020.

This is equivalent to 43 per cent more than the average build rate over the last five years.
It has been estimated that there will be approximately 252,800 additional households calling Western Australia home by 2020.

HIA estimates that in Queensland the supply of new housing is lagging well behind demographic demand. In order to house its additional population, as well as eliminate the dwelling shortage which already exists, Queensland would need to build approximately 47,200 homes per annum in the years to 2020.

Unfortunately, on present trends this is not a realistic goal – but there is no doubt the Sunshine State needs to take action to lift its levels of home building.

Meanwhile, according to economic forecaster BIS Shrapnel, Queensland can look forward to booming growth in the next four or five years, with mining and infrastructure investment leading the way. Adrian Hart, BIS Shrapnel's senior manager infrastructure and mining, said the big LNG plants planned for Queensland and a renewed coal development boom - with associated rail, port and pipeline infrastructure spending - would underwrite the forecast growth he saw continuing for four or five years at least.

Australia's rent returns: amongst the highest in the world

2011-09-28T08:58:00.000+10:00

Data for the world's cities rental returns from the Global Property Guide has shown that Sydney sits at the seventh highest in the world at present for gross rental yield. (This is what a landlord can expect as return on his investment before taxes, maintenance fees and other costs.)

The properties used for report were 120 sqm. apartments located in the city centre.

The gross rental returns (or rental yields) figures published by the Global Property Guide are based on the Global Property Guides own proprietary in-house research.

Only resale apartments and houses are researched. Yields for newly-built properties are not included.

Buyers should expect the rental yields of new properties to be lower than the gross rental yields published by the Global Property Guide.

Interestingly, data for Brisbane's West End shows gross yield for new apartments to be the highest of all the world's cities, and also had the lowest per square metre rate to buy.

A similar analysis of Melbourne's South Yarra, and Sydney's Mosman as well as Perth CBD showed yields of these three areas, plus the West End in Brisbane meant Australia commanded 4 of the top 6 places in terms of the world's highest rental yields.

Westpac cuts its fixed rates

2011-09-27T10:06:00.000+10:00

Westpac has cut its fixed rates on its home loans, taking its three-year interest rate to 6.44%.

The bank has cut rates on its three-year Premium Advantage Package fixed rate home loan by 15bps, and has cut its one and two-year products by 20bps to 6.49%.

Westpac is also discounting its variable rate up to 80bps as part of its "Spring Home Loan Celebration" promotion. It is offering a 20% discount on home loan borrowers' first year of home and contents insurance.

Westpac's subsidiary brands, St. George, BankSA and Bank of Melbourne, also made reductions to their fixed rates earlier this month

Rates to stay on hold until 2012

2011-09-27T10:02:00.002+10:00

The Reserve Bank says key financial-stress indicators suggest most households are comfortably shouldering the economic slowdown, with many paying down debt as they cut spending.

Most economists expect the official interest rate to stay on hold at 4.75% until after Christmas unless the global market meltdown accelerates.

In its September 2011 Financial Stability Review, the RBA was resolute that the increasing savings rate and cautious approach to spending among Australian consumers would help the economy withstand weakness in Europe and the US.

Fixed rate home loans popular in August 2011

2011-09-07T14:39:00.000+10:00

Mortgage loan borrowers have responded to the aggressive cutting of fixed home loan interest rates over the past couple of months by refinancing their home loans.

Mortgage aggregator AFG reported yesterday that 38% of mortgage loans sold in August 2011 went to borrowers refinancing and 9.4% of home loans were on fixed terms – up from 7.9% in July 2011.

No rate cuts as Aussies head overseas

2011-09-06T13:26:00.002+10:00

Australians are taking advantage of the strong dollar to holiday overseas in record numbers and damaging the local economy.

"If retailers want to know where all their customers have gone, they just need to visit the international air terminal," CommSec chief economist Craig James said.

"Not only are they saving for the trip and not spending locally, but when they do go on their planned trips, any spending is done overseas," Mr James said.

Futures markets are signalling that there is almost no chance the Reserve Bank board will cut the official interest rates when it meets.

In a poll of 12 economists carried out by Australian Associated Press, none forecast a rate rise before the end of the year and all were expecting the cash rate to remain on hold next week.

10 common mistakes made by investors

2011-09-01T20:24:00.000+10:00

Investing in property can be the pathway towards financial freedom – or financial ruin!

To give your property pursuits the best chance of success, here are the top 10 most common mistakes made by investors.

1. Putting it off

You keep thinking you have “no time” or you’re “waiting for the market to bottom out”. Life can be very busy and hectic, but isn’t taking control of your financial future a priority? Property prices are increasing and building is not getting any cheaper. How much is procrastination really costing you?”

2. Buying cheap

Inexpensive properties can also bring about expensive maintenance and repair bills. You don’t need to buy the most expensive properties either. You need the right investment in the right location that gives you the maximum tax benefits – thus making it cheaper and more affordable for you to own.

3. Focusing on rent

You need the right advice for your personal situation, and chasing income is not always the best strategy. Questions to ask yourself include: what are your future plans and goals? How long do you have to invest? Five years? 15 years? Are you looking for positively geared or negatively geared properties?

4. Taking advice from unqualified people

You wouldn’t take medical advice from someone who watches ‘Greys Anatomy’ or ‘All Saints’ – you demand a trusted medical professional,” Nagel says. So why would you take property advice from someone who hasn’t built a successful portfolio themselves?

5. Only buying what you would live in yourself

Do your research and explore other locations, including interstate. You are not going to live in your investment, so don’t get emotional. Instead consider, what do tenants want? Who is your market? What property types are in demand, now and in the future?

6. Being emotional

Your investment property is not a home, it’s simply a vessel to create greater wealth for your future and provide passive income. Rental yield, capital growth, tenant quality and demand should be your main considerations, not the aspect in the kitchen and the colour of the walls.

7. Investing in houses only

Apartments are a fast-growing asset class and have out-performed houses in many Australian metro areas. Diversification in all investments and asset classes is very important. So why invest in land only?

8. Selling too early

Properties double on average every 7-10 years. By selling too early, you will be missing out on the next cycle and property growth period.

9. DIY

If you’re something of a whiz with a paintbrush then by all means, spruce up the walls of your own accord. But don’t tackle large-scale renovations yourself unless you genuinely have the skills to get the job done. You can’t be an expert at everything you do, so stick to what you’re good at – and take advice from those in their chosen professions.

10. Being afraid of making a mistake – and doing nothing

Being conservative is a good attribute to possess, however if you are too conservative, then you run the risk of being one of those people who don’t do anything at all. Even when opportunity knocks man still has to get up and answer the door.

This article originally appeared in Your Investment Property Magazine.

Negotiating your next property deal

2011-08-25T10:41:00.000+10:00

You’ve found the property that you want, so how can you get a good deal.

Here are a few tips from RP Data on how to take a strong negotiating position when purchasing a property.

1.Back up your offers with evidence

Offer the vendor clear and straightforward reasoning for the terms of your offers.
If the property requires renovation or repair work, if other similar local properties are selling for less, or if a valuation gives you different figures, you should have fair grounds to ask for a discount of price.
Wherever possible, specific evidence beats general – a broad article on national property prices can’t beat a specific report analysing the local market.

2. Don’t just negotiate the price

The settlement period, deposit and other aspects of the selling process don’t have to be conducted on the vendor’s terms.
You can try to balance concessions on these factors with discounts on the property's price, and vice versa.

3. Consider the vendor’s position

See if you can find out why the vendor is selling.

Are they upgrading to a bigger home,
disposing of a deceased estate,
moving interstate, or
selling off their empty nest?

Understanding the motivation of the vendor can help you determine the best incentives you can offer them.

4. Offer a quick sale

If your finances are secure, you can offer to take a property off a vendor’s hands right now for a discounted price, rather than the vendor having to wait longer for someone willing to pay a higher price, leaving time for all kinds of things to potentially go wrong.

5. Keep everything in writing

Not only will this make it much easier to back up your negotiating positions, keeping everything in writing (including counter-offers from the vendor) helps keep everything crystal clear to the benefit of all parties. This goes a long way toward preventing any misunderstandings that could cause trouble down the track.

6. Be reasonable

Property is an asset more likely to have emotional attachment involved than many others, especially when buying or selling a home.
Consider your emotions about a property as well as those of the vendor during negotiations, but don’t let these feelings take control.
Both parties always have the option of walking away if an agreement can’t be reached, and you shouldn’t have to offer more than you’re comfortable with to secure a deal.

Conclusion

These tips offer just a few ways to help manage the purchase of property. There are shelves of books written on the topics of developing communication skills and becoming a winning negotiator.

Overall, keep your negotiations civil and professional, making sure that you can always justify your position and arguments, and you’ll be one step closer to negotiating a mutually beneficial deal.

Property investors should act now

2011-08-24T13:05:00.001+10:00

Potential property investors should always buy when the market is soft, one economist has claimed.

Speaking at the 2011 Aussie Sales Conference in Melbourne yesterday, BT Financial chief economist Chris Caton said investors always enjoy great returns on their properties when the market is soft.

“Data shoes that the best time to invest in property is when prices are softening, which is right now,” he said.

“If you invest in the property market during a downturn, research shoes investors will make 11.4 per cent every year on top of their property price.

“However, the story is quite different during a market upswing. Investors that buy property when the market is running hot, only see 2.8 per cent gain per year.”

According to MR Caton, while prices have undeniably softened over the past few months, the Australian property market was still easily outperforming its foreign counterparts.

“Australia’s economy is, by all accounts, performing very well. And, I believe we will continue to perform well into the future.”

“There is still plenty to be positive about.”

In Queensland the mood is turning positive!

2011-08-23T13:04:00.000+10:00

With the state government’s $10,000 new home buyer incentive now available from 1 August for owner occupier and investors alike, builders & selling agents of new residential dwellings in QLD are reporting a significant lift in buyer enquiry.

The early feedback is that the $10,000 Boost is already converting ‘would be buyers’ into sales. New house sales in QLD were down 17% in July according to HIA reports just to hand. It is most likely that this drop in activity is a direct result of the state government announcing the building boost $10,000 grant, but delaying its implementation for 7 weeks. A June/July dip in sales numbers has resulted as home buyers delayed their purchasing decision until August.

On the other hand residential construction work in the pipeline is growing. ABS data released 1 August 2011 shoes clearly that QLD has come out ahead of the rest of the country with an increase in dwelling approvals for the June Quarter. QLD compared favourably with the rest of Australia, with national approvals falling 4.3%. In contrast to a 7.1% QLD Increase in building activity.

There are now many signs that the QLD property cycle has bottomed after a 4 year period of declining values up to 30% in some areas.

Tim Lawless, RPData National Research Director was reported in the Australian Financial Review 28 July 2011 as saying: “Value proposition in Brisbane now was quite compelling.”

Residex Research CEO John Edwards predicts; “Over the next 3 years, Brisbane will see 6% p.a. growth compared with a national average of 4%” Residex national housing report, June 2011.

Eight Golden Rules of Property Investing

2011-08-04T10:32:00.003+10:00

In his latest book, Michael Yardney reveals his eight golden rules for property investing.

Here we summarise those rules, and show you how financial, tax and legal systems can be set up for success.

It doesn’t take a lot of capital to get going in property. You could start with your home and, as its value grows, you can borrow against this increased equity to purchase a second property. This property can be afforded with help from the tenant and the tax man.

1. Invest, don’t speculate

The first rule of property investment is that you must invest, not speculate. Most people buy with emotion, but property investment is different from buying your own home.

Here you need a well thought out strategy with measurable goals. By having a plan and a system to gauge the worth of an investment you will achieve better results.

2. Property is a high-growth investment

Investors make money in three ways: capital growth (perhaps assisted by renovations or development), rent, and tax benefits like negative gearing or depreciation allowances.

Capital growth is the most important. Often this goes hand-in-hand with lower rental returns, but that should not deter the investor from pursuing growth.

And with this growth comes extra equity which in turn allows borrowing for further investments. This is not possible with properties that enjoy higher rental returns but slow growth.

3. The property market moves in cycles

Though the long term average growth rate of property is in the order of 8% - 10%, property values tend to rise in cycles. This means that some years will be strong, but others will be flat or prices may even go backwards.

Typically the property cycle goes in four phases: boom, slump, stabilisation and upturn. Understanding the relationship between the different phases in the market is critical if you want to maximise your return whilst being exposed to lower risk.

4. Land appreciates

The land component should be a high proportion of the price you pay for a property, as this is the part of the asset that will appreciate, whilst the building itself will probably depreciate over time.

Therefore inner and middle ring suburbs of capital cities are attractive, as land is in high demand but short supply.

Conversely, properties in new suburbs are less likely to enjoy strong capital growth as there is no shortage of land in those areas.

5. Buy properties that will be in continuous, strong demand

Today medium density properties (apartments and townhouses) make great investments due in part to the fact that they are more affordable, and therefore enjoy strong demand.

The demand for this type of housing is also due to lifestyle changes: we are increasingly time-poor and starting families later in life. This means we want to live closer to work, transport, entertainment, cafes, shops and beaches.

6. It’s about property

Successful property investing is not about finance, tax or structuring. It’s about buying the best property you can afford in the right location, at the right time in the cycle and at a fair price.

Without a doubt, for the majority of investors established properties will always offer far better capital growth potential than a new property for a number of reasons.

On a new property:

you’re paying the developer for their profit margin and marketing costs, as well as estate agent commissions
you sacrifice the potential to add value through renovations
you’re better able to gauge whether the price for an established property is fair, as there is plenty of comparable property data to research.

7. Demographics hold the key

The increasing population in general, and the increase in people aged 25 to 29, are leading to a chronic housing shortage.

The majority of these people are going to live in our capital cities. Currently 70% of our population live in our capital cities, and trends suggest this could increase to 80% in time.

Also Australia is an ageing society. Over the next 15 years Australia’s 5.3 million baby boomers are going to reach retirement age. As they leave the workforce they will stop paying tax, many will go onto the pension, and most will use the public healthcare system.

The government needs to find the extra money to pay for this. The two main options are to increase taxes or to increase the number of people who are working and paying taxes.

This latter option is the more attractive and likely one, which is and will continue to be achieved through immigration. All of these extra people will of course need a home and most will want to live in the inner and middle rings of our capital cities.

8. Surround yourself with a good team

Having a good team reduces your risk, increases your knowledge, and gives you access to ideas, opportunities and funds you would never have on your own.

You need two main groups of people:

Advisers. These include a tax-savvy accountant, a smart lawyer, a bright mortgage broker, a bookkeeper, and an independent property investment strategist.
Mentors. These are people who know more, have done more, and are skilled and successful in the areas about which you’re currently learning.

5 fast facts you didn't know about the property market in Australia

2011-08-03T21:31:00.002+10:00

1. Australia's strongest performing suburb for 12-month median house price growth was Ashfield, Queensland. The suburb, near Bundaberg, recorded growth of 71.1 per cent, jumping up from $225,000 to $385,000.

2. Australia's strongest performing suburb for 12-month median unit growth was Stockton, New South Wales. The suburb, just three kilometres from Newcastle's CBD, recorded growth of 92.4 per cent, jumping from $200,000 up to $385,000.

3. Australia's strongest performing suburb for 12-month housing rental growth was New Farm, Queensland. Median rents jumped from $495 per week to $600 per week, up 33.3 per cent.

4. Australia's strongest performing suburb for 12-month unit rental growth was Muswellbrook, NSW. Median rents jumped from $180 per week to $260 per week, up 44.4 per cent.

5. The suburb with the highest number of sales over the past 12 months was Bonner, ACT. Just 44 homes sold in the suburb last year, compared with 83 this year (in the 12 months to February 2011).

Source: Australian Property Monitors. Figures accurate to June 2011.

One quarter have refinanced their home loans

2011-07-14T18:04:00.000+10:00

According to the latest Bankwest/MFAA Home Finance Index, one in four Australians have refinanced their mortgage loan in the past two years, while 14.2% had refinanced in the previous year.

MFAA chief executive Phil Naylor said “In times of economic uncertainty, people with mortgages are looking at ways to make their loans more affordable.”

The Home Finance Index showed that of those looking at borrowing or refinancing in the next three months, 45% would be most likely to select a variable rate home loan.

Fixed rate home loans continue to be the least popular option (16.3 per cent), and around one in five respondents opted for a mixture of fixed and variable rate.

Prepaying interest on your investment loan

2011-07-10T20:09:00.000+10:00

Thinking for the longer term can help property investors with their tax planning from one year to the next.

As an investor, here’s one way you may be able to claim a tax deduction.

By prepaying the interest on your investment loan now for the next 12 months you may be able to claim a tax deduction for that interest in your current year’s tax return.

When you borrow money to make an investment that will generate assessable income, you’re generally entitled to claim a tax deduction for the interest expense that arises.

In some cases the interest expense will be less than the income earned (positive gearing); in some cases it will be equal (neutral gearing); and in other circumstances the interest cost may be greater than the income return generated in that year (negative gearing).

The interest is generally deductible in the year it arises. However, if you have a geared investment portfolio in your own name, you may be able to prepay the interest expense on these loans for the next 12 months and receive your entitlement to the deduction this year.

You can choose to prepay the interest for a period of less than 12 months and still receive a deduction for the year’s tax return, but it cannot be prepaid for a period greater than 12 months.
Why would you prepay the interest?

Prepaying interest gives you the ability to bring forward the tax deduction to which you may be entitled next year into the current one. This may provide you with tax planning opportunities and advantages from one year to the next.

Additionally, by prepaying interest you are locking in the rate for the following year, and some providers offer a discounted rate when you prepay.

It’s important to remember that in order to receive these benefits you need to make the prepayment before June 30 2011.

Furthermore, once the payment is made, you cannot claw back any interest payments should the account be closed or repaid.

BIS Shrapnel releases its outlook for the market.

2011-07-10T20:04:00.002+10:00

A new report from BIS Shrapnel has found that Australian property prices are expected to remain steady in 2011 and grow moderately over the next two years.

It also points to Sydney, Perth and Brisbane as the cities likely to record the fastest residential property growth in the next three years.

The BIS Residential Property Prospects to 2011-2014 report suggests that current downward pressure is temporary and is tipping long-term growth.

Stronger economic growth in 2011-13 is expected to flow through to property. Perth, Sydney and Brisbane are expected to see the biggest rises through 2014 due to new dwelling construction remaining under demand levels.

Investors more active in the property market

2011-06-29T22:15:00.000+10:00

According to AFG, Australia’s largest mortgage broker, sales for May 2011 are back to within just 1.7% of May 2010 figures.

Property investor activity in the current market has contributed to an 18.8% increase in mortgage sales during the month of May 2011.

“Property investment has remained at consistent levels throughout the ups and downs of the property cycle, but strengthened significantly in May,” said AFG general manager Mark Hewitt.

Investors are reported to have been more active in the market over the last few months, increasing their share of all mortgage sales by 2.6% between February and May.

Victoria and New South Wales had the highest proportion of investment loans with 38.8% of loans in Victoria and 37.9% of those in New South Wales, processed for investors.

May also saw an increase of investment loans in Queensland, up to 36.5% - and this is the highest such figure for well over a year.

As more buyers chose to lock in rates, the proportion of fixed rate home loans rose slightly to 8.4% from 6.4% in April.

Home loans volume beats expectations

2011-06-27T20:38:00.000+10:00

Australian Property Monitors, a part of Fairfax, has just released some encouraging home loans data for April.

This article analyses that data and examines what it means for the property market.

Double the number of home loans were approved in April than the market expected, with Queensland showing signs of recovery after recent flooding.

The number of home loans approved in the month rose 4.8%, to a seasonally adjusted 47,347, official data shows.

Economists' forecasts had centred on a 2.3% rise in housing finance commitments for the month.

The Australian Bureau of Statistics (ABS) said total housing finance by value rose 3.8% in April, seasonally adjusted, to $19.848 billion.

JP Morgan economist Ben Jarman said the data was much stronger than he had expected, with home loan approvals coming back in Queensland after the severe weather-related disruptions earlier in the year.

"Generally, it seems pretty strong across the board with Victoria, NSW and Western Australia all posting pretty solid gains," he said.

He expects the Reserve Bank of Australia (RBA) to start raising the cash rate again, if the data in the remainder of the year shows signs of rejuvenation in the housing sector.

The RBA has kept the cash rate unchanged at 4.75% since November 2010.

This continuing trend is good news for the housing market. Interest rates have now remained stable for seven months, facilitating an orderly recovery in the Sydney housing market as it re-balances following the strong price rises of last year.

Housing market fundamentals continue to strengthen, according to the Bureau of Statistics, with Australian seasonally adjusted owner-occupied housing finance commitments rising by 4.7% in April.

If you are thinking of purchasing a property and need help with a home loan, speak to one of the mortgage brokers at Intellichoice today.

Rate rise still on the cards

2011-06-16T21:26:00.000+10:00

Reserve Bank Governor Glenn Stevens has reiterated that further interest rate hikes may be on the horizon.

In a speech to a Brisbane luncheon for the Economic Society of Australia, Stevens said the RBA expects inflation to continue to rise, and that further tightening of monetary policy could be necessary. However, Stevens may have taken a rate rise in July off the table, commenting that new data will be available late that month to help the RBA assess the level of inflation.

"New information will, as always, be important in our monthly assessments of what monetary policy needs to do. As far as prices are concerned, we will get another comprehensive round of data in late July," he remarked.

Stevens also defended Australia's multi-speed economy, saying that while the RBA recognises certain segments of the economy face hardship, the resources boom means a better overall economic position. Stevens claimed this filtered through to the broader economy in ways that are not always apparent.

"The average consumer in an advanced economy is effectively experiencing a decline in purchasing power over food, energy, and raw material-intensive manufactures. Australian consumers face this to some extent as well. Were Australia not a producer of raw materials, we would be experiencing a good deal more of it. In such a world, there would be no resources sector build up. Our currency would be much lower. We would be paying much more for petrol at the pump, for our daily coffee and for a wide range of other consumer products. We would not be holidaying overseas in our current numbers," Stevens said.

Choosing a home loan

2011-06-02T20:05:00.000+10:00

A recent report highlighted the multitude of home loan options on the market.

Here are some tips to negotiate the mortgage maze of over 2,000 home loan products to find the right one for you.

CHOICE, the largest independent consumer organisation in Australia, makes a very interesting statement about the complex world of home loans:

“Home loans are no longer just about signing up for 25 years and making regular payments.”

Whilst the interest rate is a very important feature for most borrowers, flexibility and peace of mind are also important.
Look out for fees

Along with the interest rate costs, you should also check the regular fees and charges. Fees and establishment costs can make a big difference to the amount you pay.

The comparison rate, or annualised average percentage rate (AAPR) is an 'effective interest rate' that takes into account these charges, making it easier to compare loans.

Typical fees include:

Application fees. Lenders may charge an upfront establishment fee and application fee.

Valuation fees. Lenders may also charge for a valuation of the property. If you're concerned you may not meet a lender's income requirements for the loan, ask them to check first, before going ahead with the valuation, as you may have to pay for the valuation even if your loan doesn’t get approved.

Exit penalties. Check the costs for early repayment of the loan or refinancing. Many loans have no payout penalties other than normal discharge costs, but if they exist they can be steep, particularly in the early years. They can be a flat fee, several months' interest or a percentage (around 1%) of the original amount borrowed.
Lender's mortgage insurance. Depending on how much you borrow compared with the amount you paid for your house, you may be required to take out lender's mortgage insurance. Typically you will have to insure if the Loan to Value Ratio (“LVR”) is over 80%. This insurance can be expensive, especially if you want to borrow close to the value of the property.
Features

Home loans have many different features which can affect their overall cost and convenience:

Extra repayments. Some loans, particularly those with a fixed interest rate, may limit the amount you can pay off your loan without having to pay a break fee.

Redraw facility. If you make extra payments you can get the money back later. This can have considerable tax advantages and provide useful security as you can store your savings in your mortgage. Some redraw facilities are much easier to access than others and may involve some costs.

Mortgage offset accounts. This lets you deposit money in an account and receive interest in the form of a reduction in the interest due on your loan. Because offset accounts don't actually pay you any money, they don't add to your taxable income, so like redraw facilities they offer tax advantages. Some offset accounts can be used as your everyday transaction account, while others are only suitable for putting your savings into.

Repayment holidays. Some home loans allow you to take a "repayment holiday" for a short period such as six months, for example, if you just had a baby. Sometimes you can only make use of this feature if you've made extra repayments, or you may have to make higher repayments after the repayment holiday to make up for it.
Fee Exemption. Some lenders may give you an exemption from the fees and charges on other accounts such as a free transaction account.
Expert assistance

According to Cannex, the financial research company, there are over 2,000 home loan products on the market today with varying features, fees and interest rates.

Therefore finding the right home loan will take some time, but it can save a lot of money and stress. This is where a mortgage broker can help. We will explain your options, match your needs with lenders’ products to get you the right home loan, and assist with paperwork and loan application forms.

Rents set to rise as home lending drops.

2011-05-30T13:56:00.000+10:00

Landlords are poised to see further increase in rents as the market continues to remain slow.

According to the latest information from the Australian Bureau of Statistics, the value of new housing finance commitments fell in March, dropping by 1.6 per cent in trend terms and 0.1 per cent in seasonally adjusted terms.

Loans for construction saw a 1.1 per cent fall over the month and an 8.1 per cent drop over the quarter in seasonally adjusted terms.

More interestingly, loans for the purchase of new dwellings saw a monthly rise of 2.4 per cent but a quarterly drop of 20.1 per cent.Housing Industry of Australia chief economist Harley Dale said “The loss of momentum in the housing supply reform process has combined with heightened interest rate pressure to deal a telling blow to new residential construction at the very time when a sustained boost to supply was the required outcome”.

The HIA was particularly concerned by seasonally adjusted figures for the March quarter, which saw the number of owner occupier loans for new housing fall in all states and territories.

The ACT saw the biggest drop of 23.4 per cent, followed by Victoria (17.4 per cent), Queensland (14.9 per cent), Tasmania (13.5 per cent), the Northern Territory (12.1 per cent), New South Wales (10.2 per cent), South Australia (3.4 per cent) and Western Australia (0.5 per cent).

When would I refinance my mortgage?

2011-05-26T12:20:00.000+10:00

According to the Mortgage and Finance Association of Australia the answer to that question is simple.
Whenever it makes good financial sense for you to do so.

In the past, most people who took out a mortgage loan doggedly continued with it until they had paid it off.
These days, people refinance their mortgage much more frequently. The average duration of a home loan in Australia now is under five years.

Here are some of the reasons people in Australia refinance their home loan.

1. Lower rate

The most common reason for people to refinance their home loan is to get a better deal.
But be careful you don't become interest rate-fixated. When you refinance your home loan, you need to consider fees and charges as well as the interest rate. You often have to pay charges for exiting your current home loan, plus charges for taking out the new one.You need to be sure that in refinancing your home loan that you'll be better off in the long run after taking into account all costs.

2. More flexibility

Many people only discover the full details about their home loan when it's too late. They try to do something and get told by their Lender that either they can't do it, or they will incur a hefty charge if they do.
An example is a Redraw Facility, which is the ability to pay extra money into a home loan and then redraw it later. This feature is not possible with a basic home loan, so many people refinance their home loan to give themselves this sort of increased flexibility.

3. Renovation

If you carry out renovations, it often makes sense to refinance your home loan and take out a construction loan so you only pay interest as building progresses. Once construction is over, it might make sense to refinance your home loan again so that you consolidate the total amount you owe into a loan that minimises your interest bill, while giving you a degree of liquidity.

4. Home equity

Over recent years in the property market houses have appreciated at a significant rate.For example a home you bought for $300,000 five years ago, might now be worth $500,000.

Refinancing your home loan with a home equity loan might let you tap into some of that extra $200,000 equity.

5. Over commitment

Some people find they have borrowed more than they can comfortably repay. If you're having trouble making your mortgage repayments, then you could refinance your home loan to reduce the monthly repayments.

This article is reproduced with thanks to the Mortgage and Finance Association of Australia (MFAA).

Hardship relief for home loan borrowers - Genworth Financial

2011-05-18T21:47:00.000+10:00

Genworth Financial has expanded its hardship solutions package for borrowers that are struggling to get back on their feet due to the natural disasters.

The new package expands existing initiatives to support extended loss of income, offering a range of repayment break options such as a 50% repayment break for a further three months on qualifying mortgage loans.

Subdued Outlook For House Price Growth

2011-05-11T13:07:00.000+10:00

House prices are expected to endure a relatively flat period over the coming 12 months, unlike the rental market.

National house prices are expected to remain flat over the coming 12 months, with only 0.6 per cent growth forecasted.

Western Australia is expected to lead the charge, with 1.1 per cent growth, followed closely by New South Wales with 0.9 per cent anticipated growth.

Meanwhile property prices in both South Australia and the Northern Territory are tipped to fall by 0.1 per cent over the coming year.

But while property price growth will remain sluggish, rental expectations are improving, according to NAB’s Residential Property Index.

Nationwide, rents are forecast to grow 3.5 per cent in the next year and 5.2 per cent by March 2013.

The biggest gains during this period are once again forecast to occur in Western Australia and New South Wales.

Western Australia is expected to experience 4.6 per cent rental growth, while rents in NSW are tipped to climb 4.3 per cent.

In contrast, rental expectations are weakest for Queensland and South Australia, with 2.5 per cent and 2.9 per cent growth respectively.

According to the NAB Residential Property Index, owner occupiers were nominated as the key demographic over the year – with this sector accounting for approximately 43 per cent of all new residential developments.

The second largest share of the market is expected to be Australian resident investors, who are tipped to account for 33 per cent of the market – up from 24 per cent last quarter.

NAB economist Alan Oster attributes this increase to the recent changes in superannuation rules, which ultimately makes it easier for investors to hold property within self managed super funds.

First home buyers on the other hand are only expected to account for around 16 per cent of the market, while overseas investors are expected to account for approximately 6 per cent.

New one page mortgage contracts proposed

2011-05-10T18:22:00.000+10:00

Under new proposed laws, all mortgage loan applicants will receive an easy-to-read one page summary of their home loan features, including information about where to find reputable comparison data on their competitor’s mortgage products.

That reform came from government research that revealed that ordinary consumers can consistently choose the best value financial product for them when presented with one page of clear concise information about key features and costs.

Exit fees on mortgages will be banned from July 1. “There's simply no excuse for slugging a family with an exit fee of up to $7,000,” said the treasurer Wayne Swan.

Using your home as "leverage"

2011-05-05T21:54:00.000+10:00

Smart investors categorise property borrowings in two ways, as productive debt and non-productive debt.

Productive debt is used to purchase assets that will grow in value and help contribute to financial independence.

Non-productive debt is for consumable items that don't increase in value or provide income - this includes cars, holidays clothes etc.

It’s usually sourced by the use of credit cards or personal loans, where as the residential property investor uses productive, tax-effective debt to make money through capital growth.

Most people who buy an investment property already have a home and use the 'Leverage Factor' because it's a ready made "deposit"and allows the investor to borrow up to 100 per cent of the purchase price of the investment property plus costs.

Wise use of this equity in your home can put you into wealth-creating assets much more quickly than if you wait until you own it outright.

Queensland's economy 'very strong and diversified', despite floods: ratings agency:

2011-05-04T13:13:00.000+10:00

Source: Treasurer and Minister for State Development and Trade,

The Honourable Andrew Fraser, 01/04/2011

Credit ratings agency Standard and Poor's has singled out Queensland's 'excellent financial management' and 'very strong and diversified economy' in its latest assessment of the state's finances.

In its first official analysis following the devastating floods and cyclones that smashed Queensland earlier this year, Treasurer Andrew Fraser said Standard and Poor's had reaffirmed Queensland's AA+ credit rating.

Generating phenomenal energy, the economic and population growth outstrips all other Australian capital cities. This is fuelled by high levels of business investment and the largest public infrastructure spending program in Australia's history.

Our recent South East Queensland visit showed little if any signs of the flood remaining. It was simply "business as usual".

South East Queensland is one of the fastest growing regions in the country and Brisbane's diverse economy is well positioned to manage the short-term and long-term impact of the recent flood and to continue to prosper and enjoy sustained growth.

Brisbane Marketing figures reveal that of the $1.361 billion (AUD) of investment that the organization attracted from 1 July 2007 to now, 91 per cent of these companies were not inundated or directly affected by the flood.

Early indications from this assessment are that the most significant impact to business during the flood was loss of productivity as a result of disruptions to Brisbane's central business district, trading precincts and commercial properties.

Industry forecasters, IBIS World forecast that while the floods are expected to have a negative short-term effect on economic growth as a result of temporary suspension and interruption to business, from April 2011 the floods will provide a boost to economic growth through rebuilding and is expected to last until 2012-13 and total $11.75 billion (AUD).

2011-04-29T20:20:00.000+10:00

Some people prefer to invest in houses rather than apartments, as they know that it is land that appreciates and so they often ask for where they should be looking, as brand new houses (with tax benefits and low maintenance) are actually very hard to find in Australia if you want to get a complete package rather than buying a block of land and trying to find a builder yourself.

The best rental return will be obtained by well-designed, new homes with no maintenance issues and good access to facilities such as schools, shopping and lifestyle choices in selected growth areas, around 20 to 45 kms from major CBD's to keep prices reasonable.

Rising petrol prices may also mean investors are drawn to areas well serviced by train and future train stations.

In Sydney, the strength in the economy is generating job opportunities in the CBD, so naturally, people want to live close by. Sydney's urban development is constrained by its geography with most new housing forced to stretch far to the south and west commuting is becoming more onerous with crowded roads and overstretched public transport extending travel time each year.

Therefore, apartments do offer a sound alternative in Sydney. The inner west represents some of the best value given its proximity to the city and the quality of its facilities and amenities including the light rail, private and government schools, shopping, cafes and restaurants, hospitals, universities, parkland and foreshore recreation.

The best value in inner west suburbs in terms of proximity are clearly Pyrmont and Forest Lodge, with median house prices of $A 880,000 and $866,000 respectively.

Other inner west proximity value suburbs include Green Square, Stanmore and Enmore, all within 5 km of the Sydney CBD and with current annual house prices under $900,000.

For more information about property in Australia or Sydney, speak to one of the property consultants at Intellichoice today.

Bills going up twice as fast as inflation

2011-04-18T21:08:00.000+10:00

According to the latest ING Direct Financial Wellbeing Index, household bills are rising at double the rate of inflation. Bills have risen by 7.5% over the past 12 months - more than twice the official rate of inflation.

Sense of urgency for first home buyers.

2011-04-15T20:05:00.000+10:00

A recent survey has revealed that rising rents are the motivation behind more than 50 per cent of those surveyed wanting to buy in the next two years.

The Mortgage Choice Future First Homebuyer Survey revealed potential buyers were also keen to set themselves up for the future.

The biggest concern among those surveyed was the effect that increasing housing prices would have on their ability to enter the market. It seems that this is creating a sense of urgency with many thinking that it was time to seriously consider making a move or they may be left behind.

Many are thinking they need to get in soon or they may not ever be able to afford the type of home that they would prefer.

The rental market will also start to come under increased upward pressure due to the lack of new housing construction.

Rents go up and up and up

2011-04-14T21:14:00.002+10:00

According to the Australian Property Monitors’ Rental Price Series Quarterly Report, unit rental prices in Australia rose by 2.3% throughout the March 2011 quarter, reflecting high demand in most of the capital cities.

In Sydney, median asking rents for houses rose 1.0 per cent to $485, while units jumped 2.3 per cent to $450 per week. Adelaide, Perth and Canberra also recorded growth in house rental prices, with Adelaide and Canberra leading the pack with increases of 3.0 and 2.2 per cent respectively.

In particular, demand for units in Darwin, Canberra and Melbourne has seen prices rise above the national trend.

“Renters should prepare for significant growth in rental prices throughout 2011, driven by accelerating economic activity, housing shortages and a depressed first homebuyer market,” APM’s senior economist Andrew Wilson said.

“Units in particular have seen a major shift in demand, with chronically low vacancy rates for inner-city residences in most capitals intensifying competition amongst prospective tenants for available properties.”

Low doc loans still allowed

2011-04-11T20:36:00.000+10:00

Low doc loans are still allowed under responsible lending guidelines but should not be given to employed people said the financial ombudsman last week.

The Financial Ombudsman Service issued a circular to members setting out its view of financial service providers’ responsible lending obligations under the National Consumer Credit Protection Act.

The Ombudsman said NCCP allowed for low-doc lending “if adequate inquiries are made and the statutory provisions regarding responsible lending are satisfied.”

“We recognise that there is a place for low-doc loans to cater for those self-employed clients who are unable to provide more traditional evidence of their income. However, in our view, low-doc loans should not, as a general rule, be granted to PAYG employees.”

More suburbs enter the million dollar club

2011-03-28T20:39:00.000+10:00

According to experts RP Data the number of suburbs with a median price over $1 million increased to 212 suburbs nationwide.

This is despite below average sales volumes during 2010.

During 2010, 212 suburbs across the country recorded a median price of $1 million as at the end of December.

Importantly, this figure only includes those suburbs which have recorded at least 10 sales during the calendar year.

Australia’s most expensive suburb during 2010 was Perth’s premium riverfront suburb of Peppermint Grove. With a median house price of $4.6 million, Peppermint Grove is almost $1 million more expensive than the second placed suburb, Vaucluse in Sydney ($3,787,500).

Peppermint Grove in WA has been the nation’s most expensive suburb for three consecutive years now.

Of the 212 suburbs with a median price of at least $1 million, 56% were located in New South Wales - all of which were located within Sydney.

Outside of New South Wales:

20% of suburbs were located in Victoria
12.5% in Western Australia
6% in Queensland
3% in South Australia
2% in Australian Capital Territory (2%), and
0.5% in the Northern Territory.

Over the year, the number of suburbs nationally with a $1 million price tag has increased by 35%, this has occurred despite the fact that during 2010 capital city home values have only increased by 4.7%.

In 2005, just 78 suburbs across the country had a price tag of $1 million or more meaning that, in just five years, the number of $1 million plus suburbs has increased by 172%.

Victoria has recorded the greatest increase in suburbs with a $1 million price tag over the five years, increasing by 950% during the period.

Tasmania is the only state which doesn’t currently have a suburb with a median price in excess of $1 million. That State’s most expensive suburb, Battery Point, has a median house price of $750,000.

The results highlight that not only has demand and price growth been strong for premium property but they also indicate that residents are prepared to pay the hefty price to secure a property in a premium location.

During 2011 RP Data expects that there is unlikely to be a further 35% increase in the number of suburbs within the $1m club. They anticipate subdued residential property market conditions during the year and the premium sector’s performance will also likely be impacted by high interest rates and ongoing global economic uncertainty.

These conditions are likely to hamper purchaser confidence and in turn reduce the propensity of buyers to spend in excess of $1 million.

Housing blocks now too expensive for buyers

2011-03-28T20:34:00.000+10:00

According to a new study by the National Land Survey Program, at the end of last year, just three out of 10 lots for sale in new housing estates were accessible to average-income first home buyers.

In Melbourne, just 26% of lot sales met the first home buyer affordability benchmark of $200,000 – down from 90 per cent two years ago. Queensland fared worse than Melbourne, while Adelaide and Perth were the only two capital cities found to be building enough affordable land in new estates.

Residential land sales fell by 74% in the year to September 2010, yet median land prices grew by 25 per cent to $225,750.

More homeowners fall behind on their mortgage repayments

2011-03-22T22:01:00.001+10:00

Home loan arrears of 90 days or more past due rose significantly in the December 2010 quarter and may increase further if the Australian property market becomes stagnant, said Fitch, in its report on Australian mortgage arrears for the quarter. Arrears over 90 days rose to 0.54 per cent in the fourth quarter of 2010, compared with 0.48 per cent in the third quarter of 2010. Much of this was reflected in the 30-plus day delinquencies, which rose to 1.37 per cent, from 1.30 per cent.

According to the ratings agency, the rise was unexpected because no particular event had been expected to affect mortgage performance in Q4. Separate data from Standard & Poors also showed a rise in 90-plus day arrears, to 0.56 per cent in December, from 0.53 per cent in November. Fitch said the rise in 90-plus day delinquencies coincided with an increase in claims on lenders mortgage insurance, which rose 32 per cent over the previous quarter to A$4.1 million.

While a rise in claims indicates more properties are being sold, if the housing market turns stagnant such sales could decrease and thus push up 90-plus day arrears. Delinquencies over 90 days also rose in the low-doc segment, increasing to 3.03 per cent from 2.79 per cent, to touch the highest level since July 2009. S&P data showed such delinquencies rising to 2.27 per cent in December, from 2.13 per cent in November and 1.99 per cent in October.

Bad new for renters - more rises on the way

2011-03-18T13:30:00.000+10:00

Good news for property investors - rents in Australia are set to rise a solid 7% in 2011.

During the last three months of 2010, rents in Australian capital cities increased by 1.4%; they rose
4.2% during the year. Rents in regional markets did not change during the quarter, rising just 2.9% throughout the year.

Rents for three bedroom houses performed better than four bedroom properties during the year and quarter. The median weekly advertised rent for a three-bedroom property is $350, with a four-bedroom $7 more.

During the final quarter of 2010, rents on three-bedroom houses rose 2.9%, compared with no growth in four bedroom rents. On an annual basis, three-bedroom rents have well and truly outpaced that of four bedroom rents (6.1 per cent VS 1.2 per cent).

Neither recorded a rent increase during the last quarter; but two-bedroom rents rose 6.1% during the past year, compared with 5.4 per cent for one-bedders.

With the interest rates already at levels above average, and the expectation that they will increase further during 2011.

Nationally, we are forecasting rental growth of about 7% this year, in line with the average annual growth during the past five years. While we expect rents to increase during 2011, RP Data anticipates limited home value growth.

We expect the growth in rental rates, coupled with likely wage growth due to a tight employment market, will make ownership a more viable option – especially if capital growth lags behind inflation, which would reduce
home values in real terms.

Mortgage market collapses in Jan 2011

2011-03-13T15:56:00.000+10:00

The mortgage market slumped in January 2011 according to the Australian Bureau of Statistics (ABS), with the value of dwelling commitments down more than 5% from the previous month. Data from the ABS shows that (on a seasonally adjusted basis), the number of dwellings financed fell 4.5 per cent, from 51,200 in December 2010 to 48,900 in January 2011.

In addition, the value of dwellings financed fell five per cent from A$21.4 in December to $20.3 billion in January. Year-on-year, the number of home loans being written each month is down about two per cent. The critical factor was the state of the Queensland market, where extreme weather led to a 16% fall in activity in January 2011.

The big fall was foreshadowed by mortgage aggregator AFG, which reported a 40% fall in activity from December 2010 to January 2011. The ABS raw data shows a fall of about 30% over the period. So extreme was the AFG figure that it looked as though it was not representative of the broader market.

AFG executive director Kevin Matthews put the decline down to the Queensland floods. Queensland was the state that recorded the biggest fall in AFG’s business – down 48.9 per cent from December. Matthews said another factor in the slump was uncertainty about the direction of the housing market, with buyers spooked by commentators saying Australia has a residential housing market bubble in the making.

Capital growth - top reason for investing in property

2011-03-03T22:02:00.001+10:00

Recent research by the Real Estate Institute of Queensland, on buyer and seller behaviour, found capital growth was the top reason for buying an investment property in Queensland for 74 per cent of buyers.

The next most common reasons to buy investment property were to fund retirement, for negative gearing purposes, as a means of deriving an income stream, or because they believed it offered a better long-term return than shares or superannuation.

Rents are set to rise

2011-03-03T22:01:00.001+10:00

Australia’s residential property rental market is expected to see increases of up to 7 per cent during the course of 2011 - according to market analyst RP Data.

Rents in Australian capital cities increased by 1.4 per cent during the last three months of 2010 and rose by 4.2 per cent during last year.

Rents in regional markets did not change during the quarter and rose by 2.9 per cent in 2010.

With the expectation that rents will increase further during 2011, the prospects of renters moving into home ownership is likely to deteriorate further.

The latest ABS housing finance data shows that last November Victorian first-home buyers totalled 16.3 per cent of all owner-occupier purchasers - the lowest proportion of first-home buyers since May 2004.

With continuing strong population growth in Victoria - and, more specifically, Melbourne – it is suggested that there is a likelihood of increasing competition for rental stock.

Review your home loan

2011-02-24T15:53:00.000+10:00

When was the last time you reviewed your home loan against what else is available? With careful research, you may be able to save thousands by refinancing or renegotiating your home loan.

With interest rates on the rise, we all need to ensure we’ve got the best home loan for our needs. Whilst some of the smaller non-bank mortgage lenders have left the market, there is still plenty of competition for your business, giving you the opportunity to secure a better deal.

Three things on the checklist

It is important to review your mortgage home loan every couple of years or when your situation changes. There are three important things you need to do:

Do your homework. A meeting with a mortgage broker is both convenient and offers plenty of options. Mortgage brokers can compare hundreds of home loans from across the market. Part of their role is to stay up-to-date with the latest changes or special offers being made by the mortgage lenders to ensure you can get a great deal.
Look beyond the interest rate. When deciding whether to refinance, weigh up the costs of switching against the interest savings, and check what would happen if you switched again in the near future. For example, does the new loan have a high early repayment fee and how long would it apply?
Don’t forget credit unions, building societies and other non-bank lenders. They can sometimes have lower variable interest rates and lower fees than the Big Four banks.

Costs of refinancing

Fees apply if you refinance, and research by ASIC found that credit unions and building societies may charge less than the Big Four.

For example, if you refinance a $250,000 variable-rate home loan within three years, you may have to pay anything from $200 to $8100 in fees, depending on your lender.

Mortgage insurance is required if you borrow more than 80% of the value of your home and could be close to $10,000 for a $400,000 loan. It may not be worthwhile switching if you have to pay it again for the new loan.

Three steps to refinancing

Cheap rate or full package? Don’t pay for features you don’t need. Decide which you’ll use, such as an offset account or redraw facility, and whether you want to fix all or part of your loan.
Shop around. Using my services will give you access to many lenders and loans.
Add up the costs and benefits. From your payout amount, figure out the total interest payable over the life of your loan hen compare other loan options. Include the fees and penalties involved in making the switch. I can help with these calculations.

For more information about home loans, or if you need assistance finding a home loan that suits your needs, speak to one of the mortgage brokers at Intellichoice today.

Sydney facing huge shortage of new property

2011-02-17T20:33:00.000+10:00

Sydney is currently facing a huge (and increasing) shortage of new property. The population is increasing at its fastest rate for 200 years, Australia has record migration figures, the economy is doing quite well in spite of the financial downturn elsewhere, yet the cost of money for developers (as interest rates went up between 2003 and 2009) meant many stopped building.

Remember, in Australia, unlike Asia, Developers have to fund the full construction of new projects by themselves (they can't use purchasers money like they can in most Asian cities).

So what does this mean?

It's quite simple. Australia is facing its greatest ever housing shortage, and it's greatest ever population boom at the same time, the first time in history this has happened. This is causing rents, especially in the lower and middle range, to rise as occupancy rates reach their highest levels in decades, and as Sydney prices have been flat for the past 6 years, there simply has never been a more affordable or better time to invest in Sydney, if you can find something.

Expect to pay around AUD$9,000 - $9,800 a square metre in Sydney, and look for 2 bedroom apartments at least 80 sq metres to suit the Sydney market.

And the latest figures indicate that the influx of people flocking to the Harbour city show no signs of abating. The current 1.57% population growth is well above the 1.1% decade average growth pace. But even more importantly, the current growth rate is double the rate of growth over the past 4 years.

There remains a rental crisis for tenants. There are simply not enough rental properties for tenants at affordable prices. Occupancy rates in Sydney are at record highs, with little supply of new property on the horizon to alleviate this position.

According to the Real Estate Institute's latest report, saw Sydney's occupancy rate increase by 0.35% last quarter to stand at an incredible 98.8%!

In a recent report written for QBE LMI, economic forecaster BIS Shrapnel have forecast capital growth in Sydney around 20%, within the next three years.

Great time to save for your first home

2011-02-10T21:58:00.000+10:00

According to SQM Research, there are about 102,000 more residential properties on the market than this time last year. Data from RP Data also show that property prices rose just 0.2 per cent in December 2010, after a 0.1 per cent decline in November 2010.

Now is a fantastic time to be saving for a home. Unlike in the past 10 years, when property prices rose faster than you could save, in the next few years prices may actually fall. open up a First Home Saver Account (FHSA), so you can get a 22.5 per cent return on your savings (plus, your earnings are taxed at 15 per cent, rather than your marginal rate).

Cost of living will skyrocket for mortgage holders

2011-02-07T22:12:00.000+10:00

According to a report by JP Morgan, interest rate hikes are likely to lead to a massive cost of living increase.

A report by the company has suggested RBA rate moves over the last year, along with surging prices for produce due to Queensland's floods and hikes in electricity and fuel could see living costs skyrocket for Australian mortgage holders.

While the Reserve Bank is expected to keep rates on hold until the latter half of the year, the report has predicted rate rises are "far from over".

Over 90% of Australian home owners hold a variable rate mortgage, and JPMorgan economist Helen Kevans told The Australian that rate rises will have a greater impact on the cost of living for the average Australian.

“The high level of household debt relative to income has raised the vulnerability of Australians to rising interest rates compared to a decade ago,” Kevans said.

Older borrowers face tough times

2011-02-07T22:09:00.000+10:00

Anybody over 35 years of age could be rejected and effectively barred from getting a new mortgage loan, even if they are just refinancing an existing mortgage under responsible lending guidelines in the new National Consumer Credit laws.

Anyone in their 40s and above who apply for any kind of credit can also be expected to be asked to demonstrate significant other assets or superannuation savings.

According to real estate agents, many mortgage refinancers over 35 years of age are in danger of being rejected by mortgage lenders unless they can show their mortgage will be fully repaid before or upon retirement from their superannuation or other investments.

Families who are selling one house and moving to another, could potentially be left without a home or the ability to get a new mortgage, unless they organise their new home loan and all their financial plans up to and including their retirement, before they sell their existing home.

However, the average Australian superannuation balance for Australian men is less than $90,000 and just $53,000 for women. The average Australian aged between 55 and 64 years of age has about $142,000 in super, according to the Australian Bureau of Statistics data compiled by the Australian Super Funds Association.

Rents in QLD expected to rise

2011-02-04T21:57:00.002+10:00

A surge in demand for rental properties is expected in coming months, with some rents expected to rise by as much as $100 per week on homes available for lease. Thousands of flood affected homeowners are beginning the search for accommodation as real estate agents are predicted to be inundated with inquiries about rental properties.

Property analyst Michael Matusik believes weekly rents could rise by as much as $100 per week for those looking to sign a new lease.

“Something that is now $400 a week may increase to $500 a week and we are going to see that escalate as people leave friends’ and relatives’ homes,” he said.

Strong housing market in Australia

2011-01-31T20:35:00.000+10:00

New research shows that Australia had one of the strongest housing markets in the world during 2010.
The report, released by Canada's Scotiabank, tracked the housing markets in 12 advanced economies throughout 2010.

Home prices increased in Australia, Canada, France, Sweden, Switzerland and the United Kingdom.

They remained flat in Germany and the United States, and fell in Ireland, Italy, Japan and Spain.

Australia led the way, thanks to relatively low unemployment and tight housing supply.

Meanwhile, Australia’s median house prices have jumped from about $460,000 at the beginning of the 2009 to close last year at about $550,000, according to ANZ analysis of their own research as well as data from the Australian Bureau of Statistics and the Reserve Bank.

And the ANZ predicted that a shortage of available homes to rent would help to keep pressure on prices in the year ahead.

The rental vacancy rate is tipped to fall from 2 per cent in 2010, to under 2 per cent this year.

Matusik Missive – a year of two halves

2011-01-24T20:37:00.000+10:00

Matusik Missive – a year of two halves
By Michael Matusik
19th January 2011

Back at work after a very surreal week indeed – the “To Do” list left on my desk last Tuesday seems somewhat irrelevant now.

The Queensland flood is a game changer, which will at least place a temporary hold on the normal market dynamics and potentially alter Brisbane’s urban landscape. Last year many readers thought my weekly blusters were too bearish, but I was trying to report on reality rather than writing what some wanted to hear. Now, without being too much of a hypocrite, things have changed and a more optimistic tone is warranted. As noted last week, way too much of the flood commentary is overly negative.

Please note that the flood’s true impact is a watching brief, but there are things that I think need to be said, some of which are not being commented upon (yet) in the mainstream media.

Ø      This is a year of two halves; business will be hard hit for the next three to six months, after which things should improve and markedly. Assuming that most legitimate insurance claims come through, the Queensland economy is likely to be stronger during calendar 2011 than would have been the case without the flood. Yes, you have read that right! Next year and beyond looks even better. We just have to get through the next three months or so.

Ø      Interest rates could fall and by 0.25% in coming months, correcting the unnecessary hike last November. Remember, other parts of the country are now flooding too. Rates could stay low for much of this year, despite lifts in headline inflation. The underlying rate of inflation will rise, but I think not persistently enough to warrant a rate rise.

Ø      The 28,000 properties affected represent around 2% of the total housing stock in the wider area. Those owner-occupied properties that were totally inundated, but away from the Brisbane River, could see substantial drops in value if they try and sell prior to being completely restored. Putting an actual figure on the drop is near impossible at present and those doing such (i.e. declines of up to 50%) should be challenged as to how they are arriving at such. There are few lessons to be learnt from 1974 in this regard.

Ø      Whilst a quarter of the 850-odd houses on the Brisbane River were flooded, this property is tightly held and most owners are likely to renovate and stay put. Despite claims of Armageddon, values along the Brisbane River, I don’t think, are likely to change much.

Ø      In addition, just 1.5% of the securitised mortgages across Queensland have been affected. We expect end values across SEQ to drop between 5% and 8% as a result; much of this in the first half of this year, with most of these losses potentially being regained during financial 2012. We were forecasting a 5% decline in values for the first half of 2011 prior to the flood anyway.

Ø      The real uncertainty involves inundated investment property, with up to 10,000 households (our estimate) now seeking temporary accommodation. This, coupled with the annual influx of tertiary students, is already pushing rents upwards. In and around the flooded areas, rents are likely to rise by as much as 10%. But how far this rental pressure will spread is questionable, as there are close to 25,000 properties available to rent across the state, most of which are in SEQ. Those investors without landlord insurance might elect to sell their properties, which presents an opportunity for those willing to take a risk. A mass investor sell-off, however, could have a marked negative impact on values across the city, making our 5% to 8% very bullish. Hopefully, the financial institutions appreciate this predicament.

Ø      Whilst there will be calls to “future proof” the south east corner via more and better infrastructure and changes to management, warning systems and evacuation plans, I fear that some of the changes imposed will be excessive. Remember, 98% of the homes in the region didn’t flood. We need “function over form” – that means the right type of development, levee banks, and more river crossings, more appropriate stormwater drains and no doubt another dam or two - some of which mightn’t look as nice as a park or a mangrove-lined riverfront and we might need to displace a lungfish or two, but them’s the breaks.

Ø      We also need to plan for floods and not try to totally mitigate against them. Brisbane will continue to flood and there is really little we can do about that. What we need is an accurate national flood mapping scheme, which provides property owners with certainty and allows insurance policies to be properly priced. Also, all mortgage holders (and body corporates) need to hold the appropriate insurance, without which, funding cannot be secured.

Ø      Building forms in flood-prone areas need to change – apartment complexes perhaps shouldn’t have basement parking (yes, they might now be taller) and new detached homes might need to be triple storey, with the bottom level being inhabitable. Some properties, as is already the case in Brisbane, need to be bought back as they flood somewhat frequently, but to totally blackball all new development in a potentially floodable area is a gross overreaction. Most of the newly developed areas along the Brisbane River didn’t flood last week and if they did, there was limited real impact.

A much smarter man than I, told me last week that those affected will try to rebuild their lost wealth, which in time will generate demand in retail, construction and other labour intensive industries, resulting in a stronger Queensland economy (again, in time), than otherwise would have been the case.

Newcastle’s rebound after the 1989 earthquake was remarkable, surprising many - some of whom had claimed that the city was all but finished. Once the insurance money starts to roll in and the rebuild starts in earnest, south east Queensland is likely to follow a similar trajectory.

Index points to Sydney as place to buy

2011-01-18T20:25:00.000+10:00

During the September 2010 quarter, the Time to Buy a Dwelling Index increased in four of the five measured States. South Australia was the only state to decrease, recording a decline of 0.3 index points from the previous quarter. Queensland improved the most, increasing by 29.8 index points, followed closely by New South Wales (increase of 27.6) and Victoria (13.10). Western Australia experienced only a slight increase of 0.1 index points.

New South Wales now has the highest index value at 123 index points for the September quarter, meaning Sydney is indicated as the place to buy.

According to the Westpac-Melbourne Institute Survey of Consumer Sentiment, financial conditions improved in New South Wales, Victoria and Queensland, but decreased in Western Australia and South Australia.

Latest information coming to hand from Westpac economist Bill Evans also points out that "the most striking result" of the "Time to Buy a Dwelling Index", was the rise up 15.8% in November.

Consumers see now as being an opportunity for buyers. The result suggests housing markets are well-placed to absorb recent interest rate movement.

If you are thinking of buying property in Australia or Sydney, speak to the property consultants at Intellichoice.

Access to credit just got harder

2011-01-11T21:16:00.000+10:00

Access to credit in Australia just got more difficult, with enforcement from this week of new laws that demand greater scrutiny of borrowers from credit card, mortgage and personal loan providers.

The laws are part of the National Consumer Protection Package and place a greater onus on mortgage lenders and mortgage brokers to ensure that their customers are able to repay loans and meet lending costs.

The package was drafted in the wake of the GFC and was spurred by the collapse of the US subprime mortgage market and reflects a bid by governments worldwide to make credit providers more accountable.

It applies to all authorised deposit-taking entities banks, building societies and credit unions as well as finance brokers, and stipulates that credit must be suitable for the borrower and comply with more stringent disclosure requirements.

The Federal Government is hoping the reform package will force unethical players out of the finance industry.

However, there are concerns that it will make large institutions loath to lend small sums due to the additional workload it imposes.

The package requires finance providers to secure greater certainty as to capacity to pay off a loan, prompting lenders to make changes to credit policies, including imposing a larger buffer between a borrower's earnings and expenses and their loan obligation.

As a consequence, borrowers will be subjected to extended investigation of their financial circumstances, including rigorous oversight of living costs, including insurance and entertainment expenses.

Banks say readying for introductions of reforms have cost many millions of dollars.

Nevertheless, despite the constraints the reform package imposes, financial institutions generally have acknowledged it will benefit consumers.

Fixed rate home loans gaining popularity

2011-01-07T18:37:00.001+10:00

The proportion of borrowers choosing fixed rate home loans has risen to more than 10 per cent, according to AFG. While AFG reports that the total number of mortgage loans sold in 2010 was down 10 per cent, the proportion of fixed rate home loans went up.

According to figures from AFG, fixed rate home loans made up only 2 per cent of all mortgages in December 2009. As of last month, this figure had risen to 12.6 per cent.

You could save up to 43000 off your mortgage if you switch

2011-01-07T18:35:00.000+10:00

According to a recent national survey, mortgage loan borrowers refinancing their home loan will be the major source of housing finance activity in 2011. A survey of mortgage brokers found that of 137 Loan Market brokers found that 39 per cent thought investors would be the dominant force in 2011, while only 6% believed first home buyers would be most active. Only one per cent thought finance for construction/renovation would surge.

Home owners on an average $300,000 mortgage can save up to $3,000 a year if they can be bothered switching mortgage lenders to get a better home loan deals. There can be as much as a percentage point difference between the variable home mortgage rates currently on offer at the various banks and it is worth your while to shop around. If you need help refinancing your home loan, speak to a mortgage broker.

2011 will be a good year for saving

2010-12-21T20:17:00.000+10:00

Savers can look forward to another lucrative year in 2011. Guy Debelle, the Assistant Governor of the Reserve Bank of Australia, told bankers this week that the RBA is predicting that Australians will continue to grow their savings in 2011 and competition for those dollars will remain intense.

On the other end of the spectrum, mortgage loan borrowers will experience more pain in 2011. “In order to boost their share of deposit funding, banks in Australia have competed aggressively in terms of price. “The average cost of the major banks' new deposits is now only slightly below the cash rate, whereas prior to the onset of the financial crisis, deposit rates were about 150 basis points below the cash rate,” said Debelle. The cash rate is currently set at 4.75 per cent. Online savings accounts are offering rates in the range of three to six per cent or more.
Term deposit rates are even better –some in the range of 6 to 8 per cent. “Competition has been strongest for term deposits,” said Debelle. And, even better, it seems that term deposit rates have become slightly more predictable in 2010. In April this year, ASIC released a report on term deposit pricing. That report criticised banks for rolling term deposit holders onto a lower rate at the end of the term. Banks often change their pricing on term deposits as they need quick cash.

Almost half of term deposit holders end up in a lower rate at the end of their term, said ASIC. Since then pricing variations from month to month seem to have flattened out significantly. In fact term deposit rates have become more predictable since mid 2010 than any time since the GFC hit in 2008.

Home loan borrowers will get a loan fact sheet

2010-12-13T20:03:00.000+10:00

Every new home loan borrower will be presented with a plain English one page fact sheet before they sign up for a mortgage loan. the fact sheet will explain all major elements of the home loan, including how much per dollar borrowed they will end up repaying, and a reference to competitors and to comparison services. The fact sheet idea – also known in the industry as a “one pager” – has already been extensively tested by governments, using a wide range of financial products.

The results were said to be fairly conclusively in favour, and Commonwealth government treasury officials, in particular, are believed to have been impressed by the ability of consumers to consistently pick the most suitable products for them when presented with simple information on a one-page sheet.

“Consumers are clearly able to select the best and cheapest products for them when they have the information presented to them in the one-pager format,” said Nicole Rich, policy director at the Consumer Law Action Centre. “It works especially well with credit cards, but was good for home loans, accounts, term deposits, even car loans.” The fact sheets must be available at the ‘shopping around’ stage, in brochures and on websites, said Rich, not at the final application sign-off.

More home loan borrowers looking to refinance mortgage

2010-12-08T20:45:00.000+10:00

A Newspoll has found nearly a million mortgage loan borrowers are likely to switch mortgage lenders in spite of exit fees. The survey found that more than 900,000 borrowers, or 18% of respondents, said they were likely to change mortgage lenders in the next six months. Nearly 40% said they would change if there were no exit fees.

The poll was commissioned by consultancy firm Perception Partners and was compiled from November 26 to 28, well after the last cash rate hike by the RBA.

Julian Brophy of Perception Partners has commented that the results should serve as a message to banks.

"The ongoing banking debate is clearly focusing the minds of borrowers on the options available to them, including the ultimate choice of changing to another lender," he said.

"With these findings, Australian borrowers are sending a serious shot across the bows of the home loan banking sector."

Don't wait to get a better home loan deal

2010-12-08T20:41:00.000+10:00

According to consumer group Choice, home buyers can save an average of $2500 a year on their home loan by switching lenders.

If you need a home loan, speak to the mortgage brokers at Intellichoice. They will do all the legwork and comparisons for you and find a home loan that best suits you. If you are also thinking of refinancing your home loan, speak to Intellichoice mortgage brokers today.

No more rate rises under Easter 2011 predicted

2010-12-02T20:18:00.000+10:00

Some economic analysts are now predicting that the RBA will not raise rates again until March or even April 2011. Private sector borrowing is still weak and the current account deficit has widened beyond expectations. "The RBA would be well aware that the forward looking data suggests that growth is likely to be subdued in the near term,"

Commsec economist Savanth Sebastian said "Interest rates are likely to remain on hold for the next few months, to support investment and activity."

While ANZ senior economist Katie Dean said the chances of a rate rise before April were remote."There was nothing in the data that would provide any ammunition for the RBA to lift rates before at least the second quarter of next year," Ms Dean said.

1 in 10 reassessing their Xmas spending

2010-11-23T13:48:00.000+10:00

According to an online survey, one in ten homeowners have canned their Christmas holiday plans as a result of the most recent interest rate hikes.

An online survey by mortgage broker Loan Market also found that almost two-thirds of survey respondents were re-assessing their spending due to higher mortgage loan repayments.

Unsurprisingly, 35% of the 452 respondents to the survey said the RBA and banks had "turned Santa into Scrooge''.

Seventeen per cent said they would be cooking up sausages on the barbie rather than prawns or other festive treats. However, 38% said it would be "Christmas as usual'', despite the increase in mortgage repayments.

Reverse mortgage market braces for regulation

2010-11-23T13:45:00.000+10:00

New Federal Government regulations governing the reverse mortgage market could serve to reduce the market.

Under the new rules, which will come into effect early next year, contracts allowing negative equity will be banned, and reverse mortgage providers will be required to produce a consumer statement to disclose the terms of the mortgage loan and what it means for borrowers.

The new rules could see a further reduction in a reverse mortgage market from which several major mortgage lenders have already withdrawn.

However, industry peak body SEQUAL has maintained that the changes will merely bring all mortgage lenders in line with voluntary industry guidelines to which 95% of the market already submits.

The group doesn’t believe the changes will affect the availability of funding, and says the slowdown in the market is due to consumers exercising a greater degree of caution, and not a reflection of Federal Government regulation.

Reverse mortgage and equity release loans are generally only available to people over the age of 60, and some have some of the highest interest rates and often carry additional fees.

Get used to rents increasing by up to 7% a year

2010-11-19T12:41:00.002+10:00

Economic forecaster BIS Shrapnel says tenants will have to "get used to" annual increases of between 5 to 7% per year in Perth, Brisbane and Sydney. Melbourne, Hobart and Adelaide will have 3 to 5% per year increases over the next 24 to 36 months.

Great news for those already in the market, or for those thinking of getting in shortly. Speak to Intellichoice for information about property available in Brisbane, Sydney and Melbourne.

Big 4 banks increase home loan rates

2010-11-16T13:34:00.000+10:00

The National Australia Bank and Westpac have followed CBA and ANZ and raised their standard variable home loan interest rates above the rate rise imposed by the Reserve Bank of Australia.

NAB increased their interest rates by 43 basis points, while Westpac lifted its home loan rate by 35 basis points. The Commonwealth Bank of Australia led the way with a 45 basis point increase, which was followed by a 39 basis point move by ANZ last Wednesday.

Finance Minister Penny Wong said the banks have let their customers down. "There is no justification for any bank to move above the official interest rate rise," Senator Wong told reporters in Sydney. Shadow treasurer Joe Hockey said this was just another sign of the private sector completely ignoring the most "ineffectual and the weakest" government in a generation.

If you are looking are refinancing your home loan, speak to one of the mortgage brokers at Intellichoice today on 1300 55 10 45.

House prices have increased

2010-11-14T15:02:00.000+10:00

Combined property values for houses in Australia increased by a total 41% and 42% for units over the past five years.

According to a new report by RP Data, the average annual increase for houses is 7% and 3% for units.

The report states that in dollar terms, house values have increased by a total of almost $140,000 over the last five years and unit values have increased by approximately $123,000."

Sydney was the poorest performing capital city with an increase of just 30% over five years, compared to Darwin house prices which increased by 92%. Melbourne recorded a 61% increase in its house prices.

According to RP data research analyst, Cameron Kusher, Sydney underperformed because prices were already so much higher than the rest of the country.

As for house rents, the greatest increases were also in Darwin – up 77%, while in Perth they increases 60% and just 34% in Sydney.

More home loan borrowers refinancing their mortgage

2010-11-11T12:53:00.000+10:00

Home loan borrowers are speaking to mortgage brokers and their mortgage lenders to ask about the cost of switching home loans, as more lenders start to increase interest rates.

According to a recent survey, finding a cheaper home loan is the biggest motivation for refinancing. Other reasons for switching home loans included debt consolidation, funding a renovation and buying an investment property.

Mortgage and Finance Association of Australia (MFAA) chief executive Phil Naylor said yesterday that its brokers had been "inundated" with inquiries.

"There is no doubt consumer sentiment is building as borrowers look for ways to offset rising interest rates and hop around for a better home loan deal, " said Mr Naylor.

The main resons for refinancing a home loan included:

24% of respondents said they were after a cheaper home loan
11% said it was to consolidate their debt
10% said it was to fund a renovation
9% needed a refinanced home loan to buy an investment property
8% required funds for other reasons

If you would like more information about a home loan refinance, speak to one of the mortgage brokers at Intellichoice today on 1300 55 10 45. They will do all the research for you and find a home loan to suit your needs.

QLD most sought after state for property - foreign investors

2010-11-08T13:24:00.000+10:00

Queensland is the second most sought-after state for foreign investors wishing to buy property - in front of New South Wales, with Victoria leading the way.

According to statistics released by the Foreign Investment Review Board, foreign property buyers bought $14.9 billion worth of Australian houses and land last year.

The increase in international interest for local property was an indication that Brisbane property is not over-priced or in a “bubble,” as had been suggested by media reports recently.

Overseas investors, particularly those from Asia, have identified that Brisbane represents an affordable option for them to invest in property – something that is unattainable for them at home. Furthermore, what they can get in Brisbane, with regard to size, property type and proximity to the CBD, far outstrips their local options.

Overseas investors were buying property to house their international staff, or staff who travel to Brisbane headquarters for business frequently, rather than putting them up in a hotel. Asian investors also purchase property for their children to live in while they study in local educational institutions - considered among the best in the world.

Following the effects of the Global Financial Crisis, Asian investors were searching for stronger and safer opportunities in which to invest their money. They have identified that Australia withstood the effects of the GFC relatively well, and are choosing to invest here, rather than locally or in Europe or the United States.

If you are interested in buying property in Australia, speak to one of the property advisors at Intellichoice or visit www.intellichoice.com.au for more details.

CBA home owners will now pay an extra $88/month on home loan

2010-11-05T08:39:00.000+10:00

Commonwealth Bank home loan customers with an average $300,000 standard variable mortgage will pay an extra $88 a month after the bank raised interest rates by 0.45%. CBA’s standard variable home loan rate is now 7.81%.

In other news, it seems that other banks might also follow CBA's lead and raise their standard variable home loan rate by more than the RBA's 0.25% rise.

ANZ and Bendigo have said they want to lift their margins on home loans.

North of Brisbane's gateway bridge features strongly in Residex forecasts.

2010-11-01T13:24:00.000+10:00

A recent report from Residex states that “high growth opportunities in the housing market nearly always exist, but the selection of the right area and dwelling type is paramount to future success.”

The report includes an “Overview of Predicted Growth in Brisbane” and pinpoints what are expected to be the Top Performing suburbs over the next eight years.

Upper Caboolture and Morayfield are among the top selections with a predicted growth rate of 10% per annum over the next five years and 9% per annum through to 2018.

Bellmere is close on their heels also with a forecast growth rate of 10% per annum for the next five years and 8% per annum July 2010 – July 2018.

Griffin is also another suburb expected to perform well over the next five years - 7% per annum – and 6% per annum for the 8 years period.

Top 4 banks in Australia control home loans market

2010-11-01T13:15:00.001+10:00

Statistics from the Australian Prudential Regulatory Authority reveal that the top four banks control more than 80% of the housing loan market.

Westpac, CBA, ANZ and NAB collectively own approximately 83% of all owner-occupied housing mortgage loans in September 2010 – up 0.3% from August 2010.

According to Senator Nick Xenophon, the high concentration reaffirms the importance of a Senate inquiry into the banking system. “The higher the concentration of the big four banks, the higher the fees and charges and more pressure on the consumers,” said Xenophon.

Home loans held by the major banks totalled $563.5bn – the total mortgage loan market is $700bn.

Have you checked your home loan lately?

2010-10-27T19:56:00.000+10:00

When was the last time you had a look at your home loan and actually asked yourself 'what do I really need from my home loan?'

What you need to consider...

1. Find out everything about your current home loan, such as interest rate, fees and home loan features (redraw facilities, offset account, line of credit). Do a comparison between your current and potential new home loan. Alternatively, speak to a mortgage broker - they will do the research for you and compare your current home loan and provide you with alternatives.

2. A lot may have changed since you took out your home loan. Decide which home loan features you actually require and which new features might suit you better. A mortgage broker can help you with this process.

3. Contact your current mortgage lender to find out what the exit costs for your home loan are.

You can either do your own calculations or call an experienced mortgage broker to talk you through this. Work out how long it will take for you to start receiving a benefit. Ie. when do the savings of the new interest rate outweigh the exit costs of your original mortgage loan.

4. Think about reducing the term or pay back period of your refinanced home loan, which will most likely increase the monthly repayments, but could mean you'll pay less interest and pay your home loan off sooner.

5. Speak to one of our mortgage brokers about debt consolidation. If you have a number of personal loans, credit card debts and other loans, consolidating them into your refinanced home loan could be a good solution for you. it's important to remember that although you'll most likely be paying a lower interest rate on your other debt - you are tacking it on to a longer pay-back period.

Our tip is to be vigilant and make additional repayments to cover the value of the extra debt added to your mortgage loan, potentially saving you thousands of dollars.

6. Don't send in home loan applications to multiple mortgage lenders in the hope that one will say yes. This can cause havoc by reducing your credit worthiness if home loan lenders see how many loans you have applied for.

For more information about refinancing your home loan or about debt consolidation, speak to one of the mortgage brokers at Intellichoice today on 1300 55 10 45.

First home buyers look for cheaper homes

2010-10-21T12:40:00.000+10:00

According to the latest Bankwest/MFAA Home Finance Index, an increasing number of first home buyers are keen to put their foot on the property ladder. Only 19% of renters were happy to keep renting in a bid to maintain their lifestyle.

Bankwest retail chief executive Vittoria Shortt said there had been a strong shift in the desire of first time buyers to get onto the property ladder since the March 2010 Bankwest/MFAA Home Finance Index. “Rising rents have shifted many young peoples’ focus back to home buying.”

They also found that first home buyers were changing their expectations, and were prepared to make trade-offs to enter the property market, like looking further away from the city centre or for a smaller property. First home buyers were also looking for family help with deposits now that the First Home Owners Grant is lower.

The Index showed first home buyers are only too happy to make a range of compromises if it means getting into their home sooner. Nearly 25% are continuing to live at home to save money for a deposit, while approximately 55% believe the current economic climate has led them to look for cheaper property in Australia.

Rents come down

2010-10-18T09:08:00.000+10:00

According to Australian Property Monitors, the average national rent fell just 0.3% for houses and 0.5% for units throughout the quarter. Annual growth however, is well below the long term average, sitting at just 2.8%.

APM’s head of research Yvonne Chan said the annual softening of the rental market can be attributed to the large number of first home buyers, who were drawn from the rental market by historically low interest rates and the First Home Owners Boost.

“Although first homebuyer numbers have returned to normal, we are still seeing a delayed flow on effect on rental demand,” Ms Chan said.

“Despite low vacancy rates in most cities and strong employment figures, a fall in consumer sentiment in September and continued concerns over the global economy mean landlords have continued to be conservative in raising rents.”

Darwin recorded the strongest rental growth for houses at 3.8% pushing the median weekly rent to $550, the highest in the nation and $70 more than the next most expensive city of Sydney.

Casual workers face discrimination in lending

2010-10-11T19:38:00.000+10:00

Casual and contract employment is now the norm in the Australian economy according to new research. But people in part-time employment, tradespeople, consultants, franchisees, self employed, small business owners and anyone who is not a permanent full time employee can suffer extreme discrimination in the credit market. People who don’t have a permanent full time position can often find it difficult getting a home loan, personal loan, car loan or credit card.

And there is no relief in sight. New consumer credit laws will make borrowing money even more difficult for casuals and contractors.

According to Chris Gration from credit reference agency Veda Advantage, “the new consumer credit code and more positive credit reporting like repayment histories will assist lenders in making better credit decisions.”

“And the licensing of credit providers means they have to verify your income. That will presumably lead to less defaults and problems but could possibly also raise equity issues in terms of access to credit for many groups of people in the future,” said Chris Gration.

Intellichoice has alternative home loan solutions for people in part-time employment or contract workers. Find out more about their non conforming home loans and low doc home loans for self employed people by calling 1300 55 10 45 or visit www.intellichoice.com.au for details.

Darwin & Canberra have the most expensive rents

2010-10-08T10:19:00.000+10:00

According to the RP Data September 2010 quarter Rent Review Report, there is good news for investors with rental markets in city and regional areas, with signs showing that they are in recovery mode. The report confirmed that capital city rents increased by 2.8% over the last 12 months. However, rental growth remained flat both nationally and throughout the combined capital cities during the quarter.

The report found the following:

Weekly rental rates increased nationally by 2.9% over past 12 months
Unit rents in the city over the past 5 years increased more than houses
Canberra and Melbourne were the only cities that recorded a rental increase in houses over the September quarter
Darwin rental houses are the most expensive of any capital city followed by Canberra
Pilbara in WA has the most expensive rents of all regional markets at $1500 p/w
The cheapest capital city rents for houses is in Adelaide at $320 p/w

Families should prepare for interest rate rises

2010-10-06T20:19:00.000+10:00

Although interest rates are currently on hold, there is a likelihood they will rise next month if not in December.

According to Phil Naylor, CEO of the MFAA says that 'families really should take the time now to prepare for upwards rising rates.' The MFAA is recommending borrowers follow four simple steps:

1) Evaluate opportunities to save money within the parameters of their home loan contracts by undertaking a home loan health check.

2) Negotiate any changes to existing mortgages with lenders.

3) Monitor household budget and keep spending in check – especially in lead-up to the Christmas season.

4) Manage debts, ensure adequate repayment plans.

Comparing home loans is not as simple as comparing rates alone. Flexibility of repayments, the levels of service offered by a mortgage lender and other features of the home loan must also be considered.

If you need help with a home loan, or require a home loan refinance, speak to one of the mortgage brokers at Intellichoice on 1300 55 10 45.

Debt consolidation case study

2010-07-22T15:50:00.000+10:00

Debt consolidation has the immediate benefit of reducing monthly outgoings. While this may provide a welcome short term relief, it may have other adverse consequences. Whilst savings are normally achieved with a reduced interest rate, they usually also come about by extending the term of the loan. Interest paid over a longer term could result in more interest being paid. However, if managed in a correct manner, there are significant benefits to debt consolidation.

Case Study
I have a client who bought his first home 18 months ago. His parents helped with the 20% deposit and he purchased his home for $225,000 with a loan of $180,000. At the time, he had a credit card debt which was causing him a little pain, but with a budget, he figured that he would be able to pay it out within a year.

Unfortunately, a year later, his credit card debt had increased despite a promotion and a pay rise. He had underestimated the costs of living away from his parents (like many first home buyers who go through these growing pains) and he now required $600 per month to meet the minimum repayments. This was beyond his ability to pay and he felt that his only alternative was to incur further debt to meet these payments.

The credit card company was offering him more credit to solve his problems. He was also considering moving his credit card debt across to a '0% interest' card to release his stress for 6 months - a temporary solution in most cases.

He felt that if he had access to $10,000, he'd be able to eliminate his credit card debt and be able to pay other looming large bills.

His existing home loan was on a fixed rate and no cash savings could be achieved as the interest rate was 1.5% lower than the current discounted variable rates (lucky he fixed).

To assist, our mortgage brokers arranged a separate variable facility of $10,000 with minimum fuss. This was achieved at a significantly lower interest rate than the credit card. Rather than match the 25 year loan term of his fixed rate home loan, we set up this facility with a 15 year loan term.

A 25 year loan term would have saved him $525 per month. However, reducing the loan term to 15 years, saving $500 per month, created a forced savings program to reduce his debt. We also convinced him to include an additional $100 over the required minimum repayment amount (via direct debit).

As part of the transaction, the bank paid out his credit cards and closed the accounts. We also set up a visa debit card for him to use for credit card related purchases, resulting in spending money he's earned rather than borrowed. He also has some extra cash after the repayment of the credit cards and extra payments in the loan account which can be redrawn for emergencies if required.

The refinancing was important to overcome his financial predicament. However, more importantly, it was essential to ensure that the new loan was applied over the shortest possible period in order to reduce the total interest paid over the term of the loan.

The best part to this story was his reaction to the valuation of his house. 18 months later, it was worth $80,000 more than he had paid for it. His property had made more money than his job during that time. He is now planning to use his equity to purchase investment properties in the future.

To find out more about debt consolidation or to refinance your home loan, speak to one of our mortgage brokers today on 1300 55 10 45.

No more self verified income mortgages

2010-07-21T15:47:00.000+10:00

Mortgage loans using self verified income are no longer available in the market. According to BMM’s managing director Murray Cowan, changes to the Low Doc market as a result of the new national credit code were a positive for the industry as it was clear that low doc loans had moved away from its traditional purpose of assisting self-employed borrowers in recent years.

“No Doc or asset lend style loans with little or no income verification became popular in times of rising asset prices but these loans were designed to assist investors and not specifically self-employed borrowers and are no longer acceptable under the code”, Mr Cowan said.

Suburbs in the CBD lead property price growth

2010-07-20T09:25:00.000+10:00

According to research from PRDnationwide, suburbs located close to the city CBD are leading property price growth. The research has shown that suburbs in the inner city in Queensland and Victoria were the first to show signs of price recovery in the 12 months to March 2010.

The suburbs with the biggest growth in property prices were within 10km of the CBD in Melbourne and 17km of Brisbane's CBD.

A survey conducted by PRDnationwide also showed that homeowners did not want to deal with a long commute and preferred to live in close proximity to their offices.

The survey found that 58% of home owners would be willing to drive up to 30 minutes to and from work each day, but only 1% of respondents would be willing to drive for more than one hour in one direction.

Only 18% of respondents would be willing to spend 10 minutes or less getting to work, while a quarter (23%) would be happy for it to take 30-60 minutes in one direction.

The report found that the suburb Kew, in Melbourne, registered a 52.8% increase in property price growth, while Brisbane's highest price performer was Ascot, which was up an "astonishing" 64.1%, according to the real estate group.

South Yarra recorded the second highest price growth in Melbourne, at 47.2%, followed by Albert Park (42.6%) and Canterbury (42%).

In Brisbane, St Lucia recorded the second highest price growth of 59.6%, followed by Hawthorne (34.6%).

Mortgage loan options available for self employed borrowers

2010-07-19T09:27:00.000+10:00

There are encouraging signs that self employed mortgage loan products are making a return with Australian First Mortgage (AFM) - a non-bank lender - launching its Complete Option self-employed lite doc loan last week.

The mortgage loan has a maximum LVR of 80% (LMI inclusive) and offers the refinancing of existing loans inclusive of cash out up to $10,000 to cover reasonable financing costs.

Low-doc lending was one of the first casualties of the GFC, as funders deemed the sector too risky and consequently paired back significantly on no doc and low doc mortgage loans.

Research by Genworth Financial revealed a dramatic decline in the number of low doc loans issued last year, from 24% in August 2008 to only 8% in August 2009.

And although banks have decided to pair back on lending to self-employed borrowers, demand for non conforming loans or low doc mortgage loan products still remains high.

AFM’s national director of sales and marketing Iain Forbes said “there has always been a demand. While the banks continue to tighten their funding criteria, non-banks are stepping up to the plate in a bid to cater to this demand.”

Residential home loans fall

2010-07-13T10:36:00.000+10:00

The RBA is being urged to keep interest rates on hold when they meet again in August 2010, after housing commitments fell for the fourth time this year. According to the Australian Bureau of Statistics (ABS), the total value of home loan commitments fell by 0.3% in May 2010 after a brief recovery in April 2010.

The first home owner market suffered the greatest fall in commitments, accounting for just 16.1% of all dwellings financed – a drop of 0.2% from April 2010.

“We are seeing the cumulative effect of six increases in official interest rates between October last year and May this year,” Real Estate Institute of Australia (REIA) president Mr David Airey said.

According to Mr Airey, the RBA’s decision to pause rates in June was “long overdue”.

“The message for the RBA is abundantly clear”, he said.

HIA chief executive Graham Wolfe said the result was not just a product of interest rate increases, but upward price pressures sourced from tight credit availability, and obstacles related to land supply, planning, infrastructure charges and taxation.

“Impediments to a sustained housing recovery must be removed if we are to have any chance of supplying sufficient new housing to meet demand,” said Mr Wolfe.

“HIA estimates that the underlying demand for housing in 2010 is running at 190,000 dwellings per year. Yet, housing starts in 2010 are forecast to total only 165,940. This should be a signal to the Reserve Bank that steady rates are the appropriate course for the remainder of 2010,” he said.

4 years to save deposit for a unit

2010-07-12T10:02:00.000+10:00

It takes approximately 4 years for a couple who are first home buyers to save a deposit for a unit. First home owners need to save the longest to buy a unit in Melbourne and Sydney (4.3 years and 4.2 years respectively). If you wanted to buy a house in Sydney, it would take an extra two years.

A year ago it would take first time buyers 3.2 years to save a deposit for a unit.

Development finance starting to flow more freely

2010-07-09T15:49:00.000+10:00

Business lending has grown by 0.4% based on the latest stats issued by the Reserve Bank. Business finance lending showed some tentative growth in February 2010 after consistent month on month declines that started back in November 2007.

The annual trend is clearly improving, which suggests that banks may finally be starting to loosen the purse strings on business related finance.

The 0.4% gain in May 2010 is still half of the five year average (0.8% growth month on month), but this slight improvement is a sign that the finance sector is becoming less risk averse.

The improvement in finance conditions will be welcome news for property developers, especially the medium and high density development sector, who have found securing development finance difficult after the GFC. Banks have been asking developers to secure 100% pre-commitment on unit sales before they will approve finance - a condition that significantly erodes buyer confidence when considering an off the plan purchase.

There could be another rate rise this year

2010-07-09T09:24:00.000+10:00

Industry commentators agree there will only be one more interest rate rise this year. The only thing they don't agree on is when that might happen.

RP Data's senior research analyst, Cameron Kusher, believes Australia could see a rate increase next month.

"The futures markets are pricing in no real change until the end of the year," he said. "However, depending on the inflation data due to be published at the end of the month, it's possible we could see rates go up by another 25 basis points as soon as August."

However, BIS Shrapnel's senior economist, Richard Robinson, thinks the Reserve Bank will "sit on its hands" until November or December.

"Having raised the cash rate to what it calls a neutral position, the RBA will need a good reason to make it a contractory rate," Robinson commented. "It knows the inflationary figures are going to be high, but it'll be looking for the underlying rate to be drifting down, and we expect it to be there or thereabouts."

Robinson said while the RBA might be concerned about the strong employment figures released this week, that might be tempered by the fact that growth is not yet being reflected in consumer spending."

"It's a wait and see game from here on in," he concluded.

Many don't understand reverse mortgages

2010-07-08T09:11:00.000+10:00

Many borrowers don’t understand how a reverse mortgage works and what it is and are being caught out by the complicated equity release loans.

There has been one incident which concerned an 80 year old woman who was given more than she applied for and passed on the extra cash to her children. The woman did not realise the equity she released from her home would attract compound interest until the amount was repaid.

A reverse mortgage allows the borrowers to access some of the equity in their home. The money is repaid to the mortgage lender when the home owner dies or sells the house. The product is increasingly popular with asset rich and income poor retirees.

One complaint to NICRI, the government information service for equity release products concerned an 80 year old woman who was given more than she applied for and passed on the extra cash to her children. The woman did not realise the equity she released from her home would attract compound interest until the amount was repaid.

Benefits of inventory finance

2010-07-07T10:37:00.000+10:00

Inventory finance is available to Australian businesses to purchase goods or raw materials for manufacture and resale. The main benefit of inventory finance is that the stock to be financed does not have to pre-sold, invoiced and delivered.

Some other benefits of using Inventory Finance include:

Increased purchasing power - inventory finance lets your business purchase additional stock without any requirements to have it pre-sold, invoiced or delivered.
Your business can harness additional purchasing power and achieve its full growth potential, whilst retaining title and control of your stock using inventory finance
No real estate security required
You can achieve supplier discounts, bulk savings and reduced freight costs through early supplier payments and larger orders with inventory finance
Your business has the flexibility to purchase stock now and make repayments that match your cashflow, with pre-selected payment dates.
Expand your customer base with inventory finance - you no longer have to turn large orders away due to limited working capital
Have immediate title to stock and pay for it at the end of your selected repayment term.
Utilise Extended Payment Terms
Improved supplier relationships
Optimised stock levels
Grow without increasing capital or diluting equity in your business
Inventory finance can be more cost effective than an overdraft
Clear and transparent pricing, with no annual line fees, account keeping fees or audit fees

Inventory finance provides businesses with finance for the acquisition of stock for manufacturing or resale to your customers. Some of the clients we have helped include manufacturers, wholesalers and retailers who purchase stock from Australian or overseas suppliers.

For more information about inventory finance and whether it is suitable for your needs, speak to one of mortgage brokers at Intellichoice today on 1300 55 10 45 or visit www.intellichoice.com.au.

Banks may still increase rates

2010-07-07T10:15:00.000+10:00

The Australian Financial Review has reported that wholesale funding costs could force Australia’s major banks to move above and beyond any future rate increases by the RBA.

According to The Australian Financial Review, CBA’s chief financial officer David Craig said he could see no end to rising funding costs over the medium term, which would put undue pressure on banks. Even though the banks are under political pressure not to raise lending rates independent of the RBA, especially in an election year, this may not be feasible if wholesale funding costs continue to increase.

In the past two months, new funding costs have risen, on average, 0.2 to 0.8 percentage points – at the same time the RBA has kept rates on hold.

Housing shortage makes Australian home prices almost twice the price of USA

2010-07-06T09:49:00.000+10:00

A shortage of 200,000 dwellings is helping fuel Australian home prices, which are 82% higher than in the US, and disproving investors and property experts who say they will fall 42% as interest rates rise in one of the world’s priciest home markets.

“It will take years to turn the shortage around,” said Matthew Bell, an economist at Australian Property Monitors. “When it comes down to it, that’s fundamentally what’s going to drive the market.”

Australia’s median home price was 6.8 times the gross yearly income last year, compared with 5.1 times in the UK and 2.9 times in the US, according to the annual Demographia International Housing Affordability Survey.

The nation of 22 million people has six of the 10 most unaffordable cities among the US, UK, Canada, Ireland, New Zealand and Australia, the survey showed.

RBA urged to hold interest rates

2010-07-06T09:42:00.000+10:00

Raising interest rates could stifle home building according to the Housing Industry Association (HIA).

The institute's chief economist, Harley Dale, is urging the Rerserve Bank Board not to raise interest rates at its meeting today for fear of further slowing home building. Dale argued that higher interest rates, together with obstinately large supply side constraints, were weighing down the new home building industry - with the number of building approvals falling in May 2010.

"The hikes in interest rates that we have already experienced are clearly biting, exacerbating on-going difficulties with land supply, credit availability, and a range of other obstacles preventing a sustainable boost to Australia’s new housing supply," he said.

"Steady interest rates are the clear signal."

Meanwhile, the Bank of Queensland's chief operating officer, Ram Kangatharan, warned that banks may have to increase interest rates regardless of any RBA move, due to deteriorating funding conditions.

"On the wholesale side, things are getting tougher," Kangatharan told Dow Jones Newswires.

"Sustainable retail deposit growth is pretty tough in this environment," he added. "All of the banks are starting to feel the pinch in terms of deposit margins. As the pressure continues on the majors, they would want to move outside the RBA rates - I think what's holding them back is election year."

Exit fees on a home loan vary widely

2010-07-02T10:59:00.000+10:00

The average early exit fee for all mortgage lenders in year one of a home loan contract is $1582.

The exit fee on a home loan will range widely depending on your lender, for example:

$250 for Bendigo Bank
$11,290 for BEAT Home Loans
Opportune Home Loans, with a $6950 fee in year one
Reduce Home Loans charge $5400 exit fees on a home loan
$4350 for AMP Banking
New Loan charge an exit fee of $4100
Rams charge $3925 exit fees
$3900 for Homestar ($3900)

Most early exit fees on a home loan reduce over time, so that in year five of the mortgage contract the average for all lenders is approximately $590.

More Australians owner building or renovating

2010-06-30T09:37:00.000+10:00

Activity in home renovations is set to remain at high levels due to strong job market conditions and ongoing rises in house prices. The HIA expects the total worth of the renovations sector to increase by 7% in 2009-10. Growth of 4 per cent was forecast in each of the subsequent two years.

If you are thinking of owner building and need owner builder finance, speak to the mortgage brokers at Intellichoice today. Intellichoice is the only company in Australia to offer owner builder finance of 80% of end market value of the completed property.

An owner builder system is also available through Intellichoice. The owner builder system is a DIY management tool which makes owner building your new home or renovation hassle free and stress-free.

Call 1300 55 10 45 or email info@intellichoice.com.au for more details about the owner builder system or owner builder home loan. Visit www.intellichoice.com.au.

Inner Melbourne Apartment Market - June 2010 update

2010-06-29T11:59:00.001+10:00

The ANZ June 2010 report about inner Melbourne apartments highlights the following points:

The Victorian housing market is fundamentally under-supplied by about 47,000 dwellings
This will provide a solid and favourable backdrop for the broader housing market, both in terms of engaging construction and housing finance activity, also also in protecting dwelling values
The Victorian economy has out-performed all other state economies in the post-GFC recovery phase

Intra-metropolitan population movements provide considerable growth prospects for inner-Melbourne's population
A conservative estimate for inner Melbourne housing demand over the next 5 years is around 3,1000 to 5,7000 dwellings per annum
Housing supply will grow at an estimated annual average of 3,700 to 4,500 dwellings

Apartment prices in Melbourne

An expected lift in rental vacancies towards the end of the development cycle will be frictional rather than structural, reflecting market 'indigestion'.
This could see inner Melbourne prices fall in the out-years. however, given medium and longer term fundamentals are favourable, this weakness will only be temporary

Prices speak volumes about balance between demand and supply - dwelling prices

Inner Melbourne dwelling prices have generally outperformed the broader metro average with a notable re-rating evident through 2007. Some 'clawing' back of relativities has been evident since then but the ratio remains slightly elevated
The fundamentals for the broader market remain sound with sizeable pent-up demand, incomes growth and strong population likely to underpin housing valuations in the years ahead
A slowing will become evident over 2010 and into 2011, primarily reflecting higher interest rates and the emergence of affordability constraints. While these will weaken trajectory, they are alone unlikely to generate price falls

If you are interested in buying property in Melbourne, speak to one of the property and finance consultants at Intellichoice on +61 7 3624 1900 or email info@intellichoice.com.au. Alternatively, visit www.intellichoice.com.au for more details.

Lenders defend against exit fee accusations...

2010-06-29T09:36:00.000+10:00

Lenders have defended their approaches to early mortgage loan exit fees following ASIC's announcement that it will crack down on high exit fees. The Australian Bankers Association (ABA) said the exit fees levied by banks were "appropriate and justifiable", and added that fee levels were in part due to lower upfront home loan costs.

"Australia has low entry fees for mortgages compared to countries like the US and UK," said ABA chief executive Steven Münchenberg.

"Banks achieve this by deferring some of the costs of establishing a mortgage and only charging those customers that change their mortgages in the first few years.Keeping up-front mortgage fees lower benefits all customers and supports customer switching," said Mr Munchenberg.

Mr Munchenberg also pointed the finger at non-bank lenders, arguing that "non-authorised deposit-taking institutions typically charge higher fees than banks".

Steve Sampson, head of lending distribution at non-bank lender Provident Capital, is supportive of ASIC's move, but stated that it needed to fairly take into account specific loan details and lending circumstances.

"Firstly, we must acknowledge that a deferred establishment fee actually reduces the initial costs of providing a loan," said Mr Sampson.

"Secondly, if a harder line is taken, then it needs to address other fees relating to the loan: for example, some lenders may charge high account keeping fees during the term of the loan. Thirdly, lenders fund in differing ways and expect/plan certain profitability. On, say, a fixed-rate contract, there may be a ‘book match’ of depositor vs loan funds and the early repayment of the facility may reduce an expected return on the investment. It is important that the lender can structure an early repayment fee to reflect these types of issues," said Mr Sampson.

Unfair exit fees on home loans illegal from Thursday

2010-06-29T09:25:00.000+10:00

Tough new regulations that give the corporate regulator, ASIC, the power to take action against unfair or unconscionable mortgage loan exit fees will come into effect on Thursday July 1 2010.

The National Australia Bank welcomed ‘the tough new laws’ which would aid consumers and lenders that charged lower rates than their competitors.

After July 1, a borrower can complain to their mortgage lender and to an external complaint service about their high exit fees. They can also complain to ASIC and/or take the matter to court.

Mortgage lenders continue to tighten lending criteria

2010-06-28T09:50:00.000+10:00

According to a study by RateCity, most of the lenders in Australia show no signs of easing their lending criteria. Research of more than 2,000 home loans has found a decline in the number of home loans with an LVR of 95% or above.

The report found that there were 1,079 home loans with a LVR of 95% available in May 2010, compared to 1,110 in February 2010. For home loans with an LVR of 98% or more, there was only one mortgage loan recorded in May 2010, compared to 20 home loans in February 2010.

Australian property market slowing down

2010-06-25T09:41:00.000+10:00

According to RP Data’s Rismark Home Value Index, Australian residential market activity has slowed significantly in the last few months. In April 2010, house values in the capital cities increased by just 0.1%, while apartment values increased by only 0.5%.

In comparison, house values in March 2010 climbed 1.3% and 1.4% for houses and units respectively.

RP Data also noted there are other indicators which suggest the market is slowing.

“Housing finance commitments continue to fall, as does consumer sentiment, interest rates are 150 basis points higher than their recent lows, dwelling approvals fell by 14.8 per cent during April and auction clearance rates continue to trend down,” a statement by RP Data read.

“Given these results we anticipate that the rate of property value growth during May 2010 will once again be soft and this trend is likely to continue until at least the time of the spring selling season when market activity historically begins to rebound.

“We also anticipate that our lead indicators such as vendor expectation error (discounting) and time on market will increase further due to the slower market conditions.”

Australian property market most transparent in the world

2010-06-25T09:37:00.000+10:00

According to a report by Jones Lang Lasalle, the Australian property market is the most transparent in the world. Professional services firm Jones Lang Lasalle's Global Real Estate Transparency Index 2010 report shows that Australia has displaced Canada as the world's most transparent real estate market.

Countries were assessed on five criteria: performance measurement, market fundamentals, listed vehicles, legal and regulatory factors and transaction processes.

The report showed that there has been a notable slowdown in the progress of real estate transparency over the last two years, due to the recent turmoil in global financial, economic and real estate markets. It cited Turkey as the most improved market and said the Asia Pacific region shows the most 'broadly-based' improvements over the last two years.

BankWest lowers its 3 and 5 yr fixed home loans

2010-06-22T10:13:00.000+10:00

BankWest has announced it will reduce its three and five year fixed rate home loans starting today.

This will bring its three year fixed rate home loan from 7.64% to 7.38% pa, and its five year fixed rate home loan rate will be reduced from 8.09% to 7.89%.

A spokesperson from BankWest said the move was designed to make the lender more competitive.

Investors coming back into Australian property market

2010-06-21T10:17:00.000+10:00

According to the Australian Bureau of Statistics, investors are flooding back into the property market. Share market volatility has caused investors to look elsewhere to invest their money. Low vacancy rates and the reduced demand from first home buyers are other reasons why investors are coming back into the Australian property market.

According to data from the Australian Bureau of Statistics, investors accounted for $7.99 billion worth of all home loans issued in April 2010 – an increase of 1.5% on the previous month.

Jittery investors are shying away from the volatility of the share market, which has experienced plunging returns in April and May and are looking for a less volatile asset class to invest their money in. Furthermore, a quality, well-located investment property can deliver long term returns.

If you are thinking of investing in Australian property, speak to one of the property and finance specialists at Intellichoice today on 1300 55 10 45 or email info@intellichoice.com.au.

Negatively gearing a rental property

2010-06-18T15:58:00.000+10:00

A rental investment property is negatively geared if it is purchased with the assistance of borrowed funds and the rental income does not cover the allowable deductible expenses (interest on the home loan and depreciation). For tax purposes, the ATO allows property investors to offset an income loss (when the property costs are higher than the income generated from the investment property) against any other income, for example your wages/salary.

Some of the expenses you could claim immediately when you complete your tax return for the relevant year include:

borrowing expenses, for example, interest on the home loan
repair costs - maintenance and repair of the property
depreciation of assets. Examples of assets claimable as depreciable items could include air-conditioning, dishwasher, roller-door motors, carpets
Property management costs
Legal expenses associated with the preparation of leases, purchasing or selling the investment property
Capital works deductions. It is usually spread over a period of 25 or 40 years. Deductons for capital expenditure can be applied to a variety of works, eg a building or extension - adding a garage of extra room, or alterations - demolishing or putting an an internal wall or structural improvements such as a new fence or a retaining wall