Chis Zappone from the Age has written an interesting article regarding housing affordability in Australia. An extract from the article:
The RBA yesterday raised its key cash rate to 4.25 per cent - its fifth increase since October - to quell emerging inflation pressure from the export sector and rising house prices. It also dropped commentary referring to taking a ”gradual” approach to rate hikes in the future.
The series of rate increases also appears far from over, with financial markets now betting the central bank will lift its cash rate by another percentage point to 5.25 per cent within a year.
The higher borrowing costs flowing from such moves will deter some housing developers, economists say, meaning that they will make little inroad into reducing the estimated 200,000 housing shortfall.
Read the full article here:
http://www.smh.com.au/business/rate-rises-sink-housing-affordability-hopes-20100407-rr3i.html
It’d seem the stars are aligned: low rates, population growth, low vacancy rates, strong rental market and a shortage of housing in the majority of capital cities.
Since late 2008, the number of loans to first home buyers has outweighed substantially those to existing owner-occupiers and investors as first-time buyers rush to take advantage of the increased government grant. These numbers are set to surge in the next two months after the Prime Minister indicated that the increased grant will end June 30. In previous interest-rate cycles, lending to investors and existing home buyers increased alongside that to first-home buyers.
Part of the reason is that investors are not getting the first-home-owner grant, and when you have to lay your own money down instead of the government’s, you tend to think more carefully before deciding to take the plunge. Unemployment concerns and fears about how the economy will evolve this year are also key reasons why investors are not yet entering the market.
Consumer sentiment figures released earlier this month by the Westpac-Melbourne Institute Survey found pessimists still outnumbered optimists and, with the prospect of more unemployment, that’s unlikely to change soon.
Interest rates are one of the crucial aspects investors consider. During the past month or so, several of the big banks have increased their fixed mortgage rates, even though variable rates are expected to go even lower.
Banks say it’s because of an increase in the rates in the wholesale market where they access funds. Not everyone accepts that that is the reason, but most acknowledge it’s a signal borrowing costs are near their lowest levels!!
Some economists believe fixed rates will continue to rise as banks manage their risk, and it’s just a matter of the speed at which it happens. Of course, fixed rates are not popular at the moment even with investors who traditionally use this option.
That’s not a surprise, given the cash rate is expected to fall to 2 per cent by the end of the year.
But fixed rates are a bit of a barometer of the longer term trend in interest rates, so they’re worth watching. It also pays to remember that just because the Reserve Bank of Australia cuts rates’, that doesn’t mean banks have to follow suit.
Only time will tell whether property buying will be better next year.
Perhaps investors are waiting for a sign that unemployment will stop rising, or for first-home buyer activity to dry up!
New home sale figures have not jumped as anticipated with the introduction of the federal government’s stimulus package.
There could be a number of reasons for this - the current global credit crisis, the rising unemployment figures and consumer confidence.
Should builders get incentives instead of consumers, should both consumers and builders receive financial stimulus or should we let market forces determine the outcome with no artificial influence?
Times are tough but some experts believe we’re through the worst of it.
Can you hear it? It sounds like a distant ring, a peal of bells, not of Yuletide bonhomie but of changed fortunes in that most solid of staple investments, bricks and mortar. Shares are so yesterday. Stockbroking’s a dirty word. Nobody’s talking margin loans. But could the property market be a bellwether of better times?
At least some of the notes are on song. The Reserve Bank dropping the cash rate to 4.25 per cent and perhaps going even lower. Figures this week from the nation’s largest mortgage broker, AFG, indicate NSW first-home buyers are back in the market, with November’s loan approvals up 113 per cent on August. And Sydney house prices - despite all the doomsday scenarios - actually gained 0.51 per cent in the October quarter. There was also a 1.6 per cent increase in the number of loans for established homes in October.
"The property market has moved through the bottom of its cycle," says RP Data’s head of research, Tim Lawless.
Read the full article here:
Mark Forytarz
The construction industry has hit a wall, with the number of new houses and units built nationwide plummeting to a seven-year low.
New figures from the Bureau of Statistics show the number of dwellings built in the three months to September 30 dropped 10.7 per cent compared with the previous three months.
Read the full article here:
Mark Forytarz
Mark Forytarz, Director at Castran Gilbert, views on the Australian real estate marketplace
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