Tuesday, December 2, 2014

Interest Rates Held Steady, May drop in 2015

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Growth in the global economy is continuing at a moderate pace. China's growth has generally been in line with policymakers' objectives. While weakening property markets present a challenge in the near term, economic policies have been responding in a way that should support growth. The US economy continues to strengthen, but the euro area and Japan have both seen weakness recently. Some key commodity prices have declined significantly in recent months, reflecting somewhat softer demand and, more importantly, increased supply.
Global financial conditions remain very accommodative and long-term interest rates and risk spreads remain very low. Differences in monetary policies across the large jurisdictions are affecting markets, particularly exchange rates.
In Australia, most data are consistent with moderate growth in the economy. Resources sector investment spending is starting to decline significantly, while some other areas of private demand are seeing expansion, at varying rates. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend for the next several quarters.
Inflation is running between 2 and 3 per cent, as expected, with recent data confirming subdued rises in labour costs. Although some forward indicators of employment have been firming this year, the unemployment rate has edged higher. The labour market has a degree of spare capacity and it will probably be some time yet before unemployment declines consistently. Hence, growth in wages is expected to remain relatively modest over the period ahead, which should keep inflation consistent with the target even with lower levels of the exchange rate.
Monetary policy remains accommodative. Interest rates are very low and have continued to edge lower over the past year or so as competition to lend has increased. Investors continue to look for higher returns in response to low rates on safe instruments. Credit growth is moderate overall, but with a further pick-up in recent months in lending to investors in housing assets. Dwelling prices have continued to rise.
The exchange rate has traded at lower levels recently, in large part reflecting the strengthening US dollar. But the Australian dollar remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices in recent months. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.
Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.
In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.

Tuesday, November 11, 2014

WA Second Most Expensive, Slowing House Prices

Over the last three months, Perth has gone slightly backwards in the price of homes with a -0.1% growth. This has contributed to a year on year price increase of 3.7%. The national average increase in the last year was 9.1% with Sydney steaming ahead in the last quarter with 2.7% growth and a whopping 14.7% over the last year.

Perth's average house price still sits at second in the nation with an average house price of $588,700, second only to Sydney's $681,900.


Region Quarterly Year-on-year Avg. price $ (whole of state)
Sydney 2.7% 14.8%  $              $681,900
Melbourne 1.0% 6.9%  $              $564,800
Brisbane 1.0% 6.7%  $              $457,600
Adelaide 1.0% 5.6%  $              $404,600
Perth -0.1% 3.7%  $              $588,700
Hobart 1.0% 4.3%  $              $312,000
Darwin 0.3% 3.4%  $              $521,700
Canberra 0.3% 2.4%  $              $571,000
National avg. 1.5% 9.1%  $              $563,100

Tuesday, October 7, 2014

RBA Holds Interest Rates Steady... nothing else to see here

There was a time that we looked forward with anticipation every first Tuesday of the month as to what the RBA was going to do with the cash rate. However, over the last 14 months, the cash rate hasn't changed at all - the longest period of stability on interest rates for the last ten years! We can all go back to looking for our next house now..

Wednesday, September 17, 2014

UBank fined $40,800 for misleading advertisements

Today ASIC published the findings against National Australia Bank's Ubank for misleading advertisements with regard to their $2014 eftpos card giveaway that was around earlier this year and at the end of last year. The fine was for four instances of $10,200 each.

The advertisements with headline statements, including ‘The BEST $2014 EVER’ and ‘Own $2014’ appeared in newspapers, radio and online from late December 2013 to early March 2014 and in digital screens on escalators from late January 2014 to February 2014. 

ASIC was concerned that some details of UBank’s offer were not disclosed in some of the advertisements and, in others, were not disclosed in a clear and prominent manner. These included: 
  • a minimum loan amount of $350,000
  • a requirement to use an electronic settlement process (known as FASTRefi) for refinanced loans
  • all documents to be provided within five days, and
  • a cap on the number of consumers eligible to receive the offer.

Followers of LifeinPerth would have seen our post earlier in the year about this deal highlighting the conditions attached to the offer.

Deputy Chairman Peter Kell said, 'ASIC's crackdown on misleading advertising has seen action taken against 10 entities this year. 

'ASIC will continue to take action where we believe firms have not provided clear, consistent information in their advertising'. 

ASIC’s concerns led to UBank providing a $2,014 gift card to all consumers who applied for a loan during the relevant period and subsequently settled their loan. 


Other entities that have been fined by ASIC for similar unclear advertising:

  • Make it Mine Finance Pty Ltd pays $20,400 penalty for misleading advertising (refer: 14-198MR)
  • Esuperfund Pty Ltd pays $30,600 penalty for misleading advertising (refer:14-196MR)
  • Your Super Accountant pays infringement notice in relation to ‘FREE’ SMSF set up claims (refer: 14-195MR)
  • Virgin Money pays $30,600 penalty for misleading advertising (refer: 14-091MR)
  • Wealth Within Ltd pays $20,400 in penalties over misleading advertising (refer: 14-075MR)
  • Small amount lender pays $30,600 penalty for misleading online advertisements (refer: 14-065MR)
  • SuperHelp Australia Pty Ltd pays infringement notice in relation to FREE SMSF fund setup claims (refer: 14-051MR)
  • Finance broker pays $20,400 infringement notice penalty (refer: 14-022MR)
  • Media Super pays infringement notice in relation to superannuation advertising (refer: 14-001MR).

Friday, August 22, 2014

APM: Rents Coming Down in Perth

The Australian Property Monitors today released figures that would have renters cheering in Perth as they show a 6.7% decline in the median asking rent for houses from $493 to $460 per week over the past year. For units in Perth, it was a 5.9% decrease from $425pw to $400pw which, apart from Canberra, was the only market in Australia to go backwards.

For the landlords, gross rental yield in the last 12 months has declined 5.8% for houses and a massive 8.9% for houses! Now, a Perth landlord can on average expect a yield of 5.02%. The slowing mining boom and a record numbre of multi-residential dwellings under construction in Perth will continue hurting the Perth rental market. Business investment, often a lead indicator for the real estate industry, is expecting an 8.25% decline in the 2014-15 financial year.

Tuesday, August 5, 2014

RBA Holds Interest Rate at 2.5% for 1 Year

Today, the Reserve Bank of Australia again decided to hold the interest rate at 2.5%. It has been one year since any change has been made to the central bank rates. Last year in August, the RBA dropped the rate by 25 basis points. The statement from the RBA was almost like a carbon copy of last month's announcement and the outlook from many economists is that the rate won't be changing any time soon. The Aussie dollar didn't move much in response to the announcement, having already factored in the assumption that rates won't change.

Friday, June 6, 2014

Cheapest, Closest Suburbs to the City

There was an article on Perthnow yesterday about how the suburbs 15-30km from the Perth city centre will be the top performers in the next 12 months. What was interesting was how they narrowed down a couple of suburbs that seem to be relatively cheaper than suburbs around the same distance from the city.
  1. Within 5km Glendalough was the cheapest suburb within 5km of the city. The median house price there is $607,000. The median house price for houses within 5km of the city is $897,840. 
  2. Within 15km Only three suburbs have a median house price of less than $400,000 and is within 15km of the city. They are Lockridge ($372,000), Girrawheen ($390,000) and Koondoola ($397,000). Average price of suburbs that are from 5km-15km of the city is $777,883. 
  3. Within 30km 13 suburbs in the zone with median house sales prices of less than $400,000: Brookdale ($309,750), Camillo ($312,000),Armadale ($315,000), Midvale ($350,000), Bellevue ($352,000), Koongamia ($352,000), Stratton ($357,250), Kelmscott ($360,000),Maddington ($360,000), Gosnells ($365,000), Middle Swan ($380,000),Seville Grove ($380,000) and Midland ($395,000). Otherwise, the median house price for suburbs in this area is $583,899. 
While distance is not the only factor, this helps some homebuyers who work in the city to make a decision about how far out they are willing to go in order to find a home they want. Crime is also a very big factor for many people with some suburbs notorious for their crime. This would also affect the median prices of some suburbs listed above. 

With the new stamp duty threshold sitting at $430,000, I would think that many of these suburbs will experience a growth in house prices in the coming month. 

Tuesday, June 3, 2014

Interest Rates Steady as House Prices Fall

Perth houses have recorded their fifth straight month of declining prices since the start of the year with dwellings dropping 0.8% in May. Compared to last year, house prices are still up 5.7% but Perth is the only capital city to experience negative growth in 2014.  The median house price is now at $525,000.

Today also comes the news that interest rates will be held steady by the Reserve Bank of Australia but expectations are that interest rates will start to rise by the end of the year. Given the new stamp duty threshhold of $430,000, one would guess that the median house price will probably track backwards in June as well, with the bargaining power shifting back to the buyer with sellers looking to close their sales bu 30 June when the $500,000 stamp duty exemption ends.

Thursday, May 15, 2014

What should a First Home Saver Account Holder do?

This week's federal budget has landed a quiet blow to the 46,000 people who have opened up a First Home Saver Account, but the news is not all bad. Whilst the program will be wound up, one advantage is that all 42,000 account holders will be able to withdraw their savings at the end of the next financial year without having to buy a house to withdraw the money.

The FHSA were supposed to help hundreds of thousands of first homebuyers when it was launched in 2008 with a prediction that over $4 billion dollars will be held in those accounts by this time but only $521 million sit in the 46,000 accounts with an average of $11,000 in each account.

If you have a current FHSA, our understanding is that the 17% government co-contribution will continue for all deposits up to $6,000 in the 2013/14 financial year. That means if you haven't put in any money into your FHSA this year because you were not sure whether you would be able to get the money out, it may be a good idea to make the most of the $1,020 co-contribution still available if you transfer $6,000 into your FHSA. Even if you don't get the co-contribution, your interest earned in that account still gets only taxed at 15% and you can get the money out at the end of next financial year.

This is from the ATO website

Abolition of the first home saver accounts (FHSA) scheme

In the 2014-15 Budget, the Federal Government announced the following changes to abolish the first home saver accounts scheme;
  • New accounts created in respect of applications made from 7.30pm, Tuesday 13 May 2014 will not be able to access any concessions or the government contribution.
  • Eligibility for a government contribution will cease from 1 July 2014.  Existing account holders will continue to receive the government contribution for personal contributions made during the 2013-14 income year.
  • Tax and social security concessions will cease from 1 July 2015.  Existing account holders will continue to receive all tax and social security concessions associated with these accounts for the 2013-14 and 2014-15 income years.
  • Restrictions on withdrawals will be removed from 1 July 2015.
Once the first home saver account scheme is abolished from 1 July 2015, these accounts will be treated like any other account held with a provider.
The existing rules will continue to apply until the law is changed.

Friday, May 9, 2014

45 Perth Suburbs Under Stamp Duty Exemption $430,000

The biggest announcement for real estate in WA from the Budget is that the government will drop the threshold for houses with stamp duty exemption to $430,000. The median house price in WA is at $545,000 which means that it is increasingly harder to find a property which will not attract any stamp duty. According to RP Data, only 45 suburbs in Perth and the extended metropolitan area have a median house price of less than $430,000. To help you with visualising this, we have placed all 45 suburbs in a map which also shows their distance from Perth city. You can see this here



MEDIAN HOUSE PRICES BELOW $430,000
Source: RP Data. All data is to February 2014.
ARMADALE $315,000
BALGA $416,000
BANKSIA GROVE $415,500
BEECHBORO $430,000
BELLEVUE $352,000
BERTRAM $415,000
BROOKDALE $309,750
BUTLER $430,000
CALISTA $307,500
CAMILLO $312,000
CLARKSON $429,000
COOLOONGUP $323,500
ELLENBROOK $430,000
GIRRAWHEEN $390,000
GOLDEN BAY $392,500
GOSNELLS $365,000
HERNE HILL $421,500
HILLMAN $330,000
KELMSCOTT $360,000
KENWICK $405,000
KOONDOOLA $397,000
KOONGAMIA $352,000
LANGFORD $402,000
LEDA $327,000
LOCKRIDGE $372,000
MADDINGTON $360,000
MEDINA $272,500
MERRIWA $377,000
MIDDLE SWAN $380,000
MIDLAND $395,000
MIDVALE $350,000
MIRRABOOKA $401,000
MUNDIJONG $395,000
ORELIA $328,750
PARMELIA $315,000
PORT KENNEDY $397,000
RIDGEWOOD $421,500
SAFETY BAY $420,000
SEVILLE GROVE $380,000
STRATTON $357,250
SWAN VIEW $407,000
TWO ROCKS $402,000
WAIKIKI $390,000
WARNBRO $360,000
YANCHEP $422,000

Thursday, May 8, 2014

Rents Down Vacancies Up in Perth

REIWA has reported that the median rent per week has dropped 2% to $450 in the metro area over the last three months to April. The vacancy signs are out for 4% of properties which seems to be resulting from an extra 5000 rental homes on the market.

What is most surprising is that compared to last year, there are 56% more available rentals in the market. The RBA also announced this week that they will continue to leave interest rates at the same rate as the last few months.

Tuesday, April 29, 2014

How Perth Housing has Changed - First Homebuyers

I recently came across an article from the Business Insider about how Perth has changed. Part of the article talked about first home buyers. I've extracted that part below.

One indicator on how deeply wealth has penetrated into society is the state of the first home buyer market, where affordability and confidence are critical elements.
The first home buyer has been absent in the eastern states for some time but in WA there’s something of a boom. And this has happened despite a three-fold increase in the cost of the average first home over 14 years.
In 2000, there were 1,430 first home buyer grant applications across the state for the month of July. That was when the entry for the median purchase price for established homes was $122,000.
Over the last year, monthly first home owners grant applications have been between 1,600 and 1,700. The Office of State Revenue reports the median purchase price for first home buyers is $438,000.
The Real Estate Institute of WA says: “Of course the median is only the middle price which means that half of all first home buyers are purchasing under $438,000 and there is plenty of stock under $400,000, including house and land packages.”
The percentage of first home buyers as a proportion of the overall housing market has been above average for some time and last year was at times almost 30 per cent of the whole market.
Read more: http://www.businessinsider.com/mining-boom-impact-on-western-australia-2014-3#ixzz30G7jQXQR

Tuesday, April 1, 2014

RBA Keeps Cash Rate Steady for April

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a pick-up this year. The United States economy, while affected by adverse weather, continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth. China's growth remains generally in line with policymakers' objectives, though it may have slowed a little in early 2014. Commodity prices have declined from their peaks but in historical terms remain high.
Financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets are well placed to provide adequate funding, though for some emerging market countries conditions are considerably more challenging than they were a year ago.
In Australia, the economy grew at a below trend pace in 2013. Recent information suggests slightly firmer consumer demand over the summer and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have improved from a year ago and exports are rising. But at the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans. Public spending is scheduled to be subdued.
The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. It will probably rise a little further in the near term. Growth in wages has declined noticeably. If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate.
Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth is slowly picking up. Dwelling prices have increased significantly over the past year. The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards.
Looking ahead, continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.
In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.

Friday, March 21, 2014

Sydney Apartments More Expensive than Perth Houses

When we think about how expensive Perth is, let's put it in perspective. This week news came out of Sydney that apartments there are more expensive than houses around other parts of Australia. Last week, Sydney units sold at a median price of $570,000 compared to the median house price for Perth of $505,000.

Units in Sydney have gone up 35% in the last three years and 6% in the past year.

Tuesday, March 4, 2014

Perth House Prices Down - Interest Rates Steady

It was announced yesterday that Perth house prices dropped 0.2% in the past month in a quiet February bringing down the median house price to $514,500 in Perth. Today, the RBA kept interest rates steady, citing unemployment concerns. There have been many high profile corporate collapses in the last few weeks with the federal government refusing to assist SPC, Toyota and Qantas as they slashed jobs.

The announcement from the RBA today can be found below

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.

Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a pick-up this year. The United States economy, while affected by adverse weather, continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth, while China's growth remains in line with policymakers' objectives. Commodity prices have declined from their peaks but in historical terms remain high.

Financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets are well placed to provide adequate funding, though for some emerging market countries conditions are considerably more challenging than they were a year ago.

In Australia, recent information suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have shown improvement and exports are rising. At the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative. Public spending is scheduled to be subdued.

The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. Growth in wages has declined noticeably. If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate.

Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth remains low overall but is picking up gradually for households. Dwelling prices have increased significantly over the past year. The decline in the exchange rate seen to date will assist in achieving balanced growth in the economy, though the exchange rate remains high by historical standards.

Looking ahead, the Bank expects unemployment to rise further before it peaks. Over time, growth is expected to strengthen, helped by continued low interest rates and the lower exchange rate. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.

In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.

Tuesday, February 4, 2014

RBA Cash Rate stays at 2.5%

The RBA has indicated that there is a good chance that rates will not be moving much in the near future as it decided today to keep the cash rate at 2.5%. This will be good for Australia, providing certainty for home owners and businesses for the coming months. Here is their full statement to the media below.

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Since the Board's previous meeting, information on the global economy has been consistent with growth having been a bit below trend in 2013, but with reasonable prospects of a pick-up this year. The United States economy continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth, while China's growth remains in line with policymakers' objectives. Commodity prices have declined from their peaks but in historical terms remain high.
The Federal Reserve has begun the process of curtailing stimulus measures but financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets remain able to provide adequate funding, but for some emerging market countries conditions are considerably more challenging than they were a year ago.
In Australia, information becoming available over the summer suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have shown improvement. At the same time, with resources sector investment spending set to decline significantly, considerable structural change occurring and lingering uncertainty in some areas of the business community, near-term prospects for business investment remain subdued. The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. Growth in wages has declined noticeably.
Inflation in the December quarter was higher than expected. This may be explained in part by faster than anticipated pass-through of the lower exchange rate, though domestic prices also continued to rise at a solid pace, despite slower growth in labour costs. If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time.
Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth remains low overall but is picking up gradually for households. Dwelling prices have increased further over the past several months. The exchange rate has declined further, which, if sustained, will assist in achieving balanced growth in the economy.
Looking ahead, the Bank expects growth to remain below trend for a time yet and unemployment to rise further before it peaks. Beyond the short term, growth is expected to strengthen, helped by continued low interest rates and the lower exchange rate. Inflation is expected to be somewhat higher than forecast three months ago, but still consistent with the 2–3 per cent target over the next two years.
In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.

Thursday, January 30, 2014

Perth's New Median House Price $545,000

REIWA has announced that the Perth median house price has now reached a new high of $545,000 and could get up to $570k by the end of the year. In December 2012, the house prices in Perth were at $495,000 which means that the median house price has gone up 10% in the past year.

Friday, January 3, 2014

2013 in Perth 9.9% growth

Perth has recorded a 9.9% increase in median house prices in the past year which is second in the country after Sydney (14.5%) Perth's median house price according to RP Data is now at $520,000. Just in December, Perth's median house price went up 1.3% in a normally quiet month for real estate. Apparently, the increase last year was the best since 2009 for Perth.

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