Monday, May 31, 2010

Housing Cooling Across the Country

Based on the April RP Data-Rismark Hedonic Home Value Index results, Australia’s housing market has started to display the first signs of a long-anticipated cooling in conditions in line with other recent data, such as weaker auction clearance rates, lower consumer confidence, six interest rate rises in the year and lower finance approvals.
In the month of April, Australian capital city home values (including all houses and units) rose by just 0.2 per cent, which is the lowest monthly growth rate RP Data-Rismark have recorded since the end of the GFC-induced downturn in December 2008. On a seasonally-adjusted basis,* Australian capital city home values advanced by 0.3 per cent.**
All the capital city growth rates recorded in the month of April were substantially less than the national average of 1 per cent per month over the previous year. Indeed, Melbourne’s monthly growth rate of 0.8 per cent in April was half the 1.6 per cent per month average in the year to March.
Read more at Business Spectator

Unit prices fell by 4.1 per cent in Perth to $410,000 and median house prices rose $500 to $495,500 which is the second lowest performance amongst the captial cities around 

A drive down Mt Pleasant showed twelve houses on sale in one main street and on a Saturday, most street corners had home open signs up. 

Thursday, May 20, 2010

WA first home buyers go quiet

From The West today:

WA's first-homebuyer market has plummeted, sparking fears the State's housing industry is about to stall.
Data from the Office of State Revenue on first-homeowner grants show that there were 1334 fewer first-home buyers in April this year compared with the same month last year. "The artificial boom of first-time buyers triggered by the Commonwealth grant has now well and truly ended," Real Estate Institute of Western Australia president Alan Bourke said.
In addition to the scrapping of the first-homebuyer stimulus grant, he said a string of rising interest rates also contributed to the collapse of the market.
For the month of April the OSR data showed 728 first-home buyers bought an existing home and 260 decided to build.
This is in contrast to April last year when 1555 bought established homes and 767 built new ones.
The statistics show that it is not only the first-homebuyer market that is down, with sales across the board dropping 15 per cent in Perth during April.
Homebuyers Centre sales and marketing manager Jared Stone said that demand for homes was still high but buyers were finding it difficult to obtain finance. "The demand for first homes has not changed from last year but the difference now is that there are no longer any government grants and coupled with the wash-up from the global financial crisis, banks have tightened their lending criteria which is making it difficult for first-time buyers," he said.

Wednesday, May 12, 2010

Federal Budget impacts on First Home Buyers

Last night, the Federal government handed down their election budget and naturally, this will impact the housing market across the country. You can read more from the NAB's analysis of the budget here but some of the main areas that will be affected include -

  • First Home Saver Accounts - No longer required to abstain from buying a house until the end of four years. Once legislation is passed, you will be able to use the balance of your first home saver account to put towards a mortgage at any time.
    • Make sure you wait until the legislation is passed before buying the house! 
  • 50% off tax on Interest income - Government is encouraging people to save by giving them a 50% discount on their tax on interest income from savings accounts. Sounds good but
    • It only starts from 1 July 2011 
    • Applies to only first $1000 of your interest income
    • And only if this legislation is passed
  • Less time on tax returns - If your tax return is quite straightforward, you can opt to get a $500 tax deduction and not have to prove your deductions.

Tuesday, May 11, 2010

What's Everyone Doing in the Market now?

The Real Estate Insitute of WA's has released the latest quarterly figures. The results show that the median house price rose by more than three per cent from $485,000 to $500,000. At the same time, the number of properties that were sold fell by 400 from the previous quarter. 
The market looks like it has slowed down but those that ARE buying are existing homeowners upgrading their properties to more expensive properties, pushing the median house price up. Rental vacancy rates have stagnated as many renters are becoming homeowners. SO what is the effect for a first homebuyer? As people upgrade their properties and interest rates continue to go up, there should be a greater pressure on these upgraders to sell their old house faster. If interest rates continue to go up, first home buyers may start entering in the market to find desperate sellers. That's how I see it anyway... what are your thoughts?

Tuesday, May 4, 2010

Why did the Interest Rates Increase again?

You may have already heard that the RBA increased interest rates again. Here is the statement from  the Reserve Bank as to the reasons why they lifted the cash rate by 0.25% today.

At its meeting today, the Board decided to raise the cash rate by 25 basis points to 4.5 per cent, effective 5 May 2010.
Recently, forecasts for world GDP growth have been revised up again, and growth is expected to be at trend pace or a little above in 2010. Conditions in Europe remain quite weak, though recent data suggest growth is becoming more established in North America. In Asia, where financial sectors are not impaired, growth has continued to be strong, contributing to pressure on prices for raw materials. The authorities in several countries outside the major industrial economies have now started to reduce the degree of stimulus to their economies.
Global financial markets are functioning much better than they were a year ago, but sovereign risk concerns have escalated significantly in Europe over recent weeks. This has prompted additional efforts by policymakers to put fiscal policies onto a sounder footing and to provide support for Greece in the near term. To date, there has been very little contagion outside Europe.
Australia’s terms of trade are rising by more than earlier expected, and this year will probably regain the peak seen in 2008. This will add to incomes and foster a build-up in investment in the resources sector. Under these conditions, output growth over the year ahead is likely to exceed that seen last year, even though the effects of earlier expansionary policy measures will be diminishing. The process of business sector deleveraging is moderating, with business credit stabilising and indications that lenders are starting to become more willing to lend to some borrowers, though credit conditions for some sectors remain difficult. Credit outstanding for housing has been expanding at a solid pace. New loan approvals for housing have moderated over recent months as interest rates have risen and the impact of large grants to first-home buyers has tailed off. Nonetheless, at this point the market for established dwellings is still characterised by considerable buoyancy, with prices continuing to increase over recent months.
Recent data on inflation confirm that it has declined from its peak in 2008, helped by a noticeable slowing in private-sector labour costs during 2009, the rise in the exchange rate and the earlier period of slower growth in demand. In both underlying and CPI terms, inflation over the most recent 12 months was around 3 per cent. Nonetheless, the extent of decline from here may not be quite as much as earlier forecast and inflation now appears likely to be in the upper half of the target zone over the coming year.
With the risk of serious economic contraction in Australia having passed some time ago, the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more. The Board expects that, as a result of today’s decision, rates for most borrowers will be around average levels. This represents a significant adjustment from the very expansionary settings reached a year ago.
The Board will continue to assess prospects for demand and inflation, and set monetary policy as needed to achieve an average inflation rate of 2–3 per cent over time.

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