Tuesday, May 31, 2011

Other Perth Real Estate News..

Perth New Home Sales Down 10%

New home sales in WA have dropped 10% whilst the rest of the country experiences a very slight 0.2% increase. With these changes have come calls for sellers to adjust their expectations down until the 1.5 to 1 ratio of supply to demand in WA improves.

Perth Apartment Sales Down 30%
Apartments in WA have dropped significantly as well with sales of apartments in the year to March 2011 almost 30% lower than the previous year! The Real Estate Institute of WA Alan Bourke reported that buyer activity was also down 25% across the board. 

Once upon a time in 2009...

The year was 2009. The world grappled with the mysterious Swine Flu virus, Obama entered into the White House and Perth was threatening to overtake Sydney as the most expensive city in Australia. According to RP Data, we got to within 2.3% of Sydney's median prices and then everything changed. Today, the news reported that the difference between Perth and Sydney is now $50,000 which is a massive 18% difference in price with Sydney! Over the past 12 months Perth prices have dropped 7.1% which is more than any other city.

Some articles we had in early 2009

Sunday, May 29, 2011

Why I would choose Ubank Variable Loan 6.59%

There is nothing like watching a new competitor come into a market and challenge the status quo and taking a chunk of the market with them. The National Australia Bank internet subsidiary Ubank has thrown down a lofty challenge to the incumbents by dropping their variable home loans to 6.59%.

To take advantage of this, you must have an existing home loan of which more than 20% of the value of the house has already been paid off. They are not offering this product to new home loans, just those with existing home loans looking to refinance.

I didn't realise how much a difference this was going to make until I tried comparing someone who is on a $300,000 loan paying say an existing 7.30% variable interest rate over 30 years, with Ubnk's 6.59%. The calculator showed that the person would save $134,035 and pay off their loan 5.5 years earlier! Even though this is a rough calculation, that figure is staggering and worthy of closer inspection.

So some of the questions I had in mind were -

No Offset account?
Some don't like the idea of not having an offset account but from what I could tell (and do correct me if I am wrong), Ubank allows you to redraw any amount over $1,000 that is over the minimum repayment schedule from your home loan account at any time without any fees.

No branch access?
WHen i thought about it, I hardly trust anyone nowadays and do my own research so how much do I lose not having a bank rep to talk to? How complicated can home loans be? So I decided this was not such a problem, you can always call them up anyway.

Variable means it can go up any time right?
That was also another concern I had but even assuming you can't trust anyone, your alternatives are other banks and home loan institutions and so at the end of the day, maybe you should just look at the rate if you don't trust anyone anyway? I was also thinking, the people attracted to Ubank are probably the same people who would be the first to bail on Ubank if they suddenly decided to rip people off. The typical user is net savvy and in one combined social media orchestrated jump, could leave Ubank and NAB licking their wounds so I found comfort in that.

What other issues can you see people may want to consider? But in the end it looks like Ubank is worth a shot and since there are no exit fees, just keep your finger on the trigger at the first sign of Ubank going 'traditional bank'.

Landgate shows Perth Property Sales 16 Year Low

Dangerous signs appear as Landgate confirms that property transactions in April were at a record low, with a 15% drop in transactions compared to April 2010. Have you bought a house recently? Leave a comment about how things went.

Tuesday, May 24, 2011

Is a Home an Investment?

There was an interesting article article in WAToday by a research fellow at the Centre for Independent Studies Adam Creighton. He looks at the argument that homes are investments with a very different conclusion than we are used to. 

Buying a house or unit isn't the financial investment Australians believe it to be.
Ask any economist. Buying a house or unit that someone else built is not an investment.
For economists, investment requires sacrifices of consumption today to improve the capacity of the economy in the future. Machinery, new buildings, and university degrees: these are investments.
Australians can swap title deeds at whatever velocity and price they like without bolstering the country's economic capacity one jot.
To the extent buying a house is an ''investment'', it is a gamble on factors the owner-occupier cannot control. House prices are beholden to the rate of land release, interest rates, councillors' tolerance for development, and population growth, for example. At least a small businessman's efforts and skill affect the performance of his investments.
To be sure, housing has been a very successful gamble in recent decades. Since the early 1970s Australian house prices, even accounting for inflation, have surged more than 150 per cent. Average Australian household income, by contrast, has increased about 30 per cent over the same period.
The gamble has not paid off well recently, however. The Real Estate Institute of Victoria reckons median house prices in Melbourne collapsed 6 per cent in the three months to March. Nationally, prices fell almost 2 per cent according to the Australian Bureau of Statistics.
Read the rest of the article here.

Thursday, May 12, 2011

Colin Barnett on First Homebuyer Grant - No

"I don't want to hark back to the past, but in previous times couples, single people would often be content with buying a flat or an old house and doing it up... Now there seems to be an expectation amongst many, if not all, first-home owners to buy a brand new four bed, two bathroom home. Be realistic about your expectations and be prepared to buy a fairly humble property first off and gradually work your way up as you go through life and your income increases." - Colin Barnett 11/5/11

I guess we won't be getting an increase in the first homebuyer grant. The only thing left to do is keep our expectations low. That is, don't buy houses until they are affordable. Buyer's strike may not be going ahead but we can still exercise buyer discernment.

Tuesday, May 3, 2011

Rates left at 4.75% as AUD nears USD1.10

At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent.
The global economy is continuing its expansion, led by very strong growth in the Asian region. The recent disaster in Japan is having a major impact on Japanese production, and some effects on production of manufactured products further afield. Commodity prices, including oil prices, have generally continued to rise over recent months, pushing up measures of consumer price inflation in many countries. A number of countries have been moving to tighten their monetary policy settings. Overall, though, financial conditions for the global economy remain accommodative. Uncertainty remains over the prospects for resolution of the banking and sovereign debt issues in Europe.
Australia's terms of trade are reaching higher levels than assumed a few months ago, and national income is growing strongly. Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices. In the household sector thus far, in contrast, there continues to be caution in spending and borrowing, and a higher rate of saving out of current income.
The natural disasters over the summer have reduced output in some key sectors and the resumption of coal production in flooded mines is taking longer than initially expected. It is likely this caused a decline in real GDP in the March quarter. Production levels should, however, recover over the months ahead, and there will be a mild boost to demand from the rebuilding efforts as they get under way. Over the medium term, overall growth is likely to be at trend or higher.
Growth in employment has moderated over recent months and the unemployment rate has been little changed, near 5 per cent. Most leading indicators suggest further growth in employment, though most likely at a slower pace than in 2010. Reports of skills shortages remain confined, at this point, to the resources and related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.
Overall credit growth remains quite modest. Signs have continued to emerge of some greater willingness to lend, and business credit has resumed growth after a period of contraction. Growth in credit to households, on the other hand, has softened recently, as have housing prices in several cities. The exchange rate has risen further and, in real effective terms, is at its highest level in several decades. This, if sustained, could be expected to exert additional restraint on the traded sector.

Recent data on inflation show the effects of production losses due to the floods and Cyclone Yasi. The affected prices should fall back later in the year, though substantial rises in utilities prices are still occurring. The Bank expects that, as the temporary price shocks dissipate over the coming quarters, CPI inflation will be close to target over the year ahead.
Looking through these short-term movements, however, the recent information suggests that the marked decline in underlying inflation from the peak in 2008 has now run its course. While the rising exchange rate will be helping to hold down prices for some consumer products over the coming few quarters, over the longer term inflation can be expected to increase somewhat if economic conditions evolve broadly as expected.
At today's meeting, the Board judged that the current mildly restrictive stance of monetary policy remained appropriate. In future meetings, the Board will continue to assess carefully the evolving outlook for growth and inflation.

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