PROPERTY buyers . . . on your mark, get set, go.
The race is on for residential investment properties before the competition gets too hot, according to two national forecasters.
Record low interest rates and record high rents mean for many investors their new rental properties will be profitable from day one - without relying on negative gearing.
However, the same conditions also make buying a first home cheaper than staying renting.
But some potential buyers, both investors and owner occupiers, are still holding back because of uncertainty about the economy and job security.
This is only making prices and choices even better for those people with funds to buy. The window, however, could be about to shut.
According to economic forecaster BIS Shrapnel investors and first home buyers are now the two biggest competitive forces in the housing market.
Rising rents and low interest rates are creating perfect conditions for both groups, according to BIS Shrapnel senior economist Jason Anderson.
But they are competing for the same properties which is expected to push up prices at the bottom end of the market.
First home owners are now finding that buying is a similar cost to renting, while investors can have positive cash flow from day one with the current mix of low rates and high rent.
"People can take out a fixed rate and lock that in for the next few years at less than 6 per cent. At the same time rental yields are up to 7 per cent with strong rent growth still to come," Mr Anderson said.
"The competition at the cheaper end could trigger a partial ignition of prices.
"The feedback is that in some of the cheaper parts of the market prices are already starting to come up.
"The feedback of that type we've had is that prices are up by about 5 to 6 per cent."
Some economists had forecast that the property market would show signs of increased competition in the second half.
But Mr Anderson said it had already started.
National property research company RP Data said on Friday a fall in house prices across the country was offset by an increase in weekly rents.
This provided further evidence that some households would be better off buying rather than continue renting.
In Melbourne the median rent for a house increased from $300 to $350 a week during the past year.The median rent for an apartment or unit rose $40 a week to $320.
Rents were forecast to increase again during the year, RP Data research analyst Cameron Kusher said.
However, first home buyers might still need an extra nudge to take the plunge.
"Throughout 2009 it is anticipated that rental growth will continue to be strong, although it may not be as strong as witnessed during the last 12 months," Mr Kusher said.
"Rental vacancy rates remain tight and although the government is offering up attractive incentives for first home buyers currently, many are still not in a financial position to purchase."
As long as there are more people wanting to be housed than there are houses available, higher rents and eventually higher purchase prices will remain.
According to housing estimates from ANZ Bank, there is demand for about 180,000 new homes each year in Australia.
In the year to September 2008 only 150,000 homes were built - leaving a shortfall of 30,000.
By Karina Barrymore
Publication: Herald Sun, March 23, 2009
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So what is likely to happen with the Australian Property Market in 2009 and beyond? It is a question that all the economists are at times dubious to answer and make predictions, and other times a little too fast out of the blocks to make estimates. Then there are the professors that love to grab headlines and make names for themselves and predict property will drop by 40% in 2009 with very little reason (or substance) to back up their doubtful commentary. It’s expected that most Australians want to know “can what has happened in the US housing market happen here?” Short answer… it could – but it’s highly unlikely!
Why? There are simply too many differences between the US housing market fundamentals when comparing to the Australian Housing Market fundamentals. Let’s firstly look at those defaulting on their mortgages. The main concern in the US housing market is those with subprime (Low doc or No doc) mortgages (this is the core of the credit crunch). Sub-prime mortgages account for 10% of the total US mortgage market. The Reserve Bank of Australia has determined that sub-prime accounts for only 4% of Australian mortgage-backed securities. The default rate for US sub-prime is currently 10%. The default rate for Australian low-doc loans is only 1%. So why is the default rate 1000% higher in the US than Australia? The answer is because housing loans in the US are non-recourse. Recourse loans are loans that allow the lender to come after you in case you default. Non-recourse loans are loans that create more risk for lenders and little for the borrower (borrowers are just sending the keys back to the banks with no liability for the debt). All housing loans in Australia are recourse loans – far less risk to the banks and a key reason why the Australian housing market is unlikely to collapse.
We also have to look at the enormous shortage of stock (property) as opposed to the massive oversupply in the US. Australia and its states are currently way behind the needed new dwellings required to house our growing population. Australia is growing 50% faster relative to its population than the US. It is anticipated that Australia will have an undersupply of over 160,000 dwellings this year.
The vacancy rates in the US are over 8% compared to the Australian vacancy rate at an alarmingly low 1% (bad for tenants, great for investors). Does this mean that the supply of property will increase from developers seeing the opportunity to build and ‘feed’ this massive undersupply? It’s not that easy. The government is not freeing up land (zoning), council fees and development fees are crippling development costs, high state taxes, and the general lack of confidence with developers. So the supply of housing will be dangerously low for some time yet (years) and the demand will continue to be high for the foreseeable future.
When investing in property, investors need to consider some of the drivers of property growth - Supply and Demand, Demographics, Population Growth, Economic and Employment Growth, Infrastructure changes, the Rental Market and current Government policies.
Written by Anthony Simon, Co-Founder of apsgrowth
Find out where Anthony is speaking next at http://www.apsgrowth.com/eventsoverview for more information.
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INTEREST rates are tipped to hit a record-low by winter - and analysts say this makes fixed-rate home loans a good idea again.
The popularity of fixed-rate loans collapsed to a record-low last year as the Reserve Bank of Australia slashed rates aggressively.
This left some families paying interest rates of more than nine per cent while others on variable rates saw their mortgages drop.
But fixed mortgages are now seen as possible insurance against a surprise rise in rates.
Aussie Home Loans founder and executive chairman John Symond says the overnight cash rate will hit two per cent by mid-2009, down from the present 45-year low of 3.25 per cent.
"I do believe the cash rate will get down to 2 per cent within the next three to four months," Mr Symond told AAP.
The official cash rate has not approached this level since the RBA was legislated in 1959.
With interest rates on home loans now also at four-decade lows, Aussie's Mr Symond said fixed-rate borrowing was starting to look like a good option again.
"We're getting very close to where fixed rates may be very appealing," he said.
"I would think consumers should keep their eyes out for the next month.
"My feeling is if you can lock in a fixed rate within half a percent of record lows, you've done very well."
A senior analyst with financial products researcher Canstar Cannex, Harry Senlitonga, said there was no guarantee interest rates would not rise again unexpectedly, which made fixed-rate mortgages a compelling choice.
"It's a big question mark with interest rates: in three years anything can happen," Mr Senlitonga said.
Macquarie Group interest rates strategist Rory Robertson said interest rates were likely to hit 2 per cent.
But he thinks this will happen later in the year rather than by mid-year because he believes the RBA will cut rates by smaller margins than it has recently.
Debt futures markets see interest rates falling to three per cent by March, which would be the lowest cash rate since early 1960.
With fixed-rate loans now holding a record-low share of the mortgage market, lenders are offering cheaper mortgage rates to entice borrowers away from the lowest standard variable mortgage rates since the 1960s.
St George is offering a fixed-rate mortgage rate of 5.64 per cent, set for three years.
The rate is only marginally lower than the 5.74 per cent standard variable rate offered by NAB and the Commonwealth Bank.
But the fixed-rate mortgage would be attractive if rates rose again in the next three years, and drove up standard variable rates.
Just 2.5 per cent of new borrowers chose a fixed-rate home loan, set for two years or longer, in November, Australian Bureau of Statistics data shows.
Months earlier, between March and August, more than 43,000 unlucky borrowers locked themselves into fixed rate home loans, charging more than nine per cent interest, because they thought rates would keep rising as inflation soared.
Mr Robertson said future rate cuts from the RBA were likely to be smaller than the 100 basis point margins delivered in February, December and October, on top of smaller cuts in between.
"The future moves will be smaller and will be delivered more than one meeting apart," he said.
The latest rate cut on Tuesday took the cash rate to a 45-year low of 3.25 per cent, and standard variable home loan rates below six per cent for the first time since the 1960s.
By Stephen Johnson
Publication: AAP, Feb 2009
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Note to self: 'Cancel credit cards prior to death!
Be sure and cancel your credit cards before you die! This is so priceless
and so easy to see happening - customer service, being what it is today!
A lady died this past January, and ANZ bank billed her for February and
March for their annual service charges on her credit card, and then added
late fees and interest on the monthly charge The balance had been $0.00,
now is somewhere around $60.00.
A family member placed a call to the ANZ Bank:
Family Member:
'I am calling to tell you that she died in January.'
ANZ:
'The account was never closed and the late fees and charges still apply.'
Family Member:
'Maybe, you should turn it over to collections.'
ANZ:
'Since it is two months past due, it already has been.'
Family Member:
So, what will they do when they find out she is dead?'
ANZ:
'Either report her account to the frauds division or report her to the
credit bureau, maybe both!'
Family Member:
'Do you think God will be mad at her?'
ANZ:
'Excuse me?'
Family Member:
'Did you just get what I was telling you . . . The part about her being
dead?'
ANZ:
'Sir, you'll have to speak to my supervisor.'
Supervisor gets on the phone:
Family Member:
'I'm calling to tell you, she died in January.'
ANZ Supervisor:
'The account was never closed and the late fees and charges still apply.'
Family Member:
'You mean you want to collect from her estate?'
ANZ Supervisor:
(Stammer) 'Are you her lawyer?'
Family Member:
'No, I'm her great nephew.' (Lawyer info given)
ANZ Supervisor:
'Could you fax us a certificate of death?'
Family Member:
'Sure.'
(fax number is given )
After they get the fax:
ANZ Supervisor:
'Our system just isn't set up for death. I don't know what more I can do
to help.'
Family Member:
'Well, if you figure it out, great! If not, you could just keep billing
her. I don't think she will care.'
ANZ Supervisor:
'Well, the late fees and charges do still apply.'
Family Member:
'Would you like her new billing address?'
ANZ Supervisor:
'That might help.'
Family Member:
'Rookwood Memorial Cemetery, 1249 Centenary Rd, Sydney Plot Number
1049.'
ANZ Supervisor:
'Sir, that's a cemetery!'
Family Member:
'Well, what the fu#! do you do with dead people on your planet?'
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PUBLICATION: Gold Coast Bulletin
DATE: January 27th, 2009
After more than a decade of planning and controversy, the
billion-dollar Coomera Town Centre has been given the green light, with
the State Government signing off on the Gold Coast City Council master
plan.
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PUBLICATION: The Weekend Australian Financial Review
DATE: December 30, 2008 - January 4, 2009
It's not all bad news for property - it just depends on which part of the market you inhabit.
A year ago, the danger to housing was higher interest rates. Not anymore. In 2009 the threat is unemployment.
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PUBLICATION: The Courier Mail
DATE: 7 December, 2008
THE
number of new homes in the Ipswich local government area will treble
over the next 20 years if the State Government's forecasts are right.
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The negative spiral....
As I sat in my Cairns hotel room listening to CNN describing the
collapse of the world's economic system, my anxiety levels raised much
like everyone else's as we fear what looms around the corner. Quite
clearly the media wants me to believe that the financial crisis is
something unlike we have ever seen before and are unlikely to see
again....
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