Australians in the mortgage belt are spending big on DIY home renovations, which rose 5 per cent to its highest level in two years during the September quarter as strong house prices and a tight labour market and high mortgage interest rates encouraged owners to do up their homes themselves. Spending in the quarter climbed to $891 million, its third consecutive rise, according to the Housing Industry Association's Renovation Monitor. Home owners are betting that rising property prices as well as a tight labour market will make renovation worthwhile after three interest rate rises this year curb the supply of new accommodation. "The retention of large capital gains from residential property together with continuing labour market strength is making major renovation projects an enticing proposition," HIA chief economist Harley Dale said. "This is especially the case at a time when land supply constraints, higher interest rates and unjustifiably high government-imposed costs are conspiring to make new residential construction a less appealing option than it should be."A separate report distributed today by the Real Estate Institute of Australia showed average vacancy rates ranging from 1.1 per cent in Canberra to 2.1 per cent in Perth, as higher interest rates restrain borrowing for home construction. According to the September quarter Real Estate Market Facts, annual returns across the country on three bedroom houses ranged between 14.1 per cent and 17.1 per cent over the period from March, 1983, to the present. Some 10,308 households across Australia began major home renovations at an average value of $86,476, the HIA report said. Spending rose fastest in the ACT, where it climbed 68 per cent, with Tasmania second with a 61 per cent rise, while spending fell six per cent in Western Australia, according to the HIA report
Source: AAP
Tuesday, December 19, 2006
Canberra home rental scarcity creates rent rise surge
The residential home rental market in Canberra Australia is now almost impossible to break in to and it's going to get even harder as rents climb, the Real Estate Institute of Australia (REIA) says.New REIA market figures show Canberra has the tightest vacancy rate in Australia, with just 1.1 per cent of properties vacant currently.
Across Australia, vacancy rates are extremely low, in Sydney the rate is 1.7 per cent, in Adelaide 1.5 per cent and the highest rate is in Perth at 2.1 per cent.
REIA ACT President Peter Blackshaw said he has never seen such a shortage of accommodation in the Australian Capital Territory.
"At the moment it's very, very tight - it's certainly the tightest that I've known it and I've lived in Canberra for nearly 20 years and the really alarming thing is it's going to get a lot worse,'' Mr Blackshaw told ABC radio today.
The market is so tight, he said, because there are not enough people investing in residential property, instead they are putting their money into the stock market or other investments.
"The local government takes such a big proportion of the rent through land tax and rates that (residential property) just doesn't make sense as an investment,'' he said.
One way to fix the situation would be to abolish land tax, he said, or at least start cutting it back. If the Government does not start cutting back land tax, Mr Blackshaw said there was a risk some really serious social problems would arise.
"The people who are going to be hurt in this situation are the low income earners because they're going to be outbid by people coming in from outside of Canberra.''
And the difficulty in finding a rental property will not be the only problem for Canberrans, Mr Blackshaw also said rents are starting to rise significantly.
The next time a lease expires or a property becomes vacant, he said, landlords will be able to demand a significant increase on rent, in some instances more than ten per cent.
ACT Chief Minister John Stanhope said the real reason for the low vacancy rate in the ACT is that the economy is so strong.
"The fact is, we are now dealing with the pressures of a busting, booming economy and I think it's fantastic,'' Mr Stanhope told ABC radio.
"I must say I find it ironic that here we are complaining about the incidence that we have this enormously strong economy.''
Mr Stanhope said he was investigating the possibility of reducing land tax and was awaiting advice from both the Skills Commission and the Affordable Housing Taskforce.
Source: AAP
Across Australia, vacancy rates are extremely low, in Sydney the rate is 1.7 per cent, in Adelaide 1.5 per cent and the highest rate is in Perth at 2.1 per cent.
REIA ACT President Peter Blackshaw said he has never seen such a shortage of accommodation in the Australian Capital Territory.
"At the moment it's very, very tight - it's certainly the tightest that I've known it and I've lived in Canberra for nearly 20 years and the really alarming thing is it's going to get a lot worse,'' Mr Blackshaw told ABC radio today.
The market is so tight, he said, because there are not enough people investing in residential property, instead they are putting their money into the stock market or other investments.
"The local government takes such a big proportion of the rent through land tax and rates that (residential property) just doesn't make sense as an investment,'' he said.
One way to fix the situation would be to abolish land tax, he said, or at least start cutting it back. If the Government does not start cutting back land tax, Mr Blackshaw said there was a risk some really serious social problems would arise.
"The people who are going to be hurt in this situation are the low income earners because they're going to be outbid by people coming in from outside of Canberra.''
And the difficulty in finding a rental property will not be the only problem for Canberrans, Mr Blackshaw also said rents are starting to rise significantly.
The next time a lease expires or a property becomes vacant, he said, landlords will be able to demand a significant increase on rent, in some instances more than ten per cent.
ACT Chief Minister John Stanhope said the real reason for the low vacancy rate in the ACT is that the economy is so strong.
"The fact is, we are now dealing with the pressures of a busting, booming economy and I think it's fantastic,'' Mr Stanhope told ABC radio.
"I must say I find it ironic that here we are complaining about the incidence that we have this enormously strong economy.''
Mr Stanhope said he was investigating the possibility of reducing land tax and was awaiting advice from both the Skills Commission and the Affordable Housing Taskforce.
Source: AAP
Sales of News home fall as home buyers stall
New home sales fell in November as interest rates rose for the third time this year stalling new home buyers, new figures show.
The Housing Industry Association's new home sales figures showed that the sale of new homes and units among Australia's largest builders and developers dropped 5.3 per cent last month to 7097 dwellings.
The results follow a 1.3 per cent rise in October to 7434 dwellings.
HIA chief economist Harley Dale said the fall was due largely to the November rate rise, which pushed interest rates up to 6.25 per cent and followed rises in May and August.
"New home sales have well and truly had their wings clipped in 2006 as demand for new housing has suffered a second wave of weakness at the hands of a fresh set of rate rises,'' he said.
He said that, with affordability at record lows, there simply were not enough people who could afford to buy new homes.
The monthly HIA report showed that private detached house sales dropped by 7.5 per cent during the month, reflecting falls in the resource-poor states of NSW and Victoria.
Mr Dale said private, detached house sales were now at their lowest level since December, 2000.
Sales of multi-units rose 8.8 per cent, but were note enough to offset a 16 per cent fall in October.
Detached house sales dropped 28.6 per cent in Victoria and 14 per cent in NSW.
But they rose 14.5 per cent in South Australia, 12.3 per cent in Western Australia, and 4.3 per cent in Queensland.
The new home sales survey is compiled from a sample of the largest 100 residential builders in Australia and is the leading indicator on new housing activity.
Source: AAP
The Housing Industry Association's new home sales figures showed that the sale of new homes and units among Australia's largest builders and developers dropped 5.3 per cent last month to 7097 dwellings.
The results follow a 1.3 per cent rise in October to 7434 dwellings.
HIA chief economist Harley Dale said the fall was due largely to the November rate rise, which pushed interest rates up to 6.25 per cent and followed rises in May and August.
"New home sales have well and truly had their wings clipped in 2006 as demand for new housing has suffered a second wave of weakness at the hands of a fresh set of rate rises,'' he said.
He said that, with affordability at record lows, there simply were not enough people who could afford to buy new homes.
The monthly HIA report showed that private detached house sales dropped by 7.5 per cent during the month, reflecting falls in the resource-poor states of NSW and Victoria.
Mr Dale said private, detached house sales were now at their lowest level since December, 2000.
Sales of multi-units rose 8.8 per cent, but were note enough to offset a 16 per cent fall in October.
Detached house sales dropped 28.6 per cent in Victoria and 14 per cent in NSW.
But they rose 14.5 per cent in South Australia, 12.3 per cent in Western Australia, and 4.3 per cent in Queensland.
The new home sales survey is compiled from a sample of the largest 100 residential builders in Australia and is the leading indicator on new housing activity.
Source: AAP
Pre-paid credit cards to be the next big thing
Pre-paid credit cards could soon become more common than phone cards as providers scramble to meet demand for more flexible payment options.
In recent weeks, MasterCard and Visa have launched a raft of pre-paid cards, hoping to cash in on markets previously beyond their reach - such as children, students and adults who have a poor credit history. Pre-paid cards, which could eventually be available at local convenience stores, allow the user to shop online, over the telephone or in person using credit paid for with cash when the card is purchased.
Users load the card with their desired credit amount, typically less than $1000.
The cards don't require a bank account, and can be given away as a gift, or a kind of electronic pocket money to children, allowing purchases such as music downloads.
Already common in overseas markets - including the US, where they are popular among illegal immigrants unable to open bank accounts - pre-paid cards are relatively new to Australia.
But MasterCard and Visa believe there is growing, unmet demand as credit card-style transactions become increasingly necessary for purchases such as airline tickets, hotel bookings and online items.
Infochoice analyst Denis Orrock says pre-paid cards may also prove popular with shoppers concerned about online security.
"In Australia, they will fill a void for people who want to shop on the Net but aren't comfortable using their credit card," Orrock says.
"With a pre-paid card, you know what you're in for."
MasterCard has launched two pre-paid cards, the Westpac Gift Card, available with pre-paid amounts of between $15 and $800, and the Commonwealth Bank travellers cash card, an ATM card
that allows travellers to withdraw pre-paid cash in foreign currency.
Last month, Visa launched the ANZ Gift Card, following up on its Heritage Building Society card, released in May, and the Visa BoPo, its first general-purpose pre-paid card.
Last month also saw the release of Visa's CashXpress, allowing users to send money overseas, and the Universal Visa Gift Card.
Although they miss out on the interest charges that accrue on a credit balance, card providers make money from the sale of individual cards, which cost around $5 each.
They can also re-invest the prepayments until the money is spent, earning returns on the short-term money market.
Based on US experience, most card users take about three months to spend a balance.
As well, Denis Orrock says card providers can usually bank on small sums of a few dollars each remaining unspent at the card's expiry date, generally around six months after purchase.
Source: Sunday Telegrah
In recent weeks, MasterCard and Visa have launched a raft of pre-paid cards, hoping to cash in on markets previously beyond their reach - such as children, students and adults who have a poor credit history. Pre-paid cards, which could eventually be available at local convenience stores, allow the user to shop online, over the telephone or in person using credit paid for with cash when the card is purchased.
Users load the card with their desired credit amount, typically less than $1000.
The cards don't require a bank account, and can be given away as a gift, or a kind of electronic pocket money to children, allowing purchases such as music downloads.
Already common in overseas markets - including the US, where they are popular among illegal immigrants unable to open bank accounts - pre-paid cards are relatively new to Australia.
But MasterCard and Visa believe there is growing, unmet demand as credit card-style transactions become increasingly necessary for purchases such as airline tickets, hotel bookings and online items.
Infochoice analyst Denis Orrock says pre-paid cards may also prove popular with shoppers concerned about online security.
"In Australia, they will fill a void for people who want to shop on the Net but aren't comfortable using their credit card," Orrock says.
"With a pre-paid card, you know what you're in for."
MasterCard has launched two pre-paid cards, the Westpac Gift Card, available with pre-paid amounts of between $15 and $800, and the Commonwealth Bank travellers cash card, an ATM card
that allows travellers to withdraw pre-paid cash in foreign currency.
Last month, Visa launched the ANZ Gift Card, following up on its Heritage Building Society card, released in May, and the Visa BoPo, its first general-purpose pre-paid card.
Last month also saw the release of Visa's CashXpress, allowing users to send money overseas, and the Universal Visa Gift Card.
Although they miss out on the interest charges that accrue on a credit balance, card providers make money from the sale of individual cards, which cost around $5 each.
They can also re-invest the prepayments until the money is spent, earning returns on the short-term money market.
Based on US experience, most card users take about three months to spend a balance.
As well, Denis Orrock says card providers can usually bank on small sums of a few dollars each remaining unspent at the card's expiry date, generally around six months after purchase.
Source: Sunday Telegrah
Sunday, December 10, 2006
Investment alternatives to repaying the home loan
Paying off a home loan was often said to be the wisest way to go in financial affairs whenever any extra cash came into a household. Far better to pay down the home loan than try to find a better return elsewhere, in shares or investment property. Now, it is not so clear, as new tax concessions make super more attractive.
Choosing the home loan as a place to put spare cash was always the winner when judged simply on the arithmetic.
Paying off a home loan costing, say, 7.75 per cent in interest was the same as earning a guaranteed return of 13.2 per cent elsewhere before tax, for those on the highest tax rate of 41.5 per cent. You had to earn 13.2 per cent to be left with 7.75 per cent after tax.
Even those on the lower tax rate of 31.5 are effectively earning a return of 11.3 per cent on funds used to pay off a home loan.
Such an analysis overlooks a few fine points. Buying shares can bring franking credits that lower your total tax bill, and can deliver a capital gain when sold, albeit watered down by capital gains tax.
Holding the shares for at least 12 months will cut capital gains tax by as much as half the top marginal tax rate, to a rate of 24.5 per cent.
Buying a family home might also deliver a tax-free capital gain - as a "primary place of residence" is free of capital gains tax on sale. If it's an investment property, some capital gains tax will apply.
In the wake of the Government's changes to super, it's a much closer call to make between super or the home loan, with super probably gaining the edge if you want to live adventurously.
Say 50-year-old Ross has an extra $200 a month in his pocket after the rejigging of the tax scales earlier this year. Should he whack it into the home loan or go for something entirely different?
The short answer is that if he and his family like a quiet, contented life, and a guaranteed rate of return, he should go the home loan route; if he wants more adventure, then a field of options opens up before him. There are at least six options, according to MLC's technical manager Andrew Lawless. First, he could put the extra $200 into the mortgage, or instead into a unit trust or managed fund.
Then there is the super option, soon to be free of exit taxes from next July for those over 60. The extra $200 a month going in would be an after-tax sum known as an undeducted contribution.
A smarter move to improve his long-term wealth would be to lift his super contributions to a higher plane altogether by arranging with his boss to salary sacrifice.
By doing this, Ross could put as much as $342 a month in pre-tax salary into super, and still enjoy the same after-tax income. Ross could even lift up his risk and reward a notch, by borrowing $200 to make a total investment of $400 a month into a unit trust, with gearing at a 50 per cent level.
Going up another notch of borrowing, he could gear to a 67 per cent level and invest $600 a month. Playing into the decision mix is the knowledge that from next July tax on super will effectively fall to 15 per cent - a good deal less than his current marginal rate of 41.5 per cent.
Let's assume Ross pays a top rate of 41.5 per cent income tax. His home loan of $250,000 is costing him 7.75 per cent a year in interest and consuming $3000 a month in repayments.
As shown in table 1, after 10 years the best option for Ross would be super with a salary sacrifice kicker. He would have $54,338 to his name, almost $20,000 more than if he had paid off the home loan early in nine years instead of 10 and put the savings into a unit trust. Better, too, than keeping on with the home loan and investing the spare $200 in a unit trust or as an undeducted super contribution, (options 2 and 3) and better than gearing into a unit trust (options 5 and 6).
As MLC's Andrew Lawless says, the appeal of investing in an existing home loan debt falls away when compared with better-returning investments elsewhere, especially super with end benefits due to be tax-free at age 60 from next July.
Yet another strategy exists for the bold. What if Ross converted the home loan to an interest-only loan? He would have $1585 a month ($1385 a month extra) to work as an investment, by losing the obligation to repay the principal component of his home loan.
As table 2 shows, Ross is much further ahead financially - by $180,803 even after repaying the original $250,000 home loan debt. As Lawless says: "The numbers show that superannuation will clearly be the better investment, in a comparison with a home loan."
The argument for super is helped greatly by the changes that from next July will allow withdrawals tax-free for those aged 60, though it may be an irritant to have to work until that age, says financial planner Peter Hogan of Avenue Capital Management.
"Provided you are prepared to keep working until 60, rather than simply to a preservation age likely to be a few years earlier, the opportunity to take out the money tax-free and pay off the mortgage in one lump is quite attractive. In a sense, you could have money in super accruing in a 15 per cent tax environment, where the super fund return could be well in excess of your mortgage repayment costs - it's an appealing option if you think over the long term."
Making a choice between the options hangs on a couple of critical elements, particularly the twin unknowns of interest rates and investment earnings that have been flying high in recent years.
"The whole strategy is very sensitive to interest rates and earning rates, and to marginal income tax rates," Hogan says. "If you are confident that home loan rates will rise higher and investment earning rates cannot be sustained at the levels of the past three years, then you are better off paying down the home loan."
And there are a few other thoughts to consider before making a commitment, according to Colonial First State senior adviser Julie Fox.
"You might not be comfortable in not paying down a mortgage ahead of retirement, and not sure that the Government will stay true to its word on the rules on super," she says.
"We've yet to see all the fine print on the super taxes after next July. It's unlikely that the Government will change its mind, but one has to wait and see."
For younger people, there is the nature of super, which is money locked away until retirement age. Some may prefer to have their wealth readily accessible in a unit trust, to be withdrawn whenever needed, such as in an emergency. Most home loans have redraw facilities that also can be a source of emergency money.
So what's the verdict?
Says Lawless: "You'd be better off paying off the home loan, if you are risk averse and prefer a guaranteed rate of return, or you are not prepared to lock up your money in super.
"But if you are prepared to invest in growth assets, such as shares or a unit trust, you can do a lot better than paying off your home loan."
According to Hogan, if someone is willing to be moderately aggressive in their super investing - say 75 per cent in growth assets of shares and property - then going the super route may well be more attractive.
"If you take a view that home loan rates don't have a long way to move, then pumping your money into super and later paying off your mortgage at 60 could be an option."
Julie Fox says a strategy of investing in super ahead of a home loan will appeal to people who already have substantial equity in their home, and who happen to be close to 60 (when super funds can be withdrawn tax-free).
"A shorter time frame in the strategy would minimise the legislative (government) risk," she says.
Source: The Australian, Tim Blue
Choosing the home loan as a place to put spare cash was always the winner when judged simply on the arithmetic.
Paying off a home loan costing, say, 7.75 per cent in interest was the same as earning a guaranteed return of 13.2 per cent elsewhere before tax, for those on the highest tax rate of 41.5 per cent. You had to earn 13.2 per cent to be left with 7.75 per cent after tax.
Even those on the lower tax rate of 31.5 are effectively earning a return of 11.3 per cent on funds used to pay off a home loan.
Such an analysis overlooks a few fine points. Buying shares can bring franking credits that lower your total tax bill, and can deliver a capital gain when sold, albeit watered down by capital gains tax.
Holding the shares for at least 12 months will cut capital gains tax by as much as half the top marginal tax rate, to a rate of 24.5 per cent.
Buying a family home might also deliver a tax-free capital gain - as a "primary place of residence" is free of capital gains tax on sale. If it's an investment property, some capital gains tax will apply.
In the wake of the Government's changes to super, it's a much closer call to make between super or the home loan, with super probably gaining the edge if you want to live adventurously.
Say 50-year-old Ross has an extra $200 a month in his pocket after the rejigging of the tax scales earlier this year. Should he whack it into the home loan or go for something entirely different?
The short answer is that if he and his family like a quiet, contented life, and a guaranteed rate of return, he should go the home loan route; if he wants more adventure, then a field of options opens up before him. There are at least six options, according to MLC's technical manager Andrew Lawless. First, he could put the extra $200 into the mortgage, or instead into a unit trust or managed fund.
Then there is the super option, soon to be free of exit taxes from next July for those over 60. The extra $200 a month going in would be an after-tax sum known as an undeducted contribution.
A smarter move to improve his long-term wealth would be to lift his super contributions to a higher plane altogether by arranging with his boss to salary sacrifice.
By doing this, Ross could put as much as $342 a month in pre-tax salary into super, and still enjoy the same after-tax income. Ross could even lift up his risk and reward a notch, by borrowing $200 to make a total investment of $400 a month into a unit trust, with gearing at a 50 per cent level.
Going up another notch of borrowing, he could gear to a 67 per cent level and invest $600 a month. Playing into the decision mix is the knowledge that from next July tax on super will effectively fall to 15 per cent - a good deal less than his current marginal rate of 41.5 per cent.
Let's assume Ross pays a top rate of 41.5 per cent income tax. His home loan of $250,000 is costing him 7.75 per cent a year in interest and consuming $3000 a month in repayments.
As shown in table 1, after 10 years the best option for Ross would be super with a salary sacrifice kicker. He would have $54,338 to his name, almost $20,000 more than if he had paid off the home loan early in nine years instead of 10 and put the savings into a unit trust. Better, too, than keeping on with the home loan and investing the spare $200 in a unit trust or as an undeducted super contribution, (options 2 and 3) and better than gearing into a unit trust (options 5 and 6).
As MLC's Andrew Lawless says, the appeal of investing in an existing home loan debt falls away when compared with better-returning investments elsewhere, especially super with end benefits due to be tax-free at age 60 from next July.
Yet another strategy exists for the bold. What if Ross converted the home loan to an interest-only loan? He would have $1585 a month ($1385 a month extra) to work as an investment, by losing the obligation to repay the principal component of his home loan.
As table 2 shows, Ross is much further ahead financially - by $180,803 even after repaying the original $250,000 home loan debt. As Lawless says: "The numbers show that superannuation will clearly be the better investment, in a comparison with a home loan."
The argument for super is helped greatly by the changes that from next July will allow withdrawals tax-free for those aged 60, though it may be an irritant to have to work until that age, says financial planner Peter Hogan of Avenue Capital Management.
"Provided you are prepared to keep working until 60, rather than simply to a preservation age likely to be a few years earlier, the opportunity to take out the money tax-free and pay off the mortgage in one lump is quite attractive. In a sense, you could have money in super accruing in a 15 per cent tax environment, where the super fund return could be well in excess of your mortgage repayment costs - it's an appealing option if you think over the long term."
Making a choice between the options hangs on a couple of critical elements, particularly the twin unknowns of interest rates and investment earnings that have been flying high in recent years.
"The whole strategy is very sensitive to interest rates and earning rates, and to marginal income tax rates," Hogan says. "If you are confident that home loan rates will rise higher and investment earning rates cannot be sustained at the levels of the past three years, then you are better off paying down the home loan."
And there are a few other thoughts to consider before making a commitment, according to Colonial First State senior adviser Julie Fox.
"You might not be comfortable in not paying down a mortgage ahead of retirement, and not sure that the Government will stay true to its word on the rules on super," she says.
"We've yet to see all the fine print on the super taxes after next July. It's unlikely that the Government will change its mind, but one has to wait and see."
For younger people, there is the nature of super, which is money locked away until retirement age. Some may prefer to have their wealth readily accessible in a unit trust, to be withdrawn whenever needed, such as in an emergency. Most home loans have redraw facilities that also can be a source of emergency money.
So what's the verdict?
Says Lawless: "You'd be better off paying off the home loan, if you are risk averse and prefer a guaranteed rate of return, or you are not prepared to lock up your money in super.
"But if you are prepared to invest in growth assets, such as shares or a unit trust, you can do a lot better than paying off your home loan."
According to Hogan, if someone is willing to be moderately aggressive in their super investing - say 75 per cent in growth assets of shares and property - then going the super route may well be more attractive.
"If you take a view that home loan rates don't have a long way to move, then pumping your money into super and later paying off your mortgage at 60 could be an option."
Julie Fox says a strategy of investing in super ahead of a home loan will appeal to people who already have substantial equity in their home, and who happen to be close to 60 (when super funds can be withdrawn tax-free).
"A shorter time frame in the strategy would minimise the legislative (government) risk," she says.
Source: The Australian, Tim Blue
Are you suffering from housing stress?
Most of Australia is officially in "housing stress", with more than a third of family income required to service the average home loan.
The Real Estate Institute of Australia, which compiled the figures, said affordability was consequently now at its lowest point in 16 years, with families in NSW, Queensland and Tasmania hardest hit.
Home owners, on average, now need to spend more than 30 per cent of their income on mortgage repayments, the level at which borrowers are said to be in housing stress.
"First-home buyers are being locked into the rental market due to deteriorating home-loan affordability," REIA president Graham Joyce said yesterday.
"With today's low vacancy rates, rents are going to increase significantly, making it even more difficult for renters to become buyers."
Low housing affordability has been driven by the last property boom and rising interest rates.
Negative gearing laws on investment properties have also contributed to the blowout in housing affordability, as they encourage people to buy multiple properties, forcing up prices at the lower end of the market.
In one reprieve for stretched home owners, the Reserve Bank of Australia left official interest rates unchanged at 6.25 per cent yesterday after raising rates three times this year.
But the September quarter affordability results reflected only two of those rises and affordability was expected to further deteriorate in the December quarter, the Housing Industry Association said.
Any worsening affordability is expected to be halted next year.
Weak gross domestic product figures for the September quarter released yesterday - 0.3 per cent in the period - suggest there will be little house price growth next year.
"Dwelling investment barely grew in the September quarter, reinforcing the point that talk of a housing recovery emerging was premature," said HIA chief economist Harley Dale.
The REIA said home-loan affordability had deteriorated by 4.8 per cent over the year, with 33.8 per cent of income required to service the average national mortgage.
NSW home owners were most stretched - spending 36.4 per cent of income on home loan repayments - followed by Queensland and Tasmania at 34.9 per cent and 33.3 per cent respectively.
Western Australia recorded the biggest decline in affordability over the year on the back of booming house prices in that state, with 32.1 per cent of income required to service the average family income, up 16.6 per cent.
The Northern Territory was most affordable with 20.5 per cent of household income required for loan payments.
Source: Newscorp
The Real Estate Institute of Australia, which compiled the figures, said affordability was consequently now at its lowest point in 16 years, with families in NSW, Queensland and Tasmania hardest hit.
Home owners, on average, now need to spend more than 30 per cent of their income on mortgage repayments, the level at which borrowers are said to be in housing stress.
"First-home buyers are being locked into the rental market due to deteriorating home-loan affordability," REIA president Graham Joyce said yesterday.
"With today's low vacancy rates, rents are going to increase significantly, making it even more difficult for renters to become buyers."
Low housing affordability has been driven by the last property boom and rising interest rates.
Negative gearing laws on investment properties have also contributed to the blowout in housing affordability, as they encourage people to buy multiple properties, forcing up prices at the lower end of the market.
In one reprieve for stretched home owners, the Reserve Bank of Australia left official interest rates unchanged at 6.25 per cent yesterday after raising rates three times this year.
But the September quarter affordability results reflected only two of those rises and affordability was expected to further deteriorate in the December quarter, the Housing Industry Association said.
Any worsening affordability is expected to be halted next year.
Weak gross domestic product figures for the September quarter released yesterday - 0.3 per cent in the period - suggest there will be little house price growth next year.
"Dwelling investment barely grew in the September quarter, reinforcing the point that talk of a housing recovery emerging was premature," said HIA chief economist Harley Dale.
The REIA said home-loan affordability had deteriorated by 4.8 per cent over the year, with 33.8 per cent of income required to service the average national mortgage.
NSW home owners were most stretched - spending 36.4 per cent of income on home loan repayments - followed by Queensland and Tasmania at 34.9 per cent and 33.3 per cent respectively.
Western Australia recorded the biggest decline in affordability over the year on the back of booming house prices in that state, with 32.1 per cent of income required to service the average family income, up 16.6 per cent.
The Northern Territory was most affordable with 20.5 per cent of household income required for loan payments.
Source: Newscorp
Twelve tips to protect yourself and your credit card from online fraud
Online banking fraud is on the rise and there are a number of ways you can protect your credit card and bank accounts if you transact over the internet:
1. Keep your computer secure and the access to it;
2. Don't send credit card or account details by e-mail;
3. Reject any email that asks you to follow a link to website and input account details for verification - even if the website looks authentic, its probably a fake replica
4. Make sure you log out of your online account when finished - especially at work, libraries and net cafes
5. Deal only with established and reputable merchants;
6. Only make payments to secure websites - look for the padlock symbol in the bottom-right of your browser and click for details
7. If using a new site, do business first in a small way;
8. Check your accounts and report discrepancies immediately;
9. Ignore the "remember my password option" on banking and shopping sites
10. Change your password regularly;
11. Cancel any card that has been used fraudulently;
12. Read a company's privacy policy before buying online
1. Keep your computer secure and the access to it;
2. Don't send credit card or account details by e-mail;
3. Reject any email that asks you to follow a link to website and input account details for verification - even if the website looks authentic, its probably a fake replica
4. Make sure you log out of your online account when finished - especially at work, libraries and net cafes
5. Deal only with established and reputable merchants;
6. Only make payments to secure websites - look for the padlock symbol in the bottom-right of your browser and click for details
7. If using a new site, do business first in a small way;
8. Check your accounts and report discrepancies immediately;
9. Ignore the "remember my password option" on banking and shopping sites
10. Change your password regularly;
11. Cancel any card that has been used fraudulently;
12. Read a company's privacy policy before buying online
Mortgage approvals back slide
Demandfor mortgages was subdued in October, data released today showed, as rising interest rates and a patchy housing market curbed enthusiasm from consumers to borrow.
Housing finance approvals for owner occupied housing fell for a second month in a row, easing 0.1 per cent in October, seasonally adjusted.
Market economists had expected a flat result.
The data takes into the account the May and August interest rate rises, but precedes the November rate hike.
source: AAP
Housing finance approvals for owner occupied housing fell for a second month in a row, easing 0.1 per cent in October, seasonally adjusted.
Market economists had expected a flat result.
The data takes into the account the May and August interest rate rises, but precedes the November rate hike.
source: AAP
Property gives the best returns overall
Investors should be devoting at least 20 per cent of their investment portfolio to direct property assets in the retail, office and industrial sectors, a study shows.
The study commissioned by the Australian Direct Property Investment Association (ADPIA) found increasing the direct, or commercial, property component in an investment portfolio significantly reduced risk and the chance of investment loss.
The research looked at the performance of 11 different asset classes over 10 and 20 year periods, such as local and overseas shares, residential and listed property, Australian fixed interest and cash, and managed funds.
"ADPIA's view is we should have at least 20 per cent in direct property," ADPIA immediate past-president and executive committee member Richard Cutler said.
Mr Cutler, who also heads up Macquarie Bank's Direct Property division, said there was a very significant mismatch between the findings and what was happening in the market, with the allocation to commercial property from investors and their advisers declining since the 1980s.
"It (property) is the financial wealth of the world and ... we've got a very low and decreasing allocation to it," he said.
"So common sense says we've got it back to front and this research will really flesh that out."
Atchison Consultants managing director Ken Atchison, who carried out the study for ADPIA, said the decline was caused by a lack of available research, as well as behavioural finance.
"A market goes bad and everybody withdraws – that's the time when you should invest ... it's a classical psychological reaction," Mr Atchison said.
Investment in direct property peaked in the property boom of the late 1980s and early 1990s.
He said the research showed direct property provided strong total returns of 9.5 per cent in the 20 years to June 30, 2006, and 10.5 per cent over the 10-year period, with industrial and retail assets the best performers.
In the 10 years to June 30, direct property also produced the highest levels of income return of any other asset class, at 7.2 per cent, the report found.
According to the study, the asset class also exhibited the lowest volatility of income returns over both periods, a valuable characteristic that made a significant difference to long-term returns because it reduced the chance of making a timing error entering or exiting the market, Mr Atchison said.
He said a fully diversified property portfolio should be made up of "four states, three sectors", being NSW, Victoria, Queensland and Western Australia, and across the office, retail and industrial sectors.
ADPIA represents property industry professionals such as fund managers, custodians and financiers and was set up as the peak industry body in 1999.
Source: AAP
The study commissioned by the Australian Direct Property Investment Association (ADPIA) found increasing the direct, or commercial, property component in an investment portfolio significantly reduced risk and the chance of investment loss.
The research looked at the performance of 11 different asset classes over 10 and 20 year periods, such as local and overseas shares, residential and listed property, Australian fixed interest and cash, and managed funds.
"ADPIA's view is we should have at least 20 per cent in direct property," ADPIA immediate past-president and executive committee member Richard Cutler said.
Mr Cutler, who also heads up Macquarie Bank's Direct Property division, said there was a very significant mismatch between the findings and what was happening in the market, with the allocation to commercial property from investors and their advisers declining since the 1980s.
"It (property) is the financial wealth of the world and ... we've got a very low and decreasing allocation to it," he said.
"So common sense says we've got it back to front and this research will really flesh that out."
Atchison Consultants managing director Ken Atchison, who carried out the study for ADPIA, said the decline was caused by a lack of available research, as well as behavioural finance.
"A market goes bad and everybody withdraws – that's the time when you should invest ... it's a classical psychological reaction," Mr Atchison said.
Investment in direct property peaked in the property boom of the late 1980s and early 1990s.
He said the research showed direct property provided strong total returns of 9.5 per cent in the 20 years to June 30, 2006, and 10.5 per cent over the 10-year period, with industrial and retail assets the best performers.
In the 10 years to June 30, direct property also produced the highest levels of income return of any other asset class, at 7.2 per cent, the report found.
According to the study, the asset class also exhibited the lowest volatility of income returns over both periods, a valuable characteristic that made a significant difference to long-term returns because it reduced the chance of making a timing error entering or exiting the market, Mr Atchison said.
He said a fully diversified property portfolio should be made up of "four states, three sectors", being NSW, Victoria, Queensland and Western Australia, and across the office, retail and industrial sectors.
ADPIA represents property industry professionals such as fund managers, custodians and financiers and was set up as the peak industry body in 1999.
Source: AAP
Low doc home loans on par with income verified interest rates
Adelaide Bank, a major player in the lo doc [low documentation] home loan sector has issued an earnings downgrade after intensifying competition in the mortgage lending sector forced it to remove premium pricing on its low-documentation home loans. The regional bank revised its earnings per share (EPS) growth forecast for fiscal 2007 to between 6c and 9c a share, down from 10c. The downgrade surprised the market and its shares ended down 53c, or 3.9 per cent, at $13.05.
"Competition in the banking sector, in particular the mortgage markets, has continued to intensify this financial year," the bank said.
"As a consequence, the mortgage portfolio is being repriced at a faster rate than had been expected when the 2007 financial year budgets were formulated in May."
CEO-in-waiting Jamie McPhee said the loans affected were all low-documentation loans, which comprised about 35 per cent of the bank's mortgage loan book. "They have been priced historically at a premium to a standard product," Mr McPhee said. "Today's new business is no longer written at a premium and that's the big change."
Mr McPhee said Adelaide Bank was one of the first banks to offer low-documentation loans, which were popular among the self-employed who often did not have the documentation to support a loan application, unlike company workers.
"We were early into the low-doc space, but more of the market has offered them and that premium has been competed away," he said.
Mr McPhee said the bank was also exploring development options, which could impose a short-term burden on EPS growth but increase it in the medium term. "We think there's other opportunities for the bank to take hold of, and those things come at additional cost," he said.
Investments the bank is considering include acquisitions and new product developments.
Last year, AdBank bought Goldman Sachs JB Were's margin lending business and a portfolio funding business.
"These businesses have made a significant contribution to the bank's profit growth and their contribution for the 2007 financial year is in line with or exceeding expectations," the bank said.
AdBank reported a 13 per cent lift in net profit to a record $94.42 million for 2005-06 and achieved EPS growth of 13 per cent to 88.68c. Mr McPhee will replace outgoing AdBank chief executive officer Barry Fitzpatrick when he retires next month.
AAP
"Competition in the banking sector, in particular the mortgage markets, has continued to intensify this financial year," the bank said.
"As a consequence, the mortgage portfolio is being repriced at a faster rate than had been expected when the 2007 financial year budgets were formulated in May."
CEO-in-waiting Jamie McPhee said the loans affected were all low-documentation loans, which comprised about 35 per cent of the bank's mortgage loan book. "They have been priced historically at a premium to a standard product," Mr McPhee said. "Today's new business is no longer written at a premium and that's the big change."
Mr McPhee said Adelaide Bank was one of the first banks to offer low-documentation loans, which were popular among the self-employed who often did not have the documentation to support a loan application, unlike company workers.
"We were early into the low-doc space, but more of the market has offered them and that premium has been competed away," he said.
Mr McPhee said the bank was also exploring development options, which could impose a short-term burden on EPS growth but increase it in the medium term. "We think there's other opportunities for the bank to take hold of, and those things come at additional cost," he said.
Investments the bank is considering include acquisitions and new product developments.
Last year, AdBank bought Goldman Sachs JB Were's margin lending business and a portfolio funding business.
"These businesses have made a significant contribution to the bank's profit growth and their contribution for the 2007 financial year is in line with or exceeding expectations," the bank said.
AdBank reported a 13 per cent lift in net profit to a record $94.42 million for 2005-06 and achieved EPS growth of 13 per cent to 88.68c. Mr McPhee will replace outgoing AdBank chief executive officer Barry Fitzpatrick when he retires next month.
AAP
Mortgage brokers to become top lenders
Mortgage brokers are becoming the first choice for home buyers when they're arranging a loan, a survey shows.
The Mortgage Industry Association of Australia(MIAA)/BankWest home finance survey released today showed more than 41 per cent of recent or intending homebuyers would go to a mortgage broker.
That figure compares with 37.5 per cent who regarded banks as their first preference.
MIAA chief executive Phil Naylor said the figures showed a rise in the public acceptance of brokers.
"Public awareness of brokers is now more than 90 per cent," he said.
It is the first time the survey has shown homebuyers prefer arranging their loan through a broker rather than going straight to a bank.
BankWest's head of broker sales, Phil Colton said the research highlighted that banks really couldn't afford to ignore the broking industry.
The research shows that borrowers preferred brokers mainly because they did all the legwork for customers, but also because they could offer a range of loan options from different lenders.
The MIAA/Bank West survey is conducted twice a year.
Source: AAP
The Mortgage Industry Association of Australia(MIAA)/BankWest home finance survey released today showed more than 41 per cent of recent or intending homebuyers would go to a mortgage broker.
That figure compares with 37.5 per cent who regarded banks as their first preference.
MIAA chief executive Phil Naylor said the figures showed a rise in the public acceptance of brokers.
"Public awareness of brokers is now more than 90 per cent," he said.
It is the first time the survey has shown homebuyers prefer arranging their loan through a broker rather than going straight to a bank.
BankWest's head of broker sales, Phil Colton said the research highlighted that banks really couldn't afford to ignore the broking industry.
The research shows that borrowers preferred brokers mainly because they did all the legwork for customers, but also because they could offer a range of loan options from different lenders.
The MIAA/Bank West survey is conducted twice a year.
Source: AAP
Credit card fraud on the rise in Australia
Credit cards are more than ever set to trumpet the title of "fantastic plastic" this Christmas on predictions of a sharp increase in usage and a parallel rise in card fraud.
Spending on cards will rise by close to 25 per cent over Christmas to top the $17 billion mark for the first time, according to research house Cannex.
The sheer scale of usage could generate headaches on repayments and increase the risk of theft or fraud, simply from greater exposure.
Members Equity Bank said yesterday it was encouraging members to be extra cautious when using cards.
MEB head of workplace business Tony Beck said: "Criminals are getting smarter and the incidence of fraud is increasing."
Cannex said the country's 13.1 million-plus credit cards will each swipe about $1280.
Encouraging the use of plastic are discount deals to win debt transfers from competing cards.
In the past six months, Cannex has found eight more cards offering to transfer balances at zero interest on existing debt, making a total of 15 to do so.
A "whopping" 73 more cards offer balance transfers at an interest rate on debt of less than 5 per cent, or better than half the usual rate. A total of 106 cards will offer such a rate.
Cannex reported that "lenders are lining up with their fishing nets ready to catch customers who have maxed-out over the festive season and are searching for an escape route".
To make spending easier, 21 cards were offering an interest rate of less than 10 per cent and 54 had rates under 13 per cent - eight of which did not charge an annual fee; a total of 28 cards were not charging an annual fee.
Cannex research analyst Garfield Wright said people spent up to 25 per cent more in December than they did for the other 11 months of the year.
"For the past three years, Australia's annual pattern of credit card usage has been predictable, with spending soaring in December as credit cards are well and truly given a workout," Mr Wright said.
January, however, was a different story as consumers came to terms with the credit card debt that needed to be paid off.
"There will be a completely different kind of New Year's resolution made this January."
The Australian Bankers Association reminded consumers yesterday that any debt on a card needed to be repaid.
But it said most borrowers did so, pointing to Reserve Bank of Australia figures for the past three Christmas periods that showed borrowers repaid 99.6 per cent of their debt over December and January.
Last Christmas was a good one, with RBA figures showing credit card holders made repayments that exceeded transactions by $638 million.
Source: The Australian, Tim Blue
Spending on cards will rise by close to 25 per cent over Christmas to top the $17 billion mark for the first time, according to research house Cannex.
The sheer scale of usage could generate headaches on repayments and increase the risk of theft or fraud, simply from greater exposure.
Members Equity Bank said yesterday it was encouraging members to be extra cautious when using cards.
MEB head of workplace business Tony Beck said: "Criminals are getting smarter and the incidence of fraud is increasing."
Cannex said the country's 13.1 million-plus credit cards will each swipe about $1280.
Encouraging the use of plastic are discount deals to win debt transfers from competing cards.
In the past six months, Cannex has found eight more cards offering to transfer balances at zero interest on existing debt, making a total of 15 to do so.
A "whopping" 73 more cards offer balance transfers at an interest rate on debt of less than 5 per cent, or better than half the usual rate. A total of 106 cards will offer such a rate.
Cannex reported that "lenders are lining up with their fishing nets ready to catch customers who have maxed-out over the festive season and are searching for an escape route".
To make spending easier, 21 cards were offering an interest rate of less than 10 per cent and 54 had rates under 13 per cent - eight of which did not charge an annual fee; a total of 28 cards were not charging an annual fee.
Cannex research analyst Garfield Wright said people spent up to 25 per cent more in December than they did for the other 11 months of the year.
"For the past three years, Australia's annual pattern of credit card usage has been predictable, with spending soaring in December as credit cards are well and truly given a workout," Mr Wright said.
January, however, was a different story as consumers came to terms with the credit card debt that needed to be paid off.
"There will be a completely different kind of New Year's resolution made this January."
The Australian Bankers Association reminded consumers yesterday that any debt on a card needed to be repaid.
But it said most borrowers did so, pointing to Reserve Bank of Australia figures for the past three Christmas periods that showed borrowers repaid 99.6 per cent of their debt over December and January.
Last Christmas was a good one, with RBA figures showing credit card holders made repayments that exceeded transactions by $638 million.
Source: The Australian, Tim Blue
Monday, December 04, 2006
Australians are spenders not savers
Most Australians lack a disciplined approach to saving money, but spending it is another matter, new figures show.
A survey conducted for online superannuation fund Max Super found that one in four of the 798 Australians surveyed kept nothing at all from their income to put towards their savings.
Only half of the respondents sometimes put part of their income towards their savings.
Max Super chief executive Andrew Barlow said many Australians were out for instant gratification and were willing to take on debt instead of saving for things in advance.
"This is great when you have years of income ahead of you, but may become an issue upon retirement," he said.
The survey found that three out of four respondents stated that over 50 per cent of their income went towards day to day living expenses.
Mr Barlow said it appeared many people were exhausting their pay packet on their household living costs and credit card bills instead of saving.
"It seems Australians feel confident spending their money, as the unemployment rate is at an all time low and property wealth has increased massively," he said.
The latest official figures show that unemployment fell to a 30-year low of 4.6 per cent in October, and combined with wages growth, the supportive economic conditions have encouraged Australians to spend and borrow more.
Retail spending continued to climb in October, rising 0.8 per cent to $18.372 billion, while credit card borrowings also continued to trend upwards with no sign abating.
In September, Australians had $37.176 billion on credit with credit limits surpassing a total $100 billion for the first time ever.
While the impact of the third interest rate hike for the year in November – which pushed the official rate up to 6.25 per cent – is still to be seen, borrowing for housing has continued to increase, although at a slower rate.
Reserve Bank of Australia figures showed that housing credit grew by 0.8 per cent in October to be up by 14 per cent over the year.
Mr Barlow said that while buying a home was a priority for most people, he said consumers should aim to put aside 10 per cent of their income towards their savings, and split it across both short-term and long-term investments.
"For instance, you might consider saving part in quick access investments for those emergencies in life, while salary sacrificing a component to your super to build up for needs later in life," he said.
Mr Barlow said it was unrealistic to expect people to budget down to the last cent or to deprive themselves of the odd luxury.
"However, what we do encourage is the concept of `paying yourself first' and taking good care of your finances now, for later," he said.
Source AAP
A survey conducted for online superannuation fund Max Super found that one in four of the 798 Australians surveyed kept nothing at all from their income to put towards their savings.
Only half of the respondents sometimes put part of their income towards their savings.
Max Super chief executive Andrew Barlow said many Australians were out for instant gratification and were willing to take on debt instead of saving for things in advance.
"This is great when you have years of income ahead of you, but may become an issue upon retirement," he said.
The survey found that three out of four respondents stated that over 50 per cent of their income went towards day to day living expenses.
Mr Barlow said it appeared many people were exhausting their pay packet on their household living costs and credit card bills instead of saving.
"It seems Australians feel confident spending their money, as the unemployment rate is at an all time low and property wealth has increased massively," he said.
The latest official figures show that unemployment fell to a 30-year low of 4.6 per cent in October, and combined with wages growth, the supportive economic conditions have encouraged Australians to spend and borrow more.
Retail spending continued to climb in October, rising 0.8 per cent to $18.372 billion, while credit card borrowings also continued to trend upwards with no sign abating.
In September, Australians had $37.176 billion on credit with credit limits surpassing a total $100 billion for the first time ever.
While the impact of the third interest rate hike for the year in November – which pushed the official rate up to 6.25 per cent – is still to be seen, borrowing for housing has continued to increase, although at a slower rate.
Reserve Bank of Australia figures showed that housing credit grew by 0.8 per cent in October to be up by 14 per cent over the year.
Mr Barlow said that while buying a home was a priority for most people, he said consumers should aim to put aside 10 per cent of their income towards their savings, and split it across both short-term and long-term investments.
"For instance, you might consider saving part in quick access investments for those emergencies in life, while salary sacrificing a component to your super to build up for needs later in life," he said.
Mr Barlow said it was unrealistic to expect people to budget down to the last cent or to deprive themselves of the odd luxury.
"However, what we do encourage is the concept of `paying yourself first' and taking good care of your finances now, for later," he said.
Source AAP
Mortgage lender goes for broke to expand results.
Australian Mortgage Broker and lender Aussie Home Loans Group's aggressive expansion has helped bump up its annual profit despite stagnant east coast housing markets.
The mortgage lender and broker formed by John Symond yesterday posted a 44 per cent rise in net annual profit for 2005-06 to $19.7 million.
Aussie said it processed more than $10 billion worth of housing loan applications throughout the year, with the average loan size increasing to $242,000, which is higher than the Australian Bureau of Statistics average of $221,000.
Mr Symond told AAP that even though the Perth residential property market was "going gangbusters", challenging conditions in NSW had made the overall situation tough.
But he said the unlisted Aussie Home Loans was able to maintain profit growth, employing more people and rolling out more branches. "Our mortgage writers don't write any more business but there's more of them and we're touching more people," Mr Symond said.
In the year to June 30, Aussie increased its sales force by 19 per cent to 600 mortgage advisers.
"We have also very successfully rolled out about 14 new franchise businesses at a rate of about one a month," Mr Symond said.
"These have mostly been in parts of regional Australia we have not serviced before, so more consumers are being touched by the Aussie brand."
Aussie's credit card business was also growing fast and now had more than 100,000 customers, Mr Symond said.
Aggressive growth would continue in 2007 through the rollout of more franchise businesses and the establishment of new products.
Capital expenditure over the next 12 months was expected to hit about $10 million.
As for the group's future profitability, Mr Symond said Aussie had a "confident view of the medium term".
This month's quarter of a percentage point interest rate rise to 6.25 per cent had caused more caution in the housing market, Mr Symond said.
But he felt another rate rise was unlikely.
"We might have reached the top of the cycle this time and I'm hopeful the Reserve Bank will see no reason for an increase next year - unless of course inflation gets ugly again.
"And if the economy was to slow I don't think they'll hesitate in bringing rates back down.
"The market is certainly going to hurt for a few years to come.
"Consumer debt is at astronomical levels, so people won't go out and randomly spend.
"That's what the RBA want and that's what the RBA will probably get."
Source: AAP
The mortgage lender and broker formed by John Symond yesterday posted a 44 per cent rise in net annual profit for 2005-06 to $19.7 million.
Aussie said it processed more than $10 billion worth of housing loan applications throughout the year, with the average loan size increasing to $242,000, which is higher than the Australian Bureau of Statistics average of $221,000.
Mr Symond told AAP that even though the Perth residential property market was "going gangbusters", challenging conditions in NSW had made the overall situation tough.
But he said the unlisted Aussie Home Loans was able to maintain profit growth, employing more people and rolling out more branches. "Our mortgage writers don't write any more business but there's more of them and we're touching more people," Mr Symond said.
In the year to June 30, Aussie increased its sales force by 19 per cent to 600 mortgage advisers.
"We have also very successfully rolled out about 14 new franchise businesses at a rate of about one a month," Mr Symond said.
"These have mostly been in parts of regional Australia we have not serviced before, so more consumers are being touched by the Aussie brand."
Aussie's credit card business was also growing fast and now had more than 100,000 customers, Mr Symond said.
Aggressive growth would continue in 2007 through the rollout of more franchise businesses and the establishment of new products.
Capital expenditure over the next 12 months was expected to hit about $10 million.
As for the group's future profitability, Mr Symond said Aussie had a "confident view of the medium term".
This month's quarter of a percentage point interest rate rise to 6.25 per cent had caused more caution in the housing market, Mr Symond said.
But he felt another rate rise was unlikely.
"We might have reached the top of the cycle this time and I'm hopeful the Reserve Bank will see no reason for an increase next year - unless of course inflation gets ugly again.
"And if the economy was to slow I don't think they'll hesitate in bringing rates back down.
"The market is certainly going to hurt for a few years to come.
"Consumer debt is at astronomical levels, so people won't go out and randomly spend.
"That's what the RBA want and that's what the RBA will probably get."
Source: AAP
Mortgage lenders defies trend to post a big profit
Australian Mortgage Lender Aussie Home Loans Group's aggressive expansion has helped bump up its annual profit despite stagnant east coast housing markets.
The mortgage lender and broker formed by John Symond yesterday posted a 44 per cent rise in net annual profit for 2005-06 to $19.7 million.
Aussie said it processed more than $10 billion worth of housing loan applications throughout the year, with the average loan size increasing to $242,000, which is higher than the Australian Bureau of Statistics average of $221,000.
Mr Symond told AAP that even though the Perth residential property market was "going gangbusters", challenging conditions in NSW had made the overall situation tough.
But he said the unlisted Aussie Home Loans was able to maintain profit growth, employing more people and rolling out more branches. "Our mortgage writers don't write any more business but there's more of them and we're touching more people," Mr Symond said.
In the year to June 30, Aussie increased its sales force by 19 per cent to 600 mortgage advisers.
"We have also very successfully rolled out about 14 new franchise businesses at a rate of about one a month," Mr Symond said.
"These have mostly been in parts of regional Australia we have not serviced before, so more consumers are being touched by the Aussie brand."
Aussie's credit card business was also growing fast and now had more than 100,000 customers, Mr Symond said.
Aggressive growth would continue in 2007 through the rollout of more franchise businesses and the establishment of new products.
Capital expenditure over the next 12 months was expected to hit about $10 million.
As for the group's future profitability, Mr Symond said Aussie had a "confident view of the medium term".
This month's quarter of a percentage point interest rate rise to 6.25 per cent had caused more caution in the housing market, Mr Symond said.
But he felt another rate rise was unlikely.
"We might have reached the top of the cycle this time and I'm hopeful the Reserve Bank will see no reason for an increase next year - unless of course inflation gets ugly again.
"And if the economy was to slow I don't think they'll hesitate in bringing rates back down.
"The market is certainly going to hurt for a few years to come.
"Consumer debt is at astronomical levels, so people won't go out and randomly spend.
"That's what the RBA want and that's what the RBA will probably get."
AAP
The mortgage lender and broker formed by John Symond yesterday posted a 44 per cent rise in net annual profit for 2005-06 to $19.7 million.
Aussie said it processed more than $10 billion worth of housing loan applications throughout the year, with the average loan size increasing to $242,000, which is higher than the Australian Bureau of Statistics average of $221,000.
Mr Symond told AAP that even though the Perth residential property market was "going gangbusters", challenging conditions in NSW had made the overall situation tough.
But he said the unlisted Aussie Home Loans was able to maintain profit growth, employing more people and rolling out more branches. "Our mortgage writers don't write any more business but there's more of them and we're touching more people," Mr Symond said.
In the year to June 30, Aussie increased its sales force by 19 per cent to 600 mortgage advisers.
"We have also very successfully rolled out about 14 new franchise businesses at a rate of about one a month," Mr Symond said.
"These have mostly been in parts of regional Australia we have not serviced before, so more consumers are being touched by the Aussie brand."
Aussie's credit card business was also growing fast and now had more than 100,000 customers, Mr Symond said.
Aggressive growth would continue in 2007 through the rollout of more franchise businesses and the establishment of new products.
Capital expenditure over the next 12 months was expected to hit about $10 million.
As for the group's future profitability, Mr Symond said Aussie had a "confident view of the medium term".
This month's quarter of a percentage point interest rate rise to 6.25 per cent had caused more caution in the housing market, Mr Symond said.
But he felt another rate rise was unlikely.
"We might have reached the top of the cycle this time and I'm hopeful the Reserve Bank will see no reason for an increase next year - unless of course inflation gets ugly again.
"And if the economy was to slow I don't think they'll hesitate in bringing rates back down.
"The market is certainly going to hurt for a few years to come.
"Consumer debt is at astronomical levels, so people won't go out and randomly spend.
"That's what the RBA want and that's what the RBA will probably get."
AAP
Mortgage loans lift as home sales bounce off the low.
New home sales rose last month thanks to strong improvements in housing markets in New South Wales, Victoria and Queensland markets, figures show.
The latest Housing Industry Association's (HIA) new home sales survey shows sales of new homes and units by Australia's largest builders and developers rose by 1.3 per cent in October to 7434 dwellings.
That followed a fall of 3 per cent to a 21 month low of 7342 dwellings in September.
The survey also found that new house sales increased by 4.6 per cent in October while sales of multi-unit fell by 16 per cent.
HIA executive director of economics and housing Simon Tennent said the results reflected the dual nature of the nation's economic growth and housing affordability across the states.
"New home sales were resilient in the eastern states as house prices continue to grow in line with consumer prices," he said.
New South Wales, Victoria and Queensland detached housing sales were up strongly, while the accelerating house prices and land constraints in Western Australia meant the new home sales market continued to struggle, he said.
In October, detached house sales fell by 21.9 per cent in WA and 0.9 per cent in South Australia but rose by 16.7 per cent in NSW, 15 per cent in Victoria and 8.5 per cent in Queensland.
"The real test will be in the first quarter of 2007 when the combined affect of three interest rate rises start to squeeze household budgets, particularly in the resource-poor states," Mr Tennent said.
The Reserve Bank of Australia lifted interest rates this month by 25 basis points to 6.25 per cent.
That followed hikes by the same amount in May and August.
Economists say it is not likely that the RBA will lift rates again at the first board meeting of the year in February as the RBA will want to see how the three hikes have trickled through the economy.
Source: AAP
The latest Housing Industry Association's (HIA) new home sales survey shows sales of new homes and units by Australia's largest builders and developers rose by 1.3 per cent in October to 7434 dwellings.
That followed a fall of 3 per cent to a 21 month low of 7342 dwellings in September.
The survey also found that new house sales increased by 4.6 per cent in October while sales of multi-unit fell by 16 per cent.
HIA executive director of economics and housing Simon Tennent said the results reflected the dual nature of the nation's economic growth and housing affordability across the states.
"New home sales were resilient in the eastern states as house prices continue to grow in line with consumer prices," he said.
New South Wales, Victoria and Queensland detached housing sales were up strongly, while the accelerating house prices and land constraints in Western Australia meant the new home sales market continued to struggle, he said.
In October, detached house sales fell by 21.9 per cent in WA and 0.9 per cent in South Australia but rose by 16.7 per cent in NSW, 15 per cent in Victoria and 8.5 per cent in Queensland.
"The real test will be in the first quarter of 2007 when the combined affect of three interest rate rises start to squeeze household budgets, particularly in the resource-poor states," Mr Tennent said.
The Reserve Bank of Australia lifted interest rates this month by 25 basis points to 6.25 per cent.
That followed hikes by the same amount in May and August.
Economists say it is not likely that the RBA will lift rates again at the first board meeting of the year in February as the RBA will want to see how the three hikes have trickled through the economy.
Source: AAP
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