Gold Coast property finance group City Pacific has continued its run of record profits, yesterday posting an interim result of $24.25 million.
The net profit for the six months to December 31 is up 19 per cent on a year earlier, and sets the company on course for a full-year result of about $75 million.
The half-year result was struck on a $9.1 million drop in revenue to $108.5 million, largely due to rain-affected delays in construction at its Martha Cove project on Victoria's Mornington Peninsula as well as delays in property settlements. The company reaped big rewards from joint ventures, with its 26 per cent interest in Indigo Pacific Capital producing a net profit of $1.81 million, up from $21,474 a year earlier, and its 50 per cent joint venture Mirvac Pacific reaping a healthy $2.54 million.
Earnings per share have jumped 16.5 per cent to 18.68c, the company's fifth half-year record on the trot since listing in 2001.
The interim dividend has edged up 4c to 15c a share, payable on March 30. City Pacific chief Phil Sullivan said the profit result reflected the strong core fundamentals of the business, which is among the stock exchange's top 200 companies.
"City Pacific's operations will continue to benefit from a foundational platform of specialist skills in mortgage origination, property lending and development," he said.
"Our development pipeline, now over 7000 lots, will predictably provide increasing returns in coming years."
Among the company's major projects are the $650 million Martha's Cove waterfront development in Victoria and the $1 billion Ocean Terminal and Breakwater Cove project in Townsville.
City Pacific has also teamed up with property giant Mirvac to develop a 366ha site surrounding Gainsborough Greens golf course at Pimpama.
City Pacific yesterday reported a lift in its net tangible asset backing from 93.1c a share to $1.06 a share.
The company's shares rose 4c to close at $4.70.
Following the placement of 18.3 million shares earlier this month, City Pacific's market capitalisation yesterday stood at $705 million.
Saturday, February 24, 2007
Financial planner Neil White talks about his first investment and what he'd do with $20,000 to invest
Neil White is director of Australian Financial Planning Network and a representative of Consultum Financial Advisers.
What would you do with $20,000?
Put it in three or four specialist Australian share funds - two growth and two value funds. The funds I would look at would be AMP Equity Fund, Challenger Orion Australian Share Fund, Perennial Value Share Trust and Perpetual Industrial Fund.
I would also look at using it for an investment property or some other tax-effective investment.
What was your first investment?
In 1980 I purchased my first home, in Ascot Vale [in Melbourne] - it was not considered an attractive area back then but it ended up being a fantastic investment.
What's your investment philosophy?
Never try to shoot the lights out. Be patient. The best investments are usually boring. Buy boring - boring usually works. Also, don't be afraid to borrow. You have to borrow to build. It's also important to gather experts around you and legitimately minimise your tax.
What are your current investments?
I have a two-bedroom investment property, a number of managed funds, a range of tax-effective investments, direct shares and superannuation. It is very similar to what we typically recommend to clients. Which brings me to another tip: if you are dealing with a financial planner, ask him or her what they invest in as this will give you insight into what they may be advising for you.
What's your best call?
I have done really well in property and I 've been very successful in my managed funds. My current home would be hard to beat as a best investment. I boughtit in 1998 and it has doubled in value.
Worst call?
I bought a block of land at Ocean Grove [near Geelong] in 1982 for $6000 and sold it five years later for the same price, then watched as the market skyrocketed. That was a big lesson for me. My lack of patience and lack of cash flow at the time led to a very valuable lesson.
How much property do you own?
My home and an investment property.
Do you have a mortgage? If so, are you accelerating payments?
Yes, I have a small mortgage and I am accelerating payments. Debt can be a great motivator. A lot of people don't do anything after they have paid off the mortgage. I think you should pay off the mortgage as soon as you can but utilise the cash flow for further investment. Instead, people usually increase their expenditure once they have paid off the mortgage.
Put it in three or four specialist Australian share funds - two growth and two value funds. The funds I would look at would be AMP Equity Fund, Challenger Orion Australian Share Fund, Perennial Value Share Trust and Perpetual Industrial Fund. I would also look at using it for an investment property or some other tax-effective investment.
What was your first investment?
In 1980 I purchased my first home, in Ascot Vale [in Melbourne] - it was not considered an attractive area back then but it ended up being a fantastic investment.
What's your investment philosophy?
Never try to shoot the lights out. Be patient. The best investments are usually boring. Buy boring - boring usually works. Also, don't be afraid to borrow. You have to borrow to build. It's also important to gather experts around you and legitimately minimise your tax.
What are your current investments?
I have a two-bedroom investment property, a number of managed funds, a range of tax-effective investments, direct shares and superannuation. It is very similar to what we typically recommend to clients. Which brings me to another tip: if you are dealing with a financial planner, ask him or her what they invest in as this will give you insight into what they may be advising for you.
What's your best call?
I have done really well in property and I 've been very successful in my managed funds. My current home would be hard to beat as a best investment. I boughtit in 1998 and it has doubled in value.
Worst call?
I bought a block of land at Ocean Grove [near Geelong] in 1982 for $6000 and sold it five years later for the same price, then watched as the market skyrocketed. That was a big lesson for me. My lack of patience and lack of cash flow at the time led to a very valuable lesson.
How much property do you own?
My home and an investment property.
Do you have a mortgage? If so, are you accelerating payments?
Yes, I have a small mortgage and I am accelerating payments. Debt can be a great motivator. A lot of people don't do anything after they have paid off the mortgage. I think you should pay off the mortgage as soon as you can but utilise the cash flow for further investment. Instead, people usually increase their expenditure once they have paid off the mortgage.
When do you plan on retiring?
Probably never! Really, I am the poster boy for my generation (aged 51, baby boomer). I will probably start to work fewer hours but remain in the game. I don't want to leave something I love if health and circumstances permit me to continue.
How's your super looking?
Good. My investments are good and if I put it all together it's fairly significant. I also have this business.
What's your No. 1 financial tip?
Find an expert to help you. And it's important not to confuse information with expertise, because they are very different. Expertise is not just academic; it's having a practical understanding of how things work. By all means do it yourself but get the foundations laid down by an expert. The best test is for your readers to ask and answer the following question: "Do I have clearly written goals?" If the answer is yes, congratulations - you are the equivalent of 3 per cent of Harvard University graduates. People these days go to the internet and think they have all the information they need - but true expertise comes from practical experience over a number of years.
Source: The Age, Melbourne Australia
What would you do with $20,000?
Put it in three or four specialist Australian share funds - two growth and two value funds. The funds I would look at would be AMP Equity Fund, Challenger Orion Australian Share Fund, Perennial Value Share Trust and Perpetual Industrial Fund.
I would also look at using it for an investment property or some other tax-effective investment.
What was your first investment?
In 1980 I purchased my first home, in Ascot Vale [in Melbourne] - it was not considered an attractive area back then but it ended up being a fantastic investment.
What's your investment philosophy?
Never try to shoot the lights out. Be patient. The best investments are usually boring. Buy boring - boring usually works. Also, don't be afraid to borrow. You have to borrow to build. It's also important to gather experts around you and legitimately minimise your tax.
What are your current investments?
I have a two-bedroom investment property, a number of managed funds, a range of tax-effective investments, direct shares and superannuation. It is very similar to what we typically recommend to clients. Which brings me to another tip: if you are dealing with a financial planner, ask him or her what they invest in as this will give you insight into what they may be advising for you.
What's your best call?
I have done really well in property and I 've been very successful in my managed funds. My current home would be hard to beat as a best investment. I boughtit in 1998 and it has doubled in value.
Worst call?
I bought a block of land at Ocean Grove [near Geelong] in 1982 for $6000 and sold it five years later for the same price, then watched as the market skyrocketed. That was a big lesson for me. My lack of patience and lack of cash flow at the time led to a very valuable lesson.
How much property do you own?
My home and an investment property.
Do you have a mortgage? If so, are you accelerating payments?
Yes, I have a small mortgage and I am accelerating payments. Debt can be a great motivator. A lot of people don't do anything after they have paid off the mortgage. I think you should pay off the mortgage as soon as you can but utilise the cash flow for further investment. Instead, people usually increase their expenditure once they have paid off the mortgage.
Put it in three or four specialist Australian share funds - two growth and two value funds. The funds I would look at would be AMP Equity Fund, Challenger Orion Australian Share Fund, Perennial Value Share Trust and Perpetual Industrial Fund. I would also look at using it for an investment property or some other tax-effective investment.
What was your first investment?
In 1980 I purchased my first home, in Ascot Vale [in Melbourne] - it was not considered an attractive area back then but it ended up being a fantastic investment.
What's your investment philosophy?
Never try to shoot the lights out. Be patient. The best investments are usually boring. Buy boring - boring usually works. Also, don't be afraid to borrow. You have to borrow to build. It's also important to gather experts around you and legitimately minimise your tax.
What are your current investments?
I have a two-bedroom investment property, a number of managed funds, a range of tax-effective investments, direct shares and superannuation. It is very similar to what we typically recommend to clients. Which brings me to another tip: if you are dealing with a financial planner, ask him or her what they invest in as this will give you insight into what they may be advising for you.
What's your best call?
I have done really well in property and I 've been very successful in my managed funds. My current home would be hard to beat as a best investment. I boughtit in 1998 and it has doubled in value.
Worst call?
I bought a block of land at Ocean Grove [near Geelong] in 1982 for $6000 and sold it five years later for the same price, then watched as the market skyrocketed. That was a big lesson for me. My lack of patience and lack of cash flow at the time led to a very valuable lesson.
How much property do you own?
My home and an investment property.
Do you have a mortgage? If so, are you accelerating payments?
Yes, I have a small mortgage and I am accelerating payments. Debt can be a great motivator. A lot of people don't do anything after they have paid off the mortgage. I think you should pay off the mortgage as soon as you can but utilise the cash flow for further investment. Instead, people usually increase their expenditure once they have paid off the mortgage.
When do you plan on retiring?
Probably never! Really, I am the poster boy for my generation (aged 51, baby boomer). I will probably start to work fewer hours but remain in the game. I don't want to leave something I love if health and circumstances permit me to continue.
How's your super looking?
Good. My investments are good and if I put it all together it's fairly significant. I also have this business.
What's your No. 1 financial tip?
Find an expert to help you. And it's important not to confuse information with expertise, because they are very different. Expertise is not just academic; it's having a practical understanding of how things work. By all means do it yourself but get the foundations laid down by an expert. The best test is for your readers to ask and answer the following question: "Do I have clearly written goals?" If the answer is yes, congratulations - you are the equivalent of 3 per cent of Harvard University graduates. People these days go to the internet and think they have all the information they need - but true expertise comes from practical experience over a number of years.
Source: The Age, Melbourne Australia
Perpetual Ltd to buy Wignalls Lenders Mortgage Services and be rebranded Perpetual Mortgage Lending Services
The corporate trust division of Perpetual Ltd says it will acquire the business operations of Adelaide-based Wignalls Lenders Mortgage Service.
Wignalls is a national mortgage processing and settlement company with about 100 staff across five states.
Perpetual's group executive for the corporate trust division Phil Vernon said the purchase would strengthen the company's provision of services to the securitisation and lending markets.
"Securitisation market growth and increased outsourcing by bank and non-bank institutions has led to the demand for a provider who can meet all the needs of clients under one roof," Mr Vernon said.
"The acquisition of Wignalls adds an important capability to our service offering."
All Wignalls' employees will be offered jobs with Perpetual, and Wignalls will be rebranded as Perpetual Lenders Mortgage Services.
Perpetual company declined to reveal the cost of the purchase.
Source: AAP
Wignalls is a national mortgage processing and settlement company with about 100 staff across five states.
Perpetual's group executive for the corporate trust division Phil Vernon said the purchase would strengthen the company's provision of services to the securitisation and lending markets.
"Securitisation market growth and increased outsourcing by bank and non-bank institutions has led to the demand for a provider who can meet all the needs of clients under one roof," Mr Vernon said.
"The acquisition of Wignalls adds an important capability to our service offering."
All Wignalls' employees will be offered jobs with Perpetual, and Wignalls will be rebranded as Perpetual Lenders Mortgage Services.
Perpetual company declined to reveal the cost of the purchase.
Source: AAP
Friday, February 23, 2007
House rents Jump with big increases for years to come as housing shortage forecast to take 4 years to ease
Australia's rental crisis is set to worsen and sharp rises in rents will continue for at least four years as Capital cities shrinking rental housing supply, especially in Sydney, will take years to ease a report warns.
Rents will jump due to a dramatic fall in the number of apartments built this financial year, the report by industry analysts BIS Shrapnel says.
BIS Shrapnel is predicting apartment rents will rise 42 per cent in the five years to June 2011 - equating to an average of 7.3 per cent every year.
Report author Angie Zigomanis said, since investors began to leave the property market two years ago, off-the-plan sales, which trigger building, had fallen sharply.
"Most new apartment developments won't go ahead until they have sold enough off-the-plan to get enough money to get finance,'' he said.
"At the moment there are no investors in the market to do those pre-sales. The lag between off-the-plan apartment sales and completion means that, even if investors do return, it would take some years before their purchases are translated to new rental supply. The deficiency of rental dwellings will potentially be sustained through to 2011 and beyond.''
Weak growth in the cost of rent in recent years would lead to sharp rises as a shortage of rental stock emerged this year. Rents would rise 7.3 per cent each year, or 42 per cent over the next five years.
But investors would have to wait until mid-next year to see a better return in property prices.
He said two to three years of rental growth was necessary before yields improved to a level which would draw investors back to the apartment market.
"In many instances the value of investment apartments in Sydney has declined in the past two to three years,'' Mr Zigomanis said.
Prices would remain static or decline marginally over the next financial year.
Mr Zigomanis said a peak in vacancy rates in 2003 and lower rental returns had deterred investors.
"A peak in vacancy rates lead to static rents and low rental returns which caused investors to beat a retreat,'' Mr Zigomanis said.
"Since investors have left the market, pre-sales which trigger construction have fallen away and new apartment completions have been drying up.
"Consequently, we expect new apartment completions will show a dramatic decline over 2006/07.''
In June last year, Sydney rents were 6 per cent lower than the June 2000 peak, adjusted for inflation, after showing increases below long-term trends.
Sydney's rental vacancy rate was 1.6 per cent in January, according to Real Estate Institute of NSW figures.
"While attention was focused on rising interest rates last year, the situation for tenants was steadily worsening,'' REINSW president Cristine Castle said.
"The NSW Government needs to take immediate action to encourage investors to enter the property market, which would provide more accommodation for tenants,'' she said.
Sources: Daily Telegraph and AAP
Rents will jump due to a dramatic fall in the number of apartments built this financial year, the report by industry analysts BIS Shrapnel says.
BIS Shrapnel is predicting apartment rents will rise 42 per cent in the five years to June 2011 - equating to an average of 7.3 per cent every year.
Report author Angie Zigomanis said, since investors began to leave the property market two years ago, off-the-plan sales, which trigger building, had fallen sharply.
"Most new apartment developments won't go ahead until they have sold enough off-the-plan to get enough money to get finance,'' he said.
"At the moment there are no investors in the market to do those pre-sales. The lag between off-the-plan apartment sales and completion means that, even if investors do return, it would take some years before their purchases are translated to new rental supply. The deficiency of rental dwellings will potentially be sustained through to 2011 and beyond.''
Weak growth in the cost of rent in recent years would lead to sharp rises as a shortage of rental stock emerged this year. Rents would rise 7.3 per cent each year, or 42 per cent over the next five years.
But investors would have to wait until mid-next year to see a better return in property prices.
He said two to three years of rental growth was necessary before yields improved to a level which would draw investors back to the apartment market.
"In many instances the value of investment apartments in Sydney has declined in the past two to three years,'' Mr Zigomanis said.
Prices would remain static or decline marginally over the next financial year.
Mr Zigomanis said a peak in vacancy rates in 2003 and lower rental returns had deterred investors.
"A peak in vacancy rates lead to static rents and low rental returns which caused investors to beat a retreat,'' Mr Zigomanis said.
"Since investors have left the market, pre-sales which trigger construction have fallen away and new apartment completions have been drying up.
"Consequently, we expect new apartment completions will show a dramatic decline over 2006/07.''
In June last year, Sydney rents were 6 per cent lower than the June 2000 peak, adjusted for inflation, after showing increases below long-term trends.
Sydney's rental vacancy rate was 1.6 per cent in January, according to Real Estate Institute of NSW figures.
"While attention was focused on rising interest rates last year, the situation for tenants was steadily worsening,'' REINSW president Cristine Castle said.
"The NSW Government needs to take immediate action to encourage investors to enter the property market, which would provide more accommodation for tenants,'' she said.
Sources: Daily Telegraph and AAP
Mortgage geared property investors cash out to switch to superannuation investment
Property investors, many of whom are mortgaged heavily, have been quitting the Australian housing market to pour up to $1 million each into superannuation to take advantage of the generous contributions allowance before the super payout tax is abolished on July 1.
The superannuation regime, announced in the May 2006 budget and made even more attractive by allowing large sums to be invested now, has combined with rising interest rates and tax cuts to create a crisis in rental markets around Australia, experts say.
Borrowing for negatively geared property investment has plunged by 30 per cent since June, with the biggest falls in NSW, Western Australia and the ACT, the latest figures show.
At the same time, the rental vacancy rates around Australia have dropped from a long-term average of 2.9 per cent to 1.8 per cent, with families and young couples who thought that the high price of housing and mortgage repayments a barrier to entry, are now struggling to find somewhere to rent that they can afford.
As vacancies fall, asking rents are soaring, with official figures released yesterday showing a massive 6.9 per cent jump last year in Sydney. This does not take into account the recent practice of rental auctions where the highest bidder gets to be the proud tenant.
Investment property lending in NSW has plunged by 38.1 per cent since June, a much greater drop than that which followed the introduction of the ill-fated ``exit tax'' on property investors in that state in 2004.
In a clear sign that the West Australian property boom has run out of steam, investment property lending in the state has plunged 37.1 per cent in six months. In most other states it has dropped by about 20 per cent.
Housing Industry Association chief economist Harley Dale said yesterday the new superannuation rules, higher mortgage interest rates and tax cuts had combined to make negatively geared property investment less attractive.
"There was a recovery in the housing investment market until the middle of last year when we found we were in a higher interest rate environment,'' Mr Dale said.
"The impact of superannuation was not so evident until the last quarter of last year, once the new rules started coming on to people's radar.''
The tax cuts reduced the tax savings from negative gearing for anyone earning less than $150,000.
Mr Dale said the downturn in property investment was entirely due to individuals pulling out of the market. Commercial property development has only weakened slightly since rates started rising early this year.
But Treasurer Peter Costello does not accept that his superannuation reforms are contributing to the downturn in property investment.
A spokesman said yesterday he endorsed the view of the Reserve Bank in its latest economic review that it was unsurprising investors were unwilling to supply additional rental property, given high property costs and low rental yields.
The Government rejected industry requests to allow investment properties to be transferred in to superannuation.
Source: The Australian
The superannuation regime, announced in the May 2006 budget and made even more attractive by allowing large sums to be invested now, has combined with rising interest rates and tax cuts to create a crisis in rental markets around Australia, experts say.
Borrowing for negatively geared property investment has plunged by 30 per cent since June, with the biggest falls in NSW, Western Australia and the ACT, the latest figures show.
At the same time, the rental vacancy rates around Australia have dropped from a long-term average of 2.9 per cent to 1.8 per cent, with families and young couples who thought that the high price of housing and mortgage repayments a barrier to entry, are now struggling to find somewhere to rent that they can afford.
As vacancies fall, asking rents are soaring, with official figures released yesterday showing a massive 6.9 per cent jump last year in Sydney. This does not take into account the recent practice of rental auctions where the highest bidder gets to be the proud tenant.
Investment property lending in NSW has plunged by 38.1 per cent since June, a much greater drop than that which followed the introduction of the ill-fated ``exit tax'' on property investors in that state in 2004.
In a clear sign that the West Australian property boom has run out of steam, investment property lending in the state has plunged 37.1 per cent in six months. In most other states it has dropped by about 20 per cent.
Housing Industry Association chief economist Harley Dale said yesterday the new superannuation rules, higher mortgage interest rates and tax cuts had combined to make negatively geared property investment less attractive.
"There was a recovery in the housing investment market until the middle of last year when we found we were in a higher interest rate environment,'' Mr Dale said.
"The impact of superannuation was not so evident until the last quarter of last year, once the new rules started coming on to people's radar.''
The tax cuts reduced the tax savings from negative gearing for anyone earning less than $150,000.
Mr Dale said the downturn in property investment was entirely due to individuals pulling out of the market. Commercial property development has only weakened slightly since rates started rising early this year.
But Treasurer Peter Costello does not accept that his superannuation reforms are contributing to the downturn in property investment.
A spokesman said yesterday he endorsed the view of the Reserve Bank in its latest economic review that it was unsurprising investors were unwilling to supply additional rental property, given high property costs and low rental yields.
The Government rejected industry requests to allow investment properties to be transferred in to superannuation.
Source: The Australian
Prime Minister John Howard considers rent relief for tenants caught in Australia's housing shortage
Prime Minister John Howard has confirmed he is considering rent relief for tenants as landlords increasingly move to rental auctions in the tight housing markets.
While the Prime Minister stopped short of promising direct rent relief yesterday, he argued that one of the problems was the failure of state governments to release more land, driving up the cost of housing.
However, some landlords are leaving the real estate market to take advantage of the federal Government's superannuation changes and to avoid spiralling state property taxes.
One option could be to pressure the states to release more land when Mr Howard next holds talks with the premiers, and to maintain the political pressure to reduce stamp duty and other property taxes.
Speaking in Perth yesterday, Mr Howard said he was aware the problem was placing pressure on families.
"I am conscious that rents have got up in different parts of the country," he said.
"Other people have put views to me about rental assistance ... we are considering those things, I am not going to say any more.
"In some parts of the country state governments have been far too slow at releasing land and that has contributed to the shortages."
According to the Reserve Bank, rents rose faster last year than they have in the past 15 years, and the bank has predicted rents will rise even higher this year.
Around one-third of Australians rent with the balance split between those who own their homes outright and those with mortgages.
Opposition Leader Kevin Rudd said rising rents was another pressure point for families.
"There is no silver bullet for this. But we've got to begin by recognising there is a problem," he told Southern Cross Broadcasting in Perth.
Rents could rise up to 30 per cent in the next three years as strong migration and the lack of building activity cut into the amount of available rental accommodation.
Economic forecaster BIS Shrapnel expects Sydney rents to rise by about 30 per cent by mid-late 2009 followed by Melbourne and Brisbane with 20 per cent rises. Adelaide, Perth and Canberra can expect rents to increase 10-15 per cent in the next three years.
Vacancy rates for residential properties fell in almost every capital city in the three months to September with the trend expected to worsen in every city except Perth, according to the Real Estate Institute of Australia.
While both Sydney and Brisbane's vacancy was 1.7 per cent in the September quarter, Canberra had the tightest rental market at 1.1per cent - well below the national long-term vacancy rate average of 3 per cent.
REIA president Graham Joyce expects the rental crisis to intensify with the lack of housing affordabilty forcing traditional first home buyers to stay in the rental market, and investors deterred by flat housing prices.
Source: The Australian
While the Prime Minister stopped short of promising direct rent relief yesterday, he argued that one of the problems was the failure of state governments to release more land, driving up the cost of housing.
However, some landlords are leaving the real estate market to take advantage of the federal Government's superannuation changes and to avoid spiralling state property taxes.
One option could be to pressure the states to release more land when Mr Howard next holds talks with the premiers, and to maintain the political pressure to reduce stamp duty and other property taxes.
Speaking in Perth yesterday, Mr Howard said he was aware the problem was placing pressure on families.
"I am conscious that rents have got up in different parts of the country," he said.
"Other people have put views to me about rental assistance ... we are considering those things, I am not going to say any more.
"In some parts of the country state governments have been far too slow at releasing land and that has contributed to the shortages."
According to the Reserve Bank, rents rose faster last year than they have in the past 15 years, and the bank has predicted rents will rise even higher this year.
Around one-third of Australians rent with the balance split between those who own their homes outright and those with mortgages.
Opposition Leader Kevin Rudd said rising rents was another pressure point for families.
"There is no silver bullet for this. But we've got to begin by recognising there is a problem," he told Southern Cross Broadcasting in Perth.
Rents could rise up to 30 per cent in the next three years as strong migration and the lack of building activity cut into the amount of available rental accommodation.
Economic forecaster BIS Shrapnel expects Sydney rents to rise by about 30 per cent by mid-late 2009 followed by Melbourne and Brisbane with 20 per cent rises. Adelaide, Perth and Canberra can expect rents to increase 10-15 per cent in the next three years.
Vacancy rates for residential properties fell in almost every capital city in the three months to September with the trend expected to worsen in every city except Perth, according to the Real Estate Institute of Australia.
While both Sydney and Brisbane's vacancy was 1.7 per cent in the September quarter, Canberra had the tightest rental market at 1.1per cent - well below the national long-term vacancy rate average of 3 per cent.
REIA president Graham Joyce expects the rental crisis to intensify with the lack of housing affordabilty forcing traditional first home buyers to stay in the rental market, and investors deterred by flat housing prices.
Source: The Australian
Thursday, February 22, 2007
Reverse mortgage industry under fire from niche banker with axe to grind
Financial planners have come under fire for pushing products such as reverse mortgages for commissions, but a peak industry body says the claim is unfounded.
The reverse mortgage industry body has labelled claims by Members Equity Bank that seniors are at risk from commission-hungry financial planners as unwarranted.
Members Equity Bank head of work business Tony Beck last week warned planners would push reverse mortgages in order to pocket the commission.
"Reverse mortgages combined with salespeople in search of a sales commission is a dangerous mix," he said last week.
[Members Equity Bank are a niche bank grown out of superannuation fund membership, so they naturally have a vested interst in the customer base of the reverse mortgage industry. They seem to be saying that their market base is too stupid to make up their own minds as to the value of a reverse mortgage to them.]
Kieren Dell, executive director at Senior Australians Equity Release Association of Lenders (SEQUAL), hit back, saying the comments are an unfair assumption and that the cost of sale and service is built into the product like many other financial products.
"Any investment service that you might go to see a financial planner (about), you need to understand the remuneration structure, and make sure you have someone you can trust," Mr Dell said.
"The danger seems to me making a statement saying 'don't go to financial planners because they are just going to rip you off', is that people will not go and get advice.
"And certainly from a reverse mortgage point of view, these are products that have complicated outcomes for people, we insist people get legal advice and we strongly encourage people to get (qualified) financial advice."
Reverse mortgages are a popular choice for seniors who are cash-poor looking to "unlock" the equity of their main asset - their home.
It operates the opposite way to a home loan - instead of the loan amount reducing as repayments are made, interest is applied to your loan, which is secured against the house.
Australians who fully own their own home can borrow against the value of their home to create money for their retirement.
A study of the reserve mortgage market by Trowbridge Deloitte found the average loan size of a reverse mortgage was $53,300.
Mr Dell said this meant commissions were very small and unlikely to drive sales, and he was confident about his lenders' conduct and performance.
"One of the parts of our code of conduct for our lenders is that they have to clearly disclose all the fees and charges," he said.
"That is a condition of membership of SEQUEL."
Commissions have been a long-time concern for many people involved in the financial planning business.
The Institute of Chartered Accountants says financial planners should move away from commission-based remuneration and towards a fee system that is more closely linked to the services provided.
Regardless of commissions, reverse mortgages have become increasingly popular, with the number issued doubling in the past 18 months.
SEQUEL estimates the total value of reverse loans written to the 12 months to June 2006 is more than $1.1 billion, and this is expected to surge in coming years as it becomes a more mainstream product for those heading to retirement.
The Australian consumers' association, Choice, said there were some disadvantages as a reverse mortgage could limit financial options.
"You may not have enough money left to fund moving into a retirement village," Choice said.
"The value of your estate may be much less than anticipated because the debt increases over time."
Choice noted that the loan was taken as a lump sum it could affect the eligibility for Centrelink payments.
It also warned consumers to be cautious when signing a contract as they could be hard to interpret.
Source: AAP
The reverse mortgage industry body has labelled claims by Members Equity Bank that seniors are at risk from commission-hungry financial planners as unwarranted.
Members Equity Bank head of work business Tony Beck last week warned planners would push reverse mortgages in order to pocket the commission.
"Reverse mortgages combined with salespeople in search of a sales commission is a dangerous mix," he said last week.
[Members Equity Bank are a niche bank grown out of superannuation fund membership, so they naturally have a vested interst in the customer base of the reverse mortgage industry. They seem to be saying that their market base is too stupid to make up their own minds as to the value of a reverse mortgage to them.]
Kieren Dell, executive director at Senior Australians Equity Release Association of Lenders (SEQUAL), hit back, saying the comments are an unfair assumption and that the cost of sale and service is built into the product like many other financial products.
"Any investment service that you might go to see a financial planner (about), you need to understand the remuneration structure, and make sure you have someone you can trust," Mr Dell said.
"The danger seems to me making a statement saying 'don't go to financial planners because they are just going to rip you off', is that people will not go and get advice.
"And certainly from a reverse mortgage point of view, these are products that have complicated outcomes for people, we insist people get legal advice and we strongly encourage people to get (qualified) financial advice."
Reverse mortgages are a popular choice for seniors who are cash-poor looking to "unlock" the equity of their main asset - their home.
It operates the opposite way to a home loan - instead of the loan amount reducing as repayments are made, interest is applied to your loan, which is secured against the house.
Australians who fully own their own home can borrow against the value of their home to create money for their retirement.
A study of the reserve mortgage market by Trowbridge Deloitte found the average loan size of a reverse mortgage was $53,300.
Mr Dell said this meant commissions were very small and unlikely to drive sales, and he was confident about his lenders' conduct and performance.
"One of the parts of our code of conduct for our lenders is that they have to clearly disclose all the fees and charges," he said.
"That is a condition of membership of SEQUEL."
Commissions have been a long-time concern for many people involved in the financial planning business.
The Institute of Chartered Accountants says financial planners should move away from commission-based remuneration and towards a fee system that is more closely linked to the services provided.
Regardless of commissions, reverse mortgages have become increasingly popular, with the number issued doubling in the past 18 months.
SEQUEL estimates the total value of reverse loans written to the 12 months to June 2006 is more than $1.1 billion, and this is expected to surge in coming years as it becomes a more mainstream product for those heading to retirement.
The Australian consumers' association, Choice, said there were some disadvantages as a reverse mortgage could limit financial options.
"You may not have enough money left to fund moving into a retirement village," Choice said.
"The value of your estate may be much less than anticipated because the debt increases over time."
Choice noted that the loan was taken as a lump sum it could affect the eligibility for Centrelink payments.
It also warned consumers to be cautious when signing a contract as they could be hard to interpret.
Source: AAP
Mortgage interest rates set to rise on economic growth outlook and jobs glut push inflation higher
Inflation is not only high but accelerating, according to a report that strengthens the case for the Reserve Bank to raise interest rates next month for the fourth time in a twelve month period.
The TD Securities-Melbourne Institute Monthly Inflation Gauge showed prices increased by 0.3 per cent last month.
The rise was the third consecutive month of accelerating inflation and came despite the RBA's 0.25 per cent increase in official interest rates in November to 6.25 per cent. Inflation was 3.8 per cent last year, the survey found.
"My reading is that they will look at this and they will look at some of the signals of the underlying strength in the economy — the jobs numbers, the job ads numbers, that kind of stuff — and they are probably going to say 'it's time to go now'," said Don Harding, an economist at the University of Melbourne.
Higher inflation in December came as the price for bananas fell 40 per cent. The gauge last reached 3.8 per cent in August and has not been above it since May's 4 per cent. Both months brought rate rises.
While the study cites higher petrol prices as a source of upward price pressure, CommSec chief equities economist Craig James said in a report that petrol had fallen 1.4¢ in the past week and could fall another 7¢ in the coming fortnight.
Economists are split over the prospect of another imminent rise. ANZ chief economist Saul Eslake said housing figures for November, also released yesterday, showed a market that was slowing even before that month's rate increase. Commitments, or offers for mortgages that either have been or are expected to be accepted, fell by 1.2 per cent over the year to November 30.
"They (the housing finance figures) continue to suggest, as have earlier data, that the interest rate increases that took place during 2006 have flattened the trend in housing finance — I suppose, as you would expect," Mr Eslake said.
The figures would reverse some of the momentum towards higher rates that was built up after unemployment figures released last week showed stronger than expected jobs growth. "You could say, after the data of last week, that it (the housing finance data) perhaps slightly dampens the prospect of a further tightening of monetary policy in February, which the market had increasingly started to price in."
As recently as January 5, futures markets had priced a 28 per cent chance of an interest rate rise into the 30-day bank bill futures for March delivery. That market had yesterday priced in a better than 50 per cent chance.
Westpac senior economist Andrew Hanlan disagreed with Mr Eslake's appraisal and said the housing figures added to the case for another rate rise. Mr Hanlan described the drop of 0.6 per cent in loans to owner-occupiers as "very modest", and showed that previous rises had been less effective than might have been expected.
"Most people would have expected larger reaction to the interest rate tightening than we've seen," Mr Hanlan said.
"The fact that it came in basically flat in November, given the tightening of policy, is quite a resilient result."
Commonwealth Bank senior economist Michael Workman said the housing figures for November showed no impact from that month's rate rise, so they would be of little help to the RBA when it next considered raising rates. "We believe that December (and) January numbers will also show this gradual moderation as the interest rate effects work their way through the system," Mr Workman said.
"It's a pretty finely judged situation about whether there is going to be another rate rise."
Source: The Age, Melbourne Australia
The TD Securities-Melbourne Institute Monthly Inflation Gauge showed prices increased by 0.3 per cent last month.
The rise was the third consecutive month of accelerating inflation and came despite the RBA's 0.25 per cent increase in official interest rates in November to 6.25 per cent. Inflation was 3.8 per cent last year, the survey found.
"My reading is that they will look at this and they will look at some of the signals of the underlying strength in the economy — the jobs numbers, the job ads numbers, that kind of stuff — and they are probably going to say 'it's time to go now'," said Don Harding, an economist at the University of Melbourne.
Higher inflation in December came as the price for bananas fell 40 per cent. The gauge last reached 3.8 per cent in August and has not been above it since May's 4 per cent. Both months brought rate rises.
While the study cites higher petrol prices as a source of upward price pressure, CommSec chief equities economist Craig James said in a report that petrol had fallen 1.4¢ in the past week and could fall another 7¢ in the coming fortnight.
Economists are split over the prospect of another imminent rise. ANZ chief economist Saul Eslake said housing figures for November, also released yesterday, showed a market that was slowing even before that month's rate increase. Commitments, or offers for mortgages that either have been or are expected to be accepted, fell by 1.2 per cent over the year to November 30.
"They (the housing finance figures) continue to suggest, as have earlier data, that the interest rate increases that took place during 2006 have flattened the trend in housing finance — I suppose, as you would expect," Mr Eslake said.
The figures would reverse some of the momentum towards higher rates that was built up after unemployment figures released last week showed stronger than expected jobs growth. "You could say, after the data of last week, that it (the housing finance data) perhaps slightly dampens the prospect of a further tightening of monetary policy in February, which the market had increasingly started to price in."
As recently as January 5, futures markets had priced a 28 per cent chance of an interest rate rise into the 30-day bank bill futures for March delivery. That market had yesterday priced in a better than 50 per cent chance.
Westpac senior economist Andrew Hanlan disagreed with Mr Eslake's appraisal and said the housing figures added to the case for another rate rise. Mr Hanlan described the drop of 0.6 per cent in loans to owner-occupiers as "very modest", and showed that previous rises had been less effective than might have been expected.
"Most people would have expected larger reaction to the interest rate tightening than we've seen," Mr Hanlan said.
"The fact that it came in basically flat in November, given the tightening of policy, is quite a resilient result."
Commonwealth Bank senior economist Michael Workman said the housing figures for November showed no impact from that month's rate rise, so they would be of little help to the RBA when it next considered raising rates. "We believe that December (and) January numbers will also show this gradual moderation as the interest rate effects work their way through the system," Mr Workman said.
"It's a pretty finely judged situation about whether there is going to be another rate rise."
Source: The Age, Melbourne Australia
Interest free periods on credit card balance transfers are soon paying the banks a big return
Many banks are now offering credit cards with a honeymoon period on interest rates for balance of transfers of debt, to entice the most profit type of customer they have, the ones that never clear their balances every month.
Credit cards with honeymoon sweeteners on balance transfers can help you keep to your budget but if you don't abide by the rules you can end up paying more in interest - which is why the banks love them.
Denis Orrock, the general manager of researcher InfoChoice, says most balance transfers are not paid off within the timeframe of the low interest deal. Worse, such low offers can encourage consumers to be reckless with their spending.
"Interest free is never totally interest free for most people. Over time, they start paying interest," Orrock warns.
There are 26 cards with interest rates under 10 per cent, says Andrew Willink, the managing director of Cannex, with several of these offering zero interest on balance transfers as well as new purchases.
"The card issuers are looking for market share. They want consumers to take on these new offers, put their cards in their wallets and use them," Willink says.
For consumers using these products, the challenge is to work out a hierarchy of rates to avoid being tripped up.
Mike Ebstein of MWE Consulting says growth in credit cards is declining and points to a shift in consumer behaviour, with people now using debit cards more frequently than credit cards.
"Credit card issuers are competing against each other and against other payment methods, such as debit cards, charge cards, store cards and cheques," Ebstein says.
Rod Hyde, the head of consumer finance at HSBC, says his bank is offering zero interest on balance transfers and new purchasers "in response to customer research".
"Our customers are saying that's what they want to see," he says. "Our card meets their value needs."
In a way, Hyde is right: consumers like access to someone else's cash without the worry of high interest charges if they can't meet their repayments.
Hyde's offer, though, isn't a permanent one. And it comes with strings attached. The HSBC Visa card has an annual fee of $39 and late payment fees of $30.
If you transfer your balance to the card and don't pay it off before October 1, the rate jumps to 15.95 per cent. This is also the rate charged for cash advances. After October 1, any balance you carry from purchases made during that month attract interest at the revert rate to 11.95 per cent. The offer is only for new cardholders and expires on February 28.
Members Equity Bank and Community First Credit Union also compete in this end of the market. Community First has a Visa card with a 9.50 per cent rate. It does not allow balance transfers. The card has a $30 annual fee and a $30 late payment fee.
Credit cards with honeymoon sweeteners on balance transfers can help you keep to you budget but if you don't abide by the rules you can end up paying more in interest - which is why the banks love them.
Denis Orrock, the general manager of researcher InfoChoice, says most balance transfers are not paid off within the timeframe of the low interest deal. Worse, such low offers can encourage consumers to be reckless with their spending.
"Interest free is never totally interest free for most people. Over time, they start paying interest," Orrock warns.
There are 26 cards with interest rates under 10 per cent, says Andrew Willink, the managing director of Cannex, with several of these offering zero interest on balance transfers as well as new purchases.
"The card issuers are looking for market share. They want consumers to take on these new offers, put their cards in their wallets and use them," Willink says.
For consumers using these products, the challenge is to work out a hierarchy of rates to avoid being tripped up.
Mike Ebstein of MWE Consulting says growth in credit cards is declining and points to a shift in consumer behaviour, with people now using debit cards more frequently than credit cards.
"Credit card issuers are competing against each other and against other payment methods, such as debit cards, charge cards, store cards and cheques," Ebstein says.
Rod Hyde, the head of consumer finance at HSBC, says his bank is offering zero interest on balance transfers and new purchasers "in response to customer research".
"Our customers are saying that's what they want to see," he says. "Our card meets their value needs."
In a way, Hyde is right: consumers like access to someone else's cash without the worry of high interest charges if they can't meet their repayments.
Hyde's offer, though, isn't a permanent one. And it comes with strings attached. The HSBC Visa card has an annual fee of $39 and late payment fees of $30.
If you transfer your balance to the card and don't pay it off before October 1, the rate jumps to 15.95 per cent. This is also the rate charged for cash advances. After October 1, any balance you carry from purchases made during that month attract interest at the revert rate to 11.95 per cent. The offer is only for new cardholders and expires on February 28.
Members Equity Bank and Community First Credit Union also compete in this end of the market. Community First has a Visa card with a 9.50 per cent rate. It does not allow balance transfers. The card has a $30 annual fee and a $30 late payment fee.
A spokesman, Kerry McMorrow, says it offers customers three cards and each meets specific needs. But the credit union's philosophy is to offer cheap credit with few frills.
Members Equity's MasterCard has a 10.99 per cent rate, a $30 annual fee and a $25 late payment fee. The bank's executive manager, Tony Beck, says there are two groups of customers: those who carry a balance each month and those who pay off their card in full when their statement arrives. If you carry a balance, you are known in the industry as a revolver. If you pay it off, you are a transactor.
"People interested in a low-rate card are the ones most likely to carry a balance forward every month," Beck says. "It's these customers who are the most profitable for the banks. If you are paying your card off on time in full, then you don't really care what the interest rate might be.
"But once the banks get people in on a low rate, then it's very likely those people will end up paying some interest on their card in the future."
Beck says consumers need to watch out for high late payment fees. The fees are charged on top of the high interest rate you'll pay for carrying a balance from one month to the next, once the honeymoon period is over.
Also, find out the reversion rate, or the interest rate that you will be charged once your interest-free period is over. And watch out for over-the-limit fees. Beck says people who accept a low credit limit to keep spending in check may easily breach it, triggering a nasty fee.
GE Money is also luring consumers with a zero interest rate card. A spokesman, Keith Ritchie, says the GE MasterCard has six months interest free on new purchases and 4.99 per cent interest on balance transfers. The deal is only for new cardholders and starts from the time you get the card.
"There are lots of card companies out there doing nothing," he says, referring to the plethora of high-interest rate cards still on the market. "We have been competitive in terms of what we offer customers from day one."
The GE card comes with a $58 annual fee and if you miss a payment, or make a late payment, you'll pay an extra $30.
At the end of the six-month honeymoon period, the zero interest rate on purchases reverts to 9.99 per cent, as does the interest charged on your balance transferred from another card. If you take cash advances, you'll pay 18.49 per cent.
BankWest also has a zero-interest deal on purchases and balance transfers that runs for four months. After that, its reversion rate is 13.74 per cent and its rate for cash advances is 20.49 per cent.
Willink says many people apply for such cards to provide an emergency buffer against unexpected events: "A lot of people think having a low rate card in their wallet would be fantastic for that rainy day. But you also must be disciplined.
"You have to keep making repayments, even when the interest rate is zero, and get the card paid off as soon as possible. If you don't, you will find yourself paying off a debt - a debt that should have been a small debt - for 25 years."
Source: The Australian
Credit cards with honeymoon sweeteners on balance transfers can help you keep to your budget but if you don't abide by the rules you can end up paying more in interest - which is why the banks love them.
Denis Orrock, the general manager of researcher InfoChoice, says most balance transfers are not paid off within the timeframe of the low interest deal. Worse, such low offers can encourage consumers to be reckless with their spending.
"Interest free is never totally interest free for most people. Over time, they start paying interest," Orrock warns.
There are 26 cards with interest rates under 10 per cent, says Andrew Willink, the managing director of Cannex, with several of these offering zero interest on balance transfers as well as new purchases.
"The card issuers are looking for market share. They want consumers to take on these new offers, put their cards in their wallets and use them," Willink says.
For consumers using these products, the challenge is to work out a hierarchy of rates to avoid being tripped up.
Mike Ebstein of MWE Consulting says growth in credit cards is declining and points to a shift in consumer behaviour, with people now using debit cards more frequently than credit cards.
"Credit card issuers are competing against each other and against other payment methods, such as debit cards, charge cards, store cards and cheques," Ebstein says.
Rod Hyde, the head of consumer finance at HSBC, says his bank is offering zero interest on balance transfers and new purchasers "in response to customer research".
"Our customers are saying that's what they want to see," he says. "Our card meets their value needs."
In a way, Hyde is right: consumers like access to someone else's cash without the worry of high interest charges if they can't meet their repayments.
Hyde's offer, though, isn't a permanent one. And it comes with strings attached. The HSBC Visa card has an annual fee of $39 and late payment fees of $30.
If you transfer your balance to the card and don't pay it off before October 1, the rate jumps to 15.95 per cent. This is also the rate charged for cash advances. After October 1, any balance you carry from purchases made during that month attract interest at the revert rate to 11.95 per cent. The offer is only for new cardholders and expires on February 28.
Members Equity Bank and Community First Credit Union also compete in this end of the market. Community First has a Visa card with a 9.50 per cent rate. It does not allow balance transfers. The card has a $30 annual fee and a $30 late payment fee.
Credit cards with honeymoon sweeteners on balance transfers can help you keep to you budget but if you don't abide by the rules you can end up paying more in interest - which is why the banks love them.
Denis Orrock, the general manager of researcher InfoChoice, says most balance transfers are not paid off within the timeframe of the low interest deal. Worse, such low offers can encourage consumers to be reckless with their spending.
"Interest free is never totally interest free for most people. Over time, they start paying interest," Orrock warns.
There are 26 cards with interest rates under 10 per cent, says Andrew Willink, the managing director of Cannex, with several of these offering zero interest on balance transfers as well as new purchases.
"The card issuers are looking for market share. They want consumers to take on these new offers, put their cards in their wallets and use them," Willink says.
For consumers using these products, the challenge is to work out a hierarchy of rates to avoid being tripped up.
Mike Ebstein of MWE Consulting says growth in credit cards is declining and points to a shift in consumer behaviour, with people now using debit cards more frequently than credit cards.
"Credit card issuers are competing against each other and against other payment methods, such as debit cards, charge cards, store cards and cheques," Ebstein says.
Rod Hyde, the head of consumer finance at HSBC, says his bank is offering zero interest on balance transfers and new purchasers "in response to customer research".
"Our customers are saying that's what they want to see," he says. "Our card meets their value needs."
In a way, Hyde is right: consumers like access to someone else's cash without the worry of high interest charges if they can't meet their repayments.
Hyde's offer, though, isn't a permanent one. And it comes with strings attached. The HSBC Visa card has an annual fee of $39 and late payment fees of $30.
If you transfer your balance to the card and don't pay it off before October 1, the rate jumps to 15.95 per cent. This is also the rate charged for cash advances. After October 1, any balance you carry from purchases made during that month attract interest at the revert rate to 11.95 per cent. The offer is only for new cardholders and expires on February 28.
Members Equity Bank and Community First Credit Union also compete in this end of the market. Community First has a Visa card with a 9.50 per cent rate. It does not allow balance transfers. The card has a $30 annual fee and a $30 late payment fee.
A spokesman, Kerry McMorrow, says it offers customers three cards and each meets specific needs. But the credit union's philosophy is to offer cheap credit with few frills.
Members Equity's MasterCard has a 10.99 per cent rate, a $30 annual fee and a $25 late payment fee. The bank's executive manager, Tony Beck, says there are two groups of customers: those who carry a balance each month and those who pay off their card in full when their statement arrives. If you carry a balance, you are known in the industry as a revolver. If you pay it off, you are a transactor.
"People interested in a low-rate card are the ones most likely to carry a balance forward every month," Beck says. "It's these customers who are the most profitable for the banks. If you are paying your card off on time in full, then you don't really care what the interest rate might be.
"But once the banks get people in on a low rate, then it's very likely those people will end up paying some interest on their card in the future."
Beck says consumers need to watch out for high late payment fees. The fees are charged on top of the high interest rate you'll pay for carrying a balance from one month to the next, once the honeymoon period is over.
Also, find out the reversion rate, or the interest rate that you will be charged once your interest-free period is over. And watch out for over-the-limit fees. Beck says people who accept a low credit limit to keep spending in check may easily breach it, triggering a nasty fee.
GE Money is also luring consumers with a zero interest rate card. A spokesman, Keith Ritchie, says the GE MasterCard has six months interest free on new purchases and 4.99 per cent interest on balance transfers. The deal is only for new cardholders and starts from the time you get the card.
"There are lots of card companies out there doing nothing," he says, referring to the plethora of high-interest rate cards still on the market. "We have been competitive in terms of what we offer customers from day one."
The GE card comes with a $58 annual fee and if you miss a payment, or make a late payment, you'll pay an extra $30.
At the end of the six-month honeymoon period, the zero interest rate on purchases reverts to 9.99 per cent, as does the interest charged on your balance transferred from another card. If you take cash advances, you'll pay 18.49 per cent.
BankWest also has a zero-interest deal on purchases and balance transfers that runs for four months. After that, its reversion rate is 13.74 per cent and its rate for cash advances is 20.49 per cent.
Willink says many people apply for such cards to provide an emergency buffer against unexpected events: "A lot of people think having a low rate card in their wallet would be fantastic for that rainy day. But you also must be disciplined.
"You have to keep making repayments, even when the interest rate is zero, and get the card paid off as soon as possible. If you don't, you will find yourself paying off a debt - a debt that should have been a small debt - for 25 years."
Source: The Australian
Australian housing market struggles east to west as the Perth property boom ends and Sydney house prices continue to fall
The West Australian capital Perth house price boom has ended and New South Wales capital Sydney house prices have dropped even further as the property downturn continues to bite, with analysts predicting months more pain for homeowners.
House price growth in Perth slowed to just 1.7 per cent in the December quarter, with property prices in the city now growing at the fourth-slowest rate in the country, according to Australian Bureau of Statistics figures.
In Sydney, median house prices fell 1 per cent in the quarter - reversing slight gains made earlier in the year - as the impact of last year's three rate rises was digested by the nation's weakest property market.
Housing Industry Association chief economist Harley Dale said housing affordability in NSW remained the lowest in the country, but flat or falling prices were slowly attracting first-home buyers and investors back into the Sydney market.
Mr Dale said the effect of last year's interest rate rises would continue to dampen house price growth until at least June.
National house price growth slowed to 0.9 per cent in the December quarter, resulting in annual growth of 8.3 per cent.
That slowdown was driven by the cooling Perth market, which had delivered total house price growth of 34.6 per cent in the first three quarters of last year as the state rode the resources boom.
Elsewhere in the country, house price growth remained relatively subdued in the December quarter except in Brisbane and Darwin, where prices grew by a respectable 3 per cent.
"We expect Brisbane will lead the housing recovery over the next two years," BIS Shrapnel senior analyst Jason Anderson said yesterday. "Brisbane is where rental growth has been strongest, it's where pressures are greatest and I think that's showing up in this price growth."
Mr Anderson said Perth prices were likely to fall 1 per cent this year because that market had "overshot" during the boom.
Macquarie Bank head of property Rod Cornish said interest rates were expected to remain on hold this year as inflation pressures eased.
And he predicted the Reserve Bank would probably cut rates early next year in an attempt to stimulate building activity in the floundering NSW and Victorian markets.
Mr Anderson said Sydney would remain a two-tier market, with house prices in the city's struggling outer-western suburbs expected to fall as much as 5 per cent this year, while inner-city areas could show slight growth.
"There's still this tug of war going on between what buyers are asking and what people are prepared to pay," he said.
In a sign of the weakness in Sydney's outer suburban housing market, Stockland - Australia's second-biggest property group - last week revealed only 96 of the 1900 blocks of land it had sold in the past six months were in NSW.
Source: The Australian
House price growth in Perth slowed to just 1.7 per cent in the December quarter, with property prices in the city now growing at the fourth-slowest rate in the country, according to Australian Bureau of Statistics figures.
In Sydney, median house prices fell 1 per cent in the quarter - reversing slight gains made earlier in the year - as the impact of last year's three rate rises was digested by the nation's weakest property market.
Housing Industry Association chief economist Harley Dale said housing affordability in NSW remained the lowest in the country, but flat or falling prices were slowly attracting first-home buyers and investors back into the Sydney market.
Mr Dale said the effect of last year's interest rate rises would continue to dampen house price growth until at least June.
National house price growth slowed to 0.9 per cent in the December quarter, resulting in annual growth of 8.3 per cent.
That slowdown was driven by the cooling Perth market, which had delivered total house price growth of 34.6 per cent in the first three quarters of last year as the state rode the resources boom.
Elsewhere in the country, house price growth remained relatively subdued in the December quarter except in Brisbane and Darwin, where prices grew by a respectable 3 per cent.
"We expect Brisbane will lead the housing recovery over the next two years," BIS Shrapnel senior analyst Jason Anderson said yesterday. "Brisbane is where rental growth has been strongest, it's where pressures are greatest and I think that's showing up in this price growth."
Mr Anderson said Perth prices were likely to fall 1 per cent this year because that market had "overshot" during the boom.
Macquarie Bank head of property Rod Cornish said interest rates were expected to remain on hold this year as inflation pressures eased.
And he predicted the Reserve Bank would probably cut rates early next year in an attempt to stimulate building activity in the floundering NSW and Victorian markets.
Mr Anderson said Sydney would remain a two-tier market, with house prices in the city's struggling outer-western suburbs expected to fall as much as 5 per cent this year, while inner-city areas could show slight growth.
"There's still this tug of war going on between what buyers are asking and what people are prepared to pay," he said.
In a sign of the weakness in Sydney's outer suburban housing market, Stockland - Australia's second-biggest property group - last week revealed only 96 of the 1900 blocks of land it had sold in the past six months were in NSW.
Source: The Australian
Wednesday, February 07, 2007
Home mortgage rates to stay on hold
Consumer spending has slowed in Australia, further easing pressure on inflation and the possibility of interest rates this month and through the year.
Investor confidence in the Australian dollar also took a hit after official figures released yesterday revealed a fall in home building approvals, along with the spending slowdown.
The Aussie is down almost 3 per cent since last month's Consumer Price Index showed the first fall in prices in eight years.
Although the Reserve Bank has its first meeting of the year today, any announcement on interest rates will not happen until tomorrow -- and then only if rates change.
The 0.3 per cent lift in monthly consumer spending in December to $18.45 billion was below economists' expectations of a 0.5 per cent rise.
In response to three rate rises last year, debt-bound households have curbed their spending.
CommSec chief equities economist Craig James said the economic data meant the RBA would have an easy decision in keeping interest rates steady at 6.25 per cent.
"The economy has clearly softened in response to the rate hikes delivered over 2006 with new figures on building approvals, retail spending, jobs and activity in the services sector all decidedly soggy in the latest month," Mr James said.
The TD Securities-Melbourne Institute inflation gauge also released yesterday showed inflation was unchanged in January as petrol prices fell.
The average family is spending about $157 a month on petrol -- down from almost $200 a month in June and August.
The RBA lifted rates in May, August and November last year to curb inflation, which was running above the central bank's target band of 2-3 per cent.
Macquarie Bank interest rate strategist Rory Robertson said the RBA would be thrilled with the clear deceleration in consumption growth and unemployment being at its lowest level in three decades.
"The Australian economy is in a really good place," he said.
Mr Robertson said the next interest rate move was so far off it was impossible to make a meaningful call on whether it would be up or down.
He said the April CPI numbers, tracking the first three months of the year, would be the next litmus test for inflation and interest rates.
Mr James said the good news for retailers was that, as interest rate fears receded, consumer confidence and spending would increase.
"Some retailers were forced to cut prices in the last three months to get consumers to part with their hard- earned dollars," Mr James said.
"While major retailers have reported healthy sales in recent months, the key question is how much of the rise was at the expense of bottom-line profits."
Australian Bureau of Statistics figures showed a 0.7 per cent rise to $53 billion in retail turnover in the December quarter.
The Australian dollar closed at US77.33, down marginally for the day after recovering from a sharp turn when the data was released.
In mid-January the Aussie hit a high of US79.8.
Source: Herald Sun
Investor confidence in the Australian dollar also took a hit after official figures released yesterday revealed a fall in home building approvals, along with the spending slowdown.
The Aussie is down almost 3 per cent since last month's Consumer Price Index showed the first fall in prices in eight years.
Although the Reserve Bank has its first meeting of the year today, any announcement on interest rates will not happen until tomorrow -- and then only if rates change.
The 0.3 per cent lift in monthly consumer spending in December to $18.45 billion was below economists' expectations of a 0.5 per cent rise.
In response to three rate rises last year, debt-bound households have curbed their spending.
CommSec chief equities economist Craig James said the economic data meant the RBA would have an easy decision in keeping interest rates steady at 6.25 per cent.
"The economy has clearly softened in response to the rate hikes delivered over 2006 with new figures on building approvals, retail spending, jobs and activity in the services sector all decidedly soggy in the latest month," Mr James said.
The TD Securities-Melbourne Institute inflation gauge also released yesterday showed inflation was unchanged in January as petrol prices fell.
The average family is spending about $157 a month on petrol -- down from almost $200 a month in June and August.
The RBA lifted rates in May, August and November last year to curb inflation, which was running above the central bank's target band of 2-3 per cent.
Macquarie Bank interest rate strategist Rory Robertson said the RBA would be thrilled with the clear deceleration in consumption growth and unemployment being at its lowest level in three decades.
"The Australian economy is in a really good place," he said.
Mr Robertson said the next interest rate move was so far off it was impossible to make a meaningful call on whether it would be up or down.
He said the April CPI numbers, tracking the first three months of the year, would be the next litmus test for inflation and interest rates.
Mr James said the good news for retailers was that, as interest rate fears receded, consumer confidence and spending would increase.
"Some retailers were forced to cut prices in the last three months to get consumers to part with their hard- earned dollars," Mr James said.
"While major retailers have reported healthy sales in recent months, the key question is how much of the rise was at the expense of bottom-line profits."
Australian Bureau of Statistics figures showed a 0.7 per cent rise to $53 billion in retail turnover in the December quarter.
The Australian dollar closed at US77.33, down marginally for the day after recovering from a sharp turn when the data was released.
In mid-January the Aussie hit a high of US79.8.
Source: Herald Sun
Tuesday, February 06, 2007
Brisbane man charged over property fraud
POLICE have charged a 42-year-old Brisbane man with fraud offences totalling more than $800,000.
The man, from Kenmore in Brisbane's west, allegedly used a forged birth certificate to obtain a Queensland driver's licence and bank mortgages for the purchase of three homes in Brisbane.
Police also allege he obtained personal finance totalling $90,000 through credit cards.
The man was arrested last night and is currently being held in the Brisbane watchhouse.
He will appear in the Brisbane Magistrates Court 5th February 2007.
Source: AAP
The man, from Kenmore in Brisbane's west, allegedly used a forged birth certificate to obtain a Queensland driver's licence and bank mortgages for the purchase of three homes in Brisbane.
Police also allege he obtained personal finance totalling $90,000 through credit cards.
The man was arrested last night and is currently being held in the Brisbane watchhouse.
He will appear in the Brisbane Magistrates Court 5th February 2007.
Source: AAP
Mortgage Interest rates on hold as inflation held in check
Inflation was unchanged in January helped in part by lower petrol as well as fruit and vegetable prices, a survey showed.
Consumer prices rose 3.1 per cent during the year to January, the TD Securities-Melbourne Institute inflation gauge showed.
The monthly inflation gauge was unchanged in January, following a 0.3 per cent increase in December.
The survey indicates the Reserve Bank of Australia (RBA) may decide to keep interest rates steady when it meets this week. The RBA sets rates to keep inflation between 2 and 3 per cent.
Most economists were surprised when the Australian Bureau of Statistics (ABS) reported that the consumer price index (CPI) fell by 0.1 per cent in the December quarter after petrol prices fell 12.4 per cent.
"Headline inflation continues to decelerate under the well known and well documented price declines in oil and bananas," TD Securities chief strategist Stephen Koukoulas said.
"The deceleration in headline inflation will give the RBA some breathing space when it comes to the next interest rate rise."
Consumer prices rose 3.1 per cent during the year to January, the TD Securities-Melbourne Institute inflation gauge showed.
The monthly inflation gauge was unchanged in January, following a 0.3 per cent increase in December.
The survey indicates the Reserve Bank of Australia (RBA) may decide to keep interest rates steady when it meets this week. The RBA sets rates to keep inflation between 2 and 3 per cent.
Most economists were surprised when the Australian Bureau of Statistics (ABS) reported that the consumer price index (CPI) fell by 0.1 per cent in the December quarter after petrol prices fell 12.4 per cent.
"Headline inflation continues to decelerate under the well known and well documented price declines in oil and bananas," TD Securities chief strategist Stephen Koukoulas said.
"The deceleration in headline inflation will give the RBA some breathing space when it comes to the next interest rate rise."
Mortgage Interest rates to stay steady
Building approvals fell in December as higher mortgage interest rates hurt demand for housing while retail spending sagged, taking pressure off interest rates.
Housing approvals fell 1.9 per cent to a seasonally adjusted 12,395 units, from a downwardly revised 12,630 units in November, the Australian Bureau of Statistics said today.
RBC Capital Markets senior economist Su-Lin Ong said the result shows three interest rate rises last year were hurting the building market.
This should prompt the Reserve Bank of Australia (RBA) to keep rates on hold when it meets this week, she said.
"Households had been showing resilience but its looking like the higher interest rates are starting to take their toll," Ms Ong said.
"It points to the RBA keeping rates on hold this week and for the foreseeable future."
In the year to December, building approvals fell 1.5 per cent. Economists had forecast a fall of 2 per cent in the month.
Meanwhile, the value of retail sales rose at a slightly weaker than expected pace in December, suggesting that inflationary pressures would not be strong enough to prompt the central bank to hike rates in the near-term.
Australian retail trade at current prices rose 0.3 per cent in December to a seasonally adjusted $18.445 billion from a downwardly revised $18.397 billion in November, the Australian Bureau of Statistics (ABS) said.
Economists had forecast an increase of 0.4 per cent in the month.
Meanwhile, retail trade in chain volume measures rose 1.3 per cent to $53.188 billion in the December quarter.
Macquarie Bank senior economist Brian Redican said the retail sales figures were mixed, but spending was holding up.
"In the month, the results was weaker than the market had anticipated, and it does suggest that there is a bit of a weakening trend there in the retail sales series," he said.
"But offsetting that was a very healthy quarterly retail sales number."
Mr Redican said the results suggested that while spending was healthy, it was not adding to inflationary pressures.
"It doesn't suggest that the Reserve Bank will need to do anything further, but nor does it suggest that the economy is falling in a hole either," he said.
Source: AAP
Housing approvals fell 1.9 per cent to a seasonally adjusted 12,395 units, from a downwardly revised 12,630 units in November, the Australian Bureau of Statistics said today.
RBC Capital Markets senior economist Su-Lin Ong said the result shows three interest rate rises last year were hurting the building market.
This should prompt the Reserve Bank of Australia (RBA) to keep rates on hold when it meets this week, she said.
"Households had been showing resilience but its looking like the higher interest rates are starting to take their toll," Ms Ong said.
"It points to the RBA keeping rates on hold this week and for the foreseeable future."
In the year to December, building approvals fell 1.5 per cent. Economists had forecast a fall of 2 per cent in the month.
Meanwhile, the value of retail sales rose at a slightly weaker than expected pace in December, suggesting that inflationary pressures would not be strong enough to prompt the central bank to hike rates in the near-term.
Australian retail trade at current prices rose 0.3 per cent in December to a seasonally adjusted $18.445 billion from a downwardly revised $18.397 billion in November, the Australian Bureau of Statistics (ABS) said.
Economists had forecast an increase of 0.4 per cent in the month.
Meanwhile, retail trade in chain volume measures rose 1.3 per cent to $53.188 billion in the December quarter.
Macquarie Bank senior economist Brian Redican said the retail sales figures were mixed, but spending was holding up.
"In the month, the results was weaker than the market had anticipated, and it does suggest that there is a bit of a weakening trend there in the retail sales series," he said.
"But offsetting that was a very healthy quarterly retail sales number."
Mr Redican said the results suggested that while spending was healthy, it was not adding to inflationary pressures.
"It doesn't suggest that the Reserve Bank will need to do anything further, but nor does it suggest that the economy is falling in a hole either," he said.
Source: AAP
The ten biggest mortgage myths that prevent home buyers homeowner owning their homes sooner.
Myth #1. A big brand bank home loan is better than a mortgage from non bank lender.Most people don’t like the major banks, but this myth prevents them from capitalizing on the mortgage opportunities in the growing non bank area.
Myth #2. A bad credit history means you can’t get a home loan.It is better that you have clear credit when you apply for a home loan because it improves your chance and options. But there are great loans for people with bad credit, and they can get better as your credit improves.
Myth #3. To get a home loan at the best mortgage rates you need a 20 per cent deposit.A 20% deposit on a home loan is a wonderful start, but today 100% home loans are there for the taking for people with excellent credit.Even for the self employed with no income checks we have up to 95% mortgage loans!
Myth #4. 100 per cent mortgage finance or a no deposit home loan means that you need no money for the transaction yourself.Buying property has other costs besides the home loan. These costs include stamp duty and Mortgage insurance, and you should allow around 5% for these costs for a high lend mortgage loan.
Myth #5. The lowest mortgage interest rate means the best loan deal for me. This is rarely the case. Low rates usually mean loss of valuable flexibility and higher fees and charges, or open ended fees and charges increases.
Myth #6. A lower fixed mortgage interest rate is a better deal than a higher variable rate.The truth is that market forces set the interest rates, and people that have fixed their rates in the last 10 years have lost money. If the fixed interest rates are lower now that is because the people that know are betting that variable rates will be falling.
Myth #7. Your car loans and credit cards can’t be rolled into a new home loan. We can do 105% loans today and higher, so a small amount of personal loans can be consolidated even into a new mortgage, but at a higher interest rate. We don’t however recommend this strategy.
Myth#8. Mortgage insurance is compulsory and can be around 2% of the loan amount.Non conforming lenders offer mortgage home loan finance with no mortgage insurance, so these may be a better option for you.
Myth #9. A standard variable rate loan on a principal and interest repayment is the best way to pay off a home loan.The best way depends on your financial goals and your money management skills. Most people who want to get ahead and have the income and desire to buy investment property are better off using a line of credit facility. This is an interest only facility with minimum repayments.
Myth #10. Its better to leave your mortgage with the bank.Yes, refinancing has costs that you must bear. If the borrowers are the same, these costs are kept to a minimum. But refinancing your loan to a non bank lender can save thousands in rates and fees and charges over the life of the loan.
Myth #2. A bad credit history means you can’t get a home loan.It is better that you have clear credit when you apply for a home loan because it improves your chance and options. But there are great loans for people with bad credit, and they can get better as your credit improves.
Myth #3. To get a home loan at the best mortgage rates you need a 20 per cent deposit.A 20% deposit on a home loan is a wonderful start, but today 100% home loans are there for the taking for people with excellent credit.Even for the self employed with no income checks we have up to 95% mortgage loans!
Myth #4. 100 per cent mortgage finance or a no deposit home loan means that you need no money for the transaction yourself.Buying property has other costs besides the home loan. These costs include stamp duty and Mortgage insurance, and you should allow around 5% for these costs for a high lend mortgage loan.
Myth #5. The lowest mortgage interest rate means the best loan deal for me. This is rarely the case. Low rates usually mean loss of valuable flexibility and higher fees and charges, or open ended fees and charges increases.
Myth #6. A lower fixed mortgage interest rate is a better deal than a higher variable rate.The truth is that market forces set the interest rates, and people that have fixed their rates in the last 10 years have lost money. If the fixed interest rates are lower now that is because the people that know are betting that variable rates will be falling.
Myth #7. Your car loans and credit cards can’t be rolled into a new home loan. We can do 105% loans today and higher, so a small amount of personal loans can be consolidated even into a new mortgage, but at a higher interest rate. We don’t however recommend this strategy.
Myth#8. Mortgage insurance is compulsory and can be around 2% of the loan amount.Non conforming lenders offer mortgage home loan finance with no mortgage insurance, so these may be a better option for you.
Myth #9. A standard variable rate loan on a principal and interest repayment is the best way to pay off a home loan.The best way depends on your financial goals and your money management skills. Most people who want to get ahead and have the income and desire to buy investment property are better off using a line of credit facility. This is an interest only facility with minimum repayments.
Myth #10. Its better to leave your mortgage with the bank.Yes, refinancing has costs that you must bear. If the borrowers are the same, these costs are kept to a minimum. But refinancing your loan to a non bank lender can save thousands in rates and fees and charges over the life of the loan.
First time home buyer and investment property hotspots in Adelaide South Australia
If you are a first home buyer or a property investor then take a look at Adelaide's hotspots, Mile End and Port Adelaide in South Australia's for capital growth.
But property investors who want a high yield rental income, it's a better bet to look in the city, outer suburbs or Iron Triangle towns.
A recent survey by Smart Money asked 10 of the state's biggest real estate companies for their views on which areas offer the best potential for property investors.
"Generally suburbs which are closer to the city and beach have provided better capital return over the long term," Raine & Horne manager for Burnside and Norwood, Joe DeConno, said.
L.J. Hooker regional director Rod Adcock said Mile End and Port Adelaide were "under-valued, close to the CBD and mainly comprise properties that would respond to update and improvement, therefore with potential capital growth".
Other capital growth hot spots include North Adelaide, Stirling, Payneham, Norwood and Brighton. No suburbs on the capital growth list made the high-yield list. "You are not going to get high yields in low risk areas," said Elders City Plus managing director Robin Turner, who recommends investors put capital growth above yield.
Mr DeConno said outer lying suburbs give better rental yield as purchase prices are lower.
"Some of these suburbs have recently also provided excellent capital growth, but this may not be as consistent as some of the inner suburbs are," Mr DeConno said.
Apart from the city itself, the best areas for yield include Elizabeth, Hackham, Whyalla and Port Pirie.
Professionals SA chief executive Ted Piteo said the city benefited from the growth of accommodation for overseas, interstate and country students, and more young professionals were moving to the CBD.
"Inner-city living represents great value for this market because of the proximity to all their required facilities," he said.
Mr Turner said pressures such as water restrictions and high fuel costs were making city living more desirable.
"A lot of ageing baby boomers are now looking at the city lifestyle," he said. So what is the best type of property to buy? Apartments, townhouses, units or stand-alone houses?
The answers varied widely among real estate agents, but bigger properties able to be subdivided were a popular choice.
"Land is the scarcest of commodities," Mr Turner said
Source: The Advertiser South Australia
But property investors who want a high yield rental income, it's a better bet to look in the city, outer suburbs or Iron Triangle towns.
A recent survey by Smart Money asked 10 of the state's biggest real estate companies for their views on which areas offer the best potential for property investors.
"Generally suburbs which are closer to the city and beach have provided better capital return over the long term," Raine & Horne manager for Burnside and Norwood, Joe DeConno, said.
L.J. Hooker regional director Rod Adcock said Mile End and Port Adelaide were "under-valued, close to the CBD and mainly comprise properties that would respond to update and improvement, therefore with potential capital growth".
Other capital growth hot spots include North Adelaide, Stirling, Payneham, Norwood and Brighton. No suburbs on the capital growth list made the high-yield list. "You are not going to get high yields in low risk areas," said Elders City Plus managing director Robin Turner, who recommends investors put capital growth above yield.
Mr DeConno said outer lying suburbs give better rental yield as purchase prices are lower.
"Some of these suburbs have recently also provided excellent capital growth, but this may not be as consistent as some of the inner suburbs are," Mr DeConno said.
Apart from the city itself, the best areas for yield include Elizabeth, Hackham, Whyalla and Port Pirie.
Professionals SA chief executive Ted Piteo said the city benefited from the growth of accommodation for overseas, interstate and country students, and more young professionals were moving to the CBD.
"Inner-city living represents great value for this market because of the proximity to all their required facilities," he said.
Mr Turner said pressures such as water restrictions and high fuel costs were making city living more desirable.
"A lot of ageing baby boomers are now looking at the city lifestyle," he said. So what is the best type of property to buy? Apartments, townhouses, units or stand-alone houses?
The answers varied widely among real estate agents, but bigger properties able to be subdivided were a popular choice.
"Land is the scarcest of commodities," Mr Turner said
Source: The Advertiser South Australia
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