First Home Owner Grant may be creating property bubble
Filed under Australia Real Estate News · Tagged: first home owner grant, housing australia, Property, property bubble
It’s now being reported by some analysts that there is sufficient evidence to suggest that the first-home-owner grant scheme is creating a new ‘property bubble’.
Will the government extend the inflated first-home-owner incentives beyond June 30? At the moment, first-home owners buying existing homes get $14,000 from the government. Previously they were getting $7000. If they buy a new home, they get $21,000.
The problem is that most experts think (and history agrees) the handouts simply push up prices. And house prices will drop if the incentives aren’t maintained.
Aussie Home Loans founder John Symond wants the federal government to extend the incentive package but only to those buying new homes.
“By giving the double grant on existing homes, it’s causing prices to go up by an amount greater, in my opinion, than the grant. So young people are paying $20,000 to $30,000, maybe even more, to get into a home. But they’re only getting their $14,000 [grant]. I don’t think it’s a good deal,” he says.
“That grant can’t go for ever and as soon as that’s pulled away, there’s a real danger of those [existing] property values dropping by 5 per cent or 10 per cent. Certainly the government needs to pr ov id e stimulus and the best way of doing that is to give the double grant … to first-home buyers buying a new property. That way it creates jobs and … takes some pressure off the rental problems by creating new housing.”
UK house prices fall nearly 2% in March
Filed under UK Real Estate News · Tagged: house prices uk, property prices
UK house prices fell by 1.9% in March compared with the previous month, according to data provided by the Halifax.
The Halifax (now part of Lloyds Banking Group) – said that conditions in the housing market would remain tough for the rest of the year.
The average UK home now costs £157,226, at least £30,000 less than a year ago.
The figures failed to echo the slight rise in prices in March reported by the Nationwide, with the Halifax saying that consumer confidence was still low.
The annual rate of decline eased slightly, with prices down 17.5% in March compared with a record drop of 17.7% in February.
This annual figure is based on a three-month by three-month comparison. When comparing the average price from March compared with March 2008, the drop was 17.6%.
“Conditions in the housing market are likely to be tough during the remainder of 2009 despite the improvements in affordability,” said Halifax housing economist Martin Ellis.
He said that rising unemployment, low consumer confidence and the squeeze on mortgage finance were all likely to exert “downward pressure” on the market over the coming months.
The month-on-month change is in contrast to the “surprise bounce” of 0.9% in March reported by the Nationwide Building Society.
But, on Thursday, the Nationwide warned against reading too much into its short-term price rise figure, saying that it was too early to suggest the bottom of the market had been reached.
The less volatile three-month on three-month measure by the Nationwide showed that the average UK property price dropped by 4.2% in the first three months of 2009 compared with the last quarter of 2008.
This was actually more gloomy for homeowners than the Halifax’s view, which suggested prices had fallen by 2.7% over the same period, a much smaller decrease than the 5% to 6% falls it recorded in each of the three previous quarters.
Mr Ellis said that, based on more mortgages being approved by banks and building societies recently, there were “tentative signs that activity may be beginning to stabilise”.
Homes were more affordable now that at any time since early 2003, having been at its toughest in July 2007, and existing mortgage-holders were benefitting from falling interest rates.
The amount that the average existing mortgage borrower was devoting to home loan repayments fell from a peak of 26.9% of household income in October 2008 to 22.6% in February 2009, he said.
David Smith, senior partner at Dreweatt Neate estate agents, said: “The March Halifax figures are proof positive that you can’t get carried away by a single set of figures from a single source.
“There is an inherent volatility to house prices right now and because of this a sideways-moving market, with the odd spike up or down, remains the most likely course for the rest of 2009.”
Interest rate cut not passed on in full by the big 4 banks
Filed under Australia Mortgage and Finance News · Tagged: big four banks, interest rates, mortgage rate
Australia: Following the reserve banks decision to cut the cash rate by25 basis points (0.25%) yesterday, the big 4 banks of Australia have decided not to pass on the full rate cut to borrowers – a decision which has angered federal and state governments, not to mention, consumers.
Westpac, along with the ANZ, has cut its standard variable home loan rate by 10 basis points (0.10%), in line with a similar move by the Commonwealth Bank of Australia.
Westpac is the last of the Big Four banks to respond to the Reserve Bank’s rate reduction yesterday.
National Australia Bank, stands alone out of the big 4, with it’s decision to not pass on any of the cut to it’s borrowers – leaving its standard variable home loan rate unchanged.
From April 20th, Westpac will charge 5.81% on their standard variable loan. ANZ will have the same rate, effective from April 17.
”Westpac continues to manage the challenging funding conditions with careful consideration of the deteriorating economic environment and the impact on our customers,” Westpac Group Executive, Retail and Business Banking, Peter Hanlon said.
Yesterday, CBA said it would cut its standard variable mortgage rate by 10 basis points to 5.64%, effective April 17.
National Australian Bank has said it would not cut rates because of the high cost of wholesale funding. Its variable rate stays at 5.74%.
The big four have resisted calls from Treasurer Wayne Swan for them to pass the 25 basis-point cut on to customers. Banks that don’t pass on the interest rate cut need “a good kick up the bum”, according to Federal Treasurer – Wayne Swan.
Victoria State Premier John Brumby added his voice to calls for the big banks to pass on cuts in interest rates to borrowers today, saying, “The banks need to do this, there needs to be more competition in the market, and I’m quite disappointed these reductions haven’t been passed on,”.
Prime Minister Kevin Rudd also urged banks to reconsider their decisions.
Moving the lending rate from 5.91% to 5.81% knocks $21 off the average monthly repayment on a $350,000 mortgage over 25 years.
Financial confidence shores up property prices
Filed under Australia Mortgage and Finance News · Tagged: australian property prices, global financial crisis
A G20-inspired wave of optimism has swept the world, boosting stock markets and reducing the chance of property prices dropping further.
World leaders agreed to inject $1.58 trillion into the global economy in a historic deal to kick-start growth and save jobs.
The leaders of the world’s top 20 economies, including Prime Minister Kevin Rudd, announced the deal at the end of their London summit.
The Real Estate Institute of Victoria welcomed the announcement, saying the spending would help put a floor under property prices. “The property market will benefit from any improvement in economic conditions, particularly if it results in economic growth,” chief executive Enzo Raimondo said.
Chief economist at AMP Capital Investors, Shane Oliver, said the G20 announcement had helped to push the stock market higher for a fourth week.
“While it’s too early to say shares have bottomed, there are certainly positive signs. Further gains are likely over the next few months,” he said.
Mr Rudd called it a concrete plan to beat the effects of the global recession set off by the collapse of banks in the US.
“It’s been prime ministers and presidents who have struck this deal, but it’s small businesses, tradies and young people who will benefit from it over time,” he said.
Mr Rudd said the G20 deal cracked down on “cowboys” who had brought global markets undone. Treasurer Wayne Swan added: “Any measure globally which supports growth and jobs assists the stimulus the Australian Government has put in place to support that.”
$173 million for new affordable housing in Victoria
Filed under Australia Real Estate News · Tagged: affordable housing
VICTORIA will get $173 million to build new affordable housing for families in need, the Federal Government announced today.
Federal Housing Minister Jenny Macklin said the investment was part of phase one of the $6.4 billion social housing component of the government’s Nation Building and Economic Stimulus Plan. Some $692 million has been distributed nationally.
“Working with the Victorian government, we have committed to deliver 667 new social housing dwellings across the state by July next year,” Ms Macklin said.
“Not only does this mean new homes for families, it will also support jobs in the construction industry, including apprenticeships.”
Victorian Housing Minister Richard Wynne said the new homes would deliver benefits to those Victorians in need.
“This boost from the stimulus package will help create or secure more than 3,000 new jobs as well as providing more affordable housing for the Victorian community,” he said.
“We’re looking to make housing more affordable for low and middle income earners by building new homes across metropolitan Melbourne and Victoria’s regional centres.”
Australian Bank goes into administration
Filed under Australia Mortgage and Finance News · Tagged: bank administration, global economic crisis
Babcock & Brown – Australia’s second largest investment bank, has gone into administration after it was unable to deal with its massive debt levels. The former private equity powerhouse, had struggled for more than a year.
Babcock’s downfall was blamed on taking on too much debt – and then being unable to cope in the credit crunch.
At its peak, shares were worth 37 Australian dollars (£17.40; US$24.20) but when suspended about three months ago, were worth just 32.5 cents.
Efforts to avoid administration failed when a group of shareholders rejected a proposed debt restructuring, with Deloitte being appointed as administrators.
Like with Chapter 11 bankruptcy laws in the US, firms entering voluntary administration in Australia can attempt to trade out of financial difficulties.
But administrator David Lombe told the Australian Broadcasting Corporation that it was too early to say whether Babcock could avoid collapse.
While administrators will run the company on behalf of creditors, Babcock said that it would focus on “ensuring that the value of assets and business platforms is preserved during this process and all assets and businesses continue to be managed appropriately”.
Its satellite investment funds, Babcock & Brown Infrastructure – which owns UK port firm PD Ports – said it was unaffected by the administration.
Babcock had been hailed a success, likened to a mini-version of Australia’s most dominant investment bank Macquarie.
Last November, Macquarie announced a sharp fall in profits but said it did not need to raise cash.
‘Staying put’ owners cause house sales crash
Filed under Australia Real Estate News · Tagged: house sales crash
House sales have crashed on a national level as middle and high-end owners avoid listing their properties as the financial turmoil continues.
While property clearance rates – the proportion of auctioned properties being sold – continued to improve in the southern capitals over the weekend, property volumes reveal a grimmer story.
In Sydney the auction clearance rate was 63 per cent, up from 47 per cent the same weekend last year. But the number of properties sold slumped from 229 last year to just 127 at the weekend.
In Melbourne the auction clearance rate remained steady – at 66 per cent – but the number of properties listed for sale crashed from 1265 the same weekend last year to just 396.
In Brisbane and Adelaide, markets dominated by private-treaty sales, the cupboard had almost been stripped bare, with clearance rates and property volumes both taking a dive.
In Adelaide only 25 properties were put up for auction compared with 108 for the corresponding weekend in 2008, and with eight auction results yet to be reported, 17 properties had already been passed in.
Only 38 properties were placed on the market in Brisbane compared with 115 for the same weekend last year.
Real Estate Institute of Victoria head Enzo Raimondo said it was the decline in properties available for sale that had driven the recovery in clearance rates. “We’ve seen a decrease in transactions right across the board,” Mr Raimondo said.
He said home owners had become unwilling to sell unless they were forced to. “While we’re seeing a lot of increased activity in the lower end of the market, the median to higher end where most of the action usually takes place has slowed down to a whimper,” he said.
SQM Research managing director Louis Christopher said first-home buyers had buoyed lower-end sales, but he cautioned them not to rush into the market because prices were likely to fall.
“Buying a property because of the increase to the first-home buyer’s grant is like having a baby because of the baby bonus,” Mr Christopher said. “It’s not a wise move.”
But despite the slowdown in sales, research from the Market Intelligence Strategy Centre found the “real” home lending market had proved far more robust than official data suggested.
According to MISC, the value of new mortgage settlements rose 18.5 per cent to $46 billion in the December quarter, which it attributed to the Reserve Bank’s three rate cuts during the quarter, totally 2.75 percentage points.
MISC cuts its figures from actual mortgage settlements derived from state governments’ stamp duty data. This method differs from that of the Australian Bureau of Statistics, which uses mortgage commitment data provided by selected lenders.
The ABS data showed a 20 per cent fall in December-quarter residential building approvals, seasonally adjusted, while the value of owner-occupied housing finance rose 3.49 per cent.
Mr Raimondo said if the unemployment rate steadied and confidence was restored into the economy, the market would see an upturn in the spring quarter. “(But) if the financial crisis worsens and unemployment rises then it’s going to put a real damper on the market.”
Australian economy contracts 0.5%
Filed under Australia Mortgage and Finance News · Tagged: australia recession
Australia’s economy has suffered ‘negative growth’ for the first time in eight years, raising fears that the country may be heading for a recession.
The economy contracted by 0.5% in the last three months of 2008 from the previous quarter, the government said.
Economists had been expecting it to grow by 0.2%.
If Australia’s economy shrinks again the current quarter, it will enter recession, usually defined as two consecutive quarters of contraction.
Australia’s resource-based economy has been hit hard by the decline in commodity prices, but it has fared better than others.
The country’s mining firms are cutting back on spending, slashing staff numbers, and shelving projects.
“Our economy did contract in the December quarter, but by far less than other developed economies,” said Treasurer Wayne Swan.
“This is a sobering but unsurprising outcome, because I think it does illustrate the full impact of the magnitude of the global recession and how it’s impacting on this country.”
Japan’s GDP dropped 3.3% in the final quarter of 2008, the US saw a 1.6% drop and the UK contracted by 1.5%
British pound on the slide again
Filed under UK Mortgage and Finance News · Tagged: dollar pound, exchange rate
Thebritish pound has dropped back below $1.40 to a 6 week low, as confidence in the UK economy took yet another knock following falls in bank shares.
The pound was down almost four cents at $1.3776. Sterling touched its lowest levels in 24 years in mid-January, nearing $1.35.
UK financial shares fell in Monday trading after the government increased its stake in Lloyds Banking Group.
Against the euro, the pound was down over two cents at 1.0927 euros.
Shares in Lloyds fell more than 10%, before recovering during afternoon trading to end the day up 4.1%.
Barclays lost 13% before bouncing to end down 5.3%.
Other banking stocks among the day’s biggest losers included HSBC, down 3.3%, and RBS, which fell 4%.
“What’s going on in UK shares at the moment is putting pressure on sterling,” said Geraldine Concagh at AIB Group Treasury.
She added that the Bank of England’s programme of quantitative easing will put further downward pressure on sterling.
The taxpayer will soon own 65% of Lloyds Banking Group – up from
Big uptake in first homeowner grants in Australia
Filed under Australia Mortgage and Finance News · Tagged: australia housing market, first homeowner grant
FIRST-time home buyers are rushing to take advantage of a one-off a boost in the Federal Government’s housing grant before it ends in three months time, the nation’s largest mortgage broker says.
Australian Finance Group (AFG) says the number of loans arranged by the firm rose by 36.8 per cent in February to 7673 loans, valued at $2.67 billion.
Of those more than a quarter, or 26.1 per cent, were taken out by first home buyers, up from 25.8 per cent in January.
That compared to February 2008, when the number of loans AFG sold totalled 7574, with only 11.5 per cent going to first home buyers.
However, AFG general manager of sales and operations Mark Hewitt warned that if the Government grant top-up was not extended, the market may be looking over cliff by the June 30 deadline.
“The dramatic increase we’ve seen in first home buyers over the past four months is a double edged sword,” he said.
“It’s positive in that it underpins the future recovery of mid-level property markets by getting significant numbers of people onto the property ladder.
“But we’re concerned that if the government doesn’t announce an extension to the grants fairly soon, we’ll continue to pull demand forward, and will be left staring over a cliff come the end of June.”
In mid-October, the Federal Government doubled the first home owners grant to $14,000 for established dwellings and tripled it to $21,000 for newly built properties.
AFG’s figures also showed NSW had the highest concentration of first home buyers, at 34.5 per cent, in February, followed by Victoria on 26.8 per cent.
Borrowers also continued to shun fixed-rate loans, with the number of new fixed mortgages falling to 2.5 per cent in February, after peaking at 27.3 per cent in November 2007.
Standard variable rates were the mostly popular, making up 48.8 per cent of loans.
About Me
Kate Williams has extensive experience working in property valuation and property rental in the UK and Australia over a 10 year period. Kate is now the Managing Director of a Melbourne based Relocation company which initially finds short term fully furnished rental accommodation for new arrivals to the city.
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