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Catherines Chat

Wholistic Financial Solutions provides a lot of essential information and updates regarding the property investment industry. Check this page for the updates.

Housing Affordability Surges

Tuesday, April 02, 2013

Housing affordability surged in December 2012 quarter. According to the HIA-CBA Housing Affordability Index this has been driven by earnings growth, interest rate cuts and weak price increases. The Index increased by 5.5 %  in the December 2012 quarter, representing an 18.4% advance on the same period of 2011. This is the 8th consecutive quarter of increases.

HIA senior economist, Shane Garrett commented that “For regional areas, affordability is at levels last seen during the early 2000s. Affordability is on the increase in every part of the country”. “It is worth noting that affordability would be even more favourable to householders had recent RBA rate cuts been passed on fully by lenders,” says Garrett. “Despite the relative attractiveness of house purchase implied by these figures, transactions activity on the ground is very sluggish. This underlines the need for stronger interventions from the RBA in terms of interest rates and from the government with regard to the heavy taxation of home purchase.”

What does this mean for investors?  Housing affordability can be a strong signal of impending price rises.  When houses are perceived as more affordable more first home buyers are tempted into the market, more home owners consider selling and upgrading and more investors can afford to buy another property.  As more buyers enter the market, upward pressure is placed on prices, and this eventually results in price rises.

This week we are in Canberra Weekly Magazine

Thursday, March 28, 2013

The Big Banks Big Lies

Monday, March 25, 2013

The major banks are supercharging their profits at the expense of customers. Their funding costs have fallen, not risen, as they claimed when refusing to pass on Reserve Bank interest rate cuts.

Their action has hurt not only mortgage holders but savers, small businesses and all other bank customers, according to research by Milind Sathye, a former central banker and now professor of banking and finance at the University of Canberra.

Professor Sathye has debunked claims that the banks' high cost of funding has forced them to hold back rate cuts.

And former Reserve Bank governor Bernie Fraser said the big banks had room to cut their mortgage rates, but had failed to do so because they had put profits first.

Professor Sathye said the three main sources of bank funding - deposits, long-term debt and short-term debt - had become much cheaper in recent years, even as the banks had claimed they were rising.

Since November 2011, the Reserve has lowered the cash rate by 1.75 percentage points to 3 per cent. But the banks dropped their mortgage rates by only 1.36 percentage points to the standard variable rate of 6.42 per cent. That means almost a quarter of the Reserve's cuts - billions of dollars' worth - has gone into the banks' coffers.

Professor Sathye cites the online savings account interest rate easing from 7.3 per cent in July 2008 to 3.05 per cent in January this year, a 4.25 percentage-point fall.

Term deposits fell from 7.95 to 4.25 per cent in the same period, a drop of 3.7 percentage points as the Reserve's cash rate came down further, from 7.25 to 3 per cent. But as the drop in interest paid by banks is smaller than the drop in what it charges, their profit has increased.

That shows up in the profit figures. The pre-tax combined profit of the big four banks was $22.6 billion in 2008 and $33 billion last year, a jump of 46 per cent.

All eyes will be on the banks this week if the Reserve Bank moves the cash rate on Tuesday.

Professor Sathye's analysis concludes that the greatest threat to bank profitability has come not from external funding pressures or from competition, but from a blow-out in operating costs.

His findings follow a report from UBS Investment Research last week that said the banks were in such a ''purple patch'' that they risked government intervention if they did not start making their own mortgage rate cuts outside the Reserve Bank cycle.

''Banks are now making more money from originating a mortgage than any time previously,'' UBS analyst Jonathan Mott wrote.

Last month Commonwealth Bank delivered a $3.8 billion net profit for the half-year. This put the big four - Commonwealth, Westpac, ANZ and National Australia Bank - comfortably on track to surpass their collective bottom-line profit of $25 billion last year.

It also endorsed Commonwealth's sharemarket valuation, which shot through $100 billion in the new year, further polishing the reputation of Australia's banks as among the most profitable in the world - and arguably the safest.

Professor Sathye, a former central banker in India, said this sharemarket performance ''is coming out of the pocket of somebody … and that somebody is the Australian borrower".

Even though people and business are borrowing less since the global financial crisis and despite the rise in the banks' operating costs, profits have risen because of lower funding costs and fattening credit ''spreads'' - the difference between what banks pay for money and what they charge for it when they lend.

"The majors continue to make record profits and at the same time harp on about high funding costs to justify their higher lending rates," Professor Sathye said.

Deposits are the single largest source of bank funding. They contribute just above 50 per cent of funding, according to the Reserve Bank. The Australian Bankers Association has argued that competition for deposits has pushed up the interest rates on them.

But Professor Sathye says deposit rates have fallen. In fact, they had declined more sharply than lending rates, meaning funding costs had dropped, not risen.

"So [it's] not just the mortgage holder but all bank customers who are suffering,'' he said.

Author: Michael West


Read more: http://www.smh.com.au/business/the-big-banks-big-lies-20130303-2fepi.html#ixzz2OVOReFw3

Queensland Property Growth

Friday, March 22, 2013
Hi all,
Only two weeks till I go on an extensive filed trip around QLD looking for the best property investments.  One has caught my attention as an example;
Everton Park – eight kilometers north of the Brisbane CBD - experienced the highest median price growth in 2012 for units and townhouses, according to the latest Real Estate Institute of Queensland (REIQ) data.

The median unit and townhouse price for Everton Park for the 12 months up until December is $430,000 – a 22.9% increase on the median price of $349,813 in 2011.

However suggesting some volatility in the suburb, it experienced a December quarterly fall of 16.1% to $390,000.

Sherwood – 9 kilometres south west of the CBD - comes in second place, experiencing an 18.0% annual growth from $372,500 to $439,500.

Chermside was the weakest performing suburb in the Brisbane city, falling 15.8% annually from $431,000 in December 2011 to $363,000 in December 2012.

 

Region

Median sale 12 months December 2012

Median Sale 12 months December 2011

One year change

Everton Park

$430,000

$349,813

22.9%

Sherwood

$439,500

$372,500

18.0%

Stafford

$407,500

$360,000

13.2%

St Lucia

$479,000

$425,000

12.7%

Hamilton

$477,500

$427,500

11.7%

Taringa

$434,000

$390,000

11.3%

Teneriffe

$555,938

$512,500

8.5%

West End

$523,000

$483,550

8.2%

Balmoral

$465,000

$431,500

7.8%

Bulimba

$549,500

$510,000

7.7%



Stay tuned for a more comprehensive report when I return from my trip with actual visual context and research backed up by local knowledge

Queensland Property Growth

Friday, March 22, 2013
Hi all,
Only two weeks till I go on an extensive filed trip around QLD looking for the best property investments.  One has caught my attention as an example;
Everton Park – eight kilometers north of the Brisbane CBD - experienced the highest median price growth in 2012 for units and townhouses, according to the latest Real Estate Institute of Queensland (REIQ) data.

The median unit and townhouse price for Everton Park for the 12 months up until December is $430,000 – a 22.9% increase on the median price of $349,813 in 2011.

 

However suggesting some volatility in the suburb, it experienced a December quarterly fall of 16.1% to $390,000.

Sherwood – 9 kilometres south west of the CBD - comes in second place, experiencing an 18.0% annual growth from $372,500 to $439,500.

 

Chermside was the weakest performing suburb in the Brisbane city, falling 15.8% annually from $431,000 in December 2011 to $363,000 in December 2012.

Region

Median sale 12 months December 2012

Median Sale 12 months December 2011

One year change

Everton Park

$430,000

$349,813

22.9%

Sherwood

$439,500

$372,500

18.0%

Stafford

$407,500

$360,000

13.2%

St Lucia

$479,000

$425,000

12.7%

Hamilton

$477,500

$427,500

11.7%

Taringa

$434,000

$390,000

11.3%

Teneriffe

$555,938

$512,500

8.5%

West End

$523,000

$483,550

8.2%

Balmoral

$465,000

$431,500

7.8%

Bulimba

$549,500

$510,000

7.7%



Stay tuned for a more comprehensive report when I return from my trip with actual visual context and research backed up by local knowledge

Australian housing not perceived as being in a bubble: US real estate industry boss

Monday, March 18, 2013

 

Australian house prices are high but they reflect the high cost of living, says Gary Thomas, president of the US National Realtors Association, who is currently visiting Australia.

Thomas says there is no perception among his constituency that Australian housing is in a bubble that may burst – a claim made by the likes of US economist Harry Dent and others.

The National Realtors Association is the largest trade association in the US, representing around one million US real estate agents.

 

“Australian property prices certainly are high relative to what we pay in the US, but it all depends on your average income,” Thomas tells Property Observer.
Thomas has more than 35 years’ experience in American real estate and has occupied numerous industry roles.
He operates real estate business Evergreen Realty, which has seven offices throughout Orange County, Southern California with a head office in Irvine and more than 7,000 estate agents on its books.
The most recent figures from US data provider CoreLogic showed that US home prices, including distressed sales, increased on a year-over-year basis by 9.7% in January 2013 compared to January 2012

Morgan says the US market is definitely improving with prices starting to inch up including in his home state of California and in Florida and Arizona, to name just a few.

 

“It’s kind of ironic that the recovery is occurring in the states the hardest hit,” he says.
In Southern California he says there is only 30 days’ worth of real estate inventory available to purchase at current sales rates – very low by historical standards.
Despite the lack of stock, house prices are not accelerating as they did in the boom years prior to the GFC, though they are rising at a more sustainable pace.

Among the reasons for this is that obtaining financing is still very hard with much stricter lending practices now in place.

“It’s like an inquisition” is how he describes lender inquiries into whether a borrower should receive mortgage approval.

 

By Larry Schlesinger

Thursday, 14 March 2013

Hobart vendors discounting the most to secure sales: RP Data

Wednesday, March 13, 2013

Hobart vendors are forced to offer the deepest discounts in order to secure sales, according to RP Data. Hobart houses are selling for an average of 11.9% less than the vendor's original price hopes, and units are selling for an average of 9.9% less.

These are significantly deeper discounts than the next most discounted capital, Brisbane, where house vendors offered discounts of 7.9% and unit vendors sold at 6% less than their original price hopes for the week ending February 24.

Description: rpfeb26

The rate of vendor discounting is the average percentage difference between the original listing price and the final selling price.

The statistics are calculated across results received by RP Data over the past week and include properties transacted over the past four weeks.

The data is based on private treaty sales only and records without a valid sale price have been excluded from the vendor discount analysis. The analysis also excludes results where there are less than 10 observations.

 

By Cassidy Knowlton
Tuesday, 26 February 2013

Narrowing Down My Property Focus

Thursday, March 07, 2013

My property research continues.....

I have been searching high and low for the best opportunities Australia wide.  For various reasons, but mainly the continuing economic stimulus from the mining sector and rent yields I have narrowed my focus to Qld.  I will revisit WA in the near future.

So narrowing down options in Qld - I have been looking for options other than the much talked about area of Gladstone.  I keep coming back to Mackay.  As you may know, Gladstone has seen massive growth over the last year or so.  Mackay on the other hand has not experienced such a large growth.  When looking for opportunities, I am assessing many things, but one stand out factor is increasing rent demand without a similar increase in property values.  Gladstone saw this happen prior to and in the early phases of it's "boom".  Mackay is seeing this happening now.  In other words, as more people move to the area, more accommodation is required.  If there is an accommodation shortage then the rents increase.  As rents increase - rent yields increase.  Then property prices increase as more investors are attracted to invest for yield and renters buy instead of paying large rents.  Rental demand and rental yields increasing often proceed a property price rise. This is what happened in Gladstone and is what is happening now in Mackay.

 

Further, the well known "ripple" effect. As one area, such as Gladstone increases and becomes out of reach of many buyers and investors, the surrounding areas start to look more and more attractive.  This is another factor indicating Mackay as a high potential investment area. However, for those who prefer to be closer to the CBD, I am closely examining growing areas within 30 mins of Brisbane.

 

So where to from here....

 

If I was the traditional "sales" person I would be shoving opportunities down your throat by now.  But because I am a property advisor, coach, Accountant and all that other gumph I am not yet ready to do that.  So please be patient.

I have a field trip planned to Mackay and Brisbane in a few weeks.  I would prefer to see the areas and properties first hand.  I will be continuing my research until then and will have some definite options out to you as soon as I return with first hand, on the ground, knowledge of the areas, the estates, the developers, and hence the opportunities. 

If you would like to view potential properties prior to this, please let me know and we can catch up to discuss.

Bumper Property Growth in 2013

Monday, March 04, 2013
Experts are predicting bumper growth for property in 2013

Some of the key trends supporting this potential growth are;

  • Australians have been saving more after the scare of the GFC!  In fact, 68% of people are ahead on their mortgage payments and credit card debt is historically low.In other words, Aussie’s are being smarter financially…and this means they have more money to invest in property.
  • ‘China’s growth predictions are of a whopping 8% growth this year.  This will have a very positive impact on the Australian economy.
  • There is an implosion of cash from SMSF’s (Self-Managed Super Funds) are flooding into the real estate market…as more investors choose to invest in property directly through their super.
  • The share market is showing signs of entering into another ‘bull run’ which will greatly enhance people’s wealth and their ‘confidence’ to invest in property.
  • The finalisation of the federal election will give investors more ‘certainty’
  • Interest rates are at a historic low making it easier for first home buyers & investors to get into the market
  • Migrants continue to come to the country in large amounts & housing supply still remains tight in many areas…we will likely see rents continue to climb.
  • This makes the rent yields for investors more exciting.
Property prices have remained subdued over the last year but this could all be about to change.  As the uncertainty lingering from the GFC finally lifts, economic stability returns, China booms again and we see a change of Government the underlying property shortage will see prices start to rise.  For anyone who has watched the market through it swings and troughs before will know, once it starts to increase, it just goes up and up, as investors who have been sitting on the fence start jumping in.  So seize the opportunity and get in now before prices rise.

Queensland Property Research

Friday, March 01, 2013
Hi,

I just wanted to update you as to my property research findings so far.

Note: I haven’t finalised my research but just wanted to let you know the direction I am heading.

I have been examining QLD in depth.  I have previously mentioned that Gladstone & Mackay are definitely ongoing hotspots.  My research has revealed this is still the case.  However, Gladstone has already had significant price rises so I would only recommend Gladstone if we can find a bargain.  Mackay (and neighboring Emerald) have not yet risen as significantly as Gladstone and are my preference in this area.  The price point however is still in the mid to high $400,000’s and SMSF stock is hard to come by.  SMSF stock needs to be a completed house rather than house and land package and due to the high demand builders are able to sell off the plan so quickly they are reluctant to sell to SMSF’s as they have to wait longer to receive their money.  Watch this space though as I do have a developer promising me SMSF stock next week.

If that price range is too high and/or you would prefer not to go that far South in QLD – I am also looking at really good options very close to Brisbane CBD.  These are a lower price point (mid to high $300,000) and have a great rental yield.

My research has involved reading numerous independent economic and valuation reports, government infrastructure plans and bureau of statistics data.  I am looking into capital growth %’s, rent yields, vacancy rates, future expectations etc.  There is a lot to consider when investing in property and I am hoping to draw all this data together for you ASAP.

I am also expanding my research to include numerous NSW areas such as Newcastle, Dubbo and surrounds.  Watch this space for more information.

I will let you know more next week.

Catherine



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