New Home Sales Fall Again – October 2009

Thursday, December 10th, 2009

According the latest survey of Australia’s largest builders, the number of new home sales fell for a second consecutive month in October following a first time buyer surge in August.

New home sales fell by six per cent in October, pushed lower by higher interest rates and softening first home buyer activity.

Sales activity from investors and upgrade owner occupiers has not chimed in to offset weakening first home buyer-related activity. A decent and sustainable new home building recovery needs strong momentum from private sector trade-up buyers and investors and we seem to be falling short on that score as we near the end of 2009.

In deed, given the narrowly based private sector recovery, costly delays in planning approvals, and reports of land shortages beginning to re-emerge, it is looking like 2010 will be a year where the number of new homes built will fall well short of what is required to match Australia’s rapidly growing population.

The majority of the increase in housing starts next year will be driven by the social housing program which is not pulling the private sector along with it.

The number of detached houses fell by 6.9 per cent in October following a decline of 4.3 per cent in September.

The number of apartment sales increased by 2.4 per cent in October, the fourth rise in six months, but the volume remained at a historically very low level.

Detached new home sales in October fell by 12.1 per cent in New South Wales and were down by 4.2 per cent in Victoria, 9.1 per cent in Queensland, 7.2 per cent in South Australia and 3.4 per cent in Western Australia.

The third consecutive monthly increase in the official cash rate last Tuesday would harm the chances of a strong home building recovery. A recovery is essential to moderate existing house prices and rent pressures across Australia.

While a residential construction recovery is under way, there is compelling evidence that the magnitude of the upswing will be insufficient to make a major dent on Australia’s chronic housing shortage. The home building recovery is narrowly based, driven overwhelmingly by a pull forward of first home buyer related activity and the by the Social Housing Initiative. This is the third straight month of of rate rises, at a time when general inflationary pressures are well contained.

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New Buyers Like Established Homes

Thursday, December 10th, 2009

The latest data from the State Government confirms first home buyers’ preferences for established homes over newly constructed ones.

Twenty seven per cent of all purchased made with government financial assistance over the last 12 months have been for new homes.

There is no doubt the financial assistance has been welcomed by not only the first home buyers but also vendors and builders.

The State Government has reported that during the last 12 months there have been 44,668 homes sold to first home buyers and that 12,229 of those received the higher levels of assistance for new homes. Of those, 580 or 11 per cent have gone to buyers in regional Victoria in the last month.

Over this time the total number of loans taken out by first home buyers has increased from 21 per cent in September last year to 27 per cent this September, an improvement that is a direct result of government financial assistance and record low interest rates

In October the financial assistance dropped by $3500 for an established home, and by $7000 for a new home. The REIV expects this will be reflected in the Australian Bureau of Statistics in October Housing Finance figures, which are due in December.

Prospective first home buyers need to be aware that the financial assistance will drop again at the end of December. At that time the total assistance available for purchasing an established home will drop from $12,500 to $9000.
For those buying a new home in the Melbourne metropolitan area it drops from $25,000 to $18,000, and for those buying a new home in a regional area it drops from $29,500 to $22,500.

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Buying My First Home

Thursday, December 10th, 2009

How much do I need upfront?

The largest hurdle is generally getting your deposit together, although there are a number of other costs you need to be aware of.
How much do I need for a deposit?

If you have started saving you can start to look at buying once you have around 5% of the purchase price.

If you have between 5% and 20% of the purchase price, you may need to pay what’s called Lenders Mortgage Insurance, which enables us to lend you a larger percentage of the purchase price. This can be included either in your upfront costs or in your loan repayments so that it’s spread out over the term of the loan.

The estimates below do not take into account the money you need for upfront costs.
How much do I need for a deposit Purchase price     Minimum deposit
With mortgage insurance     Without mortgage insurance
$200,000     $10,000     $40,000
$300,000     $15,000     $60,000
$400,000     $20,000     $80,000
$500,000     $25,000     $100,000
% of purchase price      5%     20%

If you have a deposit of over 20%, you can avoid the extra costs of Lenders Mortgage Insurance.

These figures may differ if you are self-employed and applying for a low doc loan. For more information, read up on low doc loans for the self employed.
What if I don’t have a deposit?

If you don’t have a deposit, there are a number of options that can help you get your home sooner.

You may be able to use a guarantee from your parents (supported by a mortgage over their property, or a term deposit) as equity to assist you with your home purchase. These are generally referred to as family guarantees.

Another option is our Deposit bond, which lets you go ahead with a purchase before you have an actual cash deposit. It’s useful if your cash is tied up in other investments, and is widely accepted at auctions.

And, if you’re eligible for the First Home Buyers Grant, you can put it towards your deposit.

Of course if you’re keen to do it by yourself we have a range of savings and investment accounts to help you save your deposit.
Review your options:

* Delay paying your deposit with a deposit bond
* Compare all Savings and investment accounts

What other costs are there?

There are other up front costs you should factor in.

This will include things like:

* Conveyancing and legal costs
* Government fees including stamp duty, although this can be included in the loan
* Title search and registration fees

You’ll also want to consider:

* Pest and building inspections (typically about $500)
* Home building Insurance prior to settlement, and possibly contents insurance when you move in.   (source www.westpac.com)

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Suburbs where it’s cheaper to buy than rent

Wednesday, December 9th, 2009

Buying property is becoming cheaper than renting in many suburbs across Australia, new research has found.

According to property pricing specialist RP Data research, which was commissioned by Commonwealth Bank of Australia, there are 94 suburbs across Australia where the monthly cost of rental outstrips the monthly mortgage repayment on both houses and units.

That’s up from 74 suburbs six months ago. Two-thirds of the suburbs are located regional areas with the remaining 34 percent in capital city metropolitan areas.

The biggest gap between the cost of buying and renting was in Western Australia.

Queensland
Brisbane and the Gold Coast are the key locations for buyers in metro areas, while Dysart and Moranbah are where most buyer-friendly regional spots. Click the link to open the map and mouse over the pins to get information about prices in each location.

New South Wales
Darlington in inner Sydney is the key metro location, while Dubbo and Coomba Park are where most buyer-friendly regional spots. Click the link to open the map and mouse over the pins to get information about prices in each location.

Australian Capital Territory
There are just two locations within the ACT where buying an apartment is cheaper than renting. Click the link to open the map and mouse over the pins to get information about prices in each location.

Victoria
Regional Victoria has the biggest gap between buying and renting while three Melbourne suburbs favour buyers.

South Australia
Adelaide has one suburb where buying is cheaper than renting, while the Whyalla area remains a hotbed for buyers looking in regional areas.

Western Australia
Most of WA’s buyer hotspots are clustered around the north west part of the state. Click the link to open the map and mouse over the pins to get information about prices in each location.
Northern Territory
There are two locations where buying is cheaper than renting in the Northern Territory, both in Darwin.

Tasmania
Tasmania is included in the research for the first time with seven locations where it is cheaper to buy than rent.

The biggest savings can be made by buying resource rich areas of Western Australia (in one town it is nearly $4000 per month cheaper to buy a house than to rent it).

Indeed, four of the top five locations in WA offer savings of more than $1000 for buyers.

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Shopping Around Pays For Borrowers

Tuesday, December 8th, 2009

Borrowers who assume there is no competition in the home loan market could be missing out on thousands of dollars in savings. A significant disparity has opened up between lenders on interest rates, fees and credit policies in the last 12 months. There tends to be a widespread view that all banks are the same, offering pretty much the exact same products with the exact same requirements. However when you make comparisons between lenders, it quickly becomes clear they are not all the same. Borrowers can potentially save thousands of dollars by shopping around for a deal that better suits their needs. One of the big differences between lenders was how much of the purchase price of a property borrowers could get access to. There are lenders requesting an LVR (loan-to-value-ratio) of 88 per cent with a deposit of 12 per cent, compared with a lender at the other end of scale that is requesting only a five per cent deposit. If you paid a 12 per cent deposit on your dream home valued at $500,000 for example, the lender would require $60,000 – versus $25,000 if you were required to pay five per cent of the property’s value. Also, once the LVR is more than 80 per cent, the lenders mortgage insurance premium kicks in – and this, too, varies between lenders. Borrowing limits could also differ between lenders, with some offering a $60,000 income earner up to $250,000 in finance, while others would provide up to $300,000.

Tags: mortgage brokers
Posted in Buying Tips, For Investors, Interest Rates | No Comments »

Things to Consider Before Buying a Home

Friday, July 3rd, 2009

Buying a home is an important event, it might be the biggest financial event in your life. You want to make sure you are well informed before making your decision.

Having bought and sold our own homes and investment properties in the past, as well as running a real estate agency, we would like to share from our experience with you.

We understand how difficult this decision can be, in scanning the market for days and months to find the right property, choosing the right finance, negotiating the best deal for yourself and going through all the paper work hassle. But if you are well informed in advance, it could be one of the best experiences of your life.

Buying your own home to live in

Buying your own home for your family can be a rather emotional experience, since it impacts on many aspects of your life. You have to consider many aspects:

Choosing the best area to live in

Ask yourself:

How far is it from your workplace?

How long will it take to travel to work every day and back?

How is the traffic in the area? Are there any freeways or motorways in close proximity?

How good is the public transport network in the area?

How far is it from places you are more likely to spend your time in (how close is it to where your family and friends live with whom you want to be in regular contact)

Are there any good childcare centres in the area? (for families with small children)

Are there any good schools in the area for your children?

Are there good facilities in the area (shops, parks, hospitals, etc)

What are the characteristics and the demographics of your neighbourhood which will impact on your possible future friendships and those of your children

What are the growth prospects in terms of capital growth for the particular area?

Choosing the Right House

Should I buy an established house or should I buy a new house and land package?

New houses might cost a little more at the beginning but they involve less maintenance and expense over the long term. They also mean less work on the house after hours. You need to weigh up the pros and cons.
What type of house to buy (lowset, highset, brick and tile, queenslander, old or new, how many bedrooms, bathrooms, land size, etc.)

What are my ‘must have’, my ‘would be nice’ and ‘I could do without’ features that I am looking for in a home?

Last, but not least: is it the kind of house that can be easily sold if we have to sell it in the future?

After viewing a number of houses:

Which house is meeting all my ‘must have’ and some of my ‘want’ features?

How does it compare price-wise with other similar properties listed in the area?

What is the best price to offer that would best suit my interests and also lead to an accepted offer?

What terms do I want to be included in the contract of sale:

- in how many days should I settle on the house?
- what are the fixtures that should remain on the property after the sale?
- what things I would like to ask to be left on the property after the sale?
- how many days should I request for finance approval?
- what other special conditions should be included in the contract?

We recommend raising all the above issues with your solicitor.

Choosing the best finance for you

Ask yourself:

Should I go directly to a bank or should I choose a mortgage broker? In many cases using a mortgage broker is a better choice, unless you have a special relationship with your bank manager, and are self-employed. Only use a mortgage broker who is paid entirely by the lender – you should not have to pay any fees yourself for the services of the mortgage broker. Good mortgage brokers are motivated to get the loan approved, and also should know which lender is best for you. It can make a huge difference.

Do I want a fixed rate or a variable rate? When they start raising fixed rates, its often a good time to fix. If they have been reducing fixed rates recently, its usually best to go for a variable rate in most cases. Talk with a financial advisor about this, don’t take what we say here as financial advice.

Should I pay off my house or should I only pay the interest? Normally its best to pay off your own residence as fast as you can because the interest is not tax deductible. Again, talk with your accountant or financial advisor.

If you are interested in us helping you find a property based on your particular needs, please see our BUYERS ADVOCACY service offer.

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