Lending Defies Rise in Interest Rates

Lending to home buyers to build or purchase new dwellings defied the increase in interest rates in October but was blunted by continued weakness in lending for rental investment.

Loans for the construction of new dwellings and the purchase of newly built homes combined increased by 5.7 per cent following a rise in September.

New housing loans increased in 13 of the last 14 months.

The strength of lending to owner-occupiers continued to be countered by weakness in loans for new investment housing which experienced a fall of 0.6 per cent.

Loans for new investment housing were down 10.5 per cent over the last three months relative to the corresponding period of the previous year.

The housing industry will be relying on a strong investor market over 2010 to assist in a broad based housing recovery through 2010.

The investment lending figures bode poorly for this outcome and signal another year of skinny rental vacancies and upward pressure on rents in the real estate market.

During October, loans for the construction of new dwellings increased by 9.2 per cent, while loans for the purchase of newly built dwellings fell by 3.9 percent. Further interest rate increases in November and December and the potential for more in the new year, along with the removal of the first home owners’ boost mean that achieving further growth over 2009 and 2010 in owner-occupier loans will be more difficult.

Higher interest rates, lower the first home owner grants and unrelenting supply side impediments to new home building provide a challenging environment for the much needed revival of the residential housing market as we move into 2010.
The total number of seasonally adjusted loans for owner-occupiers (net of refinancing) fell by 1.5 per cent in the month of October 2009.

The number of such loans, however, was up by 37.4 per cent compared to October 2008.

December 21st, 2009  |  Posted in For Investors, Interest Rates  |  No Comments »

Know The True Value Of Your Home

Even though many real estate agents strive to do their best for their clients, there are always those who are prepared to deceive homeowners, especially about the true value of their property.

The risk of an estate agent deceiving a vendor arose when a homeowner decided to sell and asked an agent for a quote on the value of their property. The danger was that an agent would over value the home to win the listing.
Almost everything in real estate is focused on finding sellers. Agents need homes to sell – no listings means no sales. Homeowners who were thinking of selling often sought the opinions of several real estate agents, and probably the most dangerous question you could ask an agent is “What is my home worth?” Some agents know that vendors would be asking other agents the same question and feared if they told the truth they would not win the sale.

Usually the agent who told the biggest lie about the home’s value was often the one chosen. Such lying could lead to a situation where, having listed a property at a high price, the agent then needed to condition the vendor into accepting a lower price – the true value of their home.

There are two stages to the conditioning process. The first is ‘activity’ conditioning, where the agents do, or appear to do lots of work. This stage can last for several weeks, sometimes months. It depends on your resistance or how urgently you need to sell. You may think all this activity is to sell your home, however, its sole purpose is to soften you up for the second stage of the conditioning process – the ‘crunch’ conditioning. Intense pressure is used to get you to accept a lower price. The crunch occurs when you are desperate to be rid of the pain of conditioning. If you are not ready, the agents have a number of high pressure tactics to make you see reason, or as they often call it ‘realistic’. The agent will commence a campaign – advertising lots of inspections – all aimed at getting lots of people to see your home. It is called exposure, and it seems so sensible, but it is just part of the conditioning process, designed to soften you up for the crunch.

Activity conditioning damages the value of a seller’s home and is one of the major reasons why homes sold for thousands of dollars below their best market value.

To protect themselves from this, vendor’s need to have a good knowledge of the current market – what comparable homes have recently sold for, the current strength of the market, and what is available now for sale. Vendors should price their property close to the market price when they want to get the best price the market will pay now. Overpricing NOW usually leads to a LOWER price later. Of course, if you don’t really WANT to sell your property at the best market price for TODAY, it might be best to keep it off the market until you DO want to sell it for the best market price of that time!

December 21st, 2009  |  Posted in Selling Tips  |  No Comments »

How To Avoid Costly Mistakes When Buying a Home

Buying a home can be the most rewarding and exciting time of a person’s life, or it can be a nightmare which can ruin someone financially and even lead to a breakdown in their marriage and serious distress.

But how do you avoid the pitfalls of buying a home and ensure you buy well and make sound financial decisions that will guarantee you and your family security for the rest of your life?

Firstly, don’t over commit yourself financially when buying. Consider the worst case scenario when purchasing, like what is the worst that can happen?

What if interest rates rise? What happens if you buy based on two incomes and you lose one income?

A common mistake made by purchasers was buying what they wanted instead of buying what they could afford. Before buying, purchasers should ask themselves whether or not they really need four or five bedrooms or would less suffice.
In contrast to some real estate agents over valuing a home, some also advertised a home at a price well below its real value.

This is called ‘bait advertising’ and is designed to attract buyers. At worst, it can result in purchasers paying more than they can afford. At best, it can result in buyers falsely getting their hopes up that they can afford a property when fact its true value is well above the advertised price.

Auctions are also an instance of where buyers can be deceived. It is true that people can often buy at auction at a lower price but the challenge is discovering the truth about the selling price.

Auctions can be deceitful and cruel and unless purchasers know what they are doing and are with a reputable real estate agent, it is best to avoid them.

December 21st, 2009  |  Posted in Buying Tips  |  No Comments »

Consumer Inflation Expectations Rise In December

An increase in consumer inflationary expectations could add to the case for a fourth consecutive interest rate rise by the Reserve Bank of Australia to curb price pressures.

A survey of consumer inflationary expectations showed a rise of 0.4 percentage points to 3.6 per cent in December.
Only 17.7 per cent of respondents expect the rate of inflation to fall to between the central bank’s two to three per cent target band, down from 18.7 in November.

A 25 basis-point rate hike by the central bank on December 1 appeared not to have curbed consumers’ inflationary expectations.

The Reserve Bank of Australia’s December rate rise followed similar moves in October and November.

This is a little surprising given the decline in median inflation expectations in November from 3.5 per cent to 3.2 per cent following the Reserve Bank board’s previous rate hike announced on November 3. Barring any major shocks, this months jump in inflationary expectations appears to pay the way for a further rate hike in February 2010.

In a survey of 1200 people conducted between November 30 and December 6, the share of respondents expecting prices to increase rose by 2.8 per cent.

The proportion predicting no price change fell by 3.5 per cent while 0.1 per cent anticipated prices to fall.

The consumer price inflation rate rose by 1.0 per cent in the September quarter for an annual rate of 1.3 per cent, the last Australian Bureau of Statistics showed.

The ABS will release its consumer price inflation report for the December quarter on January 27, 2010.

December 21st, 2009  |  Posted in Economy, Interest Rates  |  No Comments »

Think before Over-Capitalising

Over-Capitalising can be a risk for both investors and owner-occupiers.

While most investors have a good understanding of what over-capitalising is and how to avoid it, this is not always the case for owner-occupiers.

The definition of over-capitalising is spending money renovating your house that cannot be recouped through the increased value of your property.

This is less of an issue if you never have the intention of putting your property on the real estate market but if you do want to sell at a later date you need to think it through carefully.

It can be a particular issue if you are considering selling soon and are weighing up the value of a new kitchen or bathroom.
As a result when you are planning to renovate it is prudent to consult a real estate agent and architect or building designer.

In the first instance you need to consider how much your property is currently worth and how this compares to the median price in your area.

If you spend too much on your house you may put it out of reach of buyers in that area.

You also need to consider how your renovated property will fit into the area you live in as buyers are often attracted to a particular area because of a style of housing.

For instance larger two storey houses in new estates are not always the style of housing that people are looking for in the inner city.

Finally, if you are looking to sell and move in the shorter term it is important to consider if the cost of the renovations will be recouped by an increased property value. If they won’t be then it is not going to be worth the time, stress and cost of renovating.

December 21st, 2009  |  Posted in For Investors, renovation  |  No Comments »

Angst for Borrowers – Interest Rates are rising

Homeowners are nervously awaiting the major bank’s lending rate decisions after Westpac jacked up its key home loan rate by almost double last Tuesday’s official rate move. Business has backed the Federal Government’s attack on Wespac, blaming a lack of competition in the mortgage market.

The Opposition pointed the finger at the Government’s “reckless” spending for the steady rise in the official rates.
Wespac lifted its standard variable rate by 45 basis points last Tuesday because of increased funding pressures, drawing a stinging attack from the Treasurer.

The Reserve Bank of Australia (RBA) increased its cash rate by 25 basis points to 3.75 per cent at the board meeting.
The decision continued the RBA’s normalisation of monetary policy because the emergency levels set during the economic downturn were now no longer required.

It was the third month in a row that the central bank had lifted the rate, a pace unprecedented since it began announcing its rate decision in 1990.

The other major banks have yet to announce their rate decisions. This rate rise will no doubt hurt all Australians with a mortgage or credit card and all small business owners with an overdraft or small business loan.

While Westpac had limited the increase in its business rates to 25 basis points, many small business owners used their home loan for business purposes.

Westpac’s decision was a further unwelcome development given small businesses did not get all the benefit or the massive reductions when the RBA was actively cutting rates.

The onus is on the bank when then they do this to ensure that those increases do reflect pressures in terms of their underlying funding costs. If the banks in their own right are making upward adjustments, then it reduces pressure on the Reserve Bank in terms of any decision they might make in increasing rates.

Money market pricing pointed to a less than 50 per cent chance of a further move in February when the central bank holds its next board meeting. The major banks were likely to lift rates at a greater pace than the RBA because of funding pressures.

There are a number of challenges facing the market and foremost is the concentration of power with the big four banks.

December 11th, 2009  |  Posted in Finance, For Investors, Interest Rates  |  No Comments »

The Value of Kitchens in Homes

It is the heart of the home, the hub of the house, the place you always end up in at parties.

The importance of a kitchen should never be underestimated. It is the most marketable room in the house.

If you want to increase the value of your property or boost buyer appeal in the market, this is the first stop for a renovation or revamp. More than bathrooms, a fresh and functional kitchen can make or break a sale, and according to the experts is likely to return a tidy profit from any financial investment.

If you spend $20,000 renovating the kitchen, you can hope to be looking at getting that $20,000 back, plus another $20,000 on top as an absolute starting point. That’s on a dollar value. It is hard to quantify the opportunity value, or the impact it can have in the market. These favorable returns, combined with the current trend for incorporating the kitchen into the living areas for all to see, has made refurbishing the kitchen the most popular form of home improvement today.
When it comes to the scale and cost, the job should ideally reflect the home. It makes no sense to install a family sized food hall in a one bedroom apartment or cut corners in a mansion. Working out a budget however, can be daunting and confusing. You can buy a flat-pack kitchen for a few thousand dollars but that does not include installation costs, so exactly how much can you expect to fork out for a basic fit-out?

Realistically, you should be looking at from $15,000 excluding appliances. That is the price for a good, average sized kitchen using quality fittings and laminate cupboards and bench tops. To maintain a budget but still achieve the wow, benchtops and splashbacks are the way to go. They are the first things people notice. If you want to know where to save and where to spend money, have laminate cupboards and drawers and get a beautiful stone benchtop.

With the continuing advancements in design transforming the kitchen into a high-tech zone filled with impressive tricks and gadgetry, how far should you go? The most important things don’t have to cost that much. Little extras such as a pull out oil and spices drawer next to the cooktop, a narrow drawer to vertically store all your baking trays, or an Italian waste bin system with the automatic soft-close lid. They all look terrific, are not overly expensive and will be real selling points.

Of course it’s not always necessary to rip out the kitchen and start afresh. A clever revamp can be amazingly effective for a fraction of the cost. You can paint wooden kitchens, which can make an extraordinary difference. Solid timbers are so dark, heavy and really dated but usually beautifully made. If they are not, then most cupboards have hinges so you can just take the doors off and replace them – that’s not expensive. You can also just replace the handles or knobs and that can make a big difference too. For another instant lift, get rid of the old tiles, and replace them with a new splashback.

You can also just tart up an old kitchen to make it look good again, but whatever the extent you go to, it can certainly make the house a lot more saleable and a lot more appealing.

Tags: kitchens
December 11th, 2009  |  Posted in building, renovation  |  No Comments »

Do Home Colours have an effect on you?

Scientists have studied the effect of colour on our mood, health, and way of thinking for many years. It is said that the effects of colour should be taken into consideration when working out what hues you need for each room of your house.

The colours around your home could keep you warm, calm you down, make you hungry or help your memory. Here are some examples:

> Red stimulates and warms the body, increases the heart rate, brain-wave activity and
respiration. It stimulates infants brains but aggravates high blood pressure, hypertension
and poor co-ordination.
> Pink’s tranquillising effect has gained its entrance to prisons, hospital rooms and drug
centres.
> Orange stimulates the appetite and reduces fatigue.
> Yellow is a memory stimulator. A touch of yellow in every room might just help in
remembering where you left the keys or eyeglasses. Yellow also raises blood pressure
and pulse rate, but not to the degree red does.
> Green reminds us of spring and, therefore, new beginnings. It brings feelings of calm
anticipation and hope and it has a soothing and relaxing effect on the body as well as the
mind. Still on that diet? Green is good as it could help control the anxiety associated
with the discipline of controlling yourself from impulsive overeating.
> Blue is another relaxing color. Pleasant dreams might be the end result of coloring the
bedroom in shades of blue. It has a calming effect on the body. It lowers blood
pressure, heart rate and respiration and in hot, humid weather, has a cooling effect.
Children prone to tantrums and aggressive behavior became calmer after being in a
room painted blue.

More likely than not, if a particular colour is preferred, it most likely is needed by the body.
The pleasant and appealing response the body gives is a sort of a thank you notice from the body to the brain.

December 11th, 2009  |  Posted in renovation  |  No Comments »

New Home Sales Fall Again – October 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.

December 10th, 2009  |  Posted in Buying Tips, For Investors, building  |  No Comments »