Australian Mortgage and Loan Information

Continued capital appreciation is almost assured as the shortfall or gap between available housing and that needed continues to grow. This, coupled with the Rudd government leaving capital gains tax concessions alone more than balances the Reserve Bank interest rate rises. If you take a look at historical rates for the last 50 years, we are still in good shape as far as rates go. I do however think that rates need to remain steady to encourage property development.

The following article sums things up:

Mortgage Watchdog.

From NMDDATA.COM.AU

“Housing supply deficit widens

“The fact of that of the national under-supply, half of it is in Sydney, it’s going to take a long time to turn this around. We expect housing shortage to get worse over the next five years and it’s an underpinning factor for price growth, which is going to be pretty strong,” said Braddick.”

Maybe it is time to add to your property investment portfolio. Speak to your mortgage broker and find out your borrowing capacity.

My opinion is that the RBA may have raised rates too quickly, home loan approvals have now fallen for 5 straight months.

Speak to your mortgage broker, find out what your borrowing capacity is. Prepare to take advantage of some bargains as people try to offload homes in the mortgage belts. 2010 may just be the year to start your residential property investment journey.

If you are considering an investment property real-estate purchase between now and Christmas, it will be imperative that you get some sort of pre-approval from your lender. Better still ask a competent mortgage broker to secure you pre-approval. In writing!

The Reserve Bank seem hell bent on increasing official interest rates again, (the popular media have been selling the idea for them in every news program or update) and I feel that this action may just be the trigger for a sell-off of property in the low to medium price band.

Many in this band are recent first home buyers who have paid the first home buyers bonus driven inflated market value for their property. So they have bigger than expected home loans. Added to this many have funded the exorbitant lenders mortgage insurance premiums charged on their home loans with their credit cards, personal loan or loan from family.

This means opportunity if you are cashed up and ready to move.

However, credit is tight and lenders seem reluctant to lend without creating time wasting road blocks. On the plus side your rents will be good as there is still a shortage and the people who have to sell up will need somewhere to live and with immigration adding 2000 new aussie’s a week, residential property is destine to rebound strongly over the next 20 years even if interest rates follow historical trends.

Yes, It is time for a comprehensive analysis of your current home loan?

It seems all the major lenders are tinkering with their home loan offerings. They are playing their cards pretty close to their chest, but you can be assured of one thing, old loan holders will be treated like lepers’ were in the olden days once the new offering is about.

You will be getting plenty of encouragement from the tellers at the bank to speak to their home loan professional.

The “new stuff” will no doubt be irresistible, but will include new clause’s enabling the lender to boot you out of your home if you don’t comply with their current whim or fancy.

Please be prepared. Use a mortgage broker if you can. Heck, use two and play them off against each other.

Rates are on the way up, be ready.

Slide in Australian Property Values to continue

Following recent warnings by the OECD that Australian house prices are grossly overpriced, it is worth noting the comments of finance managers in Australia.

Standard and Poors credit rating agency recently reported that 10% of mortgages in Australia are in arrears, including nearly 5% that are more than 90 days in arrears. It is only to be expected that as unemployment rises and interest rates start to increase this figure will worsen.

John Symond of Aussie Home Loans was reported as saying that even a 1% rise in home loan rates could have a devastating impact on borrowers and he advised borrowers to be cautious and not over commit. He predicted that South Australian property values would fall in the next 12 months by 10% and that values would continue to fall for a further 3 years.

Home owners under stress because of unemployment and rising interest rates could flood the market and force house prices to drop drastically if (when) rates rise in the next 18 months.

Australian household debt stands at $605 billion so Australians would do well to heed the warning from the OECD. While industry leaders are starting to speak out in Australia, our Reserve Bank has not issued any strong warnings. Borrowers may have become complacent due to the temporary drop and plateau in rates but many experts are predicting rates to rise again in 2010.

Borrowers who are going to be under pressure when interest rates rise 1 to 2% would be well advised to take preventative action now, rather than waiting and being forced to sell in a declining market.

Early signs of a correction?

The information below is taken from: w w w. a b s . g o v. a u

“HOUSE PRICE INDEXES: EIGHT
CAPITAL CITIES”

“ESTABLISHED HOUSE PRI C E S
QU A R T E R L Y CH A N G E S

# Preliminary estimates show the price index for established houses for the weighted
average of the eight capital cities decreased 0.8% in the December quarter 2008.

# The main contributors to the decrease were Melbourne (–1.7%), Brisbane (–1.2%), Perth
(–0.9%), Sydney (–0.3%) and Hobart (–1.0%). These decreases were offset by increases
in Adelaide (+0.3%), Canberra (+0.7%) and Darwin (+1.6%).

# The movement in the preliminary established house price index between June and
September quarters 2008 has been revised from an estimated decrease of 1.8% to a
decrease of 2.4%.

AN N U A L CH A N G E S (D E C EM B E R QU A R T E R 20 0 7 TO DE C EMB E R
QU A R T E R 20 0 8 )

# Over the year to December quarter 2008, preliminary estimates show that the price index
for established houses for the weighted average of the eight capital cities decreased 3.3%.

# Annually, house prices rose in Darwin (+3.8%) and Adelaide (+2.0%), and fell in Perth
(–6.7%), Sydney (–4.1%), Canberra (–4.1%), Melbourne (–3.2%), Hobart (–3.1%), and
Brisbane (–1.4%).

# The movement in the preliminary established house price index between September
quarters 2007 and 2008 has been revised from an estimated increase of 2.8% to an
increase of 1.6%.”

These interesting figures come form the Australian Bureau of Statistics and were released 02/02/2009.

What do they mean? I think they say, despite having the lowest historical mortgage rates in recent history and a bumper crop of first home buyers armed with their grants and bonus’s, we have had a very small correction in values in the major cities and some continued climb in the lesser metropolices. This was to be expected! I am hunting for some figures on commercial property, I think these may give a better guide to the real situation.

Consider your current residential property position. it may be wise to take some profit. We may be in the “eye” of the storm? And what a storm it is!

Is this the start of a trend?

Maybe Australia is not as insulated from the world wide property bubble as we would like to think?

A Second consecutive quarterly fall in the Established House Price index may well be the precursor for more dramatic falls in 2009, despite the Federal Governments interest rate cuts and First Home Owner Boosts.

The Australian Bureau of Statistics provides quarterly estimates of changes in housing prices in each of the eight capital cities of Australia.

The information is presented in the form of price indexes and is published quarterly.

The following is an exert from the ABS July to September 2008 quarter paper released 3rd November 2008.

“SEPTEMBER KEY POINTS

ESTABLISHED HOUSE PRICES

Quarterly Changes
Preliminary estimates show the price index for established houses for the weighted average of the eight capital cities decreased 1.8% in the September quarter 2008.

The capital city indexes fell this quarter in Brisbane (-3.3%), Canberra (-2.5%), Melbourne (-1.9%), Sydney (-1.8%), Perth (-1.1%), and Adelaide (-0.1%), and rose in Hobart (+0.7%), and Darwin (+0.1%).

The movement in the preliminary established house price index between March and June quarters 2008 has been revised from an estimated decrease of 0.3% to a decrease of 0.2%.

ANNUAL CHANGES (SEPTEMBER QUARTER 2007 TO SEPTEMBER QUARTER 2008)

Over the year to September quarter 2008, preliminary estimates show that the price index for established houses for the weighted average of the eight capital cities rose 2.8%.

Annually, house prices rose in Adelaide (+9.7%), Melbourne (+8.1%), Darwin (+6.4%), Brisbane (+5.6%), and Hobart (+2.4%), showed no change in Canberra (0.0%), and fell in Perth (-4.1%), and Sydney (-0.4%).

The movement in the preliminary established house price index between June quarters 2007 and 2008 has been revised from an estimated increase of 8.2% to an increase of 8.6%.”

This information is generally hidden away and scantly reported by the popular media. I find it interesting as it contradicts the reports by most media outlets. The information is useful If you are buying an established house.



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A few post’s ago I started to extol the virtues of rental property investment and that I thought there were going to be some outstanding opportunities on the horizon.

Well, unless you’ve been living marooned like Robinson Crusoe on an Island in isolation for the last year, I’m sure you’re aware of the US credit meltdown, and its domino effect on the economies of the world. A new style of economy is coming, and I am now doing a John Howard style back flip.

Don’t get me wrong, I am still bullish for Australian residential property for the long term, but with such a high percentage of our workforce now employed on a casual basis, and consumer demand on the wane, the short term outlook is now very cloudy. Timing is nearly as important as location in the current financial climate. Move to soon you, and you may get badly burned, especially if you have a short term outlook.

It is now a perfect time to review your current loans, credit cards and spending habits. Interest rates are coming down. Call your mortgage broker, organise a sit down, review your mortgage suitablility and see what’s available. If you can better your cash flow at the moment, you may well be in the box seat to take advantage when the new economy emerges.

Opportunity is a funny word. The Websters dictionary definition is: 1 : “a favourable juncture of circumstances 2 : a good chance for advancement or progress.“ The current credit crisis I believe offers itself to both definitions. So for property investors the credit crisis means: “opportunity”.

There are several property investment opportunities currently presenting, in a few months there will be a dozen or so. You don’t need to rush out and slam a deposit down on just any piece of land. The opportunities I talk of will be available over the next five to seven years and will make a lot of thinking mums, average blokes and generation y kids wealthy.

The first step any of us need to take is to decide to be wealthy. Property will just be the means. Once you decide to be wealthy, get yourself a hard bound personal journal and write down in your own handwriting, the type of home, income and lifestyle you want to be enjoying in ten years. Date your entry and hold your image in your head. Every two months or so review what you have written, edit your entry if you want, but create and hold the image in your head.

The first opportunity presenting is that of property development. With many people in a panic about the their future, some very good property, with excellent development potential, is becoming liquid and available for the first time in two decades. Remember, property development does not necessarily mean building or construction. Property developement is really about increasing the value of your property purchase by any means available and managing your mortgages!

More about property development in my next post. In the mean time contact your mortgage broker and find out what your lender is doing about reducing your mortgage rate. Historical interest rates reveal a lot about the opportunities coming our way.