June 2011 Newsletter
Welcome to our June Newsletter.
Real estate sales are slow at the moment with many sellers not achieving the price they might have expected as buyers are cautious and looking for good value for their dollar. This is a marked contrast to the buyer market two years ago.
In talking to our clients many businesses are still not doing well. NSW businesses are finding it tough in most sectors and now that the dollar is strong our exporters (rural and manufacturing) are suffering too. With tourist numbers down other sectors of our economy are down too.
So the likelihood of more rate increases this year is softening. Maybe one more but with some time to go before the RBA is bold enough to press the button.
Now is the time to restructure your finances. With rates relatively stable, switching costs minimal and more funding options in the market it is worthwhile checking your current interest rate and talking to your friendly finance broker about your options.
Enjoy the read.
Richard
Slow rental growth is set to pick up in the months ahead, RP Data has indicated. 
A survey of mortgage brokers has found cost of living pressures, rather than RBA rate rises, are the main deterrent to borrowers.
Larger inner Melbourne apartments have produced better rental growth than smaller apartments over the last five years.
Residential construction has risen in the March quarter according to new figures released by the ABS.
Insider Knowledge - ""Who's Behind the Wheel" - The Industries That Drive our Markets”. OK you jokers. If after reading this month's title, you put your hand up and said "Nobody!", very good. Now who said, "I don't know but they need a licence!?!"... hilarious. Alright, who said "Ole ftang ftang biscuit barrel"? Ladies and gents, I think we have just identified the Monty Python fans amongst us. 
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Speculation over a June rate rise may have settled down, with consumers continuing to shy away from fixed rate.
High rents and property prices may be forcing Australians to share housing, Mortgage Choice data has stated.
Queensland has seen a weak March quarter in the aftermath of natural disasters.
We've all heard the phrase 'someone's loss is someone else's gain'. Quite a fitting statement for the situation we are presented with in the property market right now as good opportunities have come about over the past few weeks for investors, while sellers are losing out.
A volatile property market has Australians divided over whether to buy property according to a new poll.
Capital home values have fallen on the back of a decline in premium property prices.
Low demand in the Brisbane market has seen transactions fall to their lowest level in a decade, a property research firm has claimed.
SMEs are facing vastly increased cash-flow pressures, threatening the ongoing health of their businesses.
Federal Minister for Small Business, Nick Sherry , has called on banks to make it easier for small businesses to borrow.
Commonwealth Bank has confirmed it will pass any RBA rate rises on to borrowers.
The current fall in property prices will not bottom until next year according to SQM Research.
Source: Australian Broker News
Slow rental growth is set to pick up in the months ahead, RP Data has indicated.
While rental growth across capital cities over the last year has been below the five-year average, RP Data analyst Cameron Kusher has predicted a tightening market and high demand for inner city properties will see rental increases.
"With less new supply in most capital cities it is likely to create greater competition for available stock and result in rental increases," Kusher said.
The company has predicted strong rental growth for 2011. Over the past two years, capital cities have seen rental growth of 3.2%, compared to the five-year average of 7%. RP Data has forecast rental growth for the remainder of 2011 to come more into line with the five-year average. Kusher said, however, not all areas will see this robust growth.
"As always there are winners and losers with some areas experiencing rental growth well in excess of the national benchmark while others dramatically underperform," he commented.
Cost of living, not rates, presents buyer barrier
Australian Broker News
A survey of mortgage brokers has found cost of living pressures, rather than RBA rate rises, are the main deterrent to borrowers.
The Loan Market survey has indicated 42% of brokers polled believe rising living expenses are behind recent drops in home loan approvals. First home buyer affordability constraints were tipped by only 14% as presenting a barrier to potential home buyers. Fifteen per cent indicated flat property prices were behind home loan declines, while 29% said borrowers were wary of impending rate hikes.
Loan Market COO Dean Rushton said the rising cost of many basic necessities may be pricing potential buyers out of the market.
"Many people simply can't take on home loan credit when they are paying increased petrol and food costs as well as higher charges for utilities such as electricity," he said.
The survey of brokers found their opinion on rates forming a barrier to housing market entry mirrored that of consumers. A Loan Market consumer poll in April found only 12% considered rising interest rates a deterrent. However, consumers tipped affordability as their primary concern, with 65% saying the lack of affordable housing was keeping buyers out of the market.
Source: Broker News
A survey of mortgage brokers has found cost of living pressures, rather than RBA rate rises, are the main deterrent to borrowers.
The Loan Market survey has indicated 42% of brokers polled believe rising living expenses are behind recent drops in home loan approvals. First home buyer affordability constraints were tipped by only 14% as presenting a barrier to potential home buyers. Fifteen per cent indicated flat property prices were behind home loan declines, while 29% said borrowers were wary of impending rate hikes.
Loan Market COO Dean Rushton said the rising cost of many basic necessities may be pricing potential buyers out of the market.
"Many people simply can't take on home loan credit when they are paying increased petrol and food costs as well as higher charges for utilities such as electricity," he said.
The survey of brokers found their opinion on rates forming a barrier to housing market entry mirrored that of consumers. A Loan Market consumer poll in April found only 12% considered rising interest rates a deterrent. However, consumers tipped affordability as their primary concern, with 65% saying the lack of affordable housing was keeping buyers out of the market.
Source: Broker News
Larger inner Melbourne apartments have produced better rental growth than smaller apartments over the last five years.
Two and three-bedroom apartments in the Melbourne CBD, Docklands and Southbank areas have shown the best growth in rents over the five years to December 2010, according to research by LandMark White. Average rents for three-bedroom apartments have increased by just over 50% in that period, to an average $677.50 per week.
The firm's national research director, Vanessa Rader, says that the rental market has been strong for all sizes of apartments across the Melbourne CBD, Docklands and Southbank. However, she highlights that the growth profile for one-bedroom apartments is the lowest across the three areas, due to the high number of apartments and lesser demand.
"With the average rentals for all apartment types showing good consistent growth, greater level of investment has been in the market competing for stock, predominately two-bedrooms as these are more attractive to sharers," said Rader.
Rader also warns that while the volume of sales in the inner apartment market held up for much of 2010, anecdotal evidence suggests sales rates have slowed over the first quarter of 2011 and this may have a dampening effect on values. More apartments are set to come onto the market, too.
"The CBD has over 3,000 development approved apartments peppered throughout the city to add to the current 2,100 under construction," she adds. ""Docklands has a further 1,145 apartments with development approval, in addition to the 881 under construction, with another 280 in planning phase."
Source: Broker News
Residential construction has risen in the March quarter according to new figures released by the ABS.
The data has indicated a 1.9% seasonally adjusted increase in the value of residential building work done from the December quarter to the March quarter. The result is a 5.4% increase over the March quarter of 2010.
In spite of a rise in values of residential construction, volumes continued to drop off. The trend estimate for residential building work done fell 0.5%, declining for the second consecutive quarter.
Source: Broker News
Speculation over a June rate rise may have settled down, with consumers continuing to shy away from fixed rates.
Mortgage broker Loan Market has claimed the company has not seen an increase in enquiries for fixed rates, in spite of warnings of an RBA cash rate move as early as next month. Loan Market COO Dean Rushton said a potential rate rise may have been delayed due to recent weak economic indicators.
"With wage growth slowing to 0.8% in the first three months of the year, consumer sentiment falling by 1.3% and housing approval numbers at a 10-year low in March, the pressure is off the RBA to raise the cash rate in June," Rushton commented.
In light of this, Rushton claimed consumers do not appear convinced a rate rise is imminent. He said many are wary of locking in a fixed rate loan for fear weakening economic conditions may see rates slashed.
"The significant swings in rates three years ago are still fresh in many people's minds," he said.
With more than 100,000 borrowers locking in fixed rates of more than 8% before the onset of the GFC, Rushton said many borrowers would be hesitant to gamble on further rate rises.
"There was much speculation about fixing rates at that time, and unfortunately many consumers had to sit on the sidelines and watch rates dramatically drop in the span of several months," Rushton said.
Source: Broker News
Mortgage Choice has pointed to data from its recent Future First Homebuyer Survey which it says indicates a growing number of Australians are choosing to share housing in order to save on rental costs or afford mortgage payments. Mortgage Choice spokesperson Kristy Sheppard said the trend may help potential buyers save for a deposit, and could aid homeowners facing rising living costs.
"With rents on an upward trajectory that we haven't seen for some time, affordable share housing is a clever way to save more of a deposit or to save it faster. It can also help make home loan repayments less of a burden after the purchase, though it may not be the ideal scenario," Sheppard commented.
Sheppard said shared housing may not be the sole domain of younger borrowers. She commented that with first property buyers getting older, shared rental housing may become increasingly common among older borrowers looking to save for a deposit. Sheppard said that this would be especially prevalent in areas with high property prices and living costs.
"Inhabiting the same rental space with people outside your family or romantic relationship is often a financial necessity when utility, petrol and other costs increase as they have recently," she said.
Source: Broker News
Queensland has seen a weak March quarter in the aftermath of natural disasters.
The REIQ's March quarter median house price report has found that out of 50 flood-affected Brisbane suburbs, only 17 recorded the minimum of 10 preliminary sales needed to calculate median house price data. REIQ chairman Pamela Bennett said the weak market has led many potential vendors to hold off selling.
"Many would-be sellers in these areas have wisely either taken their homes off the market - even if they were not flooded - or decided they will ride out any market reaction to properties in flood-affected areas," Bennett said.
The March quarter saw a 14% decline in sales compared to the December quarter. Median house prices for Brisbane dropped 1.9% over the quarter, and preliminary sales figures were down around 15% on the December quarter.
Bennett commented that Queensland remains a buyer's market, but has expressed optimism in the recovery process as further mining investment moves into the state.
"The recovery process is well under way, and the multi-billion dollar investment in our state via the mining industry and a number of major infrastructure projects augurs well for the years ahead," she commented.
By Broker News
A volatile property market has Australians divided over whether to buy property, a new poll has claimed.
A survey released by Homeloans shows 48% of the 2,000 first time buyers, homeowners and investors surveyed believe the current market is right for investment. However, 32% indicated they could not give an opinion because too much uncertainty exists in the market, and 19% adamantly claimed it was not the opportune time to buy. Homeloans national marketing manager Will Keall said buyers are being cautious due to "the volatility of property and equity markets in recent years".
"With the cost of living continuing to rise, it means consumers are taking a wary approach," Keall said.
The survey has also found increasing living expenses are the top financial concern for home buyers and home owners. Thirty-seven per cent of respondents named cost of living as their primary worry, up from 26% in a December poll. Property prices remain the most commonly-named barrier to home ownership, with 49% saying low affordability presented the biggest obstacle to entering the property market. Other barriers named by consumers were the need to save for a deposit (26%) and the fear of not being able to meet repayments (22%).
By Broker News
Capital home values have fallen on the back of a decline in premium property prices.
The RP Data-Rismark Hedonic Home Value Index has shown a 1.2% seasonally adjusted drop in capital city dwelling values in the three months to the end of April, and are now down 1.5% for the year to the end of April. Values outside capital cities dropped 1.5% seasonally adjusted for the three month period, and have declined 1.8% for the 12 months to the end of April. RP Data research director Tim Lawless said the decline was driven by price drops in top-end suburbs.
According to Lawless, home values in the most expensive capital city suburbs have recorded a 5.4% decline, whereas values in mid-range suburbs fell only 0.9% and houses in the least expensive 20% of suburbs fell only 0.5%.
"The luxury end of the housing market is showing its volatility. During the growth phase of the cycle the most expensive homes realised the highest capital gains. Yet as the market cools, premium home values seem to be losing steam the fastest," Lawless said.
Lawless commented that the performance of inexpensive suburbs was contrary to prevailing sentiment that default rates were set to rise amongst first home buyers, a claim he said the RBA has recently rejected.
Source: Broker News
Low demand in the Brisbane market has seen transactions fall to their lowest level in a decade, a property research firm has claimed.
PRDnationwide's Brisbane Highlight Report has predicted the property market in Brisbane will remain flat for at least the rest of 2011, following slow growth in 2010 and the lowest sales activity in 10 years. While the cost of renting a three-bedroom house in the city rose 3%, the volume of house sales has fallen 28%.
PRDnationwide research analyst Josh Brown said unit sales had also tapered off significantly, falling 39% over the most recent December half-year period.
"This not only represents the lowest level of sales activity in over 10 years, but also 1,345 transactions below the 10-year average of 3,880 sales per six-month period," Brown commented.
However, Brown claimed there were reasons for optimism in the market, saying pent-up rental demand could bring about a rise in investor sales.
"Looking forward, investors capable of purchasing a well-placed property will begin to enjoy stronger yields," he said.
Source: Broker News
SMEs are facing increased cash-flow pressures when compared with last year, threatening the ongoing health of their businesses, according to non-bank lender Liberty Financial.
Liberty has documented a 100% increase in enquiry levels for debtor finance facilities in the six-month period from September 2010 to March 2011, whcn compared with the same period a year before.
Meanwhile, applications were up by over half of last year's volumes, which Liberty Financial told Australian BrokerNews reflected a "significant" value of total facility limits.
Liberty general manager of business finance Winston Nesfield said the trend was reflective of banks tightening up credit for SMEs, leading to increased deal numbers as well as deal size.
Nesfield said many new customers had also reported a slow-down in repayment times by their debtors.
"This has had a dramatic impact on the health of their business," he said. "This obviously places pressure on their business, as creditors nevertheless still expect to be paid on time. In many cases these customers have found it difficult to obtain finance from their banks. This combination of slower repayment by trade debtors and tighter credit availability is contributing to higher business failures."
A recent Dun & Bradstreet survey showed trade payment terms had reached a ten-year height in the March quarter at an average of 56.6 days, leaving small businesses "particularly prone".
Liberty Financial is hoping debtor finance will make a significant contribution to its diversification strategy across the mortgage, motor and SME lending spaces, according to Nesfield.
"Traditional lenders have pulled back from SME finance and haven't rushed back post-GFC, and therefore we are targeting this are as an area for growth," he said.
At present, two thirds of Liberty's debtor finance business comes via third parties, including finance brokers and professional advisers. Liberty is currently involved in an outreach to finance and leasing brokers, as Nesfield said many of the balance sheet skills required are similar to leasing.
Source: Broker News
Despite a recent flatlining of home values, ANZ has stated significant falls are unlikely.
In the bank's Pan-Regional Housing Outlook, it has stated that a "wholesale downward shift" in house prices is unlikely to be on the horizon. ANZ pointed to low unemployment figures, saying that a strong labour market and wage growth will make forced sales of homes rare.
Though the report has dismissed the possibility of sharp declines, it stated that house prices are also unlikely to rise in the near-term.
"Rising interest rates and deteriorating affordability will cap price gains and we expect little movement in house prices over the year ahead," the report said.
Source: Broker News
Commonwealth Bank has confirmed it will pass any RBA rate rises on to borrowers.
At yesterday's third quarter results meeting, in which the bank revealed a $1.7bn cash profit for the three months to March, CBA chief executive Ralph Norris said Commonwealth Bank is expecting two rate rises by the end of the year. Norris conceded that these rate rises would be passed on to customers.
The announcement follows CBA's decision to raise rates by 0.45% in November last year, above the RBA's cash rate hike of 0.25% to the current 4.75%.
The admission comes as CBA joined Westpac and ANZ in reporting a rise in mortgage delinquencies. Arrears were up 11% for the bank. Norris claimed, however, that barring the impact of natural disasters, delinquencies would have been down.
Source: Broker News
The current fall in property prices will not bottom until next year according to SQM Research, unless interest rates are cut or there is a new government stimulus program.
In its latest research newsletter, SQM said that prices are indeed falling, despite reluctance from competing property research companies to label the declines accurately as a "falling" market.
"Outside the skirmishes between the various data reporting houses and research firms, the downturn does indeed continue," manaing director Louis Christopher said.
"Fortunately, the market is bigger than those of us that publicly comment about it, it's like a tide or river. It will head in the direction that mass purchasing power and mass self-interest takes it to."
Christopher said the geographical extent and magnitude of the downturn - as well as when the downturn might end - are now the questions that should be asked by property research firms and industry players.
"The geographical extent, from what we can see is significant in that it appears to be now affecting most regions in the country," Christopher said. "The magnitude of the downturn is clearly in the minus five percent bracket and we think a number of regions are going to - and already have - fallen more than this."
Despite recent releases of gloomy housing finance figures, Australian Mortgage Planners broker Stephen Dinte said this should not be something that mortgage brokers are overly concerned about.
"This cyclic downturn is something I have experienced a number of times in the last 15 years. Now is a time to regroup, look at the business from the outside and work on marketing ideas to stimulate enquiry," he told Australian BrokerNews.
Dinte also said that despite slower business than six months ago, "every cloud has a silver lining".
"With the introduction of some great deals by lenders, now is a tremendous time for borrowers to reassess their current home loan compared to the specials available," he said.
