NSW Premier Barry O’Farrell has backflipped on his plan to slash the subsidy on the solar bonus scheme after he failed to secure support for his retrospective legislation.

Mr O’Farrell needed the backing of the Christian Democrats and Shooters and Fishers in the upper house to pass the laws but failed to secure their votes.

"I am a realist and there is no point putting up legislation which does not have widespread support and is going to be rejected," Mr O’Farrell told the Daily Telegraph.

"No one likes retrospective legislation; I don’t like it myself but we had to try to find a way of curtailing the blowout in the cost of the scheme."

The Labor government he trounced created the scheme that led people to rush out and get rooftop solar panels installed on their homes.

Mr O’Farrell said in May costs for the scheme were blowing out. To stem this, his government would cut payments to subscribers to the scheme from 60 cents to 40 cents per kilowatt hour for the power they feed into the grid.

The change would have saved taxpayers $471 million, the premier had said, but Mr O’Farrell told News Limited new figures show the scheme will cost $1.44 billion, not the $1.9 billion originally estimated.

© 2011 AAP

You can’t talk about competition in the $1.2 trillion Australian mortgage market without talking about the role of the non-bank lenders, as typified by Aussie and Wizard.

When these companies entered the Australian market in the mid-1990s, the large banks dominated mortgage lending with more than 90 per cent market share, while the credit unions and building societies had about 8 per cent.

All these lenders were deposit-taking institutions (ADIs): they paid for deposits at one rate and created mortgages at a higher rate.

The non-banks had no deposits. They sourced funds from securitisation and lent at a higher rate which was significantly less than the rate charged by banks.

Aussie and Wizard deferred the establishment fees paid on mortgages: they told their customers, ‘if you stay with us for five years, you don’t pay the establishment fee.’

This reduced the cost to the borrower and allowed the non-banks to reduce their margins. It boosted the non-banks to around 15 per cent of the market in 2005, with the banks having dropped to around 77 per cent (the building societies and credit unions remained at around 7 – 8 per cent over the years).

Now, after the GFC, non-banks have 1.2 per cent of the market, banks have 91 per cent, and the margins have been rising since the period when the non banks held a strong share of the market.

In other words, if you want competition, you need not just the right to leave a bank; you need a better deal to go to.

If you hobble the non-banks by banning exit fees (deferred establishment fees), you lose competition and it’s the consumer who loses out.

View the original article here

The mortgage industry ponders the potential impact of a ban on exit fees.

Stakeholders in the mortgage industry are eagerly awaiting the federal government’s response to recent recommendations made by the Senate economics references committee about the viability of banning mortgage exit fees.

But it raises another question: what impact is the ban likely to have on consumers themselves?

Australian Bankers’ Association chief executive Steven Munchenberg says an exit-fee ban would provide a short-term benefit for a minority of consumers who would be paying the fees but there are concerns about the impact the ban might have on the majority of consumers in the medium term.

“The consumers might not benefit if this just makes it that much harder for the smaller lenders to compete with the major lenders,” he says.

“What this whole debate is premised on is, more competition is good because it delivers benefits to consumers, which we accept. But anything that makes it harder for the smaller players to compete with the big guys is actually going to work against that.”

Mr Munchenberg says because exit fees represent actual costs to lenders, there are three ways they can respond to a ban: they can accept it as a hit to their revenue and absorb it, pass the expense on to consumers, or make up the costs elsewhere in the business.

“They’ll need to take into account the extent to which they’re capable of absorbing these costs and also the extent to which passing them on will affect their competitive position,” he says.

Ingrid Just, spokeswoman for the consumer advocate group Choice, says it’s unknown how the costs borrowers incur through exit fees might compare with those that could emerge out of a blanket exit-fee ban.

“What we do know is that the exit fees are one of the barriers discouraging people to switch to better deals,” she says.

Story by Josh Jennings http://news.domain.com.au

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Arrears on mortgage repayments spiked to a record high in the first three months of 2011, as more Australians struggle with rising costs, Fitch ratings agency says.

Arrears on prime residential mortgage-backed securities (RMBS) of 30 days or more hit a record high of 1.79 per cent in the first quarter, from 1.37 in the final quarter of 2010, the group said, as Christmas spending and the Queensland floods forced more Australians to struggle in repaying their mortgages.

RMBS are home loans which are bundled together and sold to institutional investors by banks and mortgage lenders. Misrated RMBS were at the heart of the subprime crisis in the US which lingers to today.

Fitch ‘‘did not expect arrears to increase to this extent and believes that delinquencies have peaked in the current cycle’’, the Fitch report said.

The increase in arrears for the most fragile band of mortgage borrowers, low-doc loans, with payment delays of 30 days or more hit 6.74 per cent in the first quarter, up from 5.7 per cent in the final quarter of 2010, a higher level than December 2008 quarter, when the financial crisis hit and the Reserve Bank began rapidly lowering rates.

Low-doc mortgages are written for riskier borrower than prime mortgages, which are written for customers who have a reasonably safe ability to borrow.

Delinquencies of three months or more on conforming low-doc mortgages, which are used by people who are self-employed for example, soared past 5 per cent in the March quarter, from about 3 per cent the December 2010 quarter.

“It’s very significant,” said James Zanesi, the primary analyst on the report. “It means they really have problems in terms of serviceability, probably due to loss of income from the flood or the loss of a business.”

However, the bulk of the Australian mortgage market remains healthy as long as there are no drastic rises in interest rates, said Mr Zanesi.

The latest indicator of rising mortgage stress comes as Australian bank stocks have fallen in recent days, driven both by the European debt crisis, and ongoing worries that Australia’s major banks remain over exposed to an overvalued domestic housing market.

This month Commonwealth Bank revealed an 11 per cent increase in delayed payments on mortgages in the March quarter, with ANZ and Westpac reporting similar increases.

At the same time, home price growth has flatlined. The weighted average home price in eight capital cities sank 1.7 per cent in the March quarter, according to the Australian Bureau of Statistics, the largest fall since the September quarter 2008, when the financial crisis hit.

Fitch predicted arrears should fall slightly in the second or third quarter of 2011, as the impact of both the holiday season and the floods subside.

‘‘This could however be offset by the impact of any further interest-rate rise as well as the recent increase in the cost of living,’’ the report said.

The increased scrutiny of Australian banks’ loan books also prompted Fitch last week to downgrade 54 tranches of RMBS from ratings watch “stable” to “negative”, representing approximately $1.5 billion of RMBS transactions. Fitch said the affected tranches were in about half of the agency’s RMBS ratings universe.

Last week, Moody’s downgraded the long-term debt ratings of Australia’s big four banks to Aa2 from Aa1 because of their continuing reliance on overseas funds rather than local deposits to fund their loans books.

Story by Chris Zappone http://news.domain.com.au

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The economy recorded its biggest contraction in 20 years in the March quarter, yet economists say interest rates could rise as early as this week. What gives?

INTEREST rates are going higher, and soon. It could be this week, it might be in a month, or maybe the month after that, but they are going up. You can bank on it, economists say.

Talk to practically anyone paid to predict these things right now and they will tell you to expect at least one interest rate rise before the year is out – most likely two.

Two would take the cash rate from 4.75 per cent to 5.25 per cent, adding 0.5 percentage points to your variable home mortgage rate. Some, such as Deutsche Bank chief economist Adam Boyton, expect the Reserve Bank to move on rates as early as this week after the central bank’s meeting on Tuesday (the news will be announced on Wednesday morning).

ANZ chief economist Warren Hogan doesn’t rule this out but suggests July is more likely.

Commonwealth Bank senior economist John Peters is looking for a move after the August meeting. Either way, all three expect rates are headed higher, and soon.

Incidentally, CommBank’s Mr Peters is looking for two rises before the end of the year and another two in 2012. If he’s right, you need to start factoring the impact of a one percentage point increase in your variable mortgage rate reasonably soon.

Deutsche’s Mr Boyton’s call could be seen as gutsy given last week’s unexpectedly high 1.2 per cent GDP contraction for the March quarter. But he says this news didn’t change the underlying economic story at the macro level. His argument is that while the contraction was sharp, the bounce-back from it will be equally so. ”A lot of people have looked at the economy in an optically different fashion following the 1.2 per cent decline in the GDP, and it does create a bit of a communication challenge for the Reserve Bank. But that’s a communication issue rather than an economic issue – fundamentally the big picture hasn’t changed.”

Mr Boyton says the Reserve has also established a record of moving on rates at unexpected times in recent years.

Remember the rate increase during the election campaign in November 2007 and the lift last November following a low reading on inflation? So while he admits he’s in the minority – a Bloomberg survey of economists says five expect rates to move higher this week, against 23 who don’t – Mr Boyton is sticking with it.

”The Reserve has to set policy for the average and the reality is we have strong business investment at a time when we are at close to full employment, so other parts of the economy will have to grow at below average to accommodate this.”

ANZ’s Warren Hogan agrees. He says this is the key reason why interest rates need to rise even though big parts of the economy are already struggling. ”We need to get one in pretty quickly so we are set for a significant surge in mining investment, building and construction,” he says. ”It’s a problem we have in Australia; we have very little spare capacity, particularly in the labour market, just as we are heading into a big push-up in investment.”

This is not a short-term issue, either, according to Mr Hogan. ”It’s the reality of the Australian economy in the next three to five years – some sectors will do it tough.”

CommBank’s Mr Peters says consumers have done their bit by being cautious and well behaved – using 11.5 per cent of their income to pay down debt, a rate not seen since the early 1970s, controlling spending and putting money into term deposits so that the banking sector doesn’t need as much expensive offshore borrowing for local home mortgages.

”Even in the first quarter, the domestic demand side was still strong, growing 3.3 per cent in annual terms,” Mr Peters says.

”But this mining investment boom is going to keep going, and the rest of the economy has got to make room for it.”

Story by Richard Webb http://www.smh.com.au

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Everyone is jostling for space in the carbon tax debate this week. Cate. Michael. And even Ross Cameron, a former Liberal MP known for campaigning on morals, and then proving, Clinton-style, that he didn’t walk the talk, and losing his Federal seat as a result.

Among those in the ear of the Federal Government is the Housing Industry Association, which has declared its opposition. It argues that a tax on carbon emissions will flow through to adversely affect all building products and all sectors of the construction industry.

“Building product manufacturers and new home buyers across Australia will be the hardest hit by a carbon tax,” says HIA’s chief executive, Graham Wolfe.

“There will be an immediate and inevitable flow through of cost increases across the broad range of building materials, products, fixtures and fittings,” says Wolfe.

Wolfe says at $20 per tonne, a carbon tax will add an extra $6000 or more to the cost of building an average new residence, placing additional affordability pressure on new housing activity, and adding $43 extra per month to family mortgage repayments.

“That adds a further $12,800 in repayments over a 25-year loan,” Wolfe says.

The HIA estimates that constructing the average new home and land package involves the emission of about 240 tonnes of carbon dioxide.

And Wolfe argues that $6000 – or about $12,000 if the price was to be $40 a tonne of carbon – could, for some people, be the straw that breaks the banks’ willingness to lend to someone building a home.

“There are a lot of people who don’t have a house who can’t afford to buy a house who are saving as quickly and mightily as they can but they can’t get across the line because they can’t get the deposit together. I’m not going to dismiss $6000 as being a small amount of money that should not have some consequence on the cost impact of … a new home.”

But Wolfe concedes that the amount of carbon emitted during building could well come down – and is already doing so.

“Some of the steel manufacturers and the aluminium manufacturers, the cement manufacturers are already increasing the efficiencies of their production line,” he says. “That is happening now, whether or not this makes it happen any faster, in time we might see the result of that. Efficiencies in carbon footprints are being improved all the time in any case.”

He also says, should makers of steel, aluminium, cement and other building products be compensated, that could reduce the impact of a carbon tax on people building homes. “If there is a compensation for [manufacturers] … then the cost increases won’t be as significant. So the $6000 might be a little less. “

While the HIA has made up its mind that a carbon tax is a bad idea, pointing out that it could make people look for cheaper non-taxed products from offshore, not everyone in the building industry agrees.

Cameron Rosen, the director of sustainable building consultancy Australian Living, who has recently built four eight-star homes in Sydney’s east, says a carbon tax would not necessarily cost more.

“Sure if you think old school, prices are going to up, but if you think new school, prices should come down,” Rosen says. “I think it opens up the doors for innovation to come alive.”

Rosen says a carbon tax could push builders to investigate more efficient building systems, that reduce waste, and open up the potential to integrate ideas from the commercial building sector.

On his recent build, Rosen used concrete from Boral that has a high recycled content. Doing so saved 13 tonnes of carbon emissions per home.

Rosen also says if a carbon tax pushes up the energy efficiency of new homes, people could save thousands of dollars on electricity and gas.

“About 38 per cent of our energy consumption goes to heating and cooling. It’s the biggest amount of our energy expenditure and, through good design, you can wipe that 38 per cent out [or get close to it].”

Story by Carolyn Boyd www.domain.com.au

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Today’s market conditions favour property investors who are looking to benefit from ongoing seller discounting, healthy rental income growth and longer term capital gains, says Australia’s largest independently-owned mortgage broker, Mortgage Choice.

This may be why the value of housing finance demand for investment lending – fixed loans rose for the first time this year in March, by 2.1% according to the ABS*.

Mortgage Choice spokesperson Kristy Sheppard said, “The latest data suggests greater movement from investors taking advantage of subdued market competition and housing price reductions.”

“There are many more properties on the market than usual and less buyers to purchase them. Australians who are ready financially and keen to crack the market or build on their portfolio may find that some solid hard work sees them snap up opportune purchases while demand is low.

“Other encouraging factors are our healthy population and wage growth and low rental vacancy rates. Rents are rising at a faster pace this year while property values have steadied or dropped in many areas, so rental yields are on the increase. This all bodes well for people who research the market thoroughly, have a long-term strategy and are informed about their finance options.”

Mortgage Choice’s hints and tips for those considering investing are:

Aim long-term: The market moves in cycles; it has highs, lows and steady patches. Always ensure you are comfortable with the possible pros and cons of an investment asset and think hard about how they match your goals. You will need to budget for interest rate rises and property agent fees as well as the usual ownership costs and lost rent if you struggle to find or keep a tenant.

Research the gains: Read property-related and investment articles. Talk to people in the know, eg. experienced investors and property research companies, about areas you are contemplating buying in. Compare suburbs’ rental yields, resident demographics, tenant demand, existing and planned infrastructure, past price growth and predictions and everything in between.

Invest with equity: Tapping into another property’s equity can be a strong launching platform. Say your home is valued at $700,000 and the mortgage is $350,000, you may be able to invest up to 95% of your equity ($332,500) to purchase a property, depending on factors such as your lender’s approval criteria and your ability to afford repayments. Lenders Mortgage Insurance may also be a cost consideration.

Choose a well suited loan: There is most probably a range of property loan products to weigh up against your financial situation and investment portfolio strategy. Interest only or principal and interest loan? Fixed or variable rate or perhaps a split? Which features are needed? Cash deposit and/or equity? A professional mortgage broker can help you compare a range of home loans and guide you through narrowing it down to one suited to your requirements and objectives.

Meet an expert: You may also need to discuss your move with an accountant or financial planner. Make sure your financial situation is improved by the investment.

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The federal government has unveiled its blueprint for the future of the nation’s 18 largest cities with a warning that it’s prepared to “intimidate” opponents if necessary.

The National Urban Policy, released by federal Infrastructure and Transport Minister Anthony Albanese on Wednesday, sets out a broad range of principles designed to underpin long-term urban growth and improve productivity.

Among the problems the policy aims to tackle is traffic congestion, which Mr Albanese said would cost Australian business and families more than $20 billion by 2020 if left unchecked

The policy promotes better infrastructure planning and public transport, reducing carbon footprints and improved urban planning to meet the challenges of a population growth, an ageing population and climate change.

Future federal infrastructure funding will be linked to the policy and other development plans that individual states and territories have been ordered to produce by January 2012.

Mr Albanese on Wednesday insisted the policy was not a federal takeover of existing state and territory responsibility for urban development.

But he indicated that state and territory leaders would have to toe the line.

“What this is, is the commonwealth … putting in place all the levers at our disposal to drive, foster, encourage, and if you like intimidate recalcitrants, if need be, to make sure they do get on board,” he told a Property Council of Australia breakfast in Sydney.

The Council of Capital Cities Lord Mayors (CCCLM) backed the National Urban Policy.

“Today’s policy announcement is highly symbolic and highly anticipated after three years preparation,” CCCLM chair and Lord Mayor of Hobart Rob Valentine said in a statement.

“It is an important recognition of the national and international role our cities play, and the future challenges and opportunities they face.

“What’s needed now are the partnerships between governments, backed by enough dollars to drive real change.”

The nation’s 18 biggest cities are home to three in four Australians, produce 80 per cent of national income and generate 75 per cent of its jobs, the government says.

They include every state and territory capital and large regional centres, such as Newcastle, Toowoomba and Sunshine Coast.

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Hundreds of Sydney homes fitted with solar panels will be the first checked for potentially dangerous flaws in the next few weeks.

NSW Fair Trading Minister Anthony Roberts said on Wednesday at least 500 initial spot checks would be carried out in homes across Sydney to inspect the safety of solar panels installed under state’s solar bonus scheme.

Areas where solar panel technology proved popular will be the first examined under the statewide check, which begins on June 6.

‘Fair Trading is planning this review involving 25 qualified inspectors targeting areas of Sydney where there has been significant uptake of solar panel technology,’ Mr Roberts said in a statement.

‘Fair Trading complaints data and advice from energy suppliers are being used to do this planning.’

Mr Roberts said all residents who paid for solar panels under the scheme should have received a Certificate of Compliance for the installation work.

The cost of the inspections will ‘be met from existing resources’.

The safety review comes after similar spot checks by Fair Trading in February revealed a small number of potentially fatal flaws in some Port Macquarie homes.

Mr Roberts, who flagged the impending inspection at the weekend, stressed he had acted quickly to inform the public of the problem.

‘As I made it clear in my statements over the weekend, I got these facts from Fair Trading last week, late on Thursday night, followed by a briefing on Friday, at which time I made the decision to release information to the public,’ he said.

‘This data was not provided to me or the new NSW government prior to Thursday night.

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Getting your head around what’s happening in the solar industry takes more than a little time.

At one end of the spectrum you’ve got solar companies screaming they are all about to be run out of their various states by governments scaling back generous feed-in tariffs for grid-connected systems, on top of the Federal Government winding back its support for the upfront costs.

At the other end, you’ve got government ministers such as South Australia’s Energy Minister Michael O’Brien claiming that adding $30 a year to the average household power bill would be an unjustifiable cost – even if that was what was needed to keep the solar industry alive and encourage the more sustainable take up of greener power.

Not to mention the furore unravelling in NSW this week after the newly minted Premier, Barry O’Farrell, moved to stamp his credentials as a tough economic manager by announcing plans for retrospective legislation to slash the feed-in tariff for people who have already installed their solar panels.

In the middle are the households. Some are bewildered by the news that a NSW Fair Trading audit of systems in Port Macquarie found potentially fatal flaws in some homes. Five per cent of installations had serious problems. Extrapolate that across NSW, and it adds up to 6000 potential homes with the same issues.

At the same time, the Australian Competition and Consumer Commission has issued a joint warning with state consumer protection agencies that solar power retailers must ensure their claims are true – or risk civil and in some cases criminal sanctions.

I asked the ACCC how many complaints it had received, and what the nature of the complaints were. But was told the ACCC is unable to comment on the number or nature of complaints, because it treats all complaints confidentially and has a policy of not confirming or denying any investigations.

I also put the same question to consumer protection agencies around the country.

In Victoria, Consumer Affairs has been forced to issue a warning about a company who consumers have alleged took deposits for systems and never installed them, having enticed people to buy through door-to-door direct marketing or at advertising stands in suburban shopping centres.

During 2010, Consumer Affairs Victoria received about 350 complaints about solar systems, including “delays, faulty systems, billing and grid connection issues and general customer service complaints due to the growing demand for solar”.

In NSW, since November 22 last year, Fair Trading has received 417 complaints regarding solar. The majority of consumer-related complaints were linked to “unsatisfactory or non-performance of service and supply delay”.

In South Australia, the Office of Consumer and Business Affairs has received 124 complaints in relation to solar systems in the last 16 months. This includes 87 complaints about the installation of solar panels, 33 complaints about solar hot water systems, and 4 complaints about the supply of solar panels.

In Western Australia, Consumer Protection says it has received more than 50 complaints against the solar PV industry this year.

“Some consumers believe they were misled by cost-saving claims, but the majority are concerned about unreasonable delays in installations,” says David Hillyard, director of Industry & Consumer Services at Consumer Protection in Western Australia.

“The delays are caused by a rapid increase in demand with installers battling to keep up. Consumers are concerned that their systems won’t be installed before the Federal Government rebate is reduced in July this year, which is fuelling further demand.

“At this stage there is no evidence to suggest that any operators in WA are systematically breaching legislation. Complaints are being examined on a case-by-case basis.”

Hillyard says consumers need to do their own independent research as to the benefits of the different systems and whether they meet their needs. “They must weigh up the initial cost of between $3000 and $30,000 and determine how long it will take before they break even through savings on their power bills,” he says.

For example, a 1.5 kilowatt system could produce up to 6.6 kilowatt hours (kWh) of electricity per day. Considering the average household consumes 18 kWh per day, this system is only going to supply one-third of electricity needs and will not eliminate power bills.

“The most common complaints are about delayed installation so it is important to get clear and agreed timeframes from the installers in writing,” Hillyard says. “Understand the consequences of missing an installation date, if it is going to affect a rebate qualification date and what the long-term effects might be.”

A former worker in the solar industry contacted me this week, concerned consumers were being given the runaround. He says the business he worked for dissuaded all sales contractors from mentioning the Clean Energy Council’s Solar PV Consumer Guide to prospective clients.

The guide is a must-read for anyone thinking of buying a system.

The former worker also alleged that consumers were signing up for one type of panel but getting another. “[They would] substitute another panel type without obtaining prior consent of the purchaser,” he says.

“Often customers are not knowledgeable enough to check the wattage and type of panel brought to install, and they cannot tell the difference until the installers have departed.”

The former solar worker, who asked not to be named, said consumers were being dazzled by the incentives on offer and not doing the due diligence they normally would for such a big purchase.

It is all a bit reminiscent of the insulation scandal, which, unfairly, sullied the reputation of what is a very good and useful product. The problem lay with the companies paid to put insulation in, not with the product itself.

The issues that have emerged in Port Macquarie, and the complaints to consumer protection agencies, appear to be focused more around the installers than the actual panels.

If you have installed solar panels and are worried that they may not have been put in correctly, you can pay a registered electrician to check them for you. Or contact the electrical authority in your state or territory. There is a list of authorities in the consumer guide from the Clean Energy Council.

If you are thinking of installing solar, you should contact accredited installers that use licensed electricians and supply products that meet Australian standards.  A full list can be found at the Clean Energy Council website.  The website also has useful information on connecting your home system to the grid used by your electricity supplier.
Consumers can find information on rebates, solar credits or other incentives at the following websites – Living Greener; the Office of the Renewable Energy Regulator; and the Department of Climate Change and Energy Efficiency.

Story by Carolyn Boyd www.domain.com.au

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The cost of being a tenant is rising at a rate unseen for some time, making saving a home deposit a challenge for many and leading others to wonder if they will be better off as a property owner.

Capital city rents grew a solid 4.8% in the first quarter of this year alone, which is an obvious jump on the 2.9% increase experienced in the year to March 2011*.

A number of Australians are finding their way around price barriers by reducing rental costs via share housing and/or buying a home then living with friends, siblings or others as their tenants. ‘Share housing’ isn’t simply a term for their rental situation, it’s applied to life after buying.

Mortgage Choice’s recent Future First Homebuyer Survey found this was the case for a significant proportion of its 1,013 respondents.

Company spokesperson Kristy Sheppard said, “8% of our recent 2011 Future First Homebuyer Survey respondents had already saved, or planned to save, on rent by moving to cheaper shared accommodation before buying and 14% will rent out one or more rooms after the purchase.”

“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.

“Our regular consumer surveys show us first time property buyers are getting older. I wouldn’t be surprised if shared rental housing is an option increasingly utilised by older people as another way to make saving a home deposit easier. If so, this would be especially prevalent in areas of dense housing and 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. The same goes for home owners who are looking to create more room in their budget.

“With the outlook suggesting Australia is set to experience continued rent and other living cost hikes as well as interest rate rises, people who are determined to be property owners may want to look at share housing as a longer term cost-saving strategy.”

Source: www.mortgagechoice.com.au,

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The head of the Bank of Queensland has warned that Queensland’s economy is at its weakest level in the past five years due to falling tourism and deflated real estate values, and that any additional interest rate hike would only serve to cause more damage, according to a report by The Australian.

David Liddy added that the strength of the mining and manufacturing sectors is overshadowing significant weak points elsewhere in the economy, and joined business leaders in expressing concern over the possibility of an interest rate hike by the Reserve Bank of Australia in its determination to cap inflation.

The concern expressed by Mr Liddy and business leaders at Monday’s Australian Agenda event came on the heels of the release of minutes from the RBA’s May board meeting, where board members suggested that higher interest rates may be necessary to fight inflation.

Speculation suggested a rate hike could come as early as the RBA’s next board meeting, which occurs in two weeks, according to The Australian.

REINSW members will recall that on 1 July 2010 the former NSW Labor Government introduced the Torrens Assurance Levy, which is an ad valorem tax payable on the registration of a transfer of NSW property where the purchase price is more than $500,000. The greater the purchase price, the higher the levy payable. By way of example, the tax amounts to $204 on a property with a price of $600,000, and increases to $1,004 for a property at $1,000,000 and $6,004 for a property at $3 million.

REINSW immediately sought, and received, an undertaking from the then Opposition Leader Barry O’Farrell that he would repeal the ad valorem tax should the NSW Liberals & Nationals be elected to government at the 2011 NSW election.

REINSW is pleased to report that the Real Property Amendment (Torrens Assurance Levy Repeal) Bill 2011 was introduced into the NSW Parliament yesterday on 9 May 2011.

While the Bill is not yet law, we are pleased to see the new Government taking steps to honour its undertaking to REINSW. We will monitor the progress of the Bill as it makes its way through Parliament and will keep members informed of further developments.

The Bill is proposed to come into effect on 1 July 2011. Under transitional provisions, the tax will continue to apply to registrations of transfers that are executed to give effect to Contracts for Sale of Land entered into on or after 1 July 2010 and before 1 July 2011. Only registrations of transfers made to give effect to Contracts for Sale where the contract for sale is entered into on or after 1 July 2011 will benefit from the abolition of the tax.

Accordingly, REINSW members may notice and reasonably expect some resistance to exchange of contracts by purchasers between now and 1 July 2011, as by delaying exchange to 1 July 2011 they can avoid paying the levy. The resistance may be more pronounced with respect to purchasers of premium properties who would be liable for much higher levies.

Ever since she finished university Kate Sedgwick has been on the lookout for her first home.

So when the 26-year-old event coordinator from Canberra found the perfect place last year, she didn’t hesitate for a second just because she didn’t have a man in her life to share the home and financial burden with.

“I must admit, I couldn’t be bothered waiting,” said Sedgwick.

“I’d just turned 26, there was no one on the horizon at all, no prospects. I wasn’t going to wait: I could be waiting until I was 30 or 35.”

So, with some help from her parents, Sedgwick signed on the dotted line to become the proud owner of a three-bedroom town house in the northern Canberra suburb of Bonner.

The new-build will be ready to move into by August.

Sedgwick says she knows there’s still a slight stigma attached to a single woman branching out in the property market on her own, but she wasn’t putting anything else on hold while she was looking for love, so why this?

“It would make you sad to just sit around and wait to be in a relationship,” she says.

“I didn’t know when it was going to happen – and that’s not being a sad sack about it.

“I was over renting and I didn’t want to move back home so the other option was to go in with mum and dad. So that’s what I ended up doing.”

Sedgwick is one of a growing number of women who are getting on the property ladder without worrying about whether they’re in a relationship or not first.

New data from mortgage lenders RAMS Home Loans suggest Australian women are increasingly buying property alone.

While sole loan applications usually tend to be 70 per cent from men and 30 per cent from women, last year the figures revealed an even 50 per cent split across the nation, a RAMS statement said.

“Our experience shows women have become very comfortable and knowledgeable about the process of buying property,” RAMS chief executive officer Melos Sulicich said, adding the numbers were not a surprise to him.

Some loans were to owner/occupiers like Sedgwick, others were the result of relationship breakdowns, and many were for investment properties.

Sedgwick will be moving into her place, but says it’s certainly not where she sees herself growing old.

“It just made sense to me to try and buy and get in the market – especially given Canberra’s ever-increasing house prices,” she says.

“So when I am ready to get something that I actually want to live in forever, at least I have that equity behind me.

“You just have to get in (to the market) and hope for the best – that’s my theory anyway.”

After moving from rental to rental for the past few years, Sedgwick is looking forward to putting her hard earned cash and efforts into her own place.

“My mortgage might be the same or even less than what I pay in rent,” she says.

“And a rental’s not mine. You put so much effort into it and you don’t get anything back at the end of the day.

“I want to stay in my own place for a bit and enjoy the responsibility – I have to change the light bulb and I have to do the gardening.

“After living with so many other people, I’m looking forward to having that independence and the feeling that it’s all mine.”

Story source: www.domain.com.au

Tags: community, finance, investment, news, real estate

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The Australian housing market is not experiencing a shortage and rising interest rates will keep a lid on any further price growth, one property expert has warned.

The comments come as this week’s auctions results have showed the market is still recording fairly underwhelming results, with clearance rates at levels consistent with the past few months.

Institute of Actuaries Australia fellow Anthony Street says that while properties are overvalued, this is not because of a property shortage, as some experts have suggested. Rather, it is because of higher interest rates.

“Right now the amount of people per dwelling on average is 2.5. So if you look at the population growth over the past 12 months, it’s been at 350,000. For that you need 140,000 new dwellings, and there have been over 170,000 new dwellings started,” he says.

“This argument was started 18 months ago during when immigration really peaked, so you did have a short window of time when population growth was high and sort of outstripped supply.”

Street believes the market right now is at an equilibrium – with the supply of properties neither too much or too little.

“That having been said, I don’t think there’s an oversupply either. But you’re not getting the massive pressure on rents than if there was.”

This is the same opinion forwarded by SQM Research managing director Louis Christopher, who argues the sheer amount of stock on the market means while there may be shortages in some areas, this is not the overall trend.

So what is keeping Australian housing prices so high?

“It comes down to two things – interest rates and unemployment. We’ve had pretty low interest rates for the past 10 years, and banks are more willing to lend money to people to buy houses.”

“Look at the amount of debt households have now, it’s obvious credit has been flowing. And also unemployment is historically low, and continues to fall. Everyone who wants a job, has a job, and can continue to pay more.”

And yet, the housing market has basically been stopped in its tracks over the past year. Prices have remained flat, or fallen according to various research groups, and households – especially first home buyers – are finding it harder and harder to make their repayments.

“We’ve already seen it over the last 12 months – interest rates are around average, but the slowdown in the past six months has been due to increases in interest rates. And they aren’t massive by any means.”

However, Street says that as unemployment continues to fall, buyers will continue to meet repayments, and the ongoing demand for housing will keep prices in line, or at least buffer any major reductions.

“House prices are at a peak right now from an affordability perspective, because people haven’t been able to withstand higher interest rates. Any more will keep a lid on price growth.”

Meanwhile, the auctions market has performed in-line with the last few months of results, except in Sydney where clearance rates have increased to 60%.

According to the Real Estate Institute of Victoria, the clearance rate for Melbourne was 56% from 518 reported auctions. Chief executive Enzo Raimondo said in a statement the result shows “conditions have clearly shifted in buyers favour again”.

Meanwhile, clearance results in Sydney rose to 60.1%, while Adelaide and Brisbane both recorded 36.4% and 20.8% respectively.

Story source: Patrick Stafford www.smartcompany.com.au

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