National Australia Bank’s quarterly survey of property professionals shows they expect almost no house price growth over the next 12 months. The figures coincide with a BankWest Mortgage and Finance …

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THERE are plenty of pitfalls the first-time real estate investor needs to avoid, writes Anthony Keane. Here’s a list of the most common errors and how to avoid them.

Getting your foot in the door of property investment can be a scary proposition.

It’s not every day you sign up for hundreds of thousands of dollars of debt for something you are not living in.

History has shown that, for long-term investors, the rewards are usually worth the risks, but there are plenty of traps the first-timers need to avoid.

Tax, interest rates, tenants, property agents, renovations and insurance are among the key areas where mistakes can cost investors big money, or at least deny them some of the profits they seek.

Today, Your Money examines some of the traps for first-time property investors.

Seminars that bite

University lecturer, author and investor Peter Koulizos warns about so-called "property education" seminars that are really just sales seminars designed to flog overpriced property to pumped-up investors.

"But I would encourage people to try to see lots of seminars just leave your chequebook at home," he says.

"You get different perspectives and you can get good information, but just go with your eyes wide open."

Where’s the research?

"Some people spend more time researching the plasma TV they are going to buy, rather than the property they are going to buy," says Koulizos, who wrote The Property Professor’s Top Australian Suburbs.

These days we are spoilt for choice, with a wealth of information about property prices, trends, hot and cold suburbs, tips, traps and warnings in the print media and online.
Buying for tax purposes

Koulizos says many people look at property investing as a way to get a bigger tax refund.

"But you are only getting a refund because you made a loss," he says.

This practice is known as negative gearing, but seasoned investors know that a positively-geared investment where the property pays you a profit is the ultimate aim.

First-time investors are usually negatively geared in their approach, so they may as well get their tax refund back sooner.

Louise Carr, a property strategist with investment group Ironfish, says completing an income tax variation form can help smooth out your cashflow rather than get a lump sum refund.

"This way you can organise to get your tax back on a weekly or fortnightly basis with your pay," she says.

Depreciation debacles

One of the best tax benefits from property investment is being able to claim a deduction for depreciation of items within the property and the building cost of the property.

You don’t physically pay these costs, so effectively it’s free money coming back through your tax return.

However, many investors don’t understand depreciation, Carr says.

"Deductions for new homes can be up to $15,000 a year.

"We often find that some accountants don’t make people aware of it. We recommend going to an accountant who owns property themselves, so they know the advantages and are aware of tax legislation."

A depreciation schedule will list all your depreciation deductions. They typically cost $500-$600 and are available through a quantity surveyor, are tax-deductible themselves, and are available through a quantity surveyor.

Bad advice

Everyone has an opinion about buying property and these days opinions are deeply divided about the short-term outlook for real estate investment.

There are also different opinions about what to buy, where to buy and tax strategies, and investors should not rely on the advice of friends and family members, who may have completely different financial situations.

Carr says getting good professional advice is crucial to owning the right investment.

"People who get advice from friends and relatives find that their investments are generally not set up properly," she says.

Paying too much

Ian Lloyd, an advisory board member of property and finance group Investa Solutions, says some investors are paying more than they should.

"There are developers out there who, I believe, are offering properties that are overpriced," he says.

Lloyd says some government schemes and incentives are prompting people to create properties and developments that are "a little manufactured" and slug hefty management fees, Lloyd says.

Property management is another area where people can pay too much.

"Don’t pay letting fees or re-letting fees to property managers," Lloyd says.

"For every week of rent you give up, for example for a letting fee, that equals 2 per cent of your rent. So if you pay an 8 per cent management fee but there’s two weeks’ rent for letting, it’s 12 per cent, then if it’s re-let and there’s another fee, you are in effect paying 14 per cent.

"If you can negotiate a flat fee something like 10 per cent you don’t lose rent upfront through letting fees."

No safety net

Investors can lose everything if something goes wrong and they don’t have the financial firepower to cover the costs and their loan repayments.

"Have a strategy where you have set up a reserve," Lloyd says.

"A good finance broker or adviser can help you set up a buffer that would mean if you lost your job you could still keep the property."

Carr says it doesn’t have to be cash an available line of credit could be enough protection.

"Have a kitty of $20,000. Then if you run into trouble or tenants don’t pay on time, you can still sleep at night."

Interest rate panic

Fixed-rate loans have lost popularity in recent years, but fresh talk about rising rates can prompt many beginners to fix.

Koulizos says some people can get trapped in a long-term fixed rate loan say five years because they panic when rates are relatively high.

"Then in about three, six or 12 months the rates start to come down again but you have locked yourself in for years paying a higher rate," he says.

"Generally people fix at the wrong time, but fixing rates can be good especially if you are risk-averse."

Easily scared off

Some investors decide to sell up after just one bad tenant, Koulizos says.

"You can easily get rid of a tenant who’s doing the wrong thing, but as soon as you sell, your asset will not be going up in value," he says.

The vast majority of tenants are not bad people, and if you treat them well most of them will respond in kind.

Renovating? Use your head

Koulizos says many people renovate an investment property with their heart, not their head.

"They renovate a property like they want to live in it, and can over-capitalise," he says.

Save the crazy colour schemes and top-of-the-range fittings for your own home. Rental properties with neutral colours are likely to attract a broader range of tenants.

Ignoring insurance

Landlord insurance is vital for property investors. It’s tax-deductible and not as expensive as you might think.

For example, Carr says a policy that covers things such as malicious damage, accidental damage, rental default and legal liability would cost you $255 a year through major landlord insurer Terri Scheer.

"Some investors think ‘I have a property manager – I don’t need landlord insurance’, but they do," she says.

Lack of patience

"Property is get rich slow," Carr says. "Some people don’t believe that property prices will double again, but historically they have doubled every seven to 10 years."

"The more times you go through the cycles, the more money you are going to make."

  The CEO of Australia’s largest independently-owned mortgage broker, Mortgage Choice, says the latest ABS housing finance data* highlights that warnings of interest rate rises are having a dampening effect on home loan demand.

The August ABS Housing Finance report 5609.0 shows a reduction in both the number and value of housing finance for investment housing, while the value remained steady for owner occupied housing finance. The total value of dwelling commitments dropped 1.3% from July to August 2010.

The number of owner occupied loans increased 1.0% and the number of loans for the purchase of established dwellings increased 1.4%. However, the number of loans for the purchase of new dwellings dropped 2.0% and the number of loans for the construction of dwellings dropped 1.0%.

Mortgage Choice CEO Michael Russell said, “It is no secret that winter delivered a slowed pace for housing finance demand, particularly from investors.”

“There is no doubt the Reserve Bank’s hold on the cash rate will shortly come to an end. What is just as worrying for potential and existing borrowers is how lenders will react to the news.

“To counteract any out of cycle rate movements, potential borrowers need to factor in higher loan repayments, create a savings buffer as early as possible and research their loan options thoroughly. It is important to know all the ins and outs before entering the mortgage maze.

“Some good news is that we have witnessed a dozen or so lenders announce product changes over the past couple of months. In a further sign that lender competition for home loans is rapidly returning, some lenders are offering special discounted interest rates and higher loan to value ratios.

“With a close eye on interest rates, potential and existing borrowers need to knuckle down now to prepare for rises by assessing their household budget, repayment strategy and the suitability of any home loan.

“A professional mortgage broker will introduce a borrower to a range of options, work to secure interest rate or fee discounts and put forward a solid case for loan approval. These are major reasons why 40% of all new home loans in Australia are sourced through brokers.

“Looking forward to the spring housing finance data, we will be keen to see if demand heats up.”

*All figures quoted are seasonally adjusted.

Source: www.australianhousehunters.com.au

The International Monetary Fund has warned that Australian real estate prices might be overvalued.

In its latest World Economic Outlook, cautions that a reversal in prices could hit consumers who have speculated on rising values.

"Given assessed mild overvaluation, a potential correction in house" prices "could hit household wealth and consumer confidence," the IMF has warned.

The cautionary language follows recent comments from the Reserve Bank that Australia’s property market shows "welcome signs" of cooling after earlier interest rate rises and the withdrawal of government stimulus.

Early fears of a property bubble have emerged after housing prices rose in the year to June.

The Reserve Bank’s head of financial stability, Luci Ellis, said yesterday that the Australian property market did not appear to be overheated.

However she said: "Buying an asset because you expect the price to rise in the future, well, that is actually the academic definition of a bubble. So that would be undesirable and seen as a problem."

In an earlier development, the Fitch ratings agency said it planned to "stress test" the impact of any downturn on banks and insurers.

Story by Peter Ryan Yahoo 7 Finance

Interest rates remaining unchanged for a fifth month.

The central bank left its key cash rate at 4.5 per cent, defying widespread expectations that it would increase it to 4.75 per cent.

"It’s a bit of a surprise," said Macquarie senior economist Brian Redican. "The press release (accompanying the RBA decision) looked consistent with an interest rate increase".

"The present uncertainty in the financial markets is keeping the RBA on the sidelines," Mr Redican said, adding ”that higher interest rates will be required."

Holders of a typical $300,000 mortgage are already paying $300 a month more than they were a year ago, when the RBA began the first of six rate rises to return borrowing costs to their long-term levels as the economy bounced back.

The reprieve for borrowers may be short-lived, though, with the big commercial banks flagging their intention to pass on rising funding costs in the form of higher interest rates.

There was speculation such an increase may come as early as today, but National Australia Bank, Westpac and ANZ said no change to their mortgage rates is imminent.
"We have not made any announcements regarding any changes to our standard variable interest rate at this time," said a spokesperson for NAB.

Westpac also ruled out a rate rise until after next month’s Reserve Bank meeting scheduled for November 2.

”Our standard variable rate remains unchanged in line with today’s RBA decision,” said a spokesperson for Westpac.
”We have no current plans to change our standard variable rate ahead of next months’ RBA meeting.”

The Commonwealth Bank said its rates are under review and declined to comment on its likely decision.

Rates outlook

And the prospect of an official rate rise still looms after the RBA hinted strongly last month it will use rate rises to combat inflation pressures from the booming commodity export sector – a suggestion repeated today by RBA governor Glenn Stevens.

”The current stance of monetary policy is delivering interest rates to borrowers close to their average of the past decade. The Board regards this as appropriate for the time being,” Mr Stevens said, in a statement accompanying the RBA decision.

”If economic conditions evolve as the Board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target,” Mr Steven said.

Inflation figures for the September quarter are due on October 27, just days before the central bank’s next interest rate meeting on Melbourne Cup Day.

Financial markets were pricing in an increase of 41 basis points in 12 months’ time – implying at least one more rate rise by the RBA by then – down from 53 basis points prior to today’s RBA decision.

Stocks pared their day’s losses after the announcement, ending about 0.4 per cent lower for the day after being off more than 1.4 per cent earlier.

RBA view

The RBA signalled that continuing doubts about the health of the international economy contributed significantly to its decision to stay put on interest rates this month.

”Financial markets are still characterised by a degree of uncertainty, and are responding both to differences in growth outlooks between regions and evident strains on public finances and banking systems in several smaller countries in Europe,” Mr Stevens said in his statement.

Greece, Spain and Ireland are among European economies struggling to cope with soaring budget deficits and slowing growth.

By contrast, Australia’s economy is showing ”growth around trend over the past year,” with prices for the country’s commodity exports ”very high,” the RBA governor said.

Indeed, Australia’s key economic measures are mostly improving, with the government’s fiscal stimulus spending easing back just as private spending perks up to take up the slack.

Importantly, the quickening growth is yet to stoke a pick-up in inflation, with prices growth moderating from ”the excessive pace of 2008,” the statement said. ”The effects of the rise in tobacco taxes aside, CPI inflation has been running at around 2.75 per cent over the past year. That looks likely to continue in the near term,” he said.

The Reserve Bank aims to keep inflation between a band of between 2 and 3 per cent over the medium term.

Patchy economy

One reason why inflation has been held back so far is that the growth of the overall economy – excluding the booming mining sector – remains patchy.

Data out today on the services industry showed the sector has contracted for the past five months, while retail sales rose 0.3 per cent in August – less than the 0.4 per cent pace expected.

Housing has also been under a cloud with price growth flattening out in major cities while new building approvals have fallen for six of the last eight months.

Other areas of weakness include slow lending growth, implying that banks are holding back on loans to businesses.

Mr Scutt noted that the RBA focused also on subdued credit growth.
"This has been getting little or no coverage in recent times but this will be closely watched in the months ahead…Credit has been weak despite the strong domestic labour market," said Arab Bank Australia trader dealer David Scutt.

"With households unwilling or unable to borrow more at present, it offers a strong indication that household finances are struggling with rates at present levels."

Other economists pointed to the brevity of Mr Stevens’ comments.

”What’s notable is that it is quite a short statement,” said RBC Capital Markets senior economist Su-Lin Ong.  ”There’s virtually nothing about housing or consumption” on the statement, she said.

"It does suggest maybe the RBA is paying a little more attention to what’s happening in Europe and some of the strains in the banking system there," she said.

Even so, "a rate hike before the end of the year is more likely than not," she said.

czappone@fairfax.com.au  BusinessDay

Federal Treasurer Wayne Swan says banks could not justify raising rates above the official cash rate if the Reserve Bank of Australia increases its rates when it meets on Tuesday.

On September 21, the RBA kept its benchmark cash rate on hold at 4.5 per cent since the most recent increase in May.

The last rise capped off a series of six that began in October last year when cash was at a multi-decade low of 3.0 per cent.

But economists are predicting a rise when the bank meets at 1430 AEDT on Tuesday.

Mr Swan said there were issues on the long-term funding profile of banks but it still didn’t justify hitting customers with higher interest rates than those of the RBA.

"I don’t think there is any justification whatsoever for any bank to move above the official cash rate decision of the Reserve Bank," Mr Swan told ABC Radio.

"Banks are making healthy profits at the moment, their net interest margins are back above what they were before the global financial crisis."

HSBC’s chief economist Paul Bloxham expects the RBA 25 basis points this year, putting the brakes on an economy fuelled by China’s insatiable demand for resources.

Mr Bloxham says that if the central bank does not raise official interest rates at its meeting on Tuesday, it is likely to do so before the end of the year.

Story from ninemsn.com.au

Many Australian homeowners can’t be bothered switching lenders even to save more than a thousand dollars, according to mortgage broker Loan Market.

A national survey by Loan Market found 58 per cent of respondents said they would need to save at least $1500 a year to be motivated to refinance with another lender.

Loan Market chief operating officer Dean Rushton said the survey results showed that lenders and brokers needed to communicate more effectively about the potential savings from moving mortgages.

“The differences between lenders and the interest rates and conditions they offer has never been wider,” Rushton said.

“But our survey shows that people can’t be bothered switching banks even if they were able to save $1000 to $1500 a year.

Rushton said homeowners were often hesitant to refinance because they believed it would be too much trouble due to the fees and paperwork involved. “The fact is people can achieve significant annual savings by shopping around and getting a better deal on a mortgage with a much more competitive package,” he said.

“If you’re borrowing more than $250,000, then the savings can be even greater.”

The online poll of 380 people found 42 per cent of those surveyed would need to see potential savings of more than $2000 a year before considering switching loans.

Ten per cent said they would refinance to save $500 a year, 14 per cent to save $500 to $1000, 18 per cent to save $1001 to $1500 and 16 per cent to save $1501 to $2000.

Rushton said a mortgage broker was well placed to review an existing home loan and determine whether a borrower could obtain a better deal from a rival lender.

“Mortgage holders might have to accept some exit fees from their original lender but it can be worth it if they can negotiate a significant reduction on their interest rate,” he said.

Benefits of refinancing included the chance to reduce debt on credit cards, which often had interest rates triple that of an average variable home loan.

Source: Australian Property Investor

MOUNTING evidence of accelerating growth among major Asian trading partners is shortening the odds of a rate rise tomorrow.

JPMorgan economists led by Stephen Walters added their voices over the weekend to predictions that the Reserve Bank would jack up official rates by 25 basis points when it meets tomorrow.

Stoked by a resources industry booming on the back of demand from China, inflationary fears have overshadowed recent signs of weakening credit growth and falling building approvals.

"Our conviction that a 25bp rate hike will be delivered by the RBA has risen, particularly given accumulating evidence that China is past its growth downshift," Mr Walters told clients.

Financial markets predict there is a 70 per cent chance the central bank will increase interest rates by 25 basis points to 4.75 per cent, with further rises expected through to next year.

HSBC’s chief economist, Paul Bloxham, said that if official interest rates did not rise tomorrow, the RBA was likely to act before the end of the year.

"That’s obviously a close call as to whether they go up this week or they go in November, but my broad view is that they will go up by the end of the year by 25 basis points," he told ABC television.

Mr Bloxham, who spent 12 years as an economist at the Reserve Bank, is predicting interest rates to rise by 125 basis points by the end of next year.

"The outlook for the resources sector is very strong and of course everything can’t grow at once in an economy, otherwise it puts upward pressure on inflation," he said.

But property experts warned a rate rise threatened to damage the nation’s housing sector as weekend auction clearance rates fell to 12-month lows on the back of two football grand finals and interest rate concerns.

Real Estate Institute of Australia president David Airey said it was still too soon to be thinking about lifting rates, and if the RBA did so, it would be making a "serious mistake".

"The economy is still in recovery . . . we would advise the RBA to wait until the quarterly CPI figures in late October before they make any decisions," he said.

Opposition Treasury spokesman Joe Hockey said if the RBA put up interest rates tomorrow, Labor’s economic management would be to blame. "If interest rates go up the government has responsibility . . . because they are still spending like drunken sailors (and) putting upward pressure on inflation," he told Network Ten’s Meet The Press.

But Wayne Swan cited the International Monetary Fund’s comments that the pace of stimulus withdrawal was "appropriate", and the government’s fiscal consolidation was faster than in the past. In his weekly economic note, the Treasurer said the government was committed to getting the budget back into surplus in 2012-13.

Mr Airey said there was "no doubt" tomorrow’s RBA meeting contributed to increased buyer caution over the weekend.

Total auction revenue was $149 million, down $144m on last week’s $293m and down $140m on the $289m collected on the same weekend last year.

Story by Lanai Vasek The Australian

A confluence of building approvals, housing price and population figures this week are likely to all point in one direction: the failure of housing policy in key markets to keep pace with the nation’s needs.

And there’s no sign of that changing. In just three weeks, the Australian Bureau of Statistics population clock will quietly tick over the 22,500,000 mark. On Wednesday the March quarter ABS demographic release is likely to show population growth continuing to ease from last year’s peak (the one beaten up by the Coalition during the election campaign) but is still decidedly strong.

The Federal Treasury’s Red Book briefing to the new government spelt out that strong population growth was probably inescapable, but added that it “is not necessarily unsustainable … it need not adversely affect the environment, the liveability of cities, infrastructure and service delivery", so long as governments planned well.

Well there’s not much sign of that. Federal and state housing policies have demonstrably failed but there’s no meaningful change. Tax treatment is a no-go area, infrastructure investment to make the most of what we have is lagging, social housing experiments are pretty much just that, experiments, and co-ordination of the three levels of government remains a rare exception rather than a rule.

The scariest story in yesterday’s press was the Sun Herald property watch column by SQM Research managing director, Louis Christopher. He was specifically addressing the Sydney market but this has plenty of relevance elsewhere:

“SQM’s vacancy rate series also reveals a tight rental market with only some slack at the very affluent end of the market place. Vacancy rates are at 1.3 per cent and ever tighter in Sydney’s west at a dire 0.7 per cent. And from what I can see there are no significant increases in new housing developments in the next two years for the local market.

“This is scary stuff and means only one thing for rents. Our forecast is for a Sydney-wide average rise of 5-7 per cent a year for at least the next two years. The west could record an even higher growth rate of 8 per cent-plus.”

Rent rises of that order encourage renters to try to buy – but if the new stock isn’t there, it increases price pressure that attracts Reserve Bank attention. While the RBA believes we don’t have a housing bubble, it has no interest in allowing one to develop. Having railed without apparent effect about the importance of increasing housing supply, Governor Glenn Stevens is left with the unpalatable task of heading off housing inflation with his blunt instrument while facing the bigger challenge of the terms of trade wealth surge.

Some real estate markets around the nation – most notably the Gold Coast’s many empty units – may be wobbly, but the Sydney and Melbourne influence remains strong.

The day after its demographics release, the ABS will publish its August building approvals numbers. No-one’s expecting much. While there have been signs the big banks are a little more open to business, property developers generally continue to be persona non grata.

APRA continues to monitor banks’ exposure to property very closely and I’m hearing stories of the big four starting to be more ruthless in clearing out their problem loans in the sector. They’re looking to quit loans that were sharply written down over the past two years. Catch-22 is hard at work though – buyers are scarce as the banks won’t provide the credit to enable them to buy.

The whole process is delaying the increase in housing supply the nation needs to avoid affordability worsening and to gradually wean us off expectations of ever-rising residential real estate. Our spend on dwellings as a proportion of GDP has been more or less flat for the past six years – and an increasing share of the spend has been on extending existing houses, rather than building new ones.

With our population growth, that is not sustainable. The RBA has told us as much a number of times. And now the clock is ticking.

Michael Pascoe is a Business Day contributing editor. Source: www.smh.com.au

Glenn Stevens was out last week sounding loud alarm bells about where interest rates are headed. It seems that as the economy belts full steam ahead into what Stevens has termed the biggest resources boom since the late 19th Century, interest rates are only headed one way, and that is up.

Of course, that is unless Australia is hit by global shocks that put the brakes on our growth, but Stevens isn’t assuming that is going to happen anytime soon.

Stevens know parts of Australia are already hurting, particularly those dependent on tourism, to whom the soaring Australian dollar has done no favours. Unfortunately though, Stevens has only got one stick, and he’s prepared to use it. Even Stevens admits interest rates are a blunt instrument when it comes to keeping the economy in check. It inflicts pain across Australia, even though much of the boom is happening in the west.

It certainly will start to put mortgage holders under pressure. The Real Estate Institute of Australia says we are now heading towards the average mortgaged up household across the nation devoting 35 per cent of their income to meeting loan repayments.

In NSW, mortgage holders are already spending 38 per cent of their income on loan repayments. To put that in perspective, that’s about what people across the nation were contributing to their mortgages back in the late ’80s when interest rates peaked at more than 17 per cent.

Many people were under that same pressure before the GFC hit, as can be seen in this chart, which shows house prices growth and the percentage of income people have been using to pay their mortgage over the last decade.

David Airey, president of the Real Estate Institute of Australia, says most people can comfortably manage paying 30 per cent of their income for housing, and after that things can start to get a little tight. Obviously that depends on how you spend the rest of your money, but throw a couple of kids into the mix, and the budget starts to stretch a bit thin. Airey predicts that if interest rates climb higher, pain will start set in for mortgage holders.

So what do rises mean for you? If you have a variable mortgage, you are most likely to be paying about 7 per cent to your lender. On an average 30-year $373,000 loan, that would be costing you $2482 in monthly repayments.

There’s talk of five rate rises to come from one expert, Paul Bloxham, who recently left a job with the RBA to become the chief economist at bank HSBC. Bloxham has predicted the official cash rate could hit 5.75 per cent next year, and that there will definitely be at least one 0.25 per cent increase before Christmas. The Commonwealth Bank is talking of official rates of 6 per cent, and Westpac is betting on about 5.25 per cent.

Of course, the official cash rate is way below what you pay to your lender. So if your bank was to pass the first predicted rise on in full, you’d see your variable rate jump to from 7 per cent to 7.25 per cent before Santa arrives. That would make your monthly repayment $2545, $63 more than you are paying now.

Is Bloxham is right and are there five rate rises are headed our way? Five rises would spike your rate to 8.25 per cent and on the average new mortgage, your monthly repayments would jump to $2482, $320 more than you are forking out now. Over a year that comes to $3840.

There is always the chance that banks can increase their rates by more than the Reserve Bank does, and at least two big banks are rumoured to be considering this next time around. So you might need to factor in a bit more.

In terms of what you would be paying out of your income onto your loan, this is what could happen to the average mortgage holder at various interest rate scenarios, making some assumptions about wages growth and house price growth.

Rates rises are dependant on the economy zooming along, and there is the chance that it could go the other way. But general consensus among economists seems to be we are headed for growth.

Some people will be asking themselves is it time to fix? Fixed interest rates have been falling for the past couple of months, but are now edging back up. Australia’s largest independently owned mortgage broker, Mortgage Choice, says in the past fortnight, three lenders on its panel increased rates on one or more of their fixed rate products. The company’s weekly interest rate averages for its panel of 24 residential lenders showed a rise in the three-year fixed rate, albeit a small one, to 7.37 per cent from 7.33 per cent. Three years is the most popular fixed term.

The average one-year fixed rate also rose, from 7.02 per cent to 7.03 per cent, while the five-year fixed rate was steady at 7.81 per cent.

Mortgage Choice spokeswoman Kristy Sheppard says this compares to an average basic variable rate of 7.07 per cent and standard variable rate of 7.36 per cent.

Sheppard says choosing between a fixed and a variable home loan is a decision that must be made according to individual financial circumstances, lifestyle and future needs. There are pros and cons to each. Sometimes borrowers hedge their bets by splitting the loan between the two options.

So what to do now? The best thing is to start paying more off your mortgage. See whether your budget can cope with up to five increases, and then you’ll know how you would fare if that prediction does eventuate. Of course, you’ll also pay your mortgage off faster by jumping in with extra repayments now, and build yourself a buffer should your financial circumstances suddenly change.

Source: www.domain.com.au

Carolyn Boyd is a property journalist and keen follower of Australia’s housing market.

IT’S no secret overseas investors have identified Australia as a growth region when it comes to buying property.

The funds are coming in not only to buy direct assets but also via investing in Australian real estate investment trusts, which are now more focused on the local property market than at any time in the past three years.

Jones Lang LaSalle research on global capital flows confirms Australia’s attraction to investors led it to be ranked seventh in the world as a destination for cross-border investment for the first half of 2010.

The report says cross-border investment in Australia increased more than five-fold, at $US1.8 billion, compared with $US319 million at the same time last year. The research reveals Britain has been the most popular destination for cross-border investment so far in 2010, with $US7 billion invested, while Germany replaces the US as the second most popular destination.

The US was in third place (from second in the first half of 2009), despite a doubling in transactions in the American market from $US2.2 billion to $US4.3 billion.

The director of international investments at Jones Lang LaSalle in Australia, Simon Storry, said the country’s ranking confirmed the view that Australia remained a destination of choice for foreign investment.

”We expect Australia to continue to be on the radar of foreign investors for the remainder of this year,” Mr Storry said.

”Commercial real estate in Australia has offered solid and stable returns and an attractive environment for investors seeking stability in their globally diverse portfolios.”

The Jones Lang LaSalle research reveals a near-doubling of global commercial real estate transactions in the first half of 2010, compared with the same period a year ago.

According to the report, total global commercial real estate investment was $US132 billion for the first half of 2010, compared with $US76 billion in the previous corresponding period and, after reaching a low of 31 per cent of total volumes in the first half of 2009, cross-border activity was back above 40 per cent, a trend set to continue.

Mr Storry said this reflected a general market pick-up, a return to the globalisation of real estate investment and a search for value by investors.

Carolyn Cummins Sydney Morning Herald

Sydney’s yo-yoing auction clearance rate slipped to 57 per cent amid the bumper 588 weekend listings. There had been a 61 per cent success rate the previous weekend.

Clearance rates have averaged 67 per cent so far this year, the weakest weekend result being 51 per cent in early July.

The easing success rates, combined with the high number of properties on the market, has prompted suggestions that better buying conditions were on the way.

”It’s moving towards a buyers’ market, but I wouldn’t say it was there quite yet,” said John Edwards, chief executive of the real estate monitor Residex. ”Clearance rates consistently below 60 per cent is a buyer’s market.”

It was the second busiest Saturday this year – falling short of the super Saturday in March when 70 per cent of the 680 vendors sold their houses and units at auction.

Given school holidays and the grand final, there are just 170 auctions scheduled next weekend.

The weekend’s highest sale was a three-level, cliff-top Vaucluse house which sold pre-auction for $4.3 million. The six-bedroom house last traded at $4.1 million in 2007, reflecting a subdued 1.3 per cent annual growth.

Another Vaucluse house, a modernist house designed by Tobias Partners, was passed in at $6.7 million. It was initially listed early last year with $8.5 million-plus hopes. The three-bedroom, four-bathroom house was built in 2007 after the 696 square metre block cost $2.75 million in 2005.

In 2007 a neighbouring residence sold for $8.5 million, and although that house was new at the time, keen observers of Vaucluse real estate thought the latest offering was superior in design and finish.

Figures from Residex show Sydney’s price growth fell last month by 1.45 per cent to a $658,500 median house price.

Sydney unit prices also fell 1.16 per cent in the month to a $468,000 median. However, country NSW’s median house price rose 1.88 per cent to $342,500, according to the Residex data.

The Labor government’s agreement with independent MPs could help with property values in regional Australia, Mr Edwards said.

The government’s pledge to invest in building affordable homes in regional cities and to spend on infrastructure could be one of the most significant policy shifts of modern times, he said.

”Just the development of 15,000 new homes in regional Australia suggests a capital outlay in the order of $3.7 billion. I have for a long time suggested that the only way to solve the unaffordability crisis in our capital cities is to create growth in our regional areas and in turn encourage a good percentage of our city dwellers to relocate to a better lifestyle. This process will by its very nature reduce the capital growth rate in our most unaffordable capital cities but it will in the longer term be beneficial for society and ensure there is no housing bust that is so often suggested by many.

”It will cause a better balance between capital growth and rental returns in the future.

”This is because cities will have tighter rental markets with higher rental costs due to lower investor activity because of dwelling cost and expected lower capital growth rates.”

Story by Jonathan Chancellor Sydney Morning Herald

Larrikin carpenter Scott Cam, of Channel Nine’s Domestic Blitz, gives us his top ten tips for home reno projects. Scott tells us about essential tools for the DIYer’s toolbox (see our DIY section), the move towards building with sustainable wood products and gives us an insight about builders’ beer etiquette.

What are essential tools for the home handyman?

Scott: “The main thing to remember – when you are a home handyman or woman – is to not go too big too early and not have power tools that could cut your fingers off. So, I think hand tools are the most essential thing.”

Toolbox essentials

• Screwdriver set
• Pliers
• Multigrips
• Tin snips
• Wire cutters
• Hand saw
• Square pencil
• Level and shifter

What is the best power tool someone could buy? Or should weekend renovators just hire large tools?

Scott: “The most important power tool you can have is a cordless drill, one with a hammer component so you can drill into masonry or concrete or brick.”

“I don’t like the concept of people that aren’t really up there on power tools to go out and hire a nine inch power saw because it’s so easy to injure yourself with those. So if you hire power tools, make sure they’re small ones.”

What’s your favourite power tool?

Scott: “I’ve got about 300 power tools and 10 circular saws. I really like my chainsaw – it’s petrol driven – and my big circular saw. You have to be very experienced to use a big chainsaw and it can be dangerous for the home handyman.”

What is the most important building tip to remember when revamping your home?

Scott: “Be prepared to make sure you budget. Be careful of variations. If you’ve got a plan, stick to that, and don’t change things along the way because that’s when you get into strife and you’ll run out of money.”

“And be prepared, when you’re in old homes and you’re knocking a few things down, that you’ll have to rewire the whole place, as there’s no point putting wiring in when you’re half way through – so there’s $10,000.”

* Scott advises renovators to check the plumbing and electrical on homes more than 40 years’ old.

Where is the line between home renovation and home demolition?

Scott: “It’s based on your foundations. If you’ve got bad foundations from the start, which a lot of houses had in the old days, (when) they used to just lay the foundations straight onto the ground with no footings. Sometimes a builder or an engineer may need to get involved and say, ‘look there’s no point in renovating, here, it’s best to knock this down’.”

Easy building project for the weekend renovator?

Scott: “Without a doubt it’s to put a deck on the back of the house with a pergola over the top – creating a new room – an extension. It’s an easy extension to do and make it covered, so it’s all-weather.”

“You put a little clear roof on the pergola you knock-up; and a deck underneath that, put a table and chair out there, some blinds coming down to protect against the wind and the rain, and you’ve got yourself a full extension of your house. And even when it’s pouring with rain you can sit out there. It’s without a doubt, an easy way to add value to your home and get a better standard of living.”

Are people moving towards using more sustainable products? Are the products more expensive? Any special precautions people should take when using these products? For example, embedded nails.

Scott: “We use a lot of plantation timber these days in the building industry and I also use a lot of recycled hardwood, which is quite expensive, but it’s a great feature timber. It’s very hard for the home handyman to nail into second-hand hardwood – you’ve got to be on your game!”

“As far as treated pine is concerned, it’s the way to go for your outdoor stuff because it lasts a lot longer and the price is cheap. I think that’s the way we are going in this industry, if we don’t do that, we’ll run out of timber, so we’ve got to start using the stuff they can grow in the pine plantation.”

But if you’re after a bargain, visit a demolition yard, or scout around a house block where someone is demolishing a house, to get second-hand timber. This timber could have embedded nails in it – so take care!

The best advice for our weekend carpenters?

Scott: “Know your limitations, and once you start something, make sure you finish it! Don’t take two years to build it – start it and finish it!”

“And the other thing is, make sure you get beers nice and cold for the 5 o’clock knock-off. There’s nothing finer than sitting at the end of the day and having a cold beer and admiring what you’ve accomplished for that day. It just doesn’t get any better. It’s magnificent!”

Do you think the internet is helping people with renovation/building information? Is it making the building industry lose (or gain) business.

Scott: “I think it’s a great thing that people are doing stuff at home and people are getting stuck into it. I’m not real good on the internet, I need to get in there a bit more myself, but a lot of my friends go onto the internet and find out information.”

“If people do get out of their depths and go a bit hard, then it’s great work for us to come along and fix those things.”

* Article written by Angela Erini

Source: www.realestate.com.au

THE sale of a Karrinyup home without the owner’s knowledge by a Nigerian scammer has prompted an investigation by five government agencies and a warning to real estate agents to beware of fraud.

Roger Mildenhall, 64, was living in South Africa when his $485,000 Perth property was sold in June by someone posing as him.
The money is gone, but WA’s Registrar of Titles Bruce Roberts said Mr Mildenhall would be able to apply for compensation for his losses.

The Commercial Crime Division of WA Police, Consumer Protection, Landgate, the Real Estate and Business Agents Supervisory Board (REBA) and the Settlement Agents Supervisory Board (SASB) have joined forces to investigate the fraudulent sale and consider measures aimed at minimising the risk of a repeat occurrence.

Similarities to an attempted fraudulent sale of a West Perth apartment in 2008 will also be studied as part of the extensive review.

REBA Chairman Mark Cuomo said real estate agents had reported several other cases of attempted fraud recently and the number could rise.

“The fraud attempts might increase after the success of the Karrinyup case,” Mr Cuomo said.

“All real estate agents must now be increasingly vigilant against these types of scam attempts and carry out extra checks to verify an owner’s identity, particularly those who are selling local property while overseas.

“It would be an effective fraud-prevention practice that, if a property owner changes their postal or email address, they should send a confirmation to the old address to make sure the new address is genuine. Similarly, if phone and fax numbers change, try the old number to double check.

“We would also suggest to agents to ask questions of absentee owners that only the real owner would know, perhaps about the last sale or characteristics of the property.”

“Agents could also consider asking for selling fees up front, as scammers will most likely be discouraged from pursuing the sale or will make up excuses as to why they can’t pay them.

“The onus, however, is on the agent to exercise due diligence in these situations and to be extra vigilant. It is imperative that agents adequately manage the risks involved in these sales, and, ultimately, if there is any doubt, they should report their suspicions to the proper authorities and not proceed with the transaction.”

Officer-in-charge of the Major Fraud Squad Detective Senior Sergeant Don Heise said both these cases involved scammers from Nigeria with possible collaborators in South Africa.

“It appears there was an interception of the landowner’s mail in South Africa, where the fraudsters stole his identity and falsified a number of documents. These were then sent to the relevant real estate agent in Perth,” Det Snr Sgt Heise said.

Characteristics of the 2010 successful scam that could be a warning to absentee home owners, real estate agents and settlement agents are:

· Notification of a change of contact details, email and postal addresses of the property owner prior to the sale request;

· Sale was communicated as urgent for business or other personal reasons;

· Promise of future sales through the agent as an incentive to cooperate with a speedy sale and settlement;

· Documents from Notary Public in Nigeria, verifying documents and identity;

· Request for a short-term loan before settlement;

· English in some of the correspondence very basic or poor.

Commissioner for Consumer Protection Anne Driscoll said scams are now becoming more professional and more elaborate.

“The forging of signatures and the production of fake documents is, in some cases, highly professional so these scam attempts may not be so easily spotted. It’s important that all businesses have a system in place to verify the legitimate owner before money changes hands, especially if the person they are dealing with is unknown to them and comes from overseas.”

A checklist of what agents should consider includes:

· Check signatures with those that may already be on file from previous transactions

· If official documents look suspicious, have them independently verified by the issuing authority

· If a request for change of address is received for the property, send confirmation to old address as well

· If being asked to sell house remotely, ask questions about the property that only the real owner would know

· Consider a 100-point identity verification system which includes passport or driver’s licence with photograph and signature, as well as independent proof of address from employer or local council

In another fraud case originating in Nigeria, a number of Perth businesses have lost thousands of dollars in a ‘Yellow Page’ scam.

Consumer Protection earlier listed an alert on their website warning the public of a scam involving letters sent by a company calling itself “Yellow Page”.

This company advises the recipient of the letter that payment is outstanding for an advertisement for their business and demands payment of AUS $1548.00.

Police are urging business owners to be vigilant when processing invoices.

To date detectives have seized more than 1,500 envelopes destined for potential business victims and intercepted more than $140,000 worth of cheques sent back to the scammers.

Source: www.perthnow.com.au

CFS Retail Property Trust is seeking to raise about A$500 million ($477 million) to buy as many as four shopping malls owned by Direct Factory Outlet in Australia, according to two people familiar with the matter.

CFS Retail expects to complete the capital raising today, according to one of the people, who declined to be identified because the details aren’t public.

The real estate trust that invests in Australian shopping centres is interested in buying DFO shopping malls in Homebush in Sydney’s west, in South Wharf in Melbourne’s Docklands and two others in Victoria state, with a total value of about A$600 million, the Australian Financial Review reported yesterday.

Malvina Zayats, a spokeswoman at Colonial First State Property Retail Pty, which manages CFS Retail, declined to comment.

The raising will proceed regardless of the outcome of CFS Retail’s attempt to acquire the DFO shopping centres, one of the people said. Melbourne-based Austexx Pty Ltd., DFO’s parent, is trying to sell DFO’s A$1.5 billion of shopping outlets and has agreed to refinance A$1 billion of debt to avoid going into administration, the Financial Review reported on Aug. 20.

The purchase by Sydney-based CFS Retail looks about 70 percent likely, the person said.

CFS Retail aims to announce the result of the talks with Austexx by the time their shares, which were halted yesterday, begin trading today. The outcome may be delayed until next week, according to the person.

To contact the reporter on this story: Nichola Saminather in Sydney at Nsaminather1@bloomberg.net