Don’t let the slow real estate market keep you from having the home of your dreams. You don’t have to move, you just need to improve. And this is the perfect time to do so.
Never before have all the stars been so perfectly aligned to facilitate the remodelling needed to give you your perfect palace. Materials costs have been lowered to increase sales, building contractors have reduced their fees to attract more clients, and interest rates are the lowest they have ever been. If you’ve ever wanted to tackle a home improvement task, this is the time to do so.
Here are five good places to start:

1. Kitchen Remodel - If your kitchen is tired and run down, this is a great time to remodel it. Cabinet manufacturers are pricing more competitively, granite prices have fallen, and contractors are itching to work. The contractors that were busy building homes during the housing boom are now fighting each other to get the kitchen remodelling jobs, and the homeowner is the one who wins. Since it is the kitchen that is said to sell the home, the improvements you make now will benefit you greatly when the market turns around and you put your home on the market.

2. Bathroom Remodel — No longer just a place to shower and shave, bathrooms have been elevated to spa status. If your bathroom doesn’t measure up, this is a fantastic time to bring it up to date. Popular improvements this year include heated flooring, natural materials such as stone and wood, multiple shower heads with massaging jets, higher counters with vessel sinks, and soft colours with mood lighting for that ultimate spa experience.

3. Bedroom Addition — There is always great value in adding another bedroom to your home. Whether you create an ultimate master retreat, a welcoming guest room, or a home office, the extra room will always increase your profits when you go to sell. The long line of craftsmen needed to implement a room addition are all willing to bargain now to get your job. From the architect to the contractor, to the carpet salesman, they are all offering the best deals in years.

4. Decks — Outdoor entertaining is a huge trend with homeowners, and adding a deck is a great way to welcome your friends to the great outdoors. From a simple square deck to a multi-level masterpiece featuring an outdoor kitchen, materials and labour costs have come down to make this an ideal time to take on that outdoor living project.

Story by Barbara Green – http://www.housingwatch.com
Barbara Green is The Design Diva and owner of Sensibly Chic Interior Design. She creates one of a kind interiors that reflect your taste, lifestyle and budget.

Australian banks’ preference for writing home loans rather than lending to business may pose a risk to the banking system and the overall economy, according to a leading banker.

Joseph Healy, business banking head of National Australia Bank, said the bias of banks toward retail mortgage lending could hobble the economy’s long-term growth by skimping on loans to small businesses. The money flowing into housing may create other distortions such as fuelling excessive investment, he said.

”With the apparent bias towards to the household sector, we shouldn’t discard the possibility of asset bubbles being created there,” Mr Healy said.

”We’re not saying we believe there is an asset bubble but shouldn’t close our minds to the possibility of that happening.”

Since the emergence of the global financial crisis, small businesses have complained that they have borne the brunt of tighter lending requirements, with interest rates on their loans falling less than other borrowers. In addition, competition among banks has been reduced as several smaller lenders either exited the market or where swallowed up by bigger rivals.

Mr Healy said banks’ tilt towards home loans meant fewer loans are available for business, effectively crimping the economy’s growth engine.

”This is ultimately bad for growth, bad for competition, bad for jobs, bad for business and in the end bad for Australia,” he said.

In 2000, every $1000 of home lending was matched by roughly the same amount for business. That ratio has since shifted so that today, for every $1000 of home lending, only about $600 is available for business, according to NAB research.

Home lending comprised 43 per cent of the lending of the big four banks – Commonwealth Bank, Westpac, NAB and ANZ – in 2000, but rose to 57 per cent this year. In the same time, business lending has dropped from 46 per cent to 35 per cent, according to NAB’s figures.

”The lack of access of finance has been a problem but also the cost of finance,” said Peter Strong executive director of Council of Small Business of Australia.

Banks are currently charging as much as 2 percentage points more than the standard mortgage rate to many small businesses, Mr Strong said.

Among the big four banks, NAB has the largest small-to-medium business loan book and the smallest residential mortgage book.

Most-overvalued market

In contrast to the trends in most rich nations, Australia’s house prices have continued to rise even during the global economic slowdown. Analysts have cited loan availability but also a relatively strong economy and a shortage of affordable stock for the divergence.

Some of that price fizz is coming off, though, with home price growth moderating in the past few months. Even so, the recent prices gains have pushed the national city median home price to $468,000, according to RP Data-Rismark.

The Economist magazine last week said a ”fair value” analysis of global property shows Australian property the most overvalued of any of the 20 countries the publication tracks, based on a comparison of the current ratio of rents to prices to a long-term average.

Mr Healy’s comments come as analysts speculate that Australia’s major banks may be squeezed in coming months by rising off-shore funding costs, with the banks’ exposure to the residential mortgage market drawing greater scrutiny on global markets.

Mr Healy delivered a speech on business lending to the American Chamber of Commerce in Sydney this afternoon.

Professor of Economics & Finance at the University of Western Sydney Steve Keen lauded Mr Healy’s comments.

”I’m delighted to see somebody in the banking sector come out and say this because it’s really about speculation being funded by the banks rather than investment.”

”To me the essential thing banks should be doing is providing working capital to firms.”

Story by Chris Zappone – czappone@fairfax.com.au

A friend is thinking of selling her house. It’s an upmarket place in a swish spot. Would it be appropriate, she asked me, for her to be there during the open homes, keeping the agent company? Maybe serving wine and cheese to tempt would-be home buyers (it’s a nice home, and her buyers are likely to enjoy that kind of thing), and to answer any questions about the property.

It’s generally something not done in Australia but it’s not uncommon on TV lifestyle shows to see the vendors, having spruced up their place, springing forward to open the door for house hunters, and then guiding them around the property while the agent lurks in the background.

Being on site during open houses could go either way. One of the things that makes buyers fall in love with homes is that they can imagine themselves living there, and they might find that hard to do with the owner on hand. Many also like the freedom to open and shut drawers, check if the toilet flushes properly and jump up and down on the floorboards, to see if everything is in working order.

You would have to be thick-skinned when showing your own house because buyers don’t generally hold back in letting their thoughts be known about the state of a property, the choice of paint colours or even the furniture. Sometimes it’s just the house hunter talking through what they might change to make it their own, but for sellers who’ve worked hard on getting the place to be just as they want it, that might not sound so nice. Then again you’re selling and it won’t be yours soon anyway, so you’d just have to grin and bear it, really.

On the plus side, you would get to hear first hand what it is that buyers don’t like about your place, and you might have the opportunity to make a few changes before future open homes.

As a would-be buyer I think I’d be 50-50 about whether I wanted an owner present while I was snooping through their place. Not that I’m rifling through their drawers (honestly) but it’s hard to meaningfully "inspect" something under pressure. It would be great to be able to ask the seller about the ins and outs of the house – however, I would not want them looking over my shoulder every step of the way. I’d be comfortable if they were there, but perhaps confined to the front room or the kitchen, on hand if I had any queries.

Real estate agents might not be so keen to have the owner hanging about either, or would want to set some ground rules about price quoting and impromptu negotiations.

Then there’s the question of whether having an owner on hand would add to the value of the property, or potentially detract from it. And sometimes that might come down to mood and manner because let’s face it, not all of us are people-people, if you know what I mean.

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

Buyers are prepared to pay more for a Melrose Place-type environment.

When good neighbours become good friends, it can not only make apartment buildings much more enjoyable places to live but also boost the price of the property.

One of the key things professional strata record searchers look at in apartment blocks or complexes when they’re examining buildings on behalf of potential purchasers is how friendly, harmonious and happy the residents are.

"That’s definitely something that’s included in our strata reports," says the director of I&D Strata Searching, Matt Trachtenberg-Ray.

"What a lot of people fail to understand when they move into strata buildings is that they are moving into a community and the harmony of a building is just as important as how much they have to spend on fixing the concrete."

For as well as such harmony making a building a far more pleasant place to live, with neighbours chatting in lifts rather than enduring stony silences and greeting each other on common property, it also means it’s much more likely that disputes will be settled quickly and amicably rather than through expensive legal action.

"It’s the tone of a building that’s important," says the president of the Institute of Strata Title Management, David Ferguson. "A good building that’s supportive of the social fabric can be like having an extended family and, in turn, not to have a friendly building can be disastrous.

"It’s incumbent on people, and especially office-bearers, to make people welcome and run the building in a positive way. Where a building is known for a good living environment, there’s more demand for apartments and inevitably the competition will force prices up."

That might mean buildings that host book clubs, wine-tasting evenings, playgroups, social occasions, sporting ventures and even – such as in the case of the city’s Highgate building – group holidays in far-flung destinations, such as Yemen.

At the vast Jacksons Landing in Pyrmont, for example, there are Friday drinks, BYO dinners, quarterly meals in local restaurants, tennis, a singing group, dog-owner get-togethers, newsletters and an annual Christmas charity fund-raiser concert.

"A lot of people now know each other as a result of them and it really enhances the building," says Regina Knowles, who organises many of the events. "It creates a very friendly atmosphere, which people love."

Smaller buildings can be just as welcoming. In JoAnn Holloway’s 12-unit complex in Bexley, there’s an affable ambience. In-house dinner parties for residents are a regular occurrence and everyone pitches in if there’s a problem.

"It makes it a very happy place to live," Holloway says. "Occupants are always happy to help each other with chores, like moving furniture, gardening and even rescuing washing from the clothes line if it rains.

One elderly resident often passes on home-made biscuits and enjoys having a chat, while one time, when I was sick, a neighbour immediately offered to help and dropped off a meal. It’s wonderful."

It all comes down to attitude, says the vice-president of the apartment owners’ peak group, the Owners Corporation Network, Brian Wood. If people say hello when they pass each other and engage rather than ignoring each other, it oils the wheels of a building.

"A good atmosphere in a building is completely fundamental," he says. "If you have a good relationship with other owners, then you’ll get disputes or problems being resolved sensibly and practicably rather than escalating stupidly."

Indeed, friendliness is the very reason that Robert Dodds recently decided to buy into the Motto building in Erskineville. He was happy to buy a one-bedroom apartment for $510,000 – $20,000 over the reserve – because he has friends already in the building who say it’s a very sociable place to live.

"During inspections I got the feeling that it’s a bit like Melrose Place," says Dodds, in reference to the American TV show about the comings and goings of people in an apartment building.

"I liked this apartment’s big balcony, which will be great for entertaining, but the residents seem to be young professionals who are all pretty outgoing and friendly. It looks like a great place to buy into."

Midday at the oceana

On a sunny weekend, there can be any number of residents socialising over a glass or two down by the barbecue, cabana and pool at Elizabeth Bay’s 65-unit apartment building Oceana.

"It’s just a very friendly building, with great amenities, which we all share with goodwill during warmer days," says Ross Appleton, who’s lived there for nearly four years.

"We’re a diverse group of demographics and age groups but we do interact well and socialise with each other."

There are many formal, organised activities but, every Christmas, everyone gets together over drink and food. And after each AGM – instead of, as in some buildings, trying to tear each other’s throats out over disputes – everyone socialises, with wine, beer and nibbles laid on.

In addition, if there are any major issues happening, such as the proposal to extend the nearby Elizabeth Bay marina, nearly every resident is happy to sign a petition. "If there are any disputes in the building, the sociable, friendly atmosphere enables us to work out a way around it," Appleton says.

Oceana chairman Paul Johnson says it was a deliberate strategy to create a cordial feeling throughout the building. "We wanted to help people communicate more and it’s often much easier to raise issues when you’re talking over a beer," Johnson says. "It works very well."

Ice-breaker at horizon

Having a concierge in an apartment building often provides a pivotal point for residents to get to know each other, says lawyer Richard Gration. At his building, Darlinghurst’s Horizon, people will often stand and chat to the concierge and others will join in, helping to create a friendly atmosphere for everyone.

"The concierge is a significant factor in pulling people together," Gration says. "It’s almost an ice-breaker that gives people the ability to make contact with one another.

"We also have regular organised social functions for residents, especially designed to facilitate neighbours meeting each other. They are always very well attended, with around 80 to 100 people."

One resident paid caterers out of his own pocket for cocktail food while, for Horizon’s 10th birthday, a penthouse owner opened up his $15 million apartment for a function, which was attended by about 150 residents. There are also discussions happening about a tennis day on the complex’s court.

"A friendly atmosphere also means that the number of neighbour disputes tends to be a lot lower than that you’d expect from a building with 260 apartments," Gration says. "People feel they can talk to one another like adults rather than rushing off to the courts or to the CTTT."

Playgroup the key at Pacific Place

Enterprising apartment residents at one north shore complex have set up a playgroup to enable parents and toddlers to get together in a novel experiment to ensure a friendly atmosphere.

"This is great," says mum Linda Prankerd, watching her daughter Alexandra, 1, play with her little friends from neighbouring apartments at Chatswood’s Pacific Place.

"I’ve lived in quite a few complexes but people here have worked really hard to make this one extremely friendly."

The chairman of the 221-unit Epica building in the complex, Gerry Chia, organises an annual social that has now expanded beyond his building to include all four of the strata’s on the site. There’s also been a tai chi group at the complex, a card club, quilting club and all manner of social activities.

In an effort to increase the range — and allow the playgroup to meet even in wet weather — all the residents are now chipping in to pay for a community centre to be built at the complex.

"I think many people expect apartment buildings to be soulless places and that they’ll be lonely in high-rise," Chia says. "But that’s certainly not the case here. Of course, not everyone wants to be social but we’re ensuring it’s friendly for everyone."

Story by Susan Wellings –www.domain.com.au

Standard variable loan popularity hits 18-month high

Despite the cost difference between fixed and variable interest rates dropping, June saw a higher percentage of Australians turning their backs on locking in their home loan rate.

According to the latest loan approval data from Mortgage Choice, Australia?s largest independently-owned mortgage broker, only 2.6% of new borrowers chose a fixed interest rate for their home loan. This compared to 3.3% in May and 1.8% in April.

“Many people in the industry were expecting a rise in fixed rate demand last month but that hasn’t happened with our customers. Instead we’ve seen this product’s popularity reduce by one fifth,” said Mortgage Choice senior corporate affairs manager, Kristy Sheppard.

“Further, our June data shows fixed rate loans have represented less than 5% of all new approvals for the past 10 months and less than 10% of approvals for two years now.

“It was interesting to note the proportion of fixed loans to new borrowers dropped in all states apart from Western Australia, which was a complete reversal of last month’s trend.

“So, although we’ve seen a swift rise in rates from October through to March and the cost of fixing a loan continues to decrease, demand for variable interest rates remains at near-record highs. Perhaps the price tag is still too high when potential borrowers weigh up the advantages and disadvantages of fixed versus variable.

“Or perhaps whispers of a much steadier cash rate are seeping through and wielding influence over borrowers? decision processes.”

Standard variable loan demand reached 50.1% of June loan approvals, which was an increase on 47.8% in the month prior and the highest level reached since October 2008.

One of the key reasons for the popularity of standard over basic variable loans is the plethora of quality professional packages’ on offer with these products, which attract customers with benefits such as rate discounts, ‘Gold’ credit cards and other special features.

Other key home loan choice trends for the first month of winter were:

• Basic variable: fell to 41.9% from 43.5%.
• Line of credit (often popular with investors): fell to 5.3% of approvals from 5.4%.
• Bridging (for those selling property while purchasing another): remained well below 1%.

Note: Mortgage Choice’s annual loan approvals are approximately 40,000 nationally and therefore provide a clear insight into the product preferences of housing loan borrowers generally.

Story from www.australianhousehunters.com.au

Australia’s property market is recovering with vigour thanks to the strengthening employment sector, according to CB Richard Ellis.

The company’s executive director of research for the Pacific Region, Kevin Stanley, said the employment base in Australia had already recovered from the downturn with rates of growth now returning to trend.

According to Mr Stanley, the improvement in employment confidence will help buoy rental growth across the nation’s capital cities over the next 12 months.

“The one thing that stands out is the growth phase in employment, with Australia at least a year ahead of the rest of the world,” Mr Stanley said.

Mr Stanley said CBRE had brought forward its forecasts for rental growth by 12 months, with the spike in rents now expected to occur next year as opposed to 2012. CBRE’s revised forecast is for rental growth to average 6.7 per cent from 2010 to 2012.

CBRE has also forecast capital values in the Sydney CBD to grow by an average of 10 per cent per annum between 2010 and 2012.

“The income growth promise in Australia is the big motivator and while the market will continue to be dominated in the short term by equity investors we expect to see a gradual return of bank lending, with a very cautious letting off of the screws by the banks in the next few years,” Mr Stanley said.

Story from www.rebonline.com.au

S&P credit ratings expert confirms the strength of the housing sector but questions the benefit of high home prices for society

A managing director of a credit ratings agency responsible for scoring the quality of Australia’s mortgage debt has questioned the social impact of the nation’s soaring house prices, even while she confirms the strength of the sector.

Standard & Poor’s managing director of rating services Fabienne Michaux said the strength of Australia’s mortgage quality is a success on the capital markets but the high valuation of homes underlying the debt presents a long-term risk to the basic fairness in society.

"The social implication of house prices in the longer term is a key issue," she said. "One of the things people were proud of was that (Australia) was fairly egalitarian and even and everybody had basic rights to housing and basic education and good healthcare."
"Those are the sorts of things that start to chip away when you’ve got people who can’t afford to actually to find somewhere to put a roof over their head."

The median national city median home price was $468,000 in May, according to RP Data-Rismark, following years of nearly uninterrupted increases in value, driven by a shortage of available new land, a cumbersome building approvals process and tax incentives that reward owners to purchase and hold second homes.

There is an estimated 200,000 home shortage in the nation, expected to worsen as a recovery in building stalls. Ratings agencies such as Standard & Poor’s grade the quality of the mortgage debt that is repackaged and on-sold by local lenders to institutional investors.

While confirming the strength of assets underlying Australia’s residential mortgage backed securities market, which has issued $352 billion since 2000, Ms Michaux noted home owners are unwise to take too much satisfaction in becoming property millionaires.

"Ultimately the utility of the house is still that you’re living in it," she said. "When you pass it on, it’s still one house. If you’ve got two kids you’ve got half a house each."

Story by Chris Zappone Fairfax Digital

When yours truly was on Seven’s Sunrise back in May it was acknowledged by both David Koch and myself that the Reserve Bank of Australia (RBA) would be unlikely to lift rates that day, with the knowledge that things were looking worse in Europe and there were already signs of a slowdown on housing here. We were wrong.

The RBA lifted rates that day by yet another quarter point to 4.5 per cent. At the time it was largely expected by economists.

However, I believe it was a serious mistake to lift cash rates; similar to the mistake made in 2008 when the RBA thought lifting rates was a prudent idea in the first half of that year.

Now, sure, the RBA board members do not have a crystal ball and can only go on present information at hand. So it was not to know of the events on Wall Street and in Europe later in the week (the so-called "flash crash").

However, Europe had been simmering for some time before May and as each week had gone by in March, and then in April, the situation was becoming worse and worse.

Yet the RBA moved rates higher in May largely on the belief the housing market was still surging ahead. This belief was due to, among other factors, auction clearance rates.

But, as I have stated before, there has been an increasing number of passed-in auctions failing to make it into the official results and clearance rates.

The problem with this is that the RBA has been relying on auction clearance rates to get an indicator of the market. Naturally, to think that it may have lifted interest rates in May partly based on incorrect data is a disturbing thought.

Now, not much more than a month later, the banks are starting to cut their fixed rates. And banks only tend to do that when they are sure cash rates have peaked.

Even the real estate spruikers have been stating the housing market is slowing. You know the market is seriously slowing when they do that.

The positive news in all this is that the probability of further interest rate rises this year has all but been eliminated. And I believe the next move is actually going to be down.

That is because the RBA was lifting rates to stop a potential housing bubble. Now that risk has gone and, indeed, the risk has increased for house price falls, the RBA can accommodate a cut and will likely make a cut if Europe drags us down and/or house prices retreat.

The RBA will never admit it, but it made a mistake in May. And that’s why I believe the probabilities have risen that the next move will be down.

Louis Christopher is the managing director of SQM Research and the head of property at Adviser Edge.

The Reserve Bank has opted to keep interest rates steady at its board meeting today.
It was a widely expected move and will give mortgage holders another welcome breather from the six rate hikes they have endured since September last year.

"It looks as though the earlier interest rate hikes are already biting," says Domain.com.au blogger Carolyn Boyd. "Auction clearance rates are down and house price growth is cooling. Real estate agents are also reporting there are less people looking to buy."

Each 0.25 per cent interest rate rise adds another $50 to the monthly cost of an average mortgage. Australian mortgage holders are already paying about $300 more per month in repayments than they were in September last year.
Mortgage holders on variable interest rates are currently being charged about 7.4 per cent by their lenders.

The Reserve Bank of Australia decided to leave interest rates on hold at 4.5% in June as they observe the impact that recent rate rises are having on the Australian economy. This is particularly important as Europe tries to deal with its sovereign debt issues. The RBA is paying most attention to the health of the global economy and how it may impact Australia.

For the year to March 2010, the Australian economy showed solid growth, expanding by 2.7%. This is significant when compared to the small 0.7% growth in the previous year. Economists predict a positive outlook with growth forecast to be around 3.5% for the coming year.

Property clearance rates in Melbourne have certainly eased in the past few months from the mid to high 80′s to 65% at present. Stock levels are at a record high for the time of the year. Despite this, our Street News subscribers have indicated that property sales and prices are still strong and that buyer levels at opens are still very good.

Leading industry forecaster, BIS Shrapnel, predicts a modest growth in the Melbourne market over the next three years. "Price performance will be patchy, although we expect the overall shortage of dwellings will prevent a fall in the median house price. On the other hand, price growth will remain very limited due to the rising interest rate pressuring affordability.

Our forecast is for Melbourne’s median house price to rise by a total of 11 per cent over the three year period to June 2013, or a modest 3.5 per cent per annum".

By Peter Sarmas, Managing Director, Street News

When June-quarter property prices are released in the next two months, it’s likely we’ll see house price growth down markedly from the rates we saw in March and December.

The figures probably won’t show falling prices but growth will be a lot closer to zero than it has been for more than a year.

That in itself would be an unusual result. The fall in housing finance figures compiled by the ABS has been steep and would normally suggest falling prices, not just a fall in the rate of growth.

Overall, the number of housing loans for owner occupation, excluding those for refinancing, is down more than 30 per cent year on year for NSW.

One reason the downward effect on house prices hasn’t been as pronounced as we’ve seen historically is that it was accompanied by a rise in the proportion of housing purchases not involving mortgages.

Or another way to think about it, the lack of a significant fall is partly due to a fall in the proportion of first home buyers, who recently have had a much greater propensity to use mortgages for their purchases.

The other reason is the increased level of investor activity, reported separately to the owner-occupied numbers that are usually considered to have the biggest link to prices.

Nationally, the value of loans taken out by investors is up nearly 30 per cent year on year, according to the ABS, and brokers and financing groups are reporting strong upswings in investor activity as the competition from first home buyers and upgraders continues to dissipate.

This has helped cushion the effect of the withdrawal of first home buyers and upgraders from the market as interest rate concerns dominate.

Matthew Bell is the economist for the Fairfax-owned Australian Property Monitors.

Australia must do better in the supply of housing – a supply gap that could grow to 600,000 by 2028/29, Treasurer Wayne Swan has warned.

Mr Swan told a Property Council conference in Canberra that the National Housing Supply Council estimates the country’s housing stock is currently short of 178,400 dwellings.

"It seems that the supply of housing in Australia is not as responsive as it could be, and this has been the case for some time now," Mr Swan said in a prepared speech on Monday.

He said reasons for this supply shortage were impediments created by various regulations, slow planning and zoning processes, and complex, uncertain and time-consuming systems for charging developers for infrastructure.

"In the worst-case scenario, it can take as long as 15 years to proceed from the identification of suitable land to a completed house," Mr Swan said.

"We can do better than this."

He said commonwealth and state treasuries and premiers’ departments were now fully engaged in the process of designing reforms to improve the operation of the housing market.

"I’m determined to see the Australian government play a role in reforming the housing market for the long term, embedding better practices in planning and zoning and developer charging," he said.

Mr Swan reeled off a number of initiatives undertaken by the federal government in its efforts to improve the functioning of the housing market.

These included a $6.2 billion national affordable housing agreement with the states, $5.2 million of stimulus money to build more than 19,300 in public housing stock, and a $512 million housing affordability fund.

This is on top of a national rental affordability scheme that encourages institutional investors to deliver low-cost rental housing, the first-home saver account and a more generous first-home owners grant during the global financial crisis.

The government is also committed to $27.7 billion in urban and regional road infrastructure that will help support housing.

"These are all important steps and they will all contribute to improving the functioning of the Australian housing market and, in particular, the supply of low-cost housing," he said.

Many people invest in apartments because they often have a cheaper buy-in price than houses and are also thought to be a lot easier to maintain without gardens to worry about, and with the costs of building maintenance shared across other owners.

But what makes a good investment unit?

Location, location

You can’t get past the fact  you need to look for an apartment in a good spot. In the city, walking distance to public transport and shops is a must. Nearby schools can be handy but many renters are single or young, childless couples, so a school nearby is probably going to be third on the list after a train or tram station or a very reliable bus route that is here to stay, and shops, cafés and other services. Buyers agents say you should look for a quiet side street rather than a busy main road.

Many renters are professionals who want to get into the city fast. For that reason, apartments closer to town are recommended over those on the outskirts by many buyers agents who argue they will attract higher capital growth. The downside is they often cost more to buy than units further out.

An apartment in an area where there’s high development and plenty of other similar flats around would probably grow in value more slowly than an older unit in a pre-1980s building. That’s because at sale time there could be stacks of similar new flats on the market but a well-built, well-located older unit will be a scarcer find.

Amenities

You might get away with a shared laundry (although internal washing facilities are better) but you will definitely want to look for a place with a car space. It broadens your likely tenants, and also, when it comes time to sell, gives you a valuable marketing point.

Big or small block?

Apartments in large complexes tend to have higher running costs because there are often more facilities, such as lifts, gyms and pools. Therefore your strata fees will be bigger and your rental return or yield (calculated as your annual rent divided by your purchase price, multiplied by 100 to give a percentage) could be lower. That’s one of the reasons many buyers agents tell investors to look for older-style three-level walk-up apartment blocks.

On the flipside, proponents of newer apartments argue they can attract a higher rent, and will be let faster as they are more attractive to tenants. In NSW, the Government has also recently introduced incentives to buy off-the-plan apartments. There’s also the higher depreciation benefits that can be claimed from a newer building, simply because they have more plant and equipment in the building that can be depreciated, which some investors find very handy at tax time.

If you are tossing up between an old and a new apartment, you really need to look at rental yields of other units in each block, and also the capital growth history of apartments in each block. To do this, you can ask the agent for figures they may have, search sales and rent history online or consider purchasing reports from research companies such as the Fairfax-owned Australian Property Monitors.

Outlook is important

Most of us don’t want to wake up looking at a brick wall every morning, so it makes sense that the apartments most likely to appeal to tenants and future buyers alike are those that have a nice outlook. Check with council to make sure there’s no developments planned nearby that could impinge on that view.

You’ll also want something that is nice and light and has a decent internal layout – not too poky. Storage can be important in units where space is at a premium so that’s another factor to consider. If there is not enough stow-away space, you might consider adding a bit extra once you take possession if you can squeeze it in.

Sinking fund

For older apartments where maintenance is likely to be required, it’s vital to investigate the amount of money in the sinking fund. You’ll want to make sure it’s enough to cover any big-ticket items such as lift repair, car park resurfacing or painting the building. If there’s not you could be up for a special levy after you buy.

Story by  Carolyn Boyd who is a property journalist and keen follower of Australia’s housing market. As featured on Domain.com.au

Borrowers are unlikely to get any respite from lower borrowing costs for the forseeable future as the big banks continue to replace tens of billions of dollars of cheaper-priced debt at much higher rates.

That was underlined by ANZ yesterday when it disclosed that the new long-term debt it is taking on is costing 20 per cent more than the average price across its $90 billion portfolio of borrowings that extend to the 2014 financial year.

ANZ told investors in London that while funding costs had dropped since the peak of the global financial crisis, pricing remained high and would continue to rise as the bank looked to replace another quarter of its long-term loan book.

Like its big four counterparts, ANZ has been paying as much as one full percentage point more than such debt was costing in the economic boom years before late 2007.

At the height of the crisis and when the federal government’s AAA credit rating was required to guarantee new bank lending, the industry was paying as much as double that to keep wholesale financing sources open.

That situation has eased and the big banks have been able to cut their reliance on government-guaranteed debt – and the price they pay to use it – by using their own AA credit ratings to obtain replacement funding as their borrowings have matured.

Banks have typically borrowed from domestic and overseas investors for two to three years but have been extending these times to about five years to lock in secured funding at fixed rates.

ANZ said yesterday that five years was now the average compared with 3.9 years in 2009, though this would come at a higher cost. At the same time, it had raised 70 per cent of its target of $25 billion for the 2010 financial year, which it estimates it will need to meet customers’ loan requirements in the next year or so.

But the high price of the debt will continue to feed through to interest rates on individual loans such as mortgages, personal loans and business credit, market watchers say.

According to figures compiled by BusinessDay, between now and September next year the banks need to replace long-term funding of the equivalent of $125 billion in pre-financial crisis terms.

Such an amount leaves little scope for loan rates to be eased with the banks looking at any opportunity to pass on higher funding costs to customers.

But after some banks’ controversial decisions of the past two years to increase the price of standard variable mortgages above the cash rate, the big four have kept their increases in line with the rises in official interest rates.

Story by Danny John – domain.com.au

Believe it or not, whilst housing affordability remains a huge issue in Australia, there are still options for the price sensitive purchaser. It’s no surprise they just need to target areas further away from the CBD.

Housing finance data released last week showed that across the country non first time buyers in New South Wales had the greatest average loan size at $315,400 and Tasmanian’s were taking out the smallest average loans at $194,000.  It is extremely rare that anyone would be receiving a 100% loan so for the purposes of the following analysis we have assumed that borrowers have a 10% deposit, therefore they are borrowing 90% of the total value of the loan.  Based on this assumption we can determine their borrowing power which indicates how much the purchaser could have potentially purchased a property for.

On average, purchasers in New South Wales demonstrated the greatest buying power, spending on average $350,444 and Tasmania purchasers had the least amount of buying power at $216,556.  This outcome is to be expected and reflects the characteristics of these markets with New South Wales having the most expensive property market and Tasmania the most affordable.

Looking at capital cities we are all aware that affordability is an issue however it is interesting to note that across all house sales within capital cities, Sydney, the nation’s most expensive housing market, actually had the greatest proportion of total sales priced below the determined level of borrowing power.  21.8% of all Sydney house sales were priced below $350,444.  Obviously most of these are situated in the outer more affordable areas of the city however, it shows that affordable property is still available.  The next best performer was Canberra where 15.3% of house sales were priced below $301,556.

Affordable property is much harder to come by in Perth.  Only 11.8% of all Perth house sales during the last 12 months were at prices below $324,444.  As is the case in most instances the areas where these properties are available are generally the outer more affordable regions of the city.

The Campbelltown Local Government Area (LGA) on the southern outskirt of Sydney has a current median house price of $317,500 which is well below the average borrowing power for the city.  As a result, Campbelltown has had the greatest proportion of affordable sales of any capital city council area in the country over the last year.  71.1% of Campbelltown’s house sales were priced below $350,444 during the last year.

Across the list of LGA’s / Districts detailed, Sydney LGA’s led the way providing nine of the 20 capital city LGA’s with the greatest proportion of sales being affordable for non first time buyers.  All of the Sydney LGA’s detailed are situated some way from the CBD area and all have a median price below $400,000.

Darwin LGA’s were the only regions which had no representation on the list however, Brisbane, Adelaide and Canberra each had only one LGA.

The result of the analysis shows just how important it is to dig a little deeper with data.  The housing finance numbers show us how much people are borrowing and with a few assumptions we can determine where these buyers can afford to live.

Clearly if you are an average income earner and want to own a house it’s pretty unlikely you are going to be able to live in the blue chip inner city suburbs (although there are some examples, very few, within these areas).  If you are an average income earner looking to buy property, more than ever location is becoming the most important attribute.  The best prospects for growth in property value and the most desirable locations in which to live are those suburbs which enjoy proximity to: public transport, retail and social amenity, schools, working nodes, health care, public open spaces and major roads.

Whilst the locations where the affordable properties tend to be located may not have all of these attributes certainly many of them have a number of the desirable features and purchasing in those areas will likely make for a more enjoyable place to live as well as greater potential for future price growth.

Story by JoeyJ realestate.com.au