House hunters who are pre-approved plan for a happier New Year

Future first homebuyers considering making their property move in the New Year have strong awareness of the importance of seeking loan pre-approval before house hunting, based on insights from national mortgage broker, Mortgage Choice.

A Mortgage Choice survey of first homebuyers looking to purchase before February 2013 found two-thirds of respondents intend to apply for loan pre-approval*.

According to Acting Head of Corporate Affairs, Belinda Williamson, first homebuyers are seeking assurance about their borrowing capacity before starting their property search.

“Our survey showed primed first homebuyers are making the wise choice to get their property finance pre-approved by a lender. This step helps buyers hone their property search and shop with confidence when negotiating a purchase or bidding at auction,” Ms Williamson said.

“Loan pre-approval provides a conditional approval of a loan amount and is usually based on an assessment of potential borrowers’ individual circumstances, needs and ability to repay the loan.

“Keep in mind it’s usually a limited time offer, for a period of three to six months and can be sourced through a mortgage broker. Once pre-approved, it’s important to keep your broker up to speed with any changes in your financial situation as this may void the agreement.

“It pays to shop around. Not all lenders offer loan pre-approval and some don’t conduct individual assessments, meaning you may get a different loan limit upon applying for unconditional approval and, like those without pre-approval, you could miss out on a property if it’s above your loan limit.

“If you are looking to purchase in the New Year now is a good time get pre-approved so you don’t miss out on potential property purchases over the holiday period.”

Mortgage Choice has compiled three top tips to help potential borrowers prepare for home loan pre-approval:

Organise your deposit and evidence of savings – You generally need a deposit of at least 5% of the purchase price, plus upfront costs. However, you will need to show evidence of a genuine savings plan, such as bank statements that illustrate a savings strategy for at least three and up to six consecutive months. Note some lenders now consider rent payments as savings evidence.

Check your credit history – Grey areas in your credit history, such as bill defaults and/or prior loan/credit applications can affect your loan pre-approval application. Resolve any issues with the relevant debt provider before you apply. For a copy of your credit file from mycreditfile.com.au you must provide personal details including your address, employment and driver’s licence number.

Prepare your paperwork – Gather evidence of your employment, income, assets, liabilities and expenses. You will also need to provide your driver’s licence or other ID, recent pay slips, tax returns and bank statements. Having everything at arm’s reach will streamline this process.

Story source: www.mortgagechoice.com.au

MUM-AND-DAD investors are buying bargain-priced houses in the United States for the cost of a new car.

They are cashing in on a combination of a rising Australian dollar and a depressed US property market which has seen recently built five-bedroom houses in cities such as Atlanta, Georgia, selling for as little as $35,000 – or the price of a new Holden Commodore.

They are also avoiding excessive stamp duty costs on buying property in Australia.

More than 200 people attended a seminar about buying US houses at Adelaide’s Hilton Hotel last Monday.

The cheap US prices have seen a surge of Australian agents setting up businesses promising to match buyers in Australia with potential US rental properties.

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The auction market is still performing strongly but vendors of higher-end properties are opting for private sales instead of risking their home at auction, experts warn.

Real Estate Institute of Australia president David Airey warns that although the Melbourne market recorded a 68% clearance rate, the top-end is still struggling with discounts a common occurrence.

"The average price was only about $800,000. People at the top end have decided the best way for them to sell is through private sales, rather than risking through auctions. That’s the same across Australia, where the lower end is moving, but the higher end is more average."

Airey points to the sheer number of pass-ins occurring in Melbourne. The REIV figures suggest 325 properties were passed in, and Airey says more of these would have been likely in the top-end areas.

Christopher also believes the market in the top-end properties is moving slowly.

"It’s a very difficult market to read. I’d say the top end is quite patch. You could get some very good sales, but there are still records of properties that aren’t performing particularly well at all. It’s definitely a patchy market."

However, other markets have remained strong, these experts say. Melbourne managed record a 68% clearance rate out of 1,031 auctions, according to the REIV, with chief executive Enzo Raimondo pointing out that rate hasn’t changed during the past eight weeks.

"In light of the very high number of auctions this weekend the clearance rate of 68 that was achieved is a very healthy result and demonstrates that underlying demand is good," he said.

Some analysts predicted prices might drop due to the sheer number of listings. Auctions have backed up over the past few weeks due to the AFL Grand Final and the subsequent replay, while the upcoming Cup Weekend has brought forward some sales.

"Including this weekend’s activity, the REIV has seen average weekly auction listings increase by around 30% compared to winter; interestingly, the clearance rate for spring has not changed substantially, with around 68% of homes selling during the first eight weeks of spring."

Airey agrees, saying the result was "a particularly solid one".

But the rest of the country hasn’t performed so well. Christopher says Sydney’s result in the mid-50s reveals neither buyers nor vendors have negotiating control.

"That result represents a market equilibrium, where neither buyers nor sellers have control. However, that result does indicate that there could still be price rises occurring there."

"Outside Sydney and Melbourne, and putting Canberra aside, it’s a pretty weak market out there. I would argue prices are falling in southeast Queensland, and Adelaide is looking very slow as well."

Christopher also points out activity in the Northern Territory, which he says is becoming scarily bubble-like. "Darwin is a market that is looking very scary at the moment and very bubbly. When it turns, it’s going to be a steep ride down."

According to Australian Property Monitors, Sydney recorded a 56% clearance rate out of 501 auctions. Total sales came to $149 million.

Adelaide recorded a 63% clearance rate out of the 48 auctions on the market, with total sales coming to $9.9 million, while Brisbane recorded a rate of 30.4%, with 57 total auctions coming to a sales total of $4.8 million.

Story by Patrick Stafford www.smartcompany.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

The Perth real estate market has experienced a winter of discontent, with property prices dropping 4.8 per cent in the three months to August, according to RP Data-Rismark.

The real estate consultancy said the Perth market was the worst performing of all capital cities last winter, with the homes around the nation averaging a 1.2 per cent drop.

Perth’s median price – once the highest in the nation at $500,000 – is now $460,000 following a 3.3 per cent reduction in the value of dwellings in the past year.

This is barely above the $457,000 Australian average, following a 3.9 per cent increase across the nation in the year to date.

RP Data’s research director Tim Lawless said no further capital gains were expected this year as the market battled increasing interest rates.

"Just 12 months ago mortgage rates were 160 basis points lower and the market was still benefiting from the first home buyers boost," he said.

"Since the RBA has normalised rates with six hikes, combined with additional bank top-ups, capital growth has halted."

Christopher Joye, the managing director of Rismark International, predicted further interest rate increases, with the headline rate expected to peak at seven to eight per cent before any discounts.

Mr Lawless said rental yields across capital cities are showing signs of improvement, and creating big investment opportunities.

The rental yield in Perth was 3.9 per cent in August, up from 3.8 per cent a month earlier. Units rents were steady in both months at 4.3 per cent.

"This has resulted in an overall improvement in rental yields. The outlook is likely to be positive for investors but not so great for renters as vacancy rates remain exceptionally tight and rents are now rising," Mr Lawless said.

Kim MacDonald, The West Australian

Every year at exactly this time ‘Spring Fever’ hits the real estate market as owners all over Australia shout “enough!” and put their homes up for sale. Your Investment Property looks at how you can make your place stand out from the crowd in this frantic selling season. The ‘stay at home’ nature of a long, cold winter can lead to some life changing thoughts and deeds. There’s nothing like spending a great deal of time in your home to make you feel dissatisfied with it.

The vast majority of niggling irritations can be eliminated by the simple application of a new coat of paint to the living room walls, or a radical change of curtains. Some homeowners, however, emerge from winter with plans for a more permanent cure for their dissatisfactions. In real estate parlance, among those in the know, this is referred to as ‘we gotta sell this place and get something bigger/ smaller/closer/cheaper/in better condition … (insert your own personal gripe here, as appropriate.)’

Spring has always been the traditional time for properties to appear on the market in a rush. Recent mini-boom conditions in parts of our bigger cities have, however, led to a pretty healthy winter selling market as well.

But for those owners who are particularly garden conscious, or whose homes only look their best when the natural light starts reappearing through the windows, spring is the peak time to show their homes to their best advantage. In the 16 selling weeks between 1 September and 24 December, the race is on to sell and re-buy as fast as ink can dry.

Hands up those who can spot the obvious problem with the above scenario. Gold stars to those who said ‘oversupply’! If masses of houses are launched onto the market in one short period of time, how will yours be noticed? Will your aspirations for a wonderful new dwelling be skittled in the rush? How can your home stand out, be noticed, be loved and, above all, be bought?

It’s a jungle out there, and you need to start wielding your machete, today.

The view from the street

The sign is about to go up. People are going to be openly invited to notice your place. Human nature dictates they will also be judging it on some pretty tough criteria. Let’s look at some of them.

How’s your front gate looking? Need a coat of paint, a replacement of a paling, new hinges? Will it creak when it’s opened unless it’s oiled?

Would weeding help in the front patch of garden or paving? Are your edges neat? If winter winds have killed off your plants, get them out and put in some ‘potted colour’, such as petunias, which are inexpensive and look welcoming. Don’t forget to take their identification tags off! You want to make them look older than yesterday.

Take garbage bins out as late as you can and take them in as soon as they’re emptied, if possible. When they’re out, make sure they’re well closed so that no marauding cat or dog can get into them.

A flowering pot by the door is an attractive touch. If your finances won’t run to anything grand, borrow something grand from a friend or concentrate on filling a pot with an attractively scented shrub.

Your front windows should gleam, and don’t ignore the front door. Washing the front door may look odd to the neighbours but a good scrub will quickly remove street grime. Polish the door knob while you’re at it. Security doors have a habit of squeaking so get the oil can to it. If your doormat’s ratty, buy another one.

A side driveway should be free of clutter, such as skateboards or bikes, and any garage door should be shut. If there is evidence of mould on a pathway or driveway, get in the experts to wield one of those high pressure water jets or ask your hardware store for a solution you can paint on and sweep off.

View from the back

Around the back of the house, repeat the tidy-up plan, mow the grass and put outdoor furniture into configurations that suggest you use and like the backyard.

If you have a pool, you know about grief. If it has emerged from winter looking like something only a frog could love, start an improvement program right away. You don’t want the pool smelling of chemicals on your first open for inspection, so tackle the job slowly and systematically. Some sellers are tempted to give the house a lick of paint all over. This can be a very expensive idea, and half the potential buyers will hate the colour. The other half will be wondering what damp, cracks or other atrocity the paint is hiding. Unless it’s really bad, hose accessible walls down and leave the paint job to the next owner.

Sheds, storerooms, lean-to laundries, any room at the back of the house must be very neat. Gardening equipment should look organised; pool equipment tucked away. Rakes, brooms and other long-handled items can be clipped into storage units nailed to a garage or shed wall.

The inside story

Look at each room as if you’re seeing it for the first time. Now we need brutal honesty.

• Is it as clean as it could be?

• Is it cluttered? (90% of the people reading this would say ‘yes’ to that one)

• Do the carpets need cleaning?

• Boards need polishing?

• Curtains need dry-cleaning?

Natural light is a vital selling point for Australian homes, so concentrating on this aspect of every room is your first priority.

• Clean the windows

• Pull back curtains

• Pull up blinds

• Open the slats of the venetians

• Are your hallways or staircases Black Holes of Calcutta? You will be amazed at what a skylight can do, and for a very reasonable price of around $500– $1,000 per skylight

• If a room’s light will be enhanced by a coat of paint, go for a few shades lighter. This has the added benefit of making the room look bigger

A common ruse used by many sellers, which also relates back to light, is timing the open inspections for the hour when the most light appears in the most rooms. This may take a few days to figure out, but it’s worth the trouble. A cold, damp or stuffy house is a turnoff. Get the heaters into action or open the windows, as appropriate, before your inspection times to get the right ambient temperature and smell into your house.

Speaking of smell, at some inspections you go to, there will be the distinctive smell of fresh coffee brewing or of a cake baking. And Vivaldi’s Four Seasons playing in the background seems almost compulsory at some of the more up-market inspections. Fresh flowers will help. Freesias have a wonderful scent that will fill a room – but don’t overdo it. Back to clutter. Why do you think God invented garage sales? This is your big chance. The acid test for differentiating between ‘clutter’ and ‘precious’ is ‘do I want to spend hours of my life wrapping and boxing this stuff, unwrapping it at the other end and finding somewhere to put it?’ If the answer is ‘no’, it’s clutter. Sell it. Give it away. Remove it from your life. If you have been ruthless and your house is still museum-like, start wrapping and boxing some items and store these boxes with family or friends.

Coverings and cockroaches

Threadbare or worn carpets can be covered by borrowed/bought rugs. If carpet cleaning looks like a must, give yourself a good week after the cleaning appointment before your first ‘open’.

Give yourself at least two weeks after the pest sprayers have been in to remove dead bodies, or you’ll find would-be buyers finding bugs on their backs in every cupboard they open.

Floorboards, lino, tiles and cork floors can all be made to look like new. Ring the manufacturer or umbrella organisation (eg, a timber industry body) for care instructions.

Now, turn your thoughts to dirt, often a close relation of smells. Small children’s fingermarks on the walls, dog or cat fur, stains on the sofas, grey tile grouting, a fat-trap griller – all these are terrible turnoffs to would-be buyers, even if their homes look just as bad, if not worse!

Dirt and smell

Here are some quick solutions for getting rid of dirt and bad smells:

• Sprinkle some baby powder on the carpet before vacuuming for a fresher smell.

• Restrict your pets’ movements for ‘the duration’ so that you don’t have to vacuum every cushion or check in every corner for dead ‘treasures’ they’ve brought in to show you.

• A scrub with sugar soap will remove fingerprints, and it’s also good for those greasy rooms like the kitchen and any adjoining family room.

• Stains on sofas that will not come off call for a throw-over cover or slip cover. These are available in chain stores.

• A mouldy shower curtain should be replaced, and solutions to the perennial tile grouting nightmare include scrubbing it with a toothbrush and bicarbonate of soda (not a lot of fun), attacking it with an anti-mould solution or applying new grouting.

• The smell of damp can be eliminated, or at least disguised, with a product such as Damp Rid. If you have blocked drains, invest in a plunger or get the plumber out to visit.

Little maintenance jobs you’ve been putting off, like another coat of enamel here, or a touch-up on the skirting boards there, should be next on your list.

Lastly, tidy the places you think nobody would ever look, because people look everywhere these days, including in cupboards, wardrobes (even if they’re not built-ins!), medicine cupboards, inside the oven – nothing should surprise you. Leave these tidying and cleaning jobs for last, but don’t neglect them.

A common experience of sellers who’ve gone through the major spring clean outlined above is to fall in love with their homes all over again! If that happens to you, remember, there’s always next spring.

Selling your home checklist

• Have you informed your neighbours about inspection times? They may keep the noise down and even help you by sprucing up their gardens
• Have you cleared the bedrooms of clutter and removed unnecessary furniture? This will help highlight large bedrooms and make smaller ones look bigger
• Have you washed the curtains and blinds?
• Have you cleared all the junk from your verandas or the side of your home?
• Have you remembered to clean the windows?
• Have you checked that your home and contents insurance covers household items damaged or stolen during inspections?
• Is the garden looking the best it can?

Have you arranged for the pets to be looked after during inspections

This article has been republished with permission from Your Mortgage

There’s no denying that when it comes to property investing and making money from renovating, first impressions count. Changing the first impression of a property is the second highest returning “add value” technique. Here’s why…

BY ANA STANKOVIC

In this day and age most potential buyers start their search for properties online. They look up the locations they’re interested in, enter their budgetary constraints and select certain property profile details that they require.

Only once they’ve got the search results of this initial selection do they start prioritising which of these properties interest them. Out of the ones that look interesting to them, they’ll go and drive by a number of them and have a look at them from the outside before narrowing it down even further to a select few that they’ll actually inspect.

If a potential purchaser has two properties which are in the same area, have similar profiles (number of bedrooms, bathrooms and parking spaces) and are similar in price, which do you think they’ll be more interested in:

-       the one with peeling paint, falling down fence, big bushy plant hiding half of the façade, green eaves, rusted garage door, etc., or

-       the one that’s neatly presented and looks light and modern.

The answer is simple. It’s human nature to judge a book by its cover, but it’s only because they’re trying to imagine themselves living there. It doesn’t matter how good your renovation is inside if you can’t get potential purchasers through the door to actually see it.

It’s a numbers game. The more people come inside and inspect the property, the more are likely to be interested and pursue purchasing it, creating competition and pushing the price higher. So it’s in your best interest to get as many people through the door as you can.

Winning Formulas for Success on average gets around $4 for every dollar that we spend on renovating that first impression of a property.

So how do you work out what immediately needs to change with your first impression? There’s a simple way that a colleague of mine suggested a few years ago and it works a treat.

Stand on the opposite side of the street from your property and turn around so that you’re facing away from it, turn around and face it for five seconds and away again.

Anything unappealing that caught your eye in that time should be neutralised or removed. If there was a bright color, falling down verandah, rot, big plant, etc. – anything at all that stood out in a negative light – it needs to be addressed.

Once you’ve done this, have a look at other homes in your area that are in the next price bracket from your property – what are they doing? You want to increase the value of your home so it pays to try and get your property to look more similar to higher priced ones in the same area.

Ana Stankovic is well known as one of Australia’s leading renovating-for-profit specialists and is regularly featured in prominent industry publications, expos and continually educates investors. To find out more or sign up for Ana’s free newsletter, visit www.RenovateAndProfit.com.

Story from the API Blog

Having an understanding of median sale prices can add an extra dimension to your property purchasing skills.

Take care not to confuse median sale prices and average sale prices, the two numbers can vary enormously.

Averaging adds up property prices in a list and divides by the number of properties. The median price is the figure in the middle of a range of numbers arranged from lowest to highest.

So, if you have  11 properties, the median price would be the price of the 6th property from lowest to highest. There will be five properties below it in value and five properties above it in value.

Median and average prices can be quite similar if the prices form an even range from high to low. However, if the list of  11 properties has  eight low priced and only  three  high priced properties, the median value will look low compared to the average value. Conversely, with three low priced and eight high price properties, the median value will be higher than the average value.

Median prices are usually quoted by suburb/area or by a time period.  Suburb figures are usually calculated on the previous 12 months. Areas with less than 10 sales during that time don’t give enough data to generate relevant figures.

Comparing different areas with similar median prices can help make better sense of what median prices are all about.

Capital city medians are a good guide for suburban house prices, however houses within five kilometres of the CBD will have a much higher value than the median price for that city.

While median prices can assist as broad indicators and allow comparisons between cities, looking at recent comparable property sales in specific areas will always give the clearest understanding of the market you are in.

The best understanding of property values will be a combination of both median pricing – a macro view – and individual property sales in your target area, giving a complementary micro view.

Story by Sally Howes Domain.com.au

Overall lending for property is on a slide and on the surface that looks like bad news for property investors. But a deeper look at the numbers suggests there is an upside.

Australian Bureau of Statistics figures show the number of home loans dropped by 3.4 per cent in March, following a 1.8 per cent fall in February. It’s the eighth fall in the past nine months.

Approvals for investment loans, however, are going the other way with a 3 per cent jump in March. Looking over the longer term, the trend becomes clearer with investment loans up by 24 per cent on this time last year and home loan approvals down by 30 per cent from six months ago.

When combined with a demographic analysis of an area, lending patterns can give us a very good indication of what is likely to happen to property prices in these markets.

For example in a suburb such as Glebe in Sydney’s inner west about 55 per cent of all property is owned by investors.

Investors target this kind of area because there is a strong tenant demand due to the closeness to the city, university, shops and cafes.

A significant jump in investment lending is a clear sign investors are active in the market. When this happens they compete for property in places such as Glebe and put significant upward pressure on prices.

About 45 per cent of people in Glebe own the property they live in so there will be a level of softening demand from buyers but it will be compensated for by the investors.

This differs greatly from an area such as Kellyville in Sydney’s north-west. Investors control only about 13 per cent of property in this area.

Although it is a great area to live and raise a family in, Kellyville does not have the kind of infrastructure that tenants are looking for. Therefore demand from investors is weak and will have minimal impact on property values.

However, about 85 per cent of property in Kellyville is owned by people who live in their property so the drop in owner-occupier loans is likely to have a significant impact on demand.
If interest rates continue to climb and demand continues to soften, the chances of property values falling are increased.

The property market is made up of various sub markets that can be pulling in different direction at the same time. As an investor, it is vital to understand which market you are getting yourself into and how to interpret the raw data that will affect the growth pattern of the property you wish to buy.
America’s favourite investor, Warren Buffett, once said: "I’d rather be vaguely right than precisely wrong."

Once you get your head around how to interpret raw data you will have a greater chance of being "vaguely right" and therefore a successful investor.

Mark Armstrong is a director of Property Planning Australia, www.propertyplanning.com.au

Property prices in Australia could start to fall as a result of interest rate cuts and a cut back in mortgage lending, it is claimed. Despite prices increasing by up to 20% in the last year, a six interest rate rises in the last eight months could put the brakes on and there is evidence of a slowdown, experts believe.

REAL estate experts are bracing for the housing market to finally slow down, as the effects of the latest interest rate rise filters through to buyers.

According to Australia’s largest real estate group Ray White, turnover in the first three months of the year is sluggish compared with last year, up only 8%, the smallest increase since the global financial crisis.

The reduced activity has continued in to April, said Brian White, joint chairman. ‘Judging by our April results, it looks as if the interest rate increases are having an impact on activity. With the additional interest rate hike, it would be the first time that the Australian market has not shrugged off the pattern of increases in the past. At last, it would appear that the ambition of the Reserve Bank to slow down the residential activity has been achieved,’ he explained.

Another outcome of soaring prices is an increased in those struggling to make mortgage payments. According to independent interest rate monitor RateCity about 27,000 households have already missed mortgage repayments and thousands more are expected to fall behind after the latest interest rate rise.

The number of securitised home loans more than 90 days in arrears has rapidly increased from 0.05% in January to a current rate of 0.6% it said.

The worsening financial crisis in Europe could also affect the Australian market. Some analysts even believe there might be a rate decrease later in the year, although most are predicting they are likely to remain on hold.

‘There will be a slower housing market in Sydney in the second half of this year, even with a normal economy,’ said SQM Research managing director Louis Christopher. But he added that if the euro zone woes worsen there would be the potential for quarter on quarter falls at the end of the year.

Residex chief executive John Edwards believes price growth will moderate and he forecasts 5 to 8% overall. The top end of the market would do best, while some cheaper areas of south western Sydney were already going backwards.

According to Australian Property Monitors economist Matthew Bell prices in the most expensive half of the property market would rise at twice the rate of the bottom half.

Story from PropertyWire.com

Property prices in Australia have surged 20% in the last 12 months raising further fears about a real estate bubble and making it almost certain that interest rates will rise.

   The annual rise in house prices was the fastest ever recorded by the Australian Bureau of Statistics data series which began in 2002. A rise of 4.8% in the fourth quarter of 2009 was the second biggest quarterly increase.

House prices rose 4.8% in the first quarter of 2010 from the previous three months when they gained 5.2%, according to the government figures. Property prices surged in the major capital cities in the first three months of 2010 and much of the turnover was at the top end of the market. Melbourne saw the steepest quarterly rise at 6.7% followed by 5.4% increase in Canberra and in Sydney there was an increase of 5.3%.

Demand for homes surged in 2009 after the government tripled its late 2008 payments to first time buyers of new homes to A$21,000 and doubled the grant to A$14,000 for existing homes. Those payments were reduced in January to their original A$7,000 but that has not hampered the price growth in the sector.

The Australian government last month announced drastic measures to tighten rules on foreign investment in real estate and introduced penalties to enforce the changes to ensure pressure isn’t placed on housing availability for citizens.

Temporary residents, including students, will require approval from the Foreign Investment Review Board to buy property and will have to sell when leaving the country.

The rising property prices make it almost certain that interest rates will be increased tomorrow.  Rob Henderson, head of Australian economics at National Australia Bank said that the Reserve Bank of Australia now needed to get more aggressive and acknowledge the need for a restrictive policy stance.

‘This is a shocker. The RBA needs to up their rhetoric and acknowledge that the economy is now growing at above average rates, requiring above average interest rates,’ Henderson said.
‘A 20% increase in house prices is very difficult to ignore. This latest piece of news may well be the log that broke the camel’s back. Until now, I had thought that the RBA would take a month off tomorrow. It may no longer be able to afford that luxury,’ said Chris Caton, chief economist at BT.

The RBA has raised interest rates five times since October 2009, increasing its cash rate target to 4.25% from 3%. House price increases have lately been key to the RBA’s rationale for rapidly removing loose policy settings.

Source: www.propertywire.com

The man who predicted the global credit collapse of 2007 has warned that Australia’s housing bubble is ripe to burst at any time.

US investment banker Edward Chancellor has told the Australian newspaper our economy is yet to emerge from the global financial crisis.

Mr Chancellor, who works for GMO, estimates Australian house prices are more than 50 per cent above their fair value.

He says house prices would have to fall ‘quite considerably’ to revert to their average price in relation to average income.

He also warned first home buyers were among the most vulnerable, saying the ratio of their mortgage repayments to their income would rise to ‘very high levels’ as interest rates continues to rise.

A potential trigger for economic trouble and the collapse of the housing market would come if China’s demand for iron ore and liquefied natural gas slowed, he said.

Original Story taken from www.bigpond.com