Hundreds of thousands of new homes across the country are not performing at their promised energy efficiency rating.

The result is residents are using up to double the predicted energy required for heating and cooling, industry officials say.

Research by air-tightness testing company Air Barrier Technologies has shown that air leakage in new homes is five to 10 times worse than expected under the star-rating scheme.

This means that an average five-star home is likely to perform only to a three-star level, potentially doubling expected energy bills for residents.

The Victorian Building Commissioner says builders who deliver homes that have not been properly sealed or insulated to meet the set star rating could be sued by buyers.

About 40,000 homes are built in Victoria each year. All must meet the five-star standard. This will rise to six stars from May.

But a group of industry players, including Henley Homes, who have been lobbying state and federal government and building regulators to crack down on the air leakage problem, say unless more action is taken, customers cannot be confident their homes meet the stated star rating.

”At the moment there’s an assumption that houses are built to a far tighter standard than what we believe they are,” Adam Selvay, Henley Homes energy and sustainability specialist, said.

The question of builder liability was raised in a meeting with the Federal Department of Climate Change and Energy Efficiency and the Australian Building Codes Board in April last year.

Following that meeting, Terry Mahoney, president of the Air Infiltration and Ventilation Association of Australia, emailed other attendees, as well as federal government ministers and senior public servants, criticising officials for failing to respond to the issues discussed.

”It became apparent that no amount of scientific evidence, poor global best practice comparisons or safety and health risk concerns raised by the visiting group, would engender any action or urgency, ” he wrote.

He noted the attendees’ view that there is ”overwhelming evidence” that the current star rating method ”proves grossly inaccurate when constructed homes are performance tested”.

Housing Industry Association building and environment director Kristin Brookfield said the association was not aware of specific research on air leakage, but said energy efficiency was affected by poor sealing.

Bruce Rowse, of building efficiency consultants CarbonetiX, called for inspections to include checks on sealing and insulation installation.

Victorian Building Commissioner Tony Arnel said an auditing process had consistently demonstrated that new homes complied with regulations but admitted that research had shown more work needed to be done with the industry on ”draughts and gaps”.

Story by Michael Green www.domain.com.au

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More new home loans than anticipated It adds to the case for a lift in rates Prediction of cash rate of 5pc by May

NEW home loans for owner-occupiers rose 2.1 per cent in December despite the interest rate rise from the RBA and private banks the previous month.

The rise may surprise those who thought the November cash rate rise by the RBA to 4.75 per cent – followed by bigger rises by the Commonwealth Bank – would severely set back the number of loans, particularly as the real estate market had cooled.

But the number of loans written to owner-occupiers increased 2.1 per cent or to a seasonally adjusted 51,706, the data from the Australian Bureau of Statistics shows.
Economists’ forecasts had centred on a 1.0 per cent rise in housing finance commitments for the month.

The total value of housing finance went up by 2.5 per cent in December, seasonally adjusted, to $21.587 billion.

The December data marks the sixth straight monthly rise in housing finance commitments, which last fell in June 2010 by 2.6 per cent.

“It’s an indication the household sector might be a little less cautious,” Nomura Australia chief economist Stephen Roberts said.

“It adds to the case for a lift in rates at some point in the next few months, but not immediately.”
Mr Roberts said he expects a cash rate of 5 per cent by May, up from its current 4.75 per cent.
On its own, the data is not a trigger for an interest rate rise, but National Australia Bank senior economist David de Garis said it is a series worth watching.

“Housing demand is a key barometer of consumer borrowing and spending behaviour,” he said.

Reserve Bank governor Glenn Stevens told federal MPs on Friday he was comfortable with current pricing on financial markets that points to another interest rate rise in the latter half of the year.
The central bank releases the minutes of its February board meeting tomorrow, where it left the cash rate unchanged at 4.75 per cent.

However, economists doubt that the RBA will add anything new to its post-meeting communique, quarterly monetary policy statement, and Mr Stevens’ three hours of questioning by the House of Representatives economics committee.

“The only way they could possibly be interesting is if they published the actual vote and discussion, and that’s highly unlikely to happen,” TD Securities senior strategist Roland Randall said.
It was the sixth straight month of growth in new home loans, after falling nearly every month in the first half of 2010.

A greater number of people have opted to take out the security of a fixed-rate home loan in the month.

Of the 51,706 loans granted in December, 8.9 per cent carried a fixed rate of two years or more, the biggest proportion since June 2008.

Overall, growth in owner-occupied loans rose by a seasonally adjusted 2.1 per cent, over double economists’ expectations.

The proportion of first-time home buyers taking on a loan also nudged up to 15.8 per cent, from 15.6 per cent in November, with the actual number of loans granted the highest since March last year at 8586. 

Story source: www.heraldsun.com.au

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Do your research if investing interstate. Graphic: News Limited Source: News Limited

RESEARCH matters if investing afar, writes Anthony Keane.

Investing in residential property interstate can deliver big financial benefits, but there are traps lurking for those who don’t do proper research.

Land tax savings can add up to several thousand dollars, while diversifying your assets outside your backyard is seen as a wise investment strategy.

University lecturer and author Peter Koulizos says state property markets can move in different directions, so spreading purchases across states means you can tap into growth areas, but also lower your risk when a particular market does poorly.

“For example, in the past two years Melbourne has probably increased 30 per cent, whereas Perth has dropped in values,” he says.

Land tax is one of the most painful problems for serious real estate investors.

Depending on which state you live, a $500,000 property could cost you between $0 and $5000 a year.

“Because land tax is state-based, you can own eight properties one in each state and territory and not pay one cent in land tax,” says Koulizos, who wrote The Property Professor’s Top Australian Suburbs.

Defence Housing Australia, which manages 18,000 properties nationwide, says prices vary dramatically between states.”For example, what you can get in Sydney for $400,000 is very different from what you can get in Adelaide for the same amount,” says DHA general manager, sales and marketing, Tony Winterbottom.

Figures released by RP Data show Sydney’s median house price is $605,000, followed by Canberra ($560,000), Melbourne ($557,750) and Darwin ($540,000). But Darwin and Canberra’s weekly rents, at $520 and $490 respectively, are higher than Sydney’s ($450).

Winterbottom says property investors can do a lot of research about an area before setting foot there.

“You can start by following the nation’s property markets closely,” he says.

“Once you have short-listed some areas that appeal, conduct closer scrutiny.

“Ask questions about the location’s history, past performance, population projections and planned infrastructure.”"Qualified professionals can be useful in understanding a new market and make purchasing interstate less daunting.

“It’s wise to invest in a good property manager.”

Winterbottom says traps for investors include poor research, not understanding all the costs, believing hype, not understanding conveyancing processes and failing to conduct background checks on professionals.

“A guarantee is only as good as the person giving it to you,” he says.

Koulizos says investors should avoid being sucked in by sales talk and be wary of agents selling new apartments.

“Don’t let emotions get in the way,” he says.

“Queensland is a great place to holiday, but is it the best place to invest in?”

Investors should visit any area they plan to buy in and check out shops, schools and local infrastructure.

“If you are planning on spending about $400,000 to $600,000, then go and spend $400-$600 on a plane ticket and go and look at the property,” Koulizos says.

Story by Anthony Keane www.heraldsun.com.au

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Australia’s largest independently-owned mortgage broker, Mortgage Choice, is delighted to see yet another encouraging result from the ABS Housing Finance report 5609.0.

December 2010 was the fourth successive month to show an increase in the overall value of dwelling commitments*, up by 2.5%, despite November’s much talked about rate rises that led the Federal Government to set up an inquiry into banking reform.

The number and value of commitments rose over the first month of summer for all major categories except for the purchase of new dwellings. In terms of total value, there was a 2.3% rise for owner occupied housing loans and a 3.0% rise for investment housing – fixed loans.

Of special interest was the first homebuyer category data. It showed the highest number of dwelling commitments (8,586) since December 2009 – the last month the First Home Owner Grant boost was offered. First homebuyers accounted for 15.8% of owner occupied housing finance commitments for December 2010, up from 15.6% in November and 15.4% in October.

Mortgage Choice spokesperson Kristy Sheppard said, “Four months of consistent increases in the total value of new home loans in Australia is a welcome improvement for the market. Hopefully it demonstrates a noticeable uplift in positive sentiment from potential borrowers.”

“We are especially pleased to see a good result from the first homebuyer category, with the highest number of dwelling commitments in one year. At 8,586 for December it is still 900 commitments below average but we are gradually getting there, which is terrific to see.

“Although things were a little slower in January 2011, at the moment we are cautiously confident that this year will be an overall improvement on 2010 in many respects.

“With housing price growth remaining subdued, cash rate rises now looking to be pushed back a little and wages increasing at a healthy pace, the current ‘buyers’ market’ holds much potential.”

Visit www.mortgagechoice.com.au, www.facebook.com/MortgageChoice or http://twitter.com/MortgageChoice.

*All figures quoted are seasonally adjusted.

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Apartments and townhouses in Melbourne have outperformed the stock exchange as an investment in the past 30 years, according to Oliver Hume research.

Between September 1980 and September last year, the price of a unit in Melbourne rose by an average 8.9 per cent a year compared with the sharemarket’s 7.7 per cent.

By comparison, Adelaide and Sydney apartment prices did not fare as well as the sharemarket, at respectively 7.1 and 7.4 per cent a year.

The 2007-08 collapse in the equities market also highlighted the steadier returns from property, according to the Oliver Hume analysis. A comparison of the S&P/ASX 200 Index and the Real Estate Institute of Australia median price of units found the sharemarket outperformed units until September 2007, when the global financial crisis struck.

Oliver Hume’s national general manager of research, Andrew Perkins, said that at various points in the past three decades shares and unit prices intersected during market highs and lows. ”It just shows that the set-and-forget nature of property can provide less-spectacular returns but it also highlights the volatile nature of the ASX,” he said.

In the 1982 recession, property and equities intersected while in the late ’80s, equities dropped in value as property prices surged.

Mr Perkins said a unit bought for $50,000 in 1980 was now worth about $450,000. ”This price growth is without taking into account depreciation and income that would further boost investment returns,” he said.

In the December quarter, 38 new projects were announced in metropolitan Melbourne. Mr Perkins said if they were built, this would be equivalent to about 4300 units, lifting the yearly total to about 180 projects, or about 20,000-plus units.

Story by Philip Hopkins www.domain.com.au

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Young first-home buyers are not always acquiring properties to live in.

If you think buying real estate is a pipedream for twentysomethings, it’s time to readjust your thinking. Darren Linter and Crystal Hohmuth, both 22, made their first incursion into the property market 11 months ago but instead of buying a house to live in, they bought one to rent out.

Mr Linter and Ms Hohmuth still live at home with parents. The couple, who say they’ve cut their spending on restaurants and personal items, allocate a big slice of their salaries and the rent received from their tenant to paying off a hefty bank loan on the 1970s-era Brighton Beach house, which they bought at auction last year.

Experts say the “get-the-investment-property-first” approach to real estate planning is on a red-hot growth trajectory around the country and is being propelled by the tax benefits that accrue with negative gearing. It also helps that baby-boomer parents are frequently happy to allow their adult Generation Y children to live at home, paying nominal or no rent, while the kids pay off their investment property.

“There are a hell of a lot of young people who live at home and buy investment properties,” says Sue Prestney, a tax specialist with the Institute of Chartered Accountants.

“Perhaps they’re paying some board and they’re happily buying their investment property and getting the benefit of that. Many of them are on very good salaries.”

Margaret Lomas, head of the industry body Property Investment Professionals of Australia, confirms this growing trend.

Ms Lomas says there’s another group of young investors who elect to rent in the inner city. They then deploy their discretionary income to “get an investment property somewhere else that is cheaper, has better [rental] yield than the inner city and a better prognosis for future growth”.

Dr Terry Burke, professor of housing studies at Swinburne University, says 11 per cent of residential properties are now bought by people who rent their own dwelling. They’re buyers who don’t intend to live in the property they’ve acquired, at least in the short-term.

According to Dr Burke, the rise of young “renter-investors” mirrors the decline of first-home buyers, who account for just 10 per cent of property sales.

This is in contrast to the 1960s, when first-home buyers accounted for 30 to 40 per cent of the market. It is a sign that conventional home ownership remains out of reach of many younger households, he warns.

Yet Ms Prestney says it’s common for young people to put tenants into a house or unit for a few years and then move into the rental property themselves, making it their principal residence. By doing this, an investor can turn around the gearing of a property and reduce the likelihood of having to pay a jumbo-sized capital gains tax bill when the dwelling is sold.

The two saved for several years to establish a sizeable deposit and freely admit they “couldn’t really afford the house”, which cost more than $900,000.

Being able to rent out the place and live cheaply elsewhere was the game-changer.

“There’s no way we could have moved straight in, no matter how much we were earning,” Mr Linter says. “We took the lowest minimum deposit option that we could.”

House prices are never going to go down, he believes. “So if something good comes along that works for you, you have to make some sacrifices in order to get your hands on it.”

Story by Chris Tolhurst www.domain.com.au

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Although the popularity of fixed rate home loans remains higher than the last couple of years, it barely rose as 2011 began.

Has the increasing concern among consumers about further rate rises settled?

New data from Mortgage Choice, the country’s largest independently-owned mortgage broker, shows 15.3% of the home loans approved for its customers in January had a fixed interest rate. This compares to 15.2% in December, 11.2% in November, 7.7% in October and 3.7% in September.

Uptake increased for the fourth consecutive month in the majority of states, by an average of 2.2 percentage points, but dropped in QLD and WA, by 2.9 and 2.8 percentage points respectively.

Mortgage Choice company spokesperson Kristy Sheppard said, “Australians’ appetite for fixed rate home loans has risen consistently over the past six months, but that pace slowed right down in January.”

“One has to question whether the demand for this more conservative loan type has steadied now it looks likely that the next cash rate rise has been pushed back to mid-year or later.

“Of all the mortgage types, ongoing discount loans – where the interest rate is discounted over the entire loan term usually in return for an annual fee – experienced the biggest increase in demand. They accounted for 25.3 percent of our January approvals, having risen 8.4 percentage points in the last two months.”

Notwithstanding this trend standard variable rate home loans continue to be the favourite, at 30.7% of approvals, followed by the ongoing discount loan category, which overtook basic variable loans at 23.6% of approvals to hit second spot.

Demand for line of credit home loans (often popular with investors) dropped a little to 4.8% of approvals from 5.4% the month prior while introductory rate home loans accounted for only 0.2%.

Note: Mortgage Choice currently writes one in 25 new home loans in Australia, equating to over $10 billion in approvals per year, hence it provides a clear insight into borrower preferences. The 18+ year old mortgage broker has a loan book of over $40 billion.

For further information Visit www.mortgagechoice.com.au or call customer service on 13 MORTGAGE.

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Q Can you sue the building inspector if they miss something important in their report?

A You can and must. How else are we all to justify the pages of disclaimers tacked on to every building inspection report, rendering them all but incomprehensible to anyone without a PhD in contract law.

First, check the inspector has professional indemnity insurance (it would be rare they did not but not unheard of). For those without the requisite tertiary qualifications, now is the time to call your lawyer.

As Paddo property lawyer Neil Matthews explains, they will then assess if you do have any basis to sue for negligence and, if so, send a letter of demand to the building inspector for the amount you want in damages to have said problem fixed.

The building inspector will then panic about what this will do to their future premiums and forward that letter to their insurer, at which point lawyers on both sides will then slug things out on their own letterhead, leaving you to better appreciate why everyone bangs on about the need for a building report before you buy.

Story by  Lucy Macken www.domain.com.au

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It took a while but summer has finally arrived in all its hot gusto. I mean real summer where it’s so hot you can’t sleep at night, and the flies are beating at your back door trying to find a cooler place to muck in.

The mercury has been hitting 43 degrees in some parts of the country and touching the high 30s in others. Thanks to higher humidity, though, when cities such as Sydney are sweating it out in the high 30s, they can feel just as baking-hot as Melbourne, Adelaide and Perth.

It might be great beach weather but if it’s turning your place into an oven, it’s time to cool things down. Here’s ten ideas that could help.

1. Ceiling fans are back. We Australians are seriously in denial about the climate we live in. We love to roll out the electric heaters in winter, and in summer, whoever heard of a ceiling fan? Pfft! Oh c’mon, it’s a hot country, people. And one of the best ways to cool down is to install a ceiling fan in every room, except the bathroom and laundry, and potentially the kitchen too where it could get a bit greasy from all that cooking.

It’s a crying shame that ceiling fans have been given a bad name by the cheap-as-chips options that are as ugly as hyenas.

A good ceiling fan is a seriously great way of cooling down much of the time, especially at night. Luckily there’s some sleek designs on the market now, all curvy and gorgeous, and in a range of colours and materials. There’s plenty that can have lights fitted on them as well, and a range of products that carry low-energy globes.

Fans can be installed with remotes or wall controllers. If you are renting, consider asking the landlord to fork out for ceiling fans for you, or check out some pedestal fans. They can do a good job too, but you need a few so you that don’t find yourself dragging them from room to room.

2. Shade those windows. Afternoon sun from the west is a killer. If you have any west-facing windows try to shade them with awnings, screens and plants to block out the sun. For north-facing windows, it’s a also good idea to shield them from the summer sun too, but any shading plants should be deciduous to block out the heat in summer but let the rays in in winter.

Some houses have been built without eaves – the roof overhangs that are designed to shade the windows. If this is your home, you’ll definitely need to look at some shading to the north and west quick smart. The problem with the west though, is that summer western sun is low in the sky, which is why you also need awnings and other shadings. The good old canvas awnings do a pretty good job.

3. Shut it out. Sometimes it’s not the sun but the ambient air temperature that is heating up the house. Single pane glass has little insulation value, so it is worth looking at how you can create an airlock on windows to seal out the heat. Sometimes relief can come from surprising quarters.

When we bought our house late last year it came with two aluminium shutters – the type that you roll down at night. I always thought they were domain of older folk who have become paranoid about security. But it turns out that when it’s sizzling outside, they provide a perfect barrier from the heat. The only problem is, if it’s daytime and they are drawn all the way down you have to turn a light on. But that generates a lot less heat than the oven-hot air seeping through the window.

Other options to investigate are double glazing (but take care not to stop important winter warmth from entering), and plastic films that can be placed over the glass, marketed as window insulating kits. There are do it yourself versions.

4. Manage your air-con. Some days there’s no denying that it’s so hot that air-conditioning is pretty much a necessary evil. It’s true that some locations (e.g the coast) and some house designs (very smart ones) will allow you to get away with out air-conditioning, but for the rest of us, it’s a must-have.

There’s no need to run your system at arctic temperatures though. Try setting it at about 26 degrees and then using ceiling fans to do the rest. You’ll still keep comfortable and at the same time save a bucket on your power bill.

5. Do your research. If you are buying an air-conditioner, research what your needs are. Don’t buy something bigger than you need. And depending on where you live, evaporative air-conditioning could be an option. They use a lot less energy – but they do use plenty of water, so you need to factor that in too. Evaporative air-conditioners tend to work best in drier climates.

6. Open up at night. It’s easy to forget, but once the mercury outside drops below the temperature inside your home, you should open up the windows and doors to let all the hot air out. In some areas during heatwaves it doesn’t cool down enough in the evenings for this, but for most of summer it’s an ideal way to manage your own little climate.

If you are concerned about the security of leaving your windows open all night, investigate whether there’s anyway you can add window locks to keep them partially open once you head off to bed. As soon as it warms up outside the next day, remember to shut everything up again.

To make it easier to know when to open and close everything, you could place a thermometer inside the house and one outdoors in a shady spot. Or there are also wireless weather stations on the market that among other things track inside and outside temperature.

7. Insulate your ceiling. Yes, it’s true, insulation did get a bad name in the whole debacle with the Federal Government’s grants scheme. But don’t be put off. You wouldn’t sleep without a blanket in the middle of winter, and nor should your house. The great thing is in summer insulation will make a massive dent in your cooling bill.

8. Seal up the gaps. If hot air is leaking in under doors consider some simple weather strips to seal up the spaces.

9. Cooking with gas. On really hot days, cooking inside will only add to the heat load. It could be a day for salads and cold meats, or eating out. If not, fire up the barbie, or head to the local park or beach and use theirs.

10. Cool down the kids. Now that water restrictions have been eased in many areas, let the kids run free under the sprinkler on hot days, or take a dip in a paddling pool. Cool down your own tootsies in there too, and if you’re game, the kids can go wild with water pistols.

Story by Carolyn Boyd, a property journalist and keen follower of Australia’s housing market. www.domain.com.au

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Capital city rents are set to rise by 7 per cent this year and rose faster than inflation in 2010, putting additional strain on household budgets, new figures show.

RP Data said rents in capital cities rose 4.2 per cent in the year to December, above the 2.7 per cent official inflation rate over the same period. Outside capital cities, rents rose 2.9 per cent, RP Data said.

“We expect rents to increase by around 7 per cent during 2011,” RP Data analyst Cameron Kusher said, adding rents would rise most for inner city units and the more expensive housing markets on metropolitan outskirts.

“For the coming year we expect rental markets to tighten further and rental growth during 2011 will likely eclipse that of 2010,” Mr Kusher said.

The rise in rent comes amid an expected rise in inflation and while home prices are expected to remain flat, if not fall.

This week ANZ Bank and National Australia Bank released separate reports suggesting house prices will weaken amid higher rates and worsening affordability, while US group Demographia listed Australia’s capital cities as some of the least affordable in the English-speaking world.

That affordability crisis will leave many renters in capital cities – where the bulk of Australians live – with little choice but to pay more for a home.

Australian Bureau of Statistics data released yesterday showed housing costs rose 0.6 per cent in the December quarter, taking the annual rise to 5 per cent.

Over the three months to the end of 2010, RP Data said rental growth was unchanged nationally even as it rose 1.4 per cent in capital cities.

In the December quarter, rents on houses rose 2.9 per cent to a median price of $360 a week in Melbourne, while in Sydney they were flat at $450 a week. In Brisbane, where leasing costs are tipped to rise following this month’s floods, the weekly median rent of a house rose 1.4 per cent to $365 in the quarter. In Perth, the December quarter rent rose 1.3 per cent to $385 a week, RP Data said.

“Despite sluggish growth over the quarter and on an annual basis we expect that capital city markets are likely to have strong prospects for rental growth during 2011 and the rate of growth is likely to be closer aligned with average levels over the last five years,” the report said.

Over the past five years, capital city rents have risen 44.2 per cent, to a median weekly price of $375.

“Vacancy rates remain tight in the capital cities, first home buyers remain relatively inactive, interest rates are at higher levels and new supply coming on-line is quite constrained,” the report said.

NAB’s residential property survey, which tipped moderate falls in house prices in 2011, said rents would increase 2.8 per cent in the same period, and 4.1 per cent over the next two years.

The official cash rate, currently at 4.75 per cent, is tipped to rise, as the Reserve Bank readies for an outbreak of inflation that it fears will result from Australia’s tight labour market and on-going demand from Asia for Australian commodities.

Story by Chris Zappone www.domain.com.au

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If you’re living in your preferred location but don’t have the space you need, adding an extension to your house is a less disruptive way of upgrading than relocating.

Chris French, of Duncan Thompson Building Concepts, says that by extending, you’ll also save on the costs of buying, selling and moving — money that can help fund the extension.

“Your home’s a tax-free investment and it makes sense to keep it up to date to maintain the property’s value,” Mr French says. “It’s no good having a lovely Edwardian that’s only two steps better than when it was built. We can build an extension to match the original, so you have all the modern luxuries in a beautiful period home.”

Mr French says it’s difficult to give a per-metre rate for the cost of an extension. “There are so many variables in bathrooms and kitchens, for example,” he says.

“We do a concept drawing and plan and get it priced. Most of our clients’ costs range from $200,000 to the high $300,000s, with some up to $800,000.”

Mr French warns that there may also be extra unforeseen costs.

“You can’t anticipate all the costs until you pull a house apart,” he says. “You might find that the wiring or plumbing aren’t up to scratch.

Things people have played with over the years often aren’t up to current regulations.”

Building an extension means inconvenience both inside and out. Mr French says most clients live on site during work.

“Clients experience a degree of difficulty — it’s a building site,” he says. “It’s a saving if people can stay while we do the work and there’s an advantage to having the client there to make sure we’re going in the right direction. But sometimes we can do it more quickly if clients move out.”

Story by Mary Costello www.domain.com.au

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The Reserve Bank board has left interest rates on hold, after its board met today.

The official cash rate will remain on hold at 4.75 per cent.

The decision is most likely influenced by last week’s Consumer Price Index result and the affects of Queensland’s devastating floods.

The board will meet again next month on the 1st of March.

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Melbourne and Sydney led house price gains across the country last year although the pace of the increase tapered off towards the end of the year, a real estate research group says.

Among the major cities, Melbourne’s median house prices rose 8.4 per cent in 2010 and 1.1 per cent, seasonally adjusted, in the final three months of the year, to $505,000, RP Data/Rismark said.

Sydney’s house prices rose 6.6 per cent for the year and 0.9 per cent for the quarter to a median level of $525,000, the researcher found.

Mining state capitals Perth and Brisbane both reported annual and quarterly price falls.

Nationwide, city home prices rose 0.2 per cent in December, seasonally adjusted, to a median price of $475,000, reversing the previous month’s 0.2 per cent decline, according to the data.

“Almost all of the growth in capital city home values was experienced in the first quarter of 2010, when dwelling values grew by 3.6 per cent,” Rismark managing director Christopher Joye said.

“The RBA’s four interest rate hikes in 2010, which were topped up by a fifth via the banks, conspired to snuffle out capital growth during [2010],” Mr Joye said.

“Indeed, the capital city housing market very clearly peaked in May 2010, and remains below this point today.”

Nationally, home prices rose only 4.7 per cent last year, RP Data/Rismark said.

Brisbane’s median house price fell 0.5 per cent in the December quarter – before the effects of the massive floods earlier this year – and 1 per cent for the year to $435,000. Perth’s prices slid 1.9 per cent in the quarter and 2.3 per cent in 2010 to $465,000.

A survey of residential property by National Australia Bank released last week forecast home prices will fall slightly during 2011, amid poor affordability and the prospect for more interest rate rises.

The Reserve Bank is widely expected to keep its key interest rate on hold at 4.75 per cent tomorrow when it meets. Private sector economists, though, say inflation pressure will probably mount later this year in part because of the rekindled mining boom. An upsurge in prices may prompt the RBA to lift official rates again, possibly as early as May, they predict.

Quarterly gain

In the quarter, national city home prices rose 0.4 per cent, seasonally adjusted, RP Data said.
Among the other cities covered, Adelaide values rose 0.4 per cent in the quarter, seasonally adjusted, while Canberra values dropped 1.3 per cent.
In addition to interest rates rises, affordability may also hold back the demand needed to keep prices rising, said Mr Tim Lawless, RP Data’s research director.

“Affordability is quite a pressing issue in the market place,” he said.

“If you look at the broader market, interest rates and house pricings provide a fairly challenging scenario for new buyers into the housing market,” he said.

US-New Zealand property valuation group Demographia said last week that Australia’s capital cities were some of the least affordable in the English-speaking world.
“With such strong growth last year in Melbourne and Sydney, there will be some portion of the market place that is waiting for prices to come back or halt for some time until incomes catch up,” Mr Lawless said.
“That may be potentially what we see in the next 18 months,” he said.

czappone@fairfax.com.au

Story source: www.smh.com.au

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AUSTRALIA’S peak real estate advisory body has lashed out at Labor’s management of the property market, saying the Gillard government has crippled the sector with higher prices, lower supply and slower land releases.

Speaking to The Australian yesterday, Real Estate Institute of Australia president David Airey said the industry had lost confidence in Julia Gillard and believed the government had “lost its way” by abolishing the position of a dedicated housing minister.

Mr Airey said in the four months since the election, the REIA – which has long provided research and advice to the federal government – had not been contacted.

“There has been no contact, no advice sought and we haven’t seen any policy direction,” Mr Airey said. “I think the government has lost its way and made a big mistake in changing the make up of the ministry.”

Once the carriage of now Minister for Human Services Tanya Plibersek, the portfolio of housing was split among three ministers – Jenny Macklin, Mark Arbib and Tony Burke – when the Prime Minister announced her new team on September 11.

Mr Airey said the axing of a full-time minister meant Labor had lost sight of the major housing issues of land supply, affordability, planning controls and property taxes.

“Ministers with shared portfolios only spend so much time doing certain things . . . they’re only going to address issues that pop up rather than the big picture,” Mr Airey said. “We’re told we are in a housing crisis . . . It sure is a funny way to deal with crisis . . . no dedicated ministry or cabinet-led direction.”

His comments come a day before the Reserve Bank is to decide whether to lift the official cash rate from 4.75 per cent, causing homeowners further interest rate pain, and as the Australian Bureau of Statistics prepares to release its quarterly house price data tomorrow, which many economists predict will show a rise in the median house price.

Minister for Families, Housing, Community Services and Indigenous Affairs, Jenny Macklin, rejected Mr Airey’s comments, saying the government had made housing “a national priority”.

“More than $20 billion has been invested in social and affordable housing, the largest by any Australian government in history,” Ms Macklin’s spokeswoman said.

On why the portfolio had been split, the spokeswoman said: “Social housing, homelessness and housing affordability involve many complex issues and it is appropriate that they receive the focus necessary to address them”.

“Ministers are working closely to ensure housing outcomes are delivered in a co-ordinated way.”

Story by Lanai Vasek www.theaustralian.com.au

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The warning by Standard & Poor’s on Friday that it could downgrade the credit ratings of banks with exposure to the Queensland floods shows that the floods will continue to wreak havoc on business for a long time yet.

Share prices of Suncorp and Bank of Queensland fell after the Standard & Poor’s warning, and in the past few weeks companies including Virgin Blue, Woolworths, Macarthur Coal, QR National and Energy Resources Australia have issued profit warnings partly linked to the floods.

But this is just the beginning of profit downgrades as banks, insurance companies, mining companies and retail groups start to tally the direct and indirect impact of the floods and other tough market conditions.

And the decision by the Prime Minister, Julia Gillard, to impose a flood levy will not help consumer confidence. Another levy on top of the imminent mining tax and carbon tax makes people nervous about government policy, and that puts more pressure on discretionary spending at a time when retailers and small businesses can ill afford it. The Gillard spin is that the levy will cost most people less than $1 a week, but the perception is otherwise, and it it is that that drives consumer sentiment.

Australians have curbed their spending since the global financial crisis, but a pile of worries continues to drive down consumer confidence: rising interest rates and fears of more to come if inflation takes off; rising food prices caused by food shortages; rising power bills; higher petrol prices; higher education and health bills; and an impending carbon tax.

The most recent Westpac survey shows consumer confidence fell 13 per cent in the past year. The knock-on effect of weak consumer confidence is weaker retail sales, which has a profound impact across the supply chain. This is already playing out.

In the meantime, the impact of the floods on banks and insurance companies will remain a key focus of credit ratings agencies and investors in the coming profit season.

The Standard & Poor’s warning that it cannot rule out a move to negative ratings in banking will put a blowtorch on the Bank of Queensland and Suncorp. Both arguably have the biggest number of loan customers affected by the floods.

Even before the floods there were concerns that the values of at least 30 per cent of Gold Coast properties were lower than that of their mortgages. House prices are flat, and the property group Mirvac announced last Wednesday that it had made a $215 million provision on zero-margin projects and unsold stock in poorly performing regional markets. Put all that together and you have to wonder whether banks are providing full disclosure of “Gold Coast to Noosa” properties, especially holiday homes.

This, as well as funding issues and asset quality, have prompted the banking analyst Brett Le Mesurier at BBY to suggest that a merger of the banking businesses of Suncorp and the Bank of Queensland is a good option. He estimates that such a tie-up could produce $800 million in value for the two listed entities.

He says the deal could be structured through a share swap, Suncorp selling its bank to the Bank of Queensland in return for a 52 per cent stake in the merged Bank of Queensland entity.

The Bank of Queensland and Suncorp have asset quality issues that include commercial real estate exposures. Much of Suncorp’s are in the public arena, and the Bank of Queensland’s are coming to light. On December 8 it was forced into a profit downgrade after suffering a $97 million increase in the value of troubled property assets amid a slump in the state’s commercial real estate market, implying that its impaired commercial assets had doubled in less than two months.

Profits for the 2011 financial year are forecast to be between $210 million and $230 million, compared with a previous projection of $220 million to $250 million.

The bank said it would increase bad debt provisions to cover for any losses from falling property prices to as much as $90 million in the first half of the 2011 financial year, significantly higher than its previous forecast of $53 million.

The downgrade came after a three-week review of the bank’s top 250 property exposures confirmed the sector was performing much worse than expected. Queensland’s commercial real estate market was singled out as the main offender, with an acknowledgment that it had suffered impairments to the value of two of its retail shopping centre exposures in the state. It declined to name which ones. It denied that exposure to the struggling high-rise residential property market on the Gold Coast had a role in the downgrade.

Then on Friday it published the prudential disclosure report for November 30, the APS 330, which, Le Mesurier says, shows that not only has the asset quality of its commercial loan exposures deteriorated but so has its residential loans.

If Suncorp and the Bank of Queensland decide to join forces it may be a marriage made in heaven or possibly hell.

Story by Adele Ferguson www.smh.com.au

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