The property market will be drawing a collective sigh of relief as the year comes to a close.

As we look back on how the market performed in 2011, we may well see an overall correction of up to 10 per cent – a significant drop for the property market but a fraction of the sharemarket correction of 2008.

As we gaze into the crystal ball and wonder what 2012 has in store for home owners and property investors, there are a few indicators that suggest we are entering calmer waters.

With Europe in crisis, the US economy anaemic and China cooling, interest rates are on the way down. Experts predict the Reserve Bank will cut rates on Tuesday by 25 basis points and there will be a further reduction of up to 100 basis points throughout 2012.

Falling interest rates instantly increase affordability and entice people back to the market. Buyers rushed back in 2001 and 2009 mainly due to falling interest rates. The main difference next year is that it is unlikely to come packaged with increased first home buyer incentives.

Property is a great Australian pastime and this continues to be the case.

Web statistics show that, although competition for property was soft in 2011, web browsing continues to be very high. Nielsen’s online analysis of real estate portals suggests more than 3 million Australians search for property each month. That means about 15 per cent of the population is actively looking at property at any onetime.

This activity flows on to the physical market, with many agents reporting high numbers at inspections for good quality homes. Despite the level of interest, many people believe that 2011 has not been the right time to buy.

This means first home buyers and investors have stayed out of the property market. The effect is increased demand for rental property and a lowering of supply. As a result, we are likely to see rental yields lift next year.

According to the Reserve Bank, household savings rates are at their highest levels since the mid-1980s. They have been moving up since the mid-2000s, reaching 10.5 per cent of disposable income in the June quarter.

Many borrowers have been making substantial excess principal repayments in recent years and this will increase their equity and cash flow positions.

For many people, myself included, money begins to burn a hole in our pockets. The people who have been saving and have job stability – which is 95 per cent of the population – will start to realise the sky is not falling and will begin to make a move.

All markets are cyclical and often the greatest period of growth comes directly after the biggest falls.

I think when we look back on 2012 in years to come these factors will likely result in a bounce in median values, and the market will be back to where it started before 2011 hit.

Mark Armstrong is an independent property analyst and creator of propertytycoon.com.au, Australia’s first online auction tipping competition.

Source: www.domain.com.au

What do you do if you are young and thinking about investing in property?

A 19-year-old I know has plans to save up to buy his first property, and mentioned that he’s not too sure where to start. Should he do a property course, he wondered? And how do you know where is a good place to buy? Let alone what you should pay.

He’s thinking not of giddily purchasing his first property to live in, but of buying an investment property and slowly, over his lifetime, purchasing some others.

What do you do if you are young and thinking about investing in property?

A 19-year-old I know has plans to save up to buy his first property, and mentioned that he’s not too sure where to start. Should he do a property course, he wondered? And how do you know where is a good place to buy? Let alone what you should pay.

He’s thinking not of giddily purchasing his first property to live in, but of buying an investment property and slowly, over his lifetime, purchasing some others.

We’ve been hearing for a little while now how this is a trend among 20-somethings, and those into their 30s. Buy a place as an investment, often a cheaper unit in a less desirable area, and then tap into the tax advantages of negative gearing (by keeping your outgoings on the property higher than the rent coming in) and either rent yourself in an area you want to live, or stay at home with the baby boomer parents where the board is minimal and the washing comes for free.

So for Jake, and any other young people wondering which way to go, here’s a few tips. And I’m sure readers will offer up plenty more in the comments space below.

1. Ask yourself, should I be investing in property at all, and what do I expect to get from it?

If it’s a road to quick riches you want, then this is not the path to take. Yes, we have seen some huge run-ups in prices over the years, and it’s true that property prices, like the economy, tend to run in cycles, so we will obviously see increases in years to come, even despite the current negativity enveloping much of the globe.

Because property buyers are human, and love to follow a trend, and for some bizarre reason feel more comfortable buying when prices are running hot, there is no doubt there will be price rises once again in the future.

There are a whole bunch of other factors pointing to future price increases too – in some cities the lack of building will keep the supply lower than it should be, the population continues to grow meaning so does demand, and in Australia at least, we remain a wealthy country still experiencing household income growth.

However, don’t bet everything on this happening and by how much prices will go up – instead expect to see, over a longer period of time, steady increases with plenty of troughs along the way as the economic cycle rises and falls.

And now, here’s the cue for all the readers who argue the market is about to tank and that now is not the time to buy property. And with Europe perched on a precipice and the US still in an uncertain state, you do have to question whether the bottom of the market has been reached yet despite the pretty strong fundamentals underpinning the Australian economy at the moment.

However, if you are a young person just starting to save for your first property, you have a bit of time to sit back and watch the market while you save anyway, so don’t fret too much at this juncture.

2. Educate yourself

The mere mention of "property course" sends shivers down my spine. Often it’s run by property spruikers taking hundreds or thousands of dollars off gullible people who are then, at best, fed information they could find themselves by reading widely, or at worst, the poor souls are flogged the company’s own products or services, all with the shiny promise of sky-high returns.

There has never been an easier time to learn the whys and wherefores yourself. The internet has opened up a world of information, and young people wanting to learn a bit more about property should be heading there (to reputable sources) as well as to the property lift outs in newspapers, and better quality magazines.

Want prices? Find them on websites like Domain.com.au or Australian Property Monitors (both owned by Fairfax Media). Want to find the best loan? Check out a loan websites such as ratecity.com.au. And need to know where the market is headed? Read plenty of stories and opinion pieces and rather than taking just one as gospel, glean the general themes from what all have to say.

If there’s a few property terms you don’t understand – such as negative gearing – look them up and get your head around what they mean. That won’t unlock a magical key to property investment for you and land a bag of gold at your feet, but it will stop spruikers taking advantage of your youth and naivety.

3. Take a balanced approach

Property holds a certain glimmer for some young people – perhaps under the encouragement of their parents who prefer a bricks-and-mortar approach. And also because everyone has lived in a house or a unit, but not everyone has held shares or gold or even superannuation.

But if you are young and have the advantage of having your head screwed on the right way and are already thinking about investing, you should be looking at all investment classes impartially. Sure, consider property, but look at it as part of building a balanced portfolio.

Even at 18, 19, you’re not too young to start putting a few extra dollars into super, keeping some of your money in cash in the highest-paying account you can find, and also thinking about a small parcel of blue chip shares to start you off, all while saving to buy your first property. Education, it must be said, can also be considered an investment class in the fact that you are boosting your own potential earning capacity.

And when I say dollars, I really do mean just a few dollars. Even small amounts each week from a meagre income are better than nothing.

This is a smart approach because it lets you spread your risk, and not put everything into the one basket. Sure, this mean it will take you a little longer to save for the first property, but time is on your side if you are young, and to use a cliché, Rome wasn’t built in a day.

4. Save as much as you can before buying

If you plan on being a landlord, you will need to have some extra cash available to cover the loan in between tenants, and also to pay for any repairs to the property. If you are buying into an apartment block or townhouse, you may need also extra money to pay for special levies such as building repairs not covered by the sinking fund (the general fund amassed by the body corporate from strata levies).

So the smart thing to do is to save a good amount of money before purchasing so you’re not taking an uncomfortable risk.

5. Research where to buy

The old adage is buy as close to the city as you can and look for properties that don’t have huge outgoings due to lifts and fancy add-ons such as gyms and pools, but do have the advantage of being near good infrastructure.

Closeness to the city can be good but I would also focus on the infrastructure side of things, and whether or not the suburb has the potential to develop over time.

Buying near rail (heavy or light) infrastructure is always a good bet as the infrastructure will stay there for a long time, and as populations continue to grow and further congest areas, the infrastructure will become even more important.

Do carefully think before buying in areas with inherent negatives, such as heavy flight paths or a lot of noise. Also very busy roads can be a problem – it can be smarter to buy just off them.

Keep your tenant in mind – what type of person would like to rent this and do those people generally live in this area?

Do try to buy something that would be easy to sell again in a hurry if you needed to, should your circumstances change. If a property you are buying has sat on the market for months and months, be sure to find out why and be realistic about encountering the same selling problems if you should buy it.

For that same reason it is good to try to buy something that is around the median price for a suburb, as it should have a larger pool of potential buyers.

6. Keep some cash aside after buying

When you buy the property, don’t sink all your money into the loan if you can help it, keep a good chunk in a flexible high-interest earning account (not a term deposit, as you may need to access it at short notice).

Use this as your maintenance fund, and to top up the property loan if you need to (and for many properties, in the early years at least, the rent won’t cover the mortgage, council rates, strata and water supply charges, so you need to be in a position to pay for the gap yourself).

The cash you keep, though, must strictly be for investment and as a reserve for maintenance and loan top-ups, not for holidays or random spending, as you always need a buffer so you aren’t forced to sell at the worst possible time.

7. After you buy, keep saving

Direct any spare cash to your savings account, not your investment loan. Or if you decide to buy a property to live in, use the cash to pay down your own home loan as fast as you can, rather than the investment loan.

By doing this, you make negative gearing work for you because, by keeping the loan against the property larger, you are paying the highest amount of interest you can, while earning interest off your other money you are keeping in cash.

Or in the case of living in your own property you do want to pay that off as soon as possible to get rid of non-tax-deductible debt.

While I’m advocating not dumping all of your extra cash into your investment loan, it is prudent to pay the property off over time to gradually reduce your liabilities, rather than remain solely focussed on negative gearing.

For that reason, interest-only loans on investment properties may not be wise in the longer term, as you are basically betting on price increases to cover you. Yes, price hikes will probably happen over the longer period but you don’t want to bank your entire savings on them.

8. Get your hands dirty

If you buy a property that needs to be fixed up, and you have time on your side, get in and do it. Many things such as pulling up carpets and painting can be achieved with little experience – you just need to have a go.

You might be surprised at just how much painting kitchen cupboards, tired tiles and old baths can rejuvenate a property.

Do be aware of any dangers that lurk in the property though, such as asbestos, and treat them appropriately. And do call in trades for jobs that are beyond you, such as electrics, plumbing and larger tiling jobs.

9. Be a good landlord

Be prepared to spend on maintenance over time and keep your property up to scratch. You’ll attract better tenants, and your property will also hold its value better. Rundown rentals look shabby and often don’t command a good price come sales time.

10. Take your time before buying again

If you have your sights set on owning more than one property, don’t be in too much of a rush. Keep your investing balanced, putting some funds into other classes such as cash, shares and super.

And when you have built enough equity you can then consider buying a second property. Balance your risk though and don’t get yourself in over your head. You want the power to hold each property for as long as you see fit, rather than be forced to sell should disaster strike.

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

Source: www.domain.com.au

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

Well here are the next five tips to help you go green without breaking the bank.

6. Green Kris Kringle

We’ve all heard of Kris Kringle – the holiday season group gift exchange game with a maximum limit on how much you can spend per gift ($5, $10, etc.). For Green Kris Kringle, instead of a monetary limit, have a material limit: only play the game with gifts you can find lying around the house or crafty gifts you can make with existing materials.

That boring old picture frame you have? Add some sparkly beads for a shimmery upgrade, and bring it as your gift to exchange. Green Kris Kringle is a great way to reuse things you’re no longer using and reduce some of the holiday-season material excess that can drain your green spirit.

And instead of wrapping your gifts in traditional Christmas paper, why not get creative? Old newspapers, pages from magazines, maps from your last holiday, scraps of nice fabric or leftover wallpaper can make a hip green wrapping alternative.

7. Experiment with homemade cleaners

Let’s face it, some of the eco-cleaning products at the store are expensive. Since you still have to clean, try making some cleaning supplies yourself from stuff that’s already in your kitchen. Some basic, natural, non-chemical cleaning elements include vinegar, baking soda and lemon juice.

With vinegar, mix with one part water to dilute, put in a spray bottle and test on a surface before applying it to bathrooms and kitchen countertops.

Baking soda can be used as a scrubber as well as a deodoriser.  To clean your saucepans like new, add some chopped lemons to water and simmer on the stove – it breaks down even the toughest baked on grime.

8. Reuse your bags

We all forget our reuseable grocery bags every once in a while. Luckily we know how to reuse the plastic bags when they start to accumulate (doggie bag, bin liner, storage bag, you name it). Yet all that effort and attention on plastic grocery bags leads us to forget about other types of plastic bags: the freezer bag and the sandwich bag.

Typically used for items like sandwiches or leftovers, these bags receive little wear and tear and can be washed, dried and reused again and again. Using what you already have is technically free, right?

9. On your bike

We all know it is fun to go out, but with driving, parking and inflated food and beverage prices, the night adds up fast. Try adding a green tinge to your evening and organize a bike riding night-out extravaganza with your friends – meet at a local restaurant or bar. You’re sure to have fun, not to mention save money and use less petrol.

10. Offset your emissions

If you would like to do a little more for the environment – consider offsetting the carbon footprint of your home,family or your business.  Carbon offsetting slows the effects of climate change and makes you feel super-fantastic about yourself and your impact on the world.  Check out the Yonderr website and work out what lifestyle or business fits you. The price of carbon at Yonderr is $12 a tonne – cheap at twice the price.  And OK, so this might cost you a little money but knowing that you’re making a positive contribution to the environment is priceless.

If you have any green tips we’d love to hear from you.

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Consider these tips when looking for property in a depressed market.

Purchasing an investment property when the market is down can be extremely profitable.

But you still have to make sure you’re getting a good deal in a buyers’ market – and wise investors won’t be so blinded by the chance of a ”bargain” that they ignore their long-term strategy – which all means it isn’t as simple as it might look.

In a sellers’ market almost any price a vendor puts on a property results in a sale and such buoyant conditions tend to hide ”over-enthusiastic” prices.

In a depressed market, it’s much easier to buy real estate at more realistic prices because there’s more supply than demand.

Real estate isn’t a uniform market, though. There are many sub-markets that perform differently.

Good properties in certain areas can still sell within 24 hours of being listed, whatever the prevailing conditions, so it’s vital you get up to speed with the buying tactics used by seasoned investors.

Target fail-safe properties

The best properties to buy are those that will always be in demand. For many investors, this means acquiring property that’s close to the city centre. For others it means opting for houses or units priced at near the median price for their areas, which are sought-after by owner-occupiers and investors.

Areas that perform well over time and properties that have a high land content are often your best options.

With units, the golden rule is to go for an apartment in a popular location with restaurants and transport nearby. It should be in a well-constructed building with a high land-to-unit ratio.

Distressed sellers

Many vendors have been hit hard by changes in their circumstances. While mortgagee sales are a clear sign of the economic slowdown, you also need to be on the lookout for other signs of vendor distress.

The number of couples seeking divorces tends to rise in times of financial hardship. Other vendors give up on home ownership and go back to renting. You don’t always discover these factors the first time you talk to an agent. But if you prod him or her and ask the right questions, you’ll obtain information that may help you secure a good property at a great price.

Avoid speculation

It’s crazy to buy a property at below market value if it’s in an area where prices are set to fall. Some property advisers believe this is not a good time to speculate or to rely on the ripple effect to drive up capital growth in suburbs bordering proven growth areas.

Speculators do best when markets are running hot. With the number of properties for sale rising in many areas, your opportunity to make good money by targeting properties in established suburbs is higher. Why take the risk on an unproven area?

Look for multiple listings

Listing a property with several agents shows a keen vendor. Because no single agent has an exclusive deal, you may be able to buy directly from the vendor. This can eliminate $30,000 or more in agents’ selling fees from the sale. You need to tread carefully and take legal advice, however.

Many of these vendors usually want an agent to handle the final sale. Even so, the fact their property is listed by several agents means they want to sell and fast.

Go fast, go slow

A buyers’ market means buyers are more in control than sellers. It’s easier to negotiate a delayed settlement on a purchase but don’t forget that speed is also a useful bargaining tool. In a slow market, cash is king. A vendor may take considerably less for a quick settlement compared with another higher offer on delayed terms.

If you’ve found a property you want and have gone through your normal planning and checking processes, a cash unconditional offer and a quick settlement can significantly reduce the price you pay.

Story by Chris Tolhurst www.domain.com.au

INVESTORS will be allowed to improve properties in their self-managed superannuation funds, following a tax office move to abolish a ruling that banned the practice when money had been borrowed to buy the property.

Investors have always been allowed to maintain their properties, but they were banned from changing them because it would negate the concept of the "single acquirable asset" that the Australian Taxation Office had come up with to more clearly identify assets in SMSFs.

Ken Reiss, a director at accounting firm Chan & Naylor, said the new ruling was a "huge win" and would turn around a situation where investors had lost the desire to use their SMSF to use debt to buy property.

He said the previous rules meant, for instance, that "if an SMSF had used debt to buy a property in Queensland that was destroyed in the recent floods, the insurance proceeds could only be used to pay down debt rather than rebuild".

"In that case, the investor would be left with a block of land that they had no option but to sell" because any reconstruction, even an identical one, would be classed as a new asset.

The new ruling still insists that the improvements be paid for by cash resources in the SMSF rather than by borrowing.

The draft ruling will not, however, allow SMSF investors to buy and bulldoze houses and put up units using borrowings, for example. Allowable changes include pools, extensions and bigger kitchens, but they must not "fundamentally change" the property.

It also gives owners more room to move when buying a rundown property that needs more than maintenance, although, again, the new work cannot be financed by borrowing.

The decision caps a succession of policies that used to allow borrowing to buy property in super funds until June 1999, which was then banned except for existing arrangements until September 2007. The ATO brought in the no-improvements rule last year.

Story by Andrew Main, source: www.theaustralian.com.au

With the Reserve Bank serving up a rate cut, it’s a smart move to keep your repayments at the same level. Many lenders don’t automatically reduce your repayments when rates fall.

That doesn’t mean, of course, that you’re not getting a cut in interest rates – just that your weekly or fortnightly (or monthly, but don’t pay monthly, it will cost you more in the long run, as explained below) repayments stay the same.

That’s smart because automatically you’re paying an extra $45-$60 (or whatever it equates to on your mortgage) a month, which will see you get out of the debt-jail sooner.

And with house prices stagnant or falling, the one smart way to make money out of your property is pay it off more quickly and reduce the overall cost of acquiring it.

It has, of course, always been the best way to do things. Ask any pre-baby boomer and they will tell you that.

But in the heady debt-fuelled days of recent past it seemed too easy that you could buy a place, sit it out, burn up the redraw facility on the loan on cars, clothes and overseas holidays, and still double your money in a decade. However, after such big run-ups in house prices, everything has softened and we’re not likely to see similar increases in home prices anytime soon.

Not that a slowing housing market is necessarily bad – despite the general pall it throws over things. Investors may want those days to return but most people can see that steady prices are a lot healthier.

Houses, after all, are primarily for living in. There are other money-making vehicles out there that don’t put the cost of basic shelter out of the average person’s reach.

And the slowing housing market also – in part – took the pressure off the Reserve Bank to keep hiking rates after last year’s Melbourne Cup.

When it comes to the cost of acquiring a home, you can do it the expensive way – borrowing the money (as most of us have to do), or the really, really expensive way (borrowing money and taking forever to pay it off).

The Figures

Let’s assume you’re paying 7 per cent on your mortgage now and you’ve borrowed $500,000 to buy your place. Pay it off monthly over 25 years and you’ll fork out a total of about $1,060,147.

Add another $60 a month to your repayments and you’ll be up for a total over the life of the loan of $1,031,230, saving $28,918.

Pay down an extra $200 a month, or about $50 a week, and suddenly you’re up for a six-figure total instead of a seven, of about $975,321. You’ll also save an impressive $84,842. And you’ll walk away from the shackles of that mortgage more than three years earlier.

Of course your mortgage might not be $500,000, so to find out how it works in your situation check out some of the online calculators such as this. It’s worth bookmarking the site and going back to it every time you need a bit of motivation to pay down the mortgage faster.

And another trick – now well known by many – is to pay fortnightly and not monthly. You’ll end up thousands of dollars ahead by taking advantage of the fact there’s 12 months in the year, but 26 fortnights, meaning you make one fortnight’s repayment more per year than you would if you were paying monthly.

Story by Carolyn Boyd www.domain.com.au

Fixed term mortgages hit 3.5 year high in October

Basic variable rates were the most popular with new home loan borrowers only 11 months ago, but today they have been far surpassed by ongoing discount rates and fixed rates, according to loan approval data from Mortgage Choice, Australia’s largest independently-owned mortgage broker.

At that time, the no-frills product type accounted for 34% of the broker’s new approvals. Today, this sits at less than 16%, the second lowest point since Mortgage Choice began recording such data in January 2003.

Fixed rates are now more in demand than they have been in well over three years, and although the popularity of ongoing discount rates dropped for the first time in October they remain by far the most popular home loan with new borrowers, accounting for more than 43% of approvals.

Company spokesperson Kristy Sheppard said, “When comparing our October loan approval data to that extracted one year ago, it’s remarkably obvious how much the industry has changed in reacting to subdued housing finance demand and a relatively positive interest rate outlook.”

“Then, basic variable rate was the loan of choice at just over 34% of approvals. Standard variable rate followed with just under 34%, then ongoing discount rate at 17% and fixed rate at 11%.

“That situation has now flipped. New borrowers’ appetite for fixed rate loans is at a three and a half year high of 20% of approvals and ongoing discount rate loans account for 43% of approvals.

“In an environment of rising living costs and economic uncertainty it is unsurprising borrowers are taking advantage of the relatively low fixed rates and attractive variable rate discounts offered by lenders hungry for business.”

The popularity of standard variable, line of credit and introductory rate home loans all fell in October, to 15%, 4% and 1% of approvals respectively. Basic variable demand rose slightly to 16%.

Note: Mortgage Choice currently writes one in 25 new home loans in Australia, equating to approx. $10 billion in approvals per year, hence it provides a clear insight into borrower preferences. The 19 year old mortgage broker has a loan book of over $42 billion.

One in 10 Australian households is in housing stress and at risk of financial hardship and poverty, a new report says.

Renters and first home buyers are most under pressure, with 26 per cent of renters and 15 per cent of first home buyers in housing stress, the Australians for Affordable Housing (AAH) said on Monday.

"There is an entrenched and significant group of people in Australia who face day to day hardship because of their housing costs," AAH spokeswoman Sarah Toohey said in a statement.

Overall, 850,000 households across the country are at risk of financial hardship after paying for housing costs, of which nearly 300,000 are in NSW.

The report, commissioned from the National Centre for Social and Economic Modelling (NATSEM), found 21 per cent of first home buyers in Melbourne are more likely to experience housing stress, compared to 15 per cent in Sydney.

Hobart and Sydney put the tightest squeeze on renters. Hobart has the highest rate of renters in housing stress at 33 per cent, while Sydney has the highest number with more than 100,000 households facing poverty because of the high cost of renting.

"A secure home is a fundamental building block for everything else we do in life," Ms Toohey said.

"We need to create a housing system that works for everyone."

Story source: www.ninemsn.com.au

The housing sector is stabilising as talk of an interest rate rise wanes and Australians are encouraged to borrow more, economists say.

The number of home loans approved in August rose 1.2 per cent to 50,965, official figures show. Economists’ forecasts had centred on a 1 per cent rise in housing finance commitments for the month.

August was the fifth straight month that housing finance commitments had risen.

The Australian Bureau of Statistics said total housing finance by value rose 1.0 per cent in August, seasonally adjusted, to $20.848 billion.

JPMorgan economist Ben Jarman said the figures showed the housing sector was stabilising rather than rebounding.

‘‘It certainly means it’s not falling into a hole,’’ Mr Jarman said. ‘‘In the last few months worth of data, the housing finance figures have benefited from the perception that the RBA won’t be doing much in the near term.

‘‘So, if you went back to the start of this year, the RBA didn’t hike rates but there was all the forecast and all the language were making noises that you would get a couple of hikes this year.

‘‘Those aren’t being delivered and things offshore have turned a little bit sour.

‘‘What you’ve seen in the last few months in the home loans data is these fading expectations are helping out and people are coming back and they are happy to take on new debt.

‘‘We’re kind of calling this a mini-rally, but don’t think that this is the start of a tear away in the housing market.

‘‘There’s still a lot of uncertainty globally and that’s what’s keeping the RBA on the sidelines.’’

Mr Jarman said JPMorgan still expected the RBA not to change the cash rate from its current 4.75 per cent until at least the middle of 2012.

‘‘You’ve got a lot uncertainty offshore counterbalancing the domestic inflationary situation here and we see the RBA not doing very much for a while.’’

ICAP senior economist Adam Carr said August’s housing finance figure was a good result and continued a 13 per cent increase in lending since April.

‘‘The pattern we’ve witnessed over the last year is that home lending is posting a dramatic improvement after a GFC induced slump, interrupted only by the floods and the disasters,’’ Mr Carr said. ‘‘Now we’re back on track.’’He expected housing finance data to continue to be strong in the coming months.

‘‘Financial conditions are not too tight, we’ve had an easing in financial conditions (and) lending rates are going sharply lower.

‘‘Don’t forget the unemployment rate is low and income growth is strong, so the prospects are really good.’’

The data also highlighted why a cut in the cash rate was not needed, he said.

‘‘The reason I say that is because the economy is healthy – we don’t need one or two rate cuts.

‘‘We’re either going to get 100 basis points worth of cuts or more because Europe collapses and we have another GFC or, I would imagine, we get none.

‘‘That’s because retailing is accelerating, home lending is accelerating, approvals are accelerating and the unemployment rate is low.

‘‘To argue that we need one or two rate cuts is just absurd.’’

AAP

Source: www.domain.com.au

One of the biggest trends in renovating we might be about to see emerge is the mini-makeover.

Think: paints, cupboard handles, tap fittings, wallpapers (yes, wallpapers going up, not coming down) and the polishing of timber floors. Also light fittings and window treatments. Anything that changes the feel and adds a bit of pizzazz without spending the big bucks.

If that sounds like the ’70s revisited, perhaps it is. Hopefully not with such garish results, though.

And yes, if you are thinking – ‘hang on, hasn’t everyone been doing this all along?’ In part you are right. But the difference is the mini-makeover will be used by householders to make do for much longer than in recent years.

Why will we see this replace bigger aspirations – at least for now? It’s a meeting of several forces.

First, the property market isn’t going anywhere in a hurry at the moment – so the belief that you can do a big reno and flip the property to make a good quid is quickly dissolving.

Second, Australians are saving more than we have in years and there’s a propensity to pay down debt. That means making do with what we have and not taking on huge loans to expand our lifestyles.

It’s also dawning on some people that one way to make money off housing in this current market is not to buy and sell in a hurry, but to shake the housing debt as fast as you can and that way lower your overall costs of acquiring an asset that is free from capital gains tax.

More broadly, employers continue to report that the biggest thing employees are chasing isn’t dollars but work-life balance. Money is still important, yes, but there’s a greater focus on living a life outside of the office, and people aren’t jumping ship for an extra $5,000 or $10,000 like they were a few years ago.

So if they are working less and aren’t prepared to move for a bit more cash, it’s a fairly reasonable conclusion that people will be looking to make their dollar stretch further by extending the life of their current home.

There’s another force – again related to the slowdown in the property market. Industry talk says there’s been a general shift in the mindsets of homeowners – people now expect to stay in their homes for longer. And if you’re in for the long haul, you’ve got the luxury to plan and think – ‘right, I’ll paint that old laundry for now and make it last a few more years before we get around to building a new one’.

After all, you’ve got years to live in the house, and you’re not in such a hurry to get it sorted to flick it back on to the market.

It’s all happening at the same time that we are hearing of the re-emergence of the three-bedder as the house to have – but this time with a second toilet attached. For many, that could mean bye-bye to the media room, the fourth bedroom and the extra study. And who needs those, anyway, when you’re watching movies on your iPad and emailing on your smartphone?

A comfy chair and a flip-down desk that can be discreetly packed away into the wall when not in use might suffice for a study.

And with books, DVDs and music all going digital, there’ll be more space in lounge rooms to accommodate that kind of nifty set up.

I’m not suggesting houses will be totally devoid of all books but you can see collections will get smaller – for example why buy a hard copy dictionary for the study when it’s much simpler and easier to use an app on your phone?

There’s been a school of thought in recent years – which persists today, driven in part by property marketing – that it’s cheaper to detonate a house and start again, than renovate. Homeowners are often lulled by the lower prices that large home-building companies advertise.

True, looked at on a square-metre basis, it might be cheaper to build anew than renovate – some say it costs half as much on average. But if you are being more frugal and making use of what you have, then perhaps the renovation would involve a much smaller extra footprint and be cheaper overall.

The awakening on the cost of debt since the GFC is intermingled with this mini-makeover trend. Obviously it’s an awful lot cheaper to use the money you have saved to fund renovations rather than keep increasing the size of your home loan. And if you can spend a few thousand dollars to make your house more liveable and avoid or put off for several years having to borrow $100,000, $200,000, $300,000, you could be much better off financially in the long run.

When working out how much you should spend on a mini-makeover, it’s helpful to calculate what borrowing the money for the major renovation would cost you and do your sums backwards from there.

The trick to extending the life of what you’ve already got without pouring money down the drain, is getting a good picture of where you want to take your property in the long term (which might involve getting a building designer or architect in), and working out what you can – and can’t – live with for now.

For example, if you want to make do with your ratty old kitchen for a few more years, painting it, and replacing the door handles, taps and even the lights might be a good investment. But upgrading the oven or the range hood to something you may or may not use in the new kitchen is possibly a waste of money.

And of course, like any renovation, you need to be well-researched and enter with eyes wide open so you know what the hidden costs might be.

Story by Carolyn Boyd www.domain.com.au

It’s not just houses among gum trees on ¼ acre blocks under threat from the supposed death of the Australian Dream; a report shows man’s best friend is also victim to a shift in where and how we live.

Dog and cat ownership is down across Australia, according to a report from the Australian Companion Animal Council that found high-density living, changing lifestyles and government legislation to blame.

The ACAC paper found that in the past decade Australia’s dog population has decreased by at least 14per cent and its cat population has dropped by about 10 per cent, as latest figures from the Australian Bureau of Statistics shows a decline in the rate of home ownership and rise human population.

Queensland figures from the Office of Economic and Statistical Research reflected the national downturn in pet ownership, with dog ownership in the state falling by 2.1 per cent from 2008 to 2010 as cats dropped by 1.4per cent.

The ACAC paper found slightly more than half of the state’s households accommodated cats and/or dogs in 2010.

And though pooches were more popular than pussies overall, Brisbane was among the survey regions with the lowest proportion of households with dogs.

Speaking from the inaugural Putting Pets Back Into Our Lives thinktank in Sydney, ACAC president Kersti Seksel said the steady decline in pet ownership had brought a $6.02billion pet-care industry to its knees.

But it wasn’t just commerce at risk as communities without pets were worse off as well, Ms Seksel said.

“There’s been lots of research showing pets are not just good for an individual’s physical health and mental health – if you own a dog for instance, you’re less likely to be lonely and more likely to get physical exercise – but you’re also more likely to interact with your community,” she said.

“All pets are down, but we’re focusing particularly on a decline in cat and dog ownership because there’s a lot of research that demonstrates the valuable relationships they share with owners.”

Ms Seksel said the costs associated with maintaining pets, difficulty in finding care during holidays, time constraints and moving to rented accommodation, particularly apartments, were the most common reasons why people no longer included animals in their households.

“There’s a perception that renting or apartment living don’t work with owning a dog but that’s just not true,” she said.

“If you look at America, you see that dog ownership in small space is fine as long as you’re caring properly for the pet.”

A change in Australia’s favourite breed of dog reflected a shift to inner-city living Ms Seksel said, with the diminutive Maltese ousting the German Shepherd from the top spot that the larger dog enjoyed 10 years ago.

Ms Seksel said the 150 participants in today’s Putting Pets Back Into Our Lives conference, including the RSPCA, hoped to find suitable solutions to the problem.

“Whether it’s changing the laws and regulations around pet ownership or educating the public about finding the right pet for them, we want people to realise just how good owning a pet can be,” Ms Seksel said.

Story source: www.domain.com.au

There’s good news for house hunters with lower mortgage rates and higher wages helping to improve affordability even as house prices edged higher.

A separate report, meanwhile, shows that people are staying put longer, underscoring how the property market has cooled in recent years.

The Housing Industry Association-Commonwealth Bank housing affordability index rose by 0.8 per cent in the June quarter, to 56.2 from 55.7 per cent.

Lending data from CBA, used in the index, showed an 0.8 per cent increase in the April-June period of Australia’s median home price to $471,400.

“Earnings growth and a small decrease in mortgage lending rates worked to improve housing affordability over the June 2011 quarter,’’ said HIA senior economist Mr Andrew Harvey. ‘‘These factors more than offset a small increase in the median house price.’’

Other recent reports point to stagnating or falling home prices in many regions around the country as concerns about the wider economy deter some people from the property market.

Still, unemployment levels remain low, at just above 5 per cent, and commercial banks have been trimming their fixed-term mortgage rates in recent weeks.

The Reserve Bank may also cut its key cash rate in coming months to reflect softening demand in the economy and reduced inflation risks

“Improved affordability is good news for home buyers,’’ said Mr Harvey. ‘‘If we look through the (global financial crisis) period which was skewed by unprecedented cuts to interest rates, we have not seen affordability reach its current level since 2006.’’

The home prices used in the HIA/CBA index are median loans financed by the Commonwealth Bank.

“They cannot and do not take account of changes in the mix of size, location and quality of dwellings financed,” the report said.

“Quarter-to-quarter variations therefore reflect any changes in the composition of housing financed, as well as changes in the price of a dwelling of a given size, location, and quality.

Home price trends

By most measures, however, home prices have been sinking in the new year. RP Data-Rismark information shows capital city home prices down 2 per cent in the year to June, on a seasonally adjusted basis. Home prices fell 0.2 per cent in June, according to RP Data-Rismark.

Borrowing for and building homes has slowed in 2011 while affordability remains constrained for many would-be buyers.

The pace of building has stalled amid uncertainty about the economy and about the direction of interest rates to come. Residential construction work fell by 4.1 per cent in the June quarter to $11.4 billion, the Australian Bureau of Statistics said yesterday.

The RBA will meet September 6 to decide on interest rates, with the market currently pricing in a 55 per cent chance of a 25 basis point cut.

Staying put

The slowing conditions in the property market, combined with higher transaction costs, are also keeping Australians in the same home longer, RP Data said today.

In 2001, the average hold period for a property between sales was 6.8 years. Now, it is 8.6 years, RP Data said today, with Melbourne residents the slowest to leave.

In Melbourne, the average hold period – the time between property sales – is currently 10 years, up from 8.3 years a decade ago. In Sydney the average hold period has risen to 9.5 years from 6.3 years a decade ago.

Story by Chris Zappone www.domain.com.au

Tags: housing, news, property, real estate, research

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Borrowers’ uptake of fixed interest rate home loans rose by less than one percent of approvals over August despite lenders introducing large reductions to the cost of their fixed term loans, according to Australia’s largest independently-owned mortgage broker.

Fixed rates accounted for 14.1% of Mortgage Choice’s home loan approvals last month, up only slightly from 13.3% in July (though rising for the third consecutive month), while the popularity of ongoing discount loans continued its steady increase, up from 38.6% to 41.5% of approvals.

Company spokesperson Kristy Sheppard said, “New borrowers’ appetite for ongoing discount home loans has steamed ahead for 10 consecutive months now. We have reached a point where demand for such mortgages is more than double that for any other, at 41.5% of all our August approvals.”

“This loan type, where the interest rate is discounted over the loan term usually in return for an annual fee, overtook standard variable as the favourite in April and hasn’t looked back. The trend speaks volumes about new borrowers’ and refinancers’ mindset around interest rate rises and the value they place – or rather, don’t place – on locking in their rate at the moment.

“I expected the take-up of fixed rate home loans to grow noticeably in August due to the well publicised reductions many lenders have been applying to their fixed term pricing. Despite our lender panel’s average three-year fixed rate falling half a percent in the past four weeks alone, fewer than one in seven new mortgage holders fixed part or all of their rate last month.

“Borrowers’ reticence to fix may also be influenced by memories of the break costs many people faced when considering switching out of their fixed terms during Spring 2008 to Autumn 2009 when the cash rate fell from 7.25% to 3.00% and home loan interest rates followed.

Demand for standard variable and basic variable home loans fell in August, to 19.2% and 18.2% of approvals, as did that for line of credit and introductory rate loans, to 4.7% and 2.4%.

Note: Mortgage Choice currently writes one in 25 new home loans in Australia, equating to approx. $10 billion in approvals per year, hence it provides a clear insight into borrower preferences. The 19 year old mortgage broker has a loan book of over $42 billion.

Tags: brokers, finance, home loans, mortgage, news, research

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