In many new areas, power lines are going underground. But if you live in an older area, would you fork out for the privilege?

A paper released last year by the Crawford School of Economics and Government at the Australian National University found that underground power lines could increase a home’s value by 3 per cent. That doesn’t sound much, but on a $500,000 property, it equates to $15,000.

It’s not really an issue I’d considered until I moved house recently where a hedge had been inconveniently planted under some low-hanging power lines. After getting the tree trimmers in for a fairly decent sum, it occurred to me that in the long run, it would be easier to either rip out the hedge and plant something more appropriate, or get the power lines buried underground.

In many new areas, power lines are going underground. But if you live in an older area, would you fork out for the privilege?

A paper released last year by the Crawford School of Economics and Government at the Australian National University found that underground power lines could increase a home’s value by 3 per cent. That doesn’t sound much, but on a $500,000 property, it equates to $15,000.

It’s not really an issue I’d considered until I moved house recently where a hedge had been inconveniently planted under some low-hanging power lines. After getting the tree trimmers in for a fairly decent sum, it occurred to me that in the long run, it would be easier to either rip out the hedge and plant something more appropriate, or get the power lines buried underground.

Given how long hedges take to grow, it seems more sensible to opt for the underground option.

At the same time, the local council is planning to tear up the existing footpath and lay a new one, so I wondered, would it be possible to lay the power lines underground at the same time? That would reduce fears in storms of live wires coming down, and also cut down on the need to butcher street trees growing around power lines.

Many new areas now have everything underground, and it’s easy to see why councils are forcing developers to go down that path. Although overhead set ups are seven times cheaper to install than the sub-ground option, they are also a lot more susceptible to storm damage in high winds. Or even just a tree branch coming down in normal weather and taking out half a suburb’s power.

On the downside, as Energex found out in the recent Queensland downpour, underground wires don’t much like floods. “Underground cables are laid in pipes, in conduits, and they really act more as a funnel for flood waters,” a spokeswoman says.

If something goes wrong, it can take a lot longer to find and fix the fault. “You have to dig up the earth to be able to repair anything, so it’s go its inherent issues. It was definitely more difficult for us to restore power to those underground areas [during the floods],” the Energex spokeswoman says.

Perth has been putting existing power lines underground since 1996 and is somewhat of a world leader. About half of the city’s homes now have underground power, helped along by a policy for all new estates to have underground infrastructure, as happens in many other parts of Australia too.

The impetus was some terrible storms back in 1994 that brought power lines down and left many people without power for more than a week.

Tony Moore, a spokesman from energy supplier Western Power, says putting existing cables underground costs between $10,500 and $11,500 per home. In south-west Western Australia, local councils foot 50 per cent of that cost, while the power company and the state government each cough up one-quarter.

Western Power works on a per lot basis, but some of the lots are strata title, which means councils can collect one, two or more rates for that “lot”.

By the time councils take that into account, and sometimes inject a bit of extra funding, undergrounding existing wiring usually costs ratepayers about $4500 per property, Moore says.

Because the maintenance costs of underground power lines over their nominal 40-year life are about 20 per cent of their initial installation cost, that split makes it equitable for Western Power to support the project.

But if Western Power had to pay for all of the undergrounding costs, the return on investment wouldn’t make sense, Moore says.

“In Perth we’ve been able to build a program that has encouraged people to be accepting of the fact they’ve got to pay $4000 – $4500 to get underground power. But I can tell you that when they get it, they love it. They support it in droves,” Moore says.

Surveys at the end of each project show satisfaction levels in the high 80s to early 90s, which means people often change their attitude once they see what a difference the underground wires make.

“You might have done a survey during the project to see whether they’re prepared to pay for it or not and in some cases you don’t even get 50 per cent, so we can’t do a project,” Moore notes. “It’s never forced on people, it’s always given to them as an option but if they’re not prepared to pay the money then we won’t go ahead and put Western Power and government money into areas that are not prepared to support it.”

Nevertheless, the hope is that one day, all of Perth’s power will be underground.

“The reliability levels are markedly improved where we have converted them from overhead to underground,” says Moore.

The work is done through drilling, not trenching, so while there’s still a bit of mess, it doesn’t make the street look like Armageddon. And at the end there are no poles or lines visible.

Story by Carolyn Boyd www.domain.com.au

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The issue of the government’s ban on exit fees is one that has crept up unnoticed on the Australian public.

Some people have asked me, what the issue is and who cares?

Well, the issue is that banning exit fees in the mortgage market will reduce competition by making it very hard for the most competitive players – non-bank lenders – to stay relevant in the market.

That’s the real issue.

As for who cares, try this list: the Mortgage and Finance Association of Australia (MFAA), Aussie Home Loans, Australian First Mortgage, Smartline, Mortgage EZY, Loan Market, Mortgage Choice, AFG, National Mortgage Company and Better Mortgage Management.

We all signed-on to an advertising campaign this week, aimed asking the government to drop its exit fee ban, or to at least adhere to the recommendation of the Senate Economics committee’s inquiry into banking, and exempt non-bank lenders from the exit fee regulations.

The MFAA – an industry body of mortgage and finance brokers – represents 41 per cent of mortgages written each year in Australia through organisations such as those listed above.

The Senate Economics Committee released its report into banking last month and it made comments that all Australians should note: it called for the Australian Securities and Investments Commission (ASIC) exit fee guidelines to be evaluated before any bans were implemented or that small lenders should be exempted from the Federal government’s ban on mortgage exit fees. The ASIC guidelines had been released only three weeks before Mr Swan announced the ban.

There is yet to be a government response to the Senate Committee report, but it should be noted that allowing the ASIC guidelines to operate, or exempting non-bank lenders from the ban on exit fees, would both have the effect of promoting competition in mortgages by allowing non-bank lenders – the real competitive factor in mortgages – to operate in the best interest of consumers.

Source: http://exitfeesmeancompetition.com

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DO you renovate before you sell, or just shove it on the market? Unfortunately, the answer is not simple.

There are a few tasks that cost little or nothing that should be undertaken without question. The big clean, the touch-up of paintwork, storing the clutter and fixing anything obvious.

Tidy that yard and make sure everything looks good from the street. Straight away, you have a clean and tidy home to list, but what if you feel that is not enough?

Consistently, the two most saleable homes in any market booming or busting, or location urban, or 100km down an unsealed road are either the “renovator” or the “move-in”.

The renovator offers buyers a chance to secure a home at a low figure for the area, relish the challenge and love the deal.

The well-presented home, with great decor and fittings -  the home that has the ready-to-move into feel, where sometimes the price can be a little steep sees the seller do well.

However, so many homes just fit the “in-between” category.

So, your first point of reference should be to ask yourself if it is a genuine renovator?

If it is, unless you are going to do the lot, it probably is better to leave as is.

Tidy and do the essentials, of course, but recognise that this is an entry-level home that may even have buyers fighting over it.

Likewise, if you are that fastidious homeowner who knows how to present their home as a display home, yet retaining that “lived-in, yet-we-love-living-here-even-though-we-are-selling feel”, you need to do nothing other than make sure your price expectations are 2011 and you have a good agent on board.

For the rest of us, we need to estimate how much your home is worth now as it is, versus what could it be worth with improved presentation and updated fittings?

Ask yourself what that work will cost and will it be more than the value gain? Answering these questions should help you determine the answer.

Any substantial investment runs the risk of not gaining sufficient value increase to warrant the investment in time and money.

On Selling Houses Australia we often get viewers asking: “How did you do all that work for that?”

The truth is and this is the same for homeowners everywhere the more labour you can undertake, the more bargains you can buy to aid your makeover, the tighter the budget is maintained, the less risk there is to your over-capitalising.

In our show we get all hands on deck in a few days, but the free labour is usually working on jobs many of us can undertake ourselves. (Well, some of us. My family don’t let me do anything other than painting, or clearing up as they figure they only end up having to pay a professional to complete anything properly).

So, like most things in property, knowing how much you should or shouldn’t spend is all about research.

You need to know what your home is worth now and if real improvements add enough value to warrant the work. If so, set a budget and stick to it.

Remember, if you are renovating to sell, it’s a business decision – don’t renovate with your heart or personal taste in mind.

Finally, always avoid the half-done project if your home needs a new kitchen and bathroom, overhaul both to a decent standard.

Do not spend all the money on a fantastic kitchen alone.

It is about the whole picture and finding decorative short cuts.

Remember, with these sorts of renovations, think selling, not your personal desires.

* Andrew Winter is a real estate consumer champion and the host of Selling Houses Australia on Lifestyle Channel.

Source: http://www.perthnow.com.au

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Mortgage delinquencies in the north- eastern Australian state of Queensland have risen to the highest in more than three years as floods and higher interest rates pushed up arrears, Fitch Ratings said.

Some 2 percent of mortgages in Queensland were in arrears in the six months to March 31, compared with 1.54 percent six months earlier, the highest since the ratings company starting publishing the reports in November 2007, Fitch said in an e- mailed report. Across Australia, 1.76 percent of loan repayments were late by 30 days or more as of March 31, according to the data, which represents about 17 percent of mortgages in the country.

“The Queensland floods have partially contributed to the increase in arrears,” analysts led by James Zanesi, associate director at Fitch, wrote in the report. The variable performance is a reminder to investors in residential mortgage backed securities “that the geographic diversity of the portfolio is an important attribute to be considered.”

Queensland’s capital city Brisbane saw home prices fall 3.1 percent in the three months to April, compared with a national drop of 1.2 percent, according to figures from real estate researcher RP Data. Almost two months of flooding at the start of 2011 inundated about 40,000 homes in Brisbane.

Victoria was the best-performing state, with delinquencies at 1.34 percent, and New South Wales saw arrears rise to 1.93 percent, Fitch said. Arrears rose in all six Australian states.

To contact the reporter on this story: Nichola Saminather in Sydney on nsaminather1@bloomberg.net

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AUSTRALIAN institutional investors, worth hundreds of billions of dollars, are trailing their European counterparts in funding projects to tackle climate change because of delays getting a carbon price established.

In a global survey of 90 firms – owning and managing assets of $12 trillion – Australian respondents said they were eager to develop an approach to climate change in their investment decisions but the uncertainty around domestic policy was an impediment.

Chief executive of the Australian-based Investor Group on Climate Change (IGCC), Nathan Fabian, said yesterday that his members were ”actively preparing to invest [in climate projects]. But there is no doubt a lack of clarity over a carbon price is impeding investment.”

Of the total assets managed or owned by the firms surveyed for the report, on average 0.3 per cent were invested in climate change projects such as renewable energy and clean technologies. European firms led the way, investing 0.5 per cent of assets in climate change-related projects, with Australian firms following on 0.3 per cent and US firms lagging behind on 0.1 per cent.

The survey – conducted by three international climate change investor networks, including the IGCC – also found that Australian firms had a growing recognition of the physical impacts of climate change exacerbated by the recent droughts and flooding, especially in real estate and major infrastructure investments.

The investor report follows last week’s Productivity Commission review showing Australia falling behind Germany and Britain in investing in carbon abatement from the power sector, but roughly in line with China and the US.

A domestic carbon price is being negotiated between the government, Greens and independents, with more meetings between the groups expected this week.

The government will also hold a meeting with its business roundtable on climate change on Friday as it hammers out a compensation package for industry under a carbon tax.

The Gillard government will today release a snapshot of potential climate change impacts in Victoria.

The snapshot warns that climate change could drive days over 35 degrees in Melbourne from the current nine a year to up to 26 by 2070.

In Mildura, days over 35 degrees may increase from 32 days currently to 76.

The extra hot days could drive up heat-related deaths but would decrease deaths related to cold weather, more prevalent in Victoria.

Rising temperatures could also drive more days of high and extreme bushfire risks, the snapshot shows.

Story by Tom Arup www.theage.com.au

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The decision by the State Government to remove the stamp duty home concession will flatten the struggling Queensland residential property market and cost homebuyers thousands of dollars, according to the Real Estate Institute of Queensland (REIQ).

The government announced today that from 1 August the concession which non-first home buyers receive when buying a new or established home as their principal place of residence will be removed. For a median-priced house in Brisbane, homebuyers will now be hit with more than $15,000 in stamp duty – an increase of more than $7,000.

First home buyer stamp duty concessions will remain for homes up to $500,000.

The government also announced a $10,000 grant for new-home builds. The Queensland Building Boost grant will be available for all people building, or buying, a new-build home or unit priced up to $600,000 between 1 August 2011 and 31 January 2012.

REIQ chairman Pamela Bennett said while any incentive to increase housing supply and create jobs in the construction sector is a positive for the economy, the removal of the stamp duty concession for non-first home buyers will wreak havoc on the Queensland property market.

About 60 per cent of all dwellings financed in Queensland in April were to non-first home buyers.
“The market is already the lowest it has been in many years and today’s announcement will just make it worse,” she said.

“The government is obviously trying to fill the financial void that has been left by the weak property market, and the subsequent lower stamp duty receipts given the marked reduction in property sales over the past 18 months.

“A better way to stimulate the economy would have been to provide financial incentives for all buyers of all types of properties which in turn would have increased activity and therefore helped the government’s bottom-line.”

According to the REIQ, the $10,000 grant for new-builds might provide a much-needed shot in the arm for the building sector but its value will be greatly diminished by the increased rates of stamp duty that non-first home buyers will have to pay. It is also unlikely to assist more first home buyers into the market.

“There has been a huge reduction in first home buyer activity over the past year and this grant is unlikely to change that state of affairs to any significant degree,” she said.

“While the grant means first-timers will be able to access $17,000, as well as stamp duty concessions, purchasing a new-build home or unit continues to be out of the financial reach of most prospective homeowners.”

When the First Home Owners Boost was available in late 2008 and throughout 2009, 74 per cent of first home buyers purchased an established home despite $21,000 being available for constructing a new home or the purchase of a new-build.

A new report debunks scare campaigns that Australia is going alone on climate change and backs the government’s ETS plan, Treasurer Wayne Swan says.

The Productivity Commission report puts Australia in the middle of the pack in terms of nations tackling climate change, putting paid to criticism that the Gillard government is going it alone.

The report does not suggest a starting price for carbon, saying it’s too hard to calculate a comparable figure in other countries.

But it notes 12.5 million tonnes of carbon abatement in Australia’s electricity sector last year at a cost of up to $99 a tonne could have been achieved for just $9 a tonne if there had been a price on pollution.

Treasurer Wayne Swan seized on the report as supporting the government’s plan to put a price on carbon from July 2012, followed by an ETS within three to five years.

The Productivity Commission report said various countries had around 1000 different measures in place to cut carbon pollution.

But popular methods such as direct subsidies for solar cells and tax cuts for biofuels were very expensive and produced little carbon abatement, it said.

‘An explicit carbon price applied broadly to the economy would achieve abatement in most likely much more cost-effective ways’ than other methods, the report concluded.

It compared Australia with the UK, US, Germany, China, Japan, South Korea and New Zealand and found Australia currently ranked in the middle in terms of tackling climate change.

The report will be used in talks on carbon pricing involving Labor, the Greens and independents which are expected to be finalised by early July.

It said that a number of countries were shifting from subsidies to emissions trading schemes – including Australia’s largest trading partner China.

‘The report completely debunks any scare campaigns suggesting Australia is acting alone and provides more evidence that putting a price on carbon pollution is the best way to cut pollution and protect our economy,’ Mr Swan told reporters in Brisbane.

Subsidies for solar cells equated to an effective carbon price of up to $864 per tonne, and tax exemptions for cleaner biofuels equated to around $310 a tonne.

Mr Swan said this showed ‘direct action’ policies such as that advocated by Opposition Leader Tony Abbott would ‘blow the budget’.

Greens deputy leader Christine Milne, who is on the multi-party committee working on the ETS, said the report showed Australia would not be moving ahead of the world by putting a price on carbon from 2012.

But she said it needed to be coupled with much greater investment in renewable energy.

Independent MP Tony Windsor, who is also on the committee, said the report answered the two questions he had about carbon pricing: is the rest of the world acting, and is it the most efficient method?

‘In the studied countries, the answer is they are doing something,’ Mr Windsor told AAP.

‘And if we are going to do it, the cost-effective way of achieving something is through a pricing mechanism.’

Mr Abbott said Australia would kick an ‘economic own goal’ with an ETS.

‘It won’t clean up the environment, it will clean out your wallet and it will wipe out jobs big-time, particularly in the coal industry,’ he told reporters on a visit to the Illawarra industrial region in southern NSW.

Minerals Council chief Mitch Hooke told a Senate hearing in Canberra a carbon tax would be like taking a ‘baseball bat to the Australian economy’, unless trading partners were taking part in a global ETS.

Source: www.bigpond.com

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When downsizing you’ll lose space, but there’s no need to cut back on comfort or style in your new home.

Move My Home asked three experts in decor, design and decluttering for their best advice when moving to smaller living quarters.

Di McKenzie of Interiors Intoto in Mosman believes it’s vital to be aware of the emotional aspects of the downsizing experience.

It’s one thing to see your existing space all boxed up, but it’s another to move into a new home and have that feeling of confusion when you have to start again, particularly with the elderly.”

Di’s clients include empty-nesters, people moving from a house to an apartment and older people moving into a retirement village.

“It’s important to deal with the person who’s downsizing – not their family members. They know what’s important to them and they’ll identify what they’d like to take. A move is always emotional because people become attached to their environment, no matter the age, and they’ve all got precious belongings.

The elderly tend to keep treasured items such as wedding presents or items bought on holidays because it reminds them of happy times.

“It can be devastating moving from a 4 or 5 bedroom house to an apartment, and it’s coming up more and more with the wave of baby boomers. Boxing up their kids’ bedrooms can be very emotional.

They can’t let go of trophies the kids won when they were six. Those things are sometimes more important to parents than to the kids who are now 25 and on their grand world tour – they’re not concerned about their bedrooms.”

Moves triggered by family breakup can be particularly painful, but Di thinks friends and family can help ease the transition.

“Where people decide they can’t live together any longer and are moving to separate homes, it’s important that they walk into a space that has some homely touch – a bowl of fruit or some beer for a bloke – something that will make him pause and take in his new space and realise that this is a new beginning, and that there’s a touch of humanity there already.

These are all things that people who care about them can help with.”

Di advises movers to check available space at their new place before moving belongings.

“That seem pretty logical, but often people are in a hurry, and they just take everything and plan to sort it out later. If moving to an apartment, you won’t have additional storage space, so you must be very sure that what you’re taking fits or you’ll have nowhere to put it.

Without proper planning it can be a disaster for the customer and the removalists, who may have nowhere to put it all if there’s no storage room; and that starts you off on the wrong foot in your new home.”

Kerri Rodley of Domestic Downsizing in Norman Park Queensland encourages clients on the move to consider which items are important, useful or beautiful in their home.

“When it comes to downsizing, you must be very aware of what your goal is – to get rid of your stuff to create more space,” Kerri says.

“The main questions I ask when helping clients to make decisions about their items are: do you love it? Is it useful? Do you really need it? If you can’t answer yes to one of these questions it’s time to let it go.

“I find that where people haven’t moved for many years, they haven’t really looked at their stuff for a long time. But when moving into a smaller space, you really need to do that. Walk around the house and put a sticker on the things you really love, things that give you joy when you look at them – that make a difference in your life.”

Kerri has a creative solution where clients can’t bear to part with items they don’t need or want, because they have sentimental value.

“Let’s say you’re holding on to jumpers you don’t wear because your mother knitted them for you. Are you honouring her memory by keeping stuff you don’t like? Either pass them on to someone who will love them, or have things made into other things that you will appreciate.

“You could take a set of photos of the jumpers – close-ups highlighting a detail of the pattern or texture in each. Put them in a triptych frame and you’ll have a lovely artwork – a series of different but similar things. That way you’ll keep the feel of the jumpers, and of the craftsmanship. One picture of a jumper takes up a lot less room than 10 jumpers.”

Kerri offers these additional tips for organising your new environment

Measure your furniture to see if it’ll fit into your new space – particularly large items such as sofas and beds.Take the room measurements of your new space or check the floor plan. Don’t forget about the location of doors and windows – a factor in furniture placement.

Assess how much of the new space is dedicated to storage to see how much you need to dispose of before moving. Don’t forget hidden storage areas you currently use in your old place.

Melbourne interior design consultant and fashion buyer, Mimi Marti, has first-hand experience of downsizing. Mimi and husband Hans moved to a new apartment from a beautiful period home in Richmond.

“We’d lived in a double-storey Victorian home for 18 years, and now we live in a modern apartment with superb views over Albert Park,” Mimi says, “It was a difficult choice to make, because we moved from a 35-square home to a 15-square home.

I often pass the house, but now have no feelings for it. And we still have a garden. We have a five and a half acre property in the country, which fulfils our space requirement.”

As a collector of art and antiques, Mimi had the difficult task of deciding what to take with her and what to leave behind.

“We sold most of our stuff to neighbours who were moving to a larger home, and the rest at auction. Antiques are very hard to sell at auction, but you take the losses and make a new start.

“We had a couple of favourite pieces – one a 19th century French hand-painted armoire. I fell in love with it and Hans had it delivered as a surprise birthday present many years ago.

There was also a beautiful, antique gilt-framed mirror which I felt I needed to find place for, so I designed a hall table to go under it. I designed all the furniture for the apartment and had it custom-made.”

Many of Mimi’s clients have downsized and she knows how to make small living spaces inviting.

“Look at the sizes of the rooms. In a modern apartment there’s often a wall of windows so you don’t feel confined. It’s that idea of the outside coming indoors that creates a sense of space,” she says, “If it’s a small area, stay with neutral colours and use accent colours.

If selecting carpet, don’t go for very dark colours and keep the walls light. Often people make the mistake of choosing dark furniture. You can always add colour with other things.

“You can also change the look of a room without great cost by using brighter colours in summer and darker colours in winter, by moving your paintings around, and by adding coloured glass pieces and fresh flowers.”

Story by Mary Costello www.domain.com.au

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Regional differences are emerging in the Australian housing market, with some regions reporting price rises and others seeing values decline.

Sydney and Canberra are seeing real estate values continue to climb, but those in Perth and Brisbane falling, according to the latest house market index.

In addition, the figures show that cheaper properties are selling better than the luxury end of the market, with interest rates and natural disasters such as the floods in January taking their toll.

According to Tim Lawless, RP Data’s research director, expensive suburbs have helped drag the overall market down.

Indeed, over the year to end April, properties in the most expensive suburbs fell 5.4 per cent. This compares to declines of 0.9 per cent and 0.5 per cent in the middle priced suburbs and cheapest suburbs respectively.

“The luxury end of the housing market is also showing its volatility. During the growth phase of the cycle the most expensive homes realised the highest capital gains,” he said.

“Yet as the market cools premium home values seem to be losing steam the fastest.”

Story source: http://www.propertyshowrooms.com

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The Mortgage & Finance Association of Australia has urged the government to rethink its controversial ban on mortgage exit fees after the Australian Bureau of Statistics released figures showing competition was further drying up in the crucial financial sector.

Housing Finance statistics for April were released yesterday (June 8th) showing a further reduction in competition in the home loan sector as non bank lenders market share slumped to 1.0 per cent.

This is its lowest figure since non banks entered the market in the early 1990s. It is also a drop on the 1.2 per cent market share recorded in March.

MFAA chief executive Phil Naylor said the non banks formed an important part of the mortgage market because they competed with lower interest rates, ensuring that consumers could always find a better alternative to the banks.

Between 1996 and 2006 non banks rose to have 15 per cent of Australian mortgages as lenders such as Aussie and Wizard reduced interest margins with a ‘deferred establishment fee’ and made the entire market reduce their own mortgage margins by more than a half.

“These latest figures are very disappointing and the downward trend coincides with the government announcing it will ban exit fees,” said Mr. Naylor.

In banning exit fees, effective July 1 of this year, the government had defined the deferred establishment fee as an exit fee, penalising non banks.

In these latest figures credit unions (4.9%) and building societies (2.1%) have also lost ground while the banks have increased their market share to 92 per cent – the highest bank market share for mortgages in 20 years.

“Clearly there is no meaningful competition across the industry and smaller lenders are being squeezed further each month. We urge the government to either drop the exit fee ban altogether, or take note of the Senate Economics committee inquiry into banking and exempt non banks from the new regulations.”

Contact:

Phil Naylor 02 8905 1301

0411 554 048

http://www.exitfeesmeancompetition.com

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The price of luxury properties in Australia could fall for up to three years with some having seen drops of 20% since January as expensive suburbs become the poorest real estate market performers.

The near double interest rate rise in November last year has hit Australian capital city property values which are down 1.2% in the three months to the of end April, although in raw terms home values are mostly unchanged at -0.2%, according to the latest RP Data-rismark index.

The difference between these two results reflects the fact that the housing market typically experiences higher rates of capital growth at the start of each year, which are reflected in the seasonally adjusted data.

According to Tim Lawless, RP Data’s research director, expensive suburbs have helped drag the overall market down. Over the year to the end of April, properties in the most expensive capital city suburbs recorded a 5.4% loss. In contrast, property values in the middle suburbs were down by only 0.9% while those in the cheapest suburbs were the best performers, hardly moving at -0.5 per cent.

‘The solid performance of cheap suburbs runs against the grain of popular claims that default rates are rocketing up amongst first time buyers, which the RBA recently rejected,’ said Lawless.

‘The luxury end of the housing market is also showing its volatility. During the growth phase of the cycle, the most expensive homes realised the highest capital gains. Yet as the market cools premium home values seem to be losing steam the fastest,’ he explained.

According to Rismark joint managing director, Christopher Joye, the uber-luxury segment is risky and highly illiquid due to a combination of the soaring Aussie dollar and the volatile share market.

‘A final fly in the ointment is the much lower growth and pay packets expected in the financial services industry going forward. Luxury homes in areas like Sydney’s Eastern Suburbs will continue to face valuation headwinds as banks deal with the new normal of subdued credit growth,’ he said.

The national median price in capital cities is $468,000 based on sales over the three months to April. Elsewhere it is far lower at $325,000. Across all Australian regions, the median dwelling price is currently $418,000.

Rismark expects at least another one to two rate hikes this year, which will solidify the cooling in residential valuations, according to Joye.

On a month-to-month basis, the January result was the worst on record with capital city dwelling values down 1.2%. Since that time the magnitude of declines has moderated noticeably with average monthly seasonally adjusted falls of -0.4% between February and April. ‘Thus far this has been a very controlled exit from the strong growth conditions of 2009 and the first half of 2010,’ said Lawless.

While the slow down in market conditions is evident across all cities, the Sydney and Canberra markets have remained in the black on a year on year basis. Sydney values are up 1.2% while Canberra dwelling values have risen by 0.7% over the year to April.

At the other end of the spectrum are Perth and Brisbane where home values continue to experience a more significant correction. Perth values have recorded the largest fall of any capital city over the 12 months to April, down 7.1% and down 6.8% in Brisbane.

According to Lawless, the weak conditions seen in the Perth and Brisbane markets combined with the comparatively high capital gains recorded in Melbourne and Sydney has driven a widening housing cost gap.

Story by Ray Clancy http://www.propertycommunity.com

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THE executive chairman of home lender Aussie, John Symond, has warned the government’s proposed ban on exit fees could force out smaller lenders and lead to a fresh wave of consolidation.

There are also warnings that the move could unwind the reforms from the 1983 deregulation of the financial system.

Mr Symond has written to federal Treasury warning smaller lenders could be driven out because they will not be able to absorb the costs for setting up mortgages.

“This will drive further industry consolidation as smaller lenders will be forced out since they are unable to match the aggressive discounting of set-up costs by the large banks, who will await a cleared playing field until increasing their fees,” Mr Symond said in a submission to Treasury.

“A concentrated market with fewer lenders could also present risks to the financial system.”

The government is banning exit fees as part of its reforms to boost banking competition.

It argues that exit fees discourage borrowers from switching home loans to new banks.

Treasury has been having consultations over an exposure draft of rules that would ban exit fees outright on new home loans from July 1.

Mortgage aggregator the Australian Finance Group, which has $65 billion in loans under management, has also warned the plan could thwart competition.

“The proposed exit fee amendments, if anything, push more power back to the big four banks and their subsidiaries,” it told Treasury.

According to the group, without the protection of a so-called “deferred entry fee” (an exit fee), non-bank lenders would be forced to charge higher interest rates as they already have higher funding costs. “This is self-defeating and may remove the opportunity for non-bank lenders to re-enter or enter the market as the impact of the GFC lessens,” it says.

The mortgage industry’s peak body, the Mortgage and Finance Association of Australia, says the plan could unravel decades of reform. “A ban on exit fees will unwittingly reduce competition by making it much harder for non-balance-sheet lenders to compete,” the association says.

“It is these lenders who brought real competition to the mortgage market. To sideline them by making their business models difficult, if not impossible, is a very retrograde step.

“The deregulation of the Australian banking system over the last three decades will be in danger of being reversed, with pre-1983 major banks dominating.”

The Australian Bankers Association, meanwhile, has warned the ban on exit fees appears to be rushed and has not been accompanied by a proper analysis of the effect the measure would have on the economy or the market.

Story by Annabel Hepworth http://www.theaustralian.com.au

http://exitfeesmeancompetition.com

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The leaders of the mortgage broking industry and non bank sector have joined forces to run full-page advertisements tomorrow in the national press as part of a bid to appeal to the common sense of firstly Federal Senators and then Treasurer Wayne Swan over the proposed ban of exit fees.

The ads are headed “Exit fee ban will flatten smaller lenders and reduce competition”.

Supporting the advertising campaigns are the Mortgage and Finance Association of Australia (MFAA), Aussie Home Loans, Australian First Mortgage, Smartline, Mortgage EZY, Loan Market, Mortgage Choice, AFG,  National Mortgage Company and Better Mortgage Management.

The Federal government is planning to introduce regulation on 1 July to ban exit fees, despite protests that the move will annihilate non-bank lenders which have driven competition through reduced mortgage interest rates over the past two decades.

The Senate Economics Committee released its report into banking last month and it made comments that all Australians should note: it called for the Australian Securities and Investments Commission (ASIC) exit fee guidelines to be evaluated before any bans were implemented or that small lenders should be exempted from the Federal government’s ban on mortgage exit fees.

The ASIC guidelines had been released only three weeks before Mr Swan announced the ban.

“There is yet to be a government response to the Senate Committee report, but it should be noted that allowing the ASIC guidelines to operate, or exempting non-bank lenders from the ban on exit fees, would both have the effect of promoting competition in mortgages by allowing non-bank lenders – the real competitive factor in mortgages – to operate in the best interest of consumers” Phil Naylor, MFAA chief executive officer, said.

Contact:

Phil Naylor     phone 8905 1301 / 0411 554 048

http://exitfeesmeancompetition.com

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Be sure you understand all the implications of home-equity loans.

‘Gwen” was in a predicament. The reverse mortgage she acquired to pay for home maintenance became problematic when her health began to fail.

It reached the point where managing the upkeep of the house was beyond her and she needed to sell. But the mortgage had been eating into her equity and the break fees were significant enough to stop her buying into a retirement village or having the funds for a comfortable life.

Reverse mortgages are equity-release products that borrowers use to access equity in their home, commonly in the form of a lump sum, regular payments, line of credit or a combination.

Gwen had not gone through the reverse-mortgage contract with her solicitor. Instead, the solicitor simply had her sign it without ensuring she understood its implications.

Her best option would have been to downsize in the first place and use the funds for a retirement village property and investments. This would have given her the quality of lifestyle she wanted.

She bitterly regrets her decision.

On the other hand, ”Edith”, a widow, is positive about her reverse mortgage. She initially took one out to fund an overseas holiday and give her house a much-needed facelift. This enabled her to improve living conditions and make the house more suitable for her mentally ill son.

That she could access her equity was a blessing. But she was mindful not to spend too much on the reverse mortgage, since she wanted to leave a decent inheritance.

Figures from the latest SEQUAL/Deloitte Reverse Mortgage Survey state there are 39,000 reverse mortgages on issue in Australia.

And the chief executive of Senior Australians Equity Release Association of Lenders (SEQUAL), Kevin Conlon, says the equity-release concept is gaining traction as an increasing percentage of the population reaches retirement age. But what are the implications for consumers?

Mr Conlon says it might mean more seniors will have more comfortable lives. He says about $350 billion is stored in the homes of the over-65s and the house represents about 70 per cent of their personal wealth.

”As they sit in retirement, that storage of wealth in bricks and mortar becomes quite unsuitable to what they actually need,” he says. ”And that’s where we get this often-quoted phrase, ‘asset rich, cash poor’. We believe there is an inevitable demographic shift that will see the equity-release market grow significantly over the next few years.”

But reverse mortgages have been problematic for some seniors. The Australian Securities and Investments Commission’s (ASIC) 2005 report Equity Release Products highlights how the complexity of reverse-mortgage products has made it challenging for consumers to understand how suited they are to a particular product.

Factors that affect suitability include interest rate and property price prognostics, differing life expectancies (and aged-care and housing needs), compounding interest, pension and tax implications and various terms and conditions.

It’s not that there isn’t a wealth of information and advice available to consumers about reverse mortgages.

Credit providers are obliged under law to meet pre-contractual and continuing disclosure requirements concerning interest rates, fees and charges and other matters; SEQUAL requires members to make sure borrowers seek independent legal advice, recommend they do likewise with financial advice and provide them with SEQUAL’s Key Facts Guideline; and other self-regulatory initiatives and information access points abound.

But the chief executive officer of the National Information Centre on Retirement Investments (NICRI), Wendy Schilg, says disseminating information is not enough.

”They are very complex products and people don’t understand them,” Ms Schilg says. ”The only information they’re getting is from the providers. Obviously, when they get information from the providers, the providers aren’t giving them any other options like downsizing.”

Reverse-mortgage regulation is under review as part of the federal government’s consumer credit reforms.

Forthcoming legislative changes include greater disclosure of the features and fees on reverse-mortgage products, mandatory protection against negative equity (SEQUAL lenders already provide guarantees against negative equity) and making legal advice compulsory for all borrowers of equity-release products (though Ms Schilg says reverse-mortgage providers already make legal advice compulsory to protect themselves and she has lobbied for the mandatory provision of financial literacy information for all borrowers).

National Credit Reform: Enhancing Confidence and Fairness in Australia’s Credit Law, the green paper Treasury released last year, provides an indication of how significantly SEQUAL already affects industry regulation.

It estimates that the nine lenders SEQUAL represents provide 95 per cent of the reverse-mortgage products in Australia. Mr Conlon says he expects the current review will result in self-regulatory initiatives introduced by SEQUAL becoming statutory protections. ”Beyond that, we expect very few surprises and very few new regulations,” he says.

Mr Conlon adds that if the government heavily regulates product design, it could ultimately have a stifling effect on the development of the reverse-mortgage market, which could adversely affect opportunities available for consumers.

”I think the danger would be, if the market became heavily regulated, it would simply dampen down competitors and slow product innovation, in that it would keep other funders out of the market. These are not easy products to bring to the market.”

Fiona Guthrie, executive director of the Australian Financial Counselling and Credit Reform Association (AFCCRA), says there are questions about the impact that improved disclosure around equity-release products will have on consumer understanding.

”Improved disclosure is the weakest form of consumer protection,” she says. ”Nobody ever says, ‘Do you understand what you have just read? Please explain it back to me.’ Nobody checks whether anyone’s read anything.”

According to Mr Conlon, customers of equity-release products have lodged just four complaints with the Financial Ombudsman in the past 20 years (three were decided in favour of the lender and the fourth was settled by negotiation, he says).

”As the Financial Ombudsman said, ‘There are very few industries that can point to that type of track record’,” Mr Conlon says.

But a 2007 ASIC report, All We Have is This House: Consumer Experiences with Reverse Mortgages, shows there are degrees of customer satisfaction. Although 26 of the 29 borrowers interviewed said their product had performed as expected so far, a small number expressed regret about the way they used their reverse mortgage and how quickly they spent the borrowings.

Lenders approved 10 of the borrowers for more credit than requested and half took it. These borrowers were only in the first three years of the loan and very few had plans to accommodate changes to their financial needs in subsequent years.

Ms Schilg says you can categorise reverse-mortgage customer satisfaction in three ways: consumers who say acquiring a reverse mortgage was the best thing they have done; those who acknowledge it gave them a financial freedom but worry they no longer have the capacity to make the financial provisions they intended for their children; and those who view the experience as destructive.

She suggests the majority belong to the first category.

”I’m not saying all those understand what’s going on but I think about 90 per cent would be happy, or reasonably happy, with what they’ve done.”

But the development of the equity-release market raises questions about consumer attitudes to credit, Ms Guthrie says. ”These sorts of products in the marketplace have tapped into that latent desire we all have to live now and pay later.”

Gwen and Edith are case studies sourced from Reverse Mortgages and Older People: Growth Factors and Implications for Retirement Decisions, a 2010 report for the Australian Housing and Urban Research Institute.

Story source: Josh Jennings www.domain.com.au

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Australia is suffering from a housing affordability crisis because of rising interest rates and uncertainty surrounding the Gillard government’s planned carbon tax, the opposition says.

Australian Bureau of Statistics data released today showed the number of new homes approved in April fell by 1.3 per cent from the previous month, and now stand 11.5 per cent lower than a year earlier.

Opposition treasury spokesman Joe Hockey said the data showed that housing construction remains under significant pressures.

Australia is suffering from a housing affordability crisis because of rising interest rates and uncertainty surrounding the Gillard government’s planned carbon tax, the opposition says.

Australian Bureau of Statistics data released today showed the number of new homes approved in April fell by 1.3 per cent from the previous month, and now stand 11.5 per cent lower than a year earlier.

Opposition treasury spokesman Joe Hockey said the data showed that housing construction remains under significant pressures.

“Australia is suffering an affordability crisis in the housing sector, with insufficient houses being built to meet demand,” Mr Hockey said in a statement.

“For many, the Australian dream of owning a home is becoming a nightmare.”

He said housing activity is being squeezed by the seven interest rate rises by the Reserve Bank since 2009, coupled with additional increases by the commercial banks.

The uncertain impact of Labor’s carbon tax is also affecting confidence of the industry and potential buyers.

“This lack of confidence is shown clearly in the slowest growth in housing finance in a generation,” Mr Hockey said.

He said while it is pleasing to see a recovery in approvals in Queensland – jumping by 29.2 per cent in April – as it continues to rebuild from the devastation caused by natural disasters earlier this year, the falling national trend remains of concern.

He again called on the government to wind back its “wasteful and reckless” spending to ease upward pressure on interest rates.

“Failure to do so will only deny more Australians the chance to own their own home,” he said.

AAP

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