Potential first homebuyers who want to jump off the rental roundabout should consider the effects of a strengthening economy, particularly as lenders begin improving borrowing conditions.

Expected interest rate rises and higher living costs will compel many landlords to recoup lost funds by hiking rental prices, affecting many prospective buyers who juggle rent with saving for a deposit.

Mortgage Choice spokesperson Kristy Sheppard said, “Consumer confidence in the housing market is quite strong as we face a bumper spring, but there are hesitations from first time buyers who are unsettled by affordability concerns as they struggle to raise a significant deposit.”

“The latest ABS housing finance figures show a small increase in the number of first homebuyers as a percentage of total owner-occupied dwelling commitments, up point one of a percent to 16.1% in July. Our data supports this. However, that ABS figure was 25% for the same period last year.

“Many would-be buyers biding their time as tenants will be feeling a tighter pinch thanks to already-rising house and unit rents. Combined, these increased 2.9% over the year to June, according to RP Data’s June 2010 Quarterly Rental Review. While this probably hinders their savings ability it could be the persuasive stimulus they need to move into home ownership.

“The good news is, several lenders have begun loosening loan approval criteria. In some cases this means increasing the amount they will lend to 95% of the purchase price from 90% earlier this year and 80% during the GFC. Borrowers who choose such lenders will require only a 5% deposit plus other possible purchase costs such as lenders mortgage insurance and legal fees.

“With lenders tipped to soon raise variable interest rates independently of the cash rate cycle, fixed rate loans are looking more attractive. Mortgage Choice’s August customer loan approval data shows fixed rate demand rose for the first time in three months. These loans are often popular with first timers, who are more likely to need peace of mind over their repayment level.

“That’s all well and good, but potential buyers must knuckle down to combat higher housing prices, which inevitably mean higher loan sizes. Thankfully for them, growth is plateauing in many areas.

“The ABS reports the current first homebuyer average loan size is $282,500. In contrast, the Mortgage Choice 2010 First Homebuyers Survey found the majority of respondents purchasing their first home before February 2012 will apply for a loan of between $300,001 and $400,000.

“At present, we’re looking at higher than average property listings with lower than average competition between buyers. But it’s a cycle. As positive sentiment grows so too will demand, which may mean now is a good time to act. What prospective first homebuyers really need to do is explore their choices carefully – both property and mortgage wise – before leaping in too quickly.”

Source: www.australianhousehunters.com.au

Like some carnival mystic, before the last election I wrote some predictions in an envelope and sealed it, with instructions only to open it after the election was over. Lo and behold, when I opened the envelope afterwards my prediction proved right: ”That neither party will do anything about making housing more affordable.”

They say that neither of the major parties can agree about anything, but they have certainly continued their conspiracy of silence about the ruinous price of housing in this country. Large parts of New South Wales and the rest of the country are desperately crying out for action on both reducing the price of housing and freeing up more land for residential development, but the reply during the election has been a deafening silence.
We’ve been distracted by a wide variety of carnival tricks, with politicians from both sides busy dancing around marginal electorates in NSW, Victoria, Queensland and elsewhere, but yet no action on one of the most pressing issues of our times.

Neither party is willing to touch the negative gearing issue, perhaps in fear of offending their backers in the business community (although New Zealand seems to have the courage to). The NSW state government still remains addicted to stamp duty. Wage increases in the past 10 years have come nowhere near close to matching the stratospheric rise in house prices. Houses in NSW are at least 10 times the average wage (which is in itself a ridiculous way of measuring affordability — that assumes that the average person on $60,000 has no expenses as they pay off their house, perhaps existing on thin air and hope. A more accurate figure would be 20 times the average wage, taking into account minimum expenses of $30,000.)

Relaxed Foreign Investment Review Board rules of home availability means that Australians are competing with the rest of the world for their local resource. The Liberal Party says it will ”reduce the debt”, but it neglects to say that our public debt is tiny compared to other countries — instead, the nation is hocked to the gills on private debt, partly credit card debt but mostly housing debt.

We’ve reached the point where people are actively praying for that long-awaited major collapse in the housing bubble so they can possibly afford a home, something akin to planning one’s retirement strategy on a win at lotto or a punt on the dogs. Sydney and Melbourne’s western suburbs, traditionally the working-class heartland of Labor, might have gone aspirational but they still want affordable homes, something state Labor seems unable to provide.

Meanwhile, the housing affordability time bomb ticks away — a growing population and a shortage of land promises a price explosion in the future, locking out yet another generation from home ownership. Soon we will reach a point where only the richest of Australians — and cashed-up investors from overseas — will be able to own a house. And with our banks finding it harder and harder to compete for capital overseas, money for home lending may become harder to obtain.

There are many models we could follow around the world — the German model for long-term renters signing a contract with their landlords, reducing housing speculation; or the Denmark model where tax benefits are given mainly to purchasers of residential property who intend to live in their home – but we refuse to do so, because they aren’t enough votes in it, and because it’s the sweetest racket for the rich apart from mining.

Perhaps millions of us will just have to settle on being renters in our own country. That is, until a leader or a political party comes along with the guts to do something about it.

Charles Purcell is a Fairfax writer. Story from the Sydney Morning herald

It can be desperate times if you are looking to rent something. Especially when vacancy rates are dipping under 2 per cent in some areas, such as Melbourne’s inner city and its outer reaches.

Even if you’re not too fussy, tight rental vacancy rates in many cities means the situation can be dire. So it’s not surprising that when we asked our readers what they had done to secure a rental property, more than one-quarter said they had offered more than the asking price, taking a punt that a landlord couldn’t resist some extra income.

It seems if people find a house or an apartment they like, they are often pulling out all the stops to secure it. Other survey respondents told us they had payed the rent and bond on the day, completed their application before the open for inspection because it showed they were keen and ready to go, or buttered up the leasing agent, believing it never hurts to be friendly.

Personally, the most ridiculous thing I’ve had to do is provide pet references for our two small dogs who aren’t large enough to chew the big toe off the postman. My two ankle biters are another matter – but no references requested for them. Yet.

Looking around Australia, there’s bound to be a vast chasm in how easy some tenants will be having it in their hunt for a home. As the below figures show, it’s likely to be difficult in Melbourne, Sydney, Canberra and Adelaide, but a whole lot easier in Brisbane and Perth. But if mining returns to its previous highs, that could change too.

There’s also news that investors are making a comeback to some parts of the market – for example in Sydney in the city’s west and south west. That could help to ease the situation for some tenants by providing more rental properties. The other good news is first home buyers are expected to begin buying again soon, potentially freeing up some rental homes as well.

Vacancy rates around the country

Canberra; About 1 per cent, as of April, 2010

Adelaide; 1.03 per cent for the month of May.

Wollongong; 1.1 per cent in May. Up 0.2 per cent from the previous month.

Sydney; Overall 1.2 per cent in May, a fall of 0.1 per cent from the previous month.

Melbourne; Overall 1.5 per cent in May. Within 4kms of the CBD, 0.9 per cent in June, down from 1.6 per cent in May. Outer suburbs 0.8 per cent.

Newcastle; 1.6 per cent in May, a fall of 0.3 per cent from the previous month.

Darwin; 2.5 per cent, as of April.

Brisbane; 3.9 per cent in the three months to the end of June. Within 5kms of the CBD 2.6 per cent. Remainder of Brisbane 4.6 per cent.

Perth; 4.1 per cent in the three months to the end of March. This is a significant turnaround from March 2007 when the Perth vacancy rate plunged to just 0.8 per cent.

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

Residential rents across Sydney have remained stable despite rising property prices, NSW government figures show.

NSW Housing Minister David Borger said the average rent in Sydney in the March quarter was $400 a week, just $10 more than in the same period a year ago.

"Rents remained relatively stable throughout 2009, and the latest data shows the stability continuing into the first quarter of 2010," Mr Borger said, referring to the latest Rent and Sales report from Housing NSW.

The cheapest one-bedroom homes in Sydney’s "outer ring" were in Wyong and Gosford on the central coast, costing just $170 a week.

The most expensive one-bedroom home was in the Sydney local government area, with an average weekly rent of $450.

Meanwhile, a four-bedroom home in Wyong cost just $373 a week, compared with $1800 in the eastern Sydney council area of Woollahra.