Business Day, 28/10/2009
THE Treasury unexpectedly announced sweeping new measures to relax exchange controls yesterday in a bid to weaken the rand to a more “competitive” level and cut red tape for investors.
“We are concerned about the fact that the exchange rate is as strong as it is — we wish we had the capacity to intervene in a more assertive way than we are able to do at the moment,” Finance Minister Pravin Gordhan said.
He was speaking to reporters at the release of the Treasury's medium-term budget, which makes it easier for companies and individuals to invest offshore.
The rand weakened nearly 1% to R7,69/ in response to the news, which was widely welcomed.
The measures included removing a 180-day time limit during which local companies were required to convert foreign exchange earnings into rands, although they still have to repatriate the money within a month.
South African companies will now be able to open foreign bank accounts without prior approval. Local firms can also now invest up to R500m anywhere offshore without prior approval, up from R50m previously.
A foreign capital allowance for residents — last adjusted in 2006 — was doubled to R4m.
“This is definitely unexpected and a pleasant surprise. It shows the authorities are being more long-term in their thinking,” said Razia Khan, Standard Chartered regional research head, Africa.
The rand has been one of the best-performing currencies in the world this year, scaling a 14-month peak at R7,15/ earlier this month.
Its sustained strength has threatened to erode the competitiveness of local exports and undermine SA’s fragile economic recovery.
Reserve Bank officials have said it is expensive for them to mop up the excess rands generated by foreign exchange purchases, which would normally help weaken the currency.
Treasury officials said they were “confident” there would not be a big outflow of capital at a time when the global financial crisis has forced many other countries to tighten financial regulations.
“We are confident South Africans will invest in our country, they’ve seen the grass is not so green on the other side,” Treasury deputy director-general Ismail Momoniat told Business Day.
“We are confident we can relax these things ... we think South Africans will see this as a good place to invest.”
The decision to loosen exchange controls was seen as a masterstroke that would keep markets, business and labour unions happy. It also signalled that the authorities were confident the rand would find its feet regardless of the global circumstances.
“This will be welcomed by investors. The shift to the left — if there is such a thing — has not detracted from market-friendly policy so far,” Khan said.
Analysts say the rand has appreciated or depreciated 20% in seven of the past 14 years. Its volatility is a much bigger concern than its level as it makes it difficult for business to plan ahead.
“A more stable and competitive real exchange rate is important for growth,” the Treasury said. “Reform of exchange controls can facilitate greater two-way flow of capital and help to reduce volatility.”
Treasury officials said they had not taken a view on the most desirable level of the rand. Treasury director-general Lesetja Kganyago said there were no official estimates of capital outflows. “Who knows, there may be capital inflows,” he said.
“What’s important is to undertake reform with a goal in mind ... you want to lower the cost of doing business, and remove the hassle factor with respect to exchange controls.”
There were rumours last week of a plan, backed by Economic Development Minister Ebrahim Patel, to fix the exchange rate of the rand at a particular level, which is impossible in the face of global market forces.
Gordhan said the Treasury would assist the Reserve Bank in any way it could to build its foreign exchange reserves, which help cushion the economy from external shocks and make foreign exchange intervention possible. They stand at about 40bn.
Scott Picken, CEO of IPS says, “The new changes in the reserve bank legislation are very exciting for South Africans. Now they can take out R4 million per person and also R750 000 per year as a travelling allowance. This allows them a far greater opportunity to take advantage of the opportunities overseas, especially if they had reached the original limit of R2 million. With a strong Rand and good growth prospects in Australia, along with the guaranteed market related rentals through the leaseback program, this is certainly something South Africans should be looking into at the moment. We also have some very exciting prospects which we are about to Launch in the London!"
Go to www.ipsinvest.com for more information.
IPS
Facebook Badge
Thursday, October 29, 2009
Tuesday, October 27, 2009
To rent or to buy: weighing up the options
By Anthony Keane
News Limited newspapers
October 26, 2009 12:00am
Renting v buying
"We have an absolute affinity with owning our own castle," says Ironfish's Damon Nagel / Your Money
IT'S a lie to say that numbers don't lie. This is especially true in the real estate debate about whether you are financially better off renting or buying a house.
Crunching the numbers for this argument can produce almost any answer you like, depending on the assumptions made for factors such as interest rates, house prices, rental costs, investment growth and tax deductions.
And, of course, there's the matter of trying to save up the tens of thousands of dollars it usually takes to build a deposit.
The "rent money is dead money" line is a fair claim in many cases, but things can get murky when the money saved by renting is invested elsewhere typically shares or an investment property that have tax incentives.
It's easy enough to compare the basics. For example, Brisbane's median asking rent for a house is $360 a week, according to a report by Australian Property Monitors. The median house price for Brisbane is $419,000, says the Real Estate Institute of Australia.
Related Coverage
* Readers' Comments: Renting versus buying - PerthNowPerth Now,
* Readers' Comments: 'Rate rises will hurt property' - PerthNowPerth Now,
* Lower age, higher risksThe Australian, 30 Sep 2009
* Love affair with houses not always bestNEWS.com.au, 14 Sep 2009
* Reader's Comments: Housing taxes under spotlightNEWS.com.au,
Your Say
this is depressing, what single person earns 70k a year? i'm 20 and earning just under 50k, i've got a couple k in saving...
(Read More)
jeff of brisbane
The interest cost of a $419,000 loan based on a 6.5 per cent interest rate is $524 a week, and for an 8.5per cent interest rate it is $685 a week. But the basics just don't tell the full story.
Damon Nagel, managing director of property investment firm Ironfish, says most people don't consider the long list of other factors that affect the renting versus buying decision.
He says people can benefit by owning investment property while themselves living in a rented residence, although these "rental investors" are uncommon.
"We have an absolute affinity with owning our own castle."
Home ownership offers a sense of security and the ability to change your living environment without seeking permission, Nagel says, which often outweighs any financial benefits.
He has calculated that a single person earning $70,000 a year who buys a $400,000 home with a 20 per cent deposit will spend $469 a week, based on a 6.5 per cent home loan rate and taking into account all the extras such as council rates and mortgage set-up costs.
But a renter in an equivalent $400,000 property would pay $420 a week a saving of $50.
"When interest rates go higher than 7 per cent, it's even more of a no-brainer to be a rental investor," Nagel says.
"The argument shifts back to buying your own home when rates are low."
Tax deductions worth considering
The key factor is the tax deductions property investors can claim something that owner/occupiers cannot do. But a big benefit of being an owner/occupier is that you pay no tax on your property's capital growth.
"What you save on a swing you lose on the roundabout," he says.
So what is his verdict rent or buy? "It's a Russian roulette question. If I was young and starting out I would do a rental investment. If I had my own home I would keep my own home."
Making your first home an investment property is a strategy also recommended by the chief executive of property company Investa Solutions, Ian Lloyd.
"People tend to do things the traditional way and are scared of doing something a different way, but this strategy means you still own property, and at the worst you can go and move into your investment property," he says.
Young Australians can benefit from having a tenant help repay their property. "I'm trying to encourage my youngest son at 18 to buy his first property at 19 he will be able to set it up to work for him before he leaves university."
Lloyd says the tax deductions are usually the biggest when the investment property is new. "A lot of people forget that you can take your tax benefits in your weekly, fortnightly or monthly pay packet. You don't have to wait until tax time to get the benefit," he says.
An income tax variation form is available on the Tax Office website, although Lloyd suggests people get their accountant to have a quick look at this strategy.
"Another thing that people miss is the growth you are getting is on a very big asset," he says.
"It only has to go up 10 per cent on a $300,000 property and you have gained $30,000."
Renting a low-hassle option
Smartline Personal Mortgage Advisers managing director Chris Acret says renting can be attractive for people who want to avoid maintenance costs or want the flexibility to move without the costs and hassles associated with selling a property.
"Renting may also be a good option for people who want to live in a suburb close to the city or the beach, but can't afford to buy a property in that area," he says.
"You could buy a property in an adjoining suburb which isn't as expensive but still has good scope for capital growth and rent that out while you rent a property in your preferred suburb."
Of course, the money saved by renting should be channelled into investment, he says.
"The most important thing is to be doing something proactive about creating wealth for you and your family. The biggest mistake people make is doing nothing."
AMP financial planner Darren James says people should remember that property is not a get-rich-quick strategy.
"At present the cost of borrowing is relatively low, but this environment won't last forever," says James, of MBA Financial Strategists. "Another factor that makes real estate risky in the short term is transaction costs.
"These tend to be pricey often thousands of dollars for stamp duty and agents' fees so buyers need to consider the financial implications," he says.
"Those wanting better short-to-medium-term investment returns could consider other strategies such as managed funds or putting money into a high-interest savings account. For those who are prepared to wait to reap the rewards, home ownership remains a reliable long-term investment.
"At the end of the day, the unique needs of the people have to be taken into account, as well as time frames, tax effectiveness and an investor's attitude to risk."
Club Financial Services director David Garner believes in buying rather than renting.
"People might worry they will be in debt for 30 years, but the alternative is you rent for the rest of your life," he says.
While house price inflation will lower the relative size of the home loan over time, renters always have their costs adjusted upward.
"You are always paying a percentage of your income in rent," he says.
Garner says people who end up choosing the renting option need to make sure their savings are properly invested.
"Do people have the discipline to do that or does it just get blown on lifestyle?" he says.
"It's very rare that we would come across someone in a fantastic financial position who rents their home and has an investment property. Most people have equity in their own home."
Scott Picken from IPS, says, "Remember there are also huge advantages to owning investment property prior to immigrating to Australia and you can make sure you are getting the best return on your capital. When you are ready to buy you dream "house" your investment properties can really assist you."
Contact IPS on www.ipsinvest.com for more information.
News Limited newspapers
October 26, 2009 12:00am
Renting v buying
"We have an absolute affinity with owning our own castle," says Ironfish's Damon Nagel / Your Money
IT'S a lie to say that numbers don't lie. This is especially true in the real estate debate about whether you are financially better off renting or buying a house.
Crunching the numbers for this argument can produce almost any answer you like, depending on the assumptions made for factors such as interest rates, house prices, rental costs, investment growth and tax deductions.
And, of course, there's the matter of trying to save up the tens of thousands of dollars it usually takes to build a deposit.
The "rent money is dead money" line is a fair claim in many cases, but things can get murky when the money saved by renting is invested elsewhere typically shares or an investment property that have tax incentives.
It's easy enough to compare the basics. For example, Brisbane's median asking rent for a house is $360 a week, according to a report by Australian Property Monitors. The median house price for Brisbane is $419,000, says the Real Estate Institute of Australia.
Related Coverage
* Readers' Comments: Renting versus buying - PerthNowPerth Now,
* Readers' Comments: 'Rate rises will hurt property' - PerthNowPerth Now,
* Lower age, higher risksThe Australian, 30 Sep 2009
* Love affair with houses not always bestNEWS.com.au, 14 Sep 2009
* Reader's Comments: Housing taxes under spotlightNEWS.com.au,
Your Say
this is depressing, what single person earns 70k a year? i'm 20 and earning just under 50k, i've got a couple k in saving...
(Read More)
jeff of brisbane
The interest cost of a $419,000 loan based on a 6.5 per cent interest rate is $524 a week, and for an 8.5per cent interest rate it is $685 a week. But the basics just don't tell the full story.
Damon Nagel, managing director of property investment firm Ironfish, says most people don't consider the long list of other factors that affect the renting versus buying decision.
He says people can benefit by owning investment property while themselves living in a rented residence, although these "rental investors" are uncommon.
"We have an absolute affinity with owning our own castle."
Home ownership offers a sense of security and the ability to change your living environment without seeking permission, Nagel says, which often outweighs any financial benefits.
He has calculated that a single person earning $70,000 a year who buys a $400,000 home with a 20 per cent deposit will spend $469 a week, based on a 6.5 per cent home loan rate and taking into account all the extras such as council rates and mortgage set-up costs.
But a renter in an equivalent $400,000 property would pay $420 a week a saving of $50.
"When interest rates go higher than 7 per cent, it's even more of a no-brainer to be a rental investor," Nagel says.
"The argument shifts back to buying your own home when rates are low."
Tax deductions worth considering
The key factor is the tax deductions property investors can claim something that owner/occupiers cannot do. But a big benefit of being an owner/occupier is that you pay no tax on your property's capital growth.
"What you save on a swing you lose on the roundabout," he says.
So what is his verdict rent or buy? "It's a Russian roulette question. If I was young and starting out I would do a rental investment. If I had my own home I would keep my own home."
Making your first home an investment property is a strategy also recommended by the chief executive of property company Investa Solutions, Ian Lloyd.
"People tend to do things the traditional way and are scared of doing something a different way, but this strategy means you still own property, and at the worst you can go and move into your investment property," he says.
Young Australians can benefit from having a tenant help repay their property. "I'm trying to encourage my youngest son at 18 to buy his first property at 19 he will be able to set it up to work for him before he leaves university."
Lloyd says the tax deductions are usually the biggest when the investment property is new. "A lot of people forget that you can take your tax benefits in your weekly, fortnightly or monthly pay packet. You don't have to wait until tax time to get the benefit," he says.
An income tax variation form is available on the Tax Office website, although Lloyd suggests people get their accountant to have a quick look at this strategy.
"Another thing that people miss is the growth you are getting is on a very big asset," he says.
"It only has to go up 10 per cent on a $300,000 property and you have gained $30,000."
Renting a low-hassle option
Smartline Personal Mortgage Advisers managing director Chris Acret says renting can be attractive for people who want to avoid maintenance costs or want the flexibility to move without the costs and hassles associated with selling a property.
"Renting may also be a good option for people who want to live in a suburb close to the city or the beach, but can't afford to buy a property in that area," he says.
"You could buy a property in an adjoining suburb which isn't as expensive but still has good scope for capital growth and rent that out while you rent a property in your preferred suburb."
Of course, the money saved by renting should be channelled into investment, he says.
"The most important thing is to be doing something proactive about creating wealth for you and your family. The biggest mistake people make is doing nothing."
AMP financial planner Darren James says people should remember that property is not a get-rich-quick strategy.
"At present the cost of borrowing is relatively low, but this environment won't last forever," says James, of MBA Financial Strategists. "Another factor that makes real estate risky in the short term is transaction costs.
"These tend to be pricey often thousands of dollars for stamp duty and agents' fees so buyers need to consider the financial implications," he says.
"Those wanting better short-to-medium-term investment returns could consider other strategies such as managed funds or putting money into a high-interest savings account. For those who are prepared to wait to reap the rewards, home ownership remains a reliable long-term investment.
"At the end of the day, the unique needs of the people have to be taken into account, as well as time frames, tax effectiveness and an investor's attitude to risk."
Club Financial Services director David Garner believes in buying rather than renting.
"People might worry they will be in debt for 30 years, but the alternative is you rent for the rest of your life," he says.
While house price inflation will lower the relative size of the home loan over time, renters always have their costs adjusted upward.
"You are always paying a percentage of your income in rent," he says.
Garner says people who end up choosing the renting option need to make sure their savings are properly invested.
"Do people have the discipline to do that or does it just get blown on lifestyle?" he says.
"It's very rare that we would come across someone in a fantastic financial position who rents their home and has an investment property. Most people have equity in their own home."
Scott Picken from IPS, says, "Remember there are also huge advantages to owning investment property prior to immigrating to Australia and you can make sure you are getting the best return on your capital. When you are ready to buy you dream "house" your investment properties can really assist you."
Contact IPS on www.ipsinvest.com for more information.
Not as rosy as it sounds
MARIKA DOBBIN, property market editor
October 26, 2009
SOME in the real-estate game may have experienced deja vu in the lead-up to this weekend. Not the pleasurable kind, but an eerie feeling that inspires the biting of fingernails and twirling of hair.
The market hit peak supply on Saturday, only the 10th time in the past five years that auction listings have approached 1000 or more.
It was bigger than even the 820 that went under the hammer on the weekend before this year's AFL grand final, in a rush to sell before the Federal Government's first home buyers grant was cut in half.
The last time Melbourne had such a blockbuster auction event was on the same weekend last year, when the property market was in the depths of the slump. Back then, the glut of stock was not met by a surge in demand, and the clearance rate fell to 53 per cent, the worst result for vendors in many years.
This weekend's clearance rate of 82 per cent is evidence of how much the market has recovered, largely due to low interest rates and grants for first home buyers. Given the result, it seems safe to say the sustainability of the recovery towards Christmas is solid, with demand seemingly unabated despite interest rates now on the rise and the grants being wound up.
It has been a remarkable purple patch for vendors and agents, who have been so spoiled by clearance rates of 80 per cent or more for five months that some have come to think of it as normal. Far from it. Instead, the phenomenon is an indication of a market way out of balance, with supply nowhere near enough to satisfy demand.
Beyond that, there are some other key differences in the current market compared to the meltdown this time last year. Firstly, there is much less uncertainty about the economic outlook. Back then, it was the global picture that rattled Australian property market nerves, evidenced by the fact property was the first sector to bounce back.
Secondly, unlike 2007 and the first half of 2008, the market has been starved of stock for the year, with enough pent-up demand to carry into next year.
Another difference now is that investors, who retreated last year and have been wary of overpaying due to first home buyer enthusiasm, are on the charge. Data for August showed while the value of lending to owner-occupiers fell by a seasonally adjusted 1.7 per cent, lending to investors rose by 7.6 per cent (it's been rising for months).
Investors own 30 per cent of Australian real estate and that stake is getting bigger, according to Property Planning Australia. Their number and comparative wealth make them a much more powerful market force than first home buyers, who have driven competition for a year but traditionally make up less than 10 per cent of the market.
''First home buyers are very small in number, so they can enter the market with momentum but then die out very quickly,'' PPA director Mark Armstrong says. ''When investors compete with first home buyers, that is the start of a moving market. When investors compete with other investors, that is when a market really moves.''
Cumulative interest rate rises of 1 per cent are likely to knock many first home buyers out of the market. But investors are better protected and history shows that rates could increase by as much as 2.5 per cent before it cools investor demand.
The grants for first-timers have had no discernible effect on the rental squeeze. While rental growth slowed to a crawl in the first half of the year, rents are still at record highs and could start to move up again, as those prospective first home buyers who were priced out now look to sign new leases.
Yet for investors, the big problem will be a lack of investment-grade stock. The market has been skewed this year by a shortage of stock across all sectors, one reason that prices have climbed to new highs, with $30,000 growth to the median price in just three months.
Current listings show a scattering of affordable apartments and houses within 12 kilometres of the CBD. Property adviser Monique Wakelin says investors with more than $600,000 to spend will be at an advantage: ''The six weeks from now until the end of November is going to be the best buying time in that mid-priced bracket we are likely to see for quite some while.''
But investors playing in the $300,000-600,000 range may have to sit on their hands until next year - not good news for those wanting to grow their fingernails.
October 26, 2009
SOME in the real-estate game may have experienced deja vu in the lead-up to this weekend. Not the pleasurable kind, but an eerie feeling that inspires the biting of fingernails and twirling of hair.
The market hit peak supply on Saturday, only the 10th time in the past five years that auction listings have approached 1000 or more.
It was bigger than even the 820 that went under the hammer on the weekend before this year's AFL grand final, in a rush to sell before the Federal Government's first home buyers grant was cut in half.
The last time Melbourne had such a blockbuster auction event was on the same weekend last year, when the property market was in the depths of the slump. Back then, the glut of stock was not met by a surge in demand, and the clearance rate fell to 53 per cent, the worst result for vendors in many years.
This weekend's clearance rate of 82 per cent is evidence of how much the market has recovered, largely due to low interest rates and grants for first home buyers. Given the result, it seems safe to say the sustainability of the recovery towards Christmas is solid, with demand seemingly unabated despite interest rates now on the rise and the grants being wound up.
It has been a remarkable purple patch for vendors and agents, who have been so spoiled by clearance rates of 80 per cent or more for five months that some have come to think of it as normal. Far from it. Instead, the phenomenon is an indication of a market way out of balance, with supply nowhere near enough to satisfy demand.
Beyond that, there are some other key differences in the current market compared to the meltdown this time last year. Firstly, there is much less uncertainty about the economic outlook. Back then, it was the global picture that rattled Australian property market nerves, evidenced by the fact property was the first sector to bounce back.
Secondly, unlike 2007 and the first half of 2008, the market has been starved of stock for the year, with enough pent-up demand to carry into next year.
Another difference now is that investors, who retreated last year and have been wary of overpaying due to first home buyer enthusiasm, are on the charge. Data for August showed while the value of lending to owner-occupiers fell by a seasonally adjusted 1.7 per cent, lending to investors rose by 7.6 per cent (it's been rising for months).
Investors own 30 per cent of Australian real estate and that stake is getting bigger, according to Property Planning Australia. Their number and comparative wealth make them a much more powerful market force than first home buyers, who have driven competition for a year but traditionally make up less than 10 per cent of the market.
''First home buyers are very small in number, so they can enter the market with momentum but then die out very quickly,'' PPA director Mark Armstrong says. ''When investors compete with first home buyers, that is the start of a moving market. When investors compete with other investors, that is when a market really moves.''
Cumulative interest rate rises of 1 per cent are likely to knock many first home buyers out of the market. But investors are better protected and history shows that rates could increase by as much as 2.5 per cent before it cools investor demand.
The grants for first-timers have had no discernible effect on the rental squeeze. While rental growth slowed to a crawl in the first half of the year, rents are still at record highs and could start to move up again, as those prospective first home buyers who were priced out now look to sign new leases.
Yet for investors, the big problem will be a lack of investment-grade stock. The market has been skewed this year by a shortage of stock across all sectors, one reason that prices have climbed to new highs, with $30,000 growth to the median price in just three months.
Current listings show a scattering of affordable apartments and houses within 12 kilometres of the CBD. Property adviser Monique Wakelin says investors with more than $600,000 to spend will be at an advantage: ''The six weeks from now until the end of November is going to be the best buying time in that mid-priced bracket we are likely to see for quite some while.''
But investors playing in the $300,000-600,000 range may have to sit on their hands until next year - not good news for those wanting to grow their fingernails.
The Australian Property Market and the Global Recession
Australia is one of the few countries, along with Canada, who has felt the credit crunch less than the rest of the world. There may be many reason for this, such as stricter property lending rules or because there is such a large amount of space and supply of land to be able to be used for homes that the vast increases the majority of the world saw from 2004 – 2006 did not happen.
While Australia has not been completely sheltered by the economic downturn, it has weathered the storm quite well. There is a divide amongst experts as to how the property market will react in 2009 and 2010 in Australia. Most financial analysts tend to think that property values will fall from 5 10 . Most agree, however, that an increase in value to the property market is not likely before 2011.
In the end, the Australian property market will be affected, either positively or negatively by four overriding factors: debt, employment, the global economy, and housing price stability. In reference to debt, the main issue that is facing the majority of Australian households is that the debt levels are at record highs. In a property market where housing prices are rising, the number of eligible buyers may drastically fall as people are financially unable to take on any more debt.
Employment is a very strong factor in whether the Australian property market will rise or fall. Unemployment rates are on the rise, but because there have been labour shortages in the mines, there has been work for those able to do manual mining labour. Unfortunately, due to the uncertainty in the economy, some businesses are protecting themselves by making full time employees part time, as this saves on health care and tax expenses. If the economy does not begin to strengthen, more business will have to move to measures such as this, in addition to redundancies and lay offs.
The global economy, but specifically the economies of the US and China, needs to strengthen in order for the world to come back to financial order. Many countries are introducing stimulus plans to help revitalize their country, get spending under control, and to help bring financial strength back to their currencies. While the Australian property market will not feel the immediate affects of a strengthening US or Chinese economy, the medium term affects will help to maintain or increase property values.
In order to keep housing stability in Australia, interest rates have to remain low and repossessions must remain few. Banks that are working with their customers in order to allow them to keep their homes are helping bring back the economy. If banks repossess a majority of homes and hold on their books a large amount of overvalued, non saleable stock, the market will surely fall.
Half way through 2009, the Australian property market has been able to maintain a solid ground. If employment can continue and the stimulus packages of other countries begin to kick in, the property market will remain strong. Although significant rises in the Australian property market should not be expected, a modest increase next year should be an attainable goal.
Author Resource:- Michael Sterios is a writer for http://www.moneynet.com.au
While Australia has not been completely sheltered by the economic downturn, it has weathered the storm quite well. There is a divide amongst experts as to how the property market will react in 2009 and 2010 in Australia. Most financial analysts tend to think that property values will fall from 5 10 . Most agree, however, that an increase in value to the property market is not likely before 2011.
In the end, the Australian property market will be affected, either positively or negatively by four overriding factors: debt, employment, the global economy, and housing price stability. In reference to debt, the main issue that is facing the majority of Australian households is that the debt levels are at record highs. In a property market where housing prices are rising, the number of eligible buyers may drastically fall as people are financially unable to take on any more debt.
Employment is a very strong factor in whether the Australian property market will rise or fall. Unemployment rates are on the rise, but because there have been labour shortages in the mines, there has been work for those able to do manual mining labour. Unfortunately, due to the uncertainty in the economy, some businesses are protecting themselves by making full time employees part time, as this saves on health care and tax expenses. If the economy does not begin to strengthen, more business will have to move to measures such as this, in addition to redundancies and lay offs.
The global economy, but specifically the economies of the US and China, needs to strengthen in order for the world to come back to financial order. Many countries are introducing stimulus plans to help revitalize their country, get spending under control, and to help bring financial strength back to their currencies. While the Australian property market will not feel the immediate affects of a strengthening US or Chinese economy, the medium term affects will help to maintain or increase property values.
In order to keep housing stability in Australia, interest rates have to remain low and repossessions must remain few. Banks that are working with their customers in order to allow them to keep their homes are helping bring back the economy. If banks repossess a majority of homes and hold on their books a large amount of overvalued, non saleable stock, the market will surely fall.
Half way through 2009, the Australian property market has been able to maintain a solid ground. If employment can continue and the stimulus packages of other countries begin to kick in, the property market will remain strong. Although significant rises in the Australian property market should not be expected, a modest increase next year should be an attainable goal.
Author Resource:- Michael Sterios is a writer for http://www.moneynet.com.au
Base rate rise 'will stabilise Australian property market'
Article Date : 22 October 2009
Australia's property market will benefit in the longer run from the recent interest rate rise, it has been claimed.
Brian White, the chairman of real estate firm Ray White, said the decision of the Reserve Bank of Australia (RBA) to hiked the Cash Rate from three per cent to 3.25 per cent will help to stabilise the sector.
He remarked: "There's nothing worse than a market getting out of control and the residential market has been remarkably strong over the last four or five months."
A stable situation may help the Australian real estate market to grow gradually without a boom-and-bust scenario arising, something that could encourage those keen to invest in the country.
In the minutes of this month's board meeting released yesterday, the RBA said it had raised the interest rate partly because a "sizeable gap" has emerged between its relatively strong performance and the weaker ones of other developed countries.
Australia's property market will benefit in the longer run from the recent interest rate rise, it has been claimed.
Brian White, the chairman of real estate firm Ray White, said the decision of the Reserve Bank of Australia (RBA) to hiked the Cash Rate from three per cent to 3.25 per cent will help to stabilise the sector.
He remarked: "There's nothing worse than a market getting out of control and the residential market has been remarkably strong over the last four or five months."
A stable situation may help the Australian real estate market to grow gradually without a boom-and-bust scenario arising, something that could encourage those keen to invest in the country.
In the minutes of this month's board meeting released yesterday, the RBA said it had raised the interest rate partly because a "sizeable gap" has emerged between its relatively strong performance and the weaker ones of other developed countries.
Population boom and China could set Australia up for “unprecedented prosperity”: Ken Henry
Friday 23 October 2009
Patrick Stafford
Print
Australia's population growth will create several business opportunities but will wreak havoc on the property industry unless the supply of new housing can keep up with demand, an industry expert has said.
The comments come in response to figures released by treasury secretary Ken Henry yesterday, which reveal Australia's population is set to reach 35 million people by 2050.
In a speech at the Brisbane University of Technology, Henry said Australia's population will grow as the mining boom, fuelled by demand from China and India, will continue to bring in immigrant workers. Handled correctly, he said, this could provide a "period of unprecedented prosperity".
Henry pointed to growth in several Asian countries, which he said will give a boost to the mining boom that will see it last for several more decades into 2050.
As a result, the Australian population will grow to over 35 million people by 2050, with Sydney, Melbourne and Brisbane to record the most growth.
While Sydney's and Melbourne's populations are set to grow by 54% and 74% respectively leading to populations of over seven million, Brisbane's will grow by a massive 106% to four million.
Henry emphasised the population growth will mean business opportunities for the exporting, manufacturing, natural resource and technology sectors, with the financial industry also set to grow.
"With the right decisions one can envisage a period of unprecedented prosperity," he said, saying cities will cope with the growth by innovating and creating new services. But he also warned the country will struggle to cope if new infrastructure is not developed.
He warned greater investment is needed to supply new infrastructure, and said a major problem will be the need for new accommodation to house the growing population.
"With a population of 22 million, we haven't managed to find accommodation with the environment," he said. "Our record has been poor, and in my view, we are not well placed to deal effectively with the environmental challenges posed by a population of 35 million."
"With less judicious decision... we could experience an extended period of extreme volatility, with no growth path proving sustainable."
Housing Industry of Australia chief economist Harley Dale says while population growth will deliver new opportunities for business, housing prices will continue to grow if supply does not meet demand.
"The impact this growth will have will very much demand on the success, or lack thereof, we have in boosting supply to meet demand. The longer we fail to create new dwelling stock as we need to each year, the greater the risk that this increased population will cause us a number of more physical and social infrastructure problems."
"At the end of the day, everybody needs somewhere to live. A fundamental social tenant is putting roofs over people's heads. If we're not keeping up with that rate, then that is a fundamental problem... and will affect everything else."
Patrick Stafford
Australia's population growth will create several business opportunities but will wreak havoc on the property industry unless the supply of new housing can keep up with demand, an industry expert has said.
The comments come in response to figures released by treasury secretary Ken Henry yesterday, which reveal Australia's population is set to reach 35 million people by 2050.
In a speech at the Brisbane University of Technology, Henry said Australia's population will grow as the mining boom, fuelled by demand from China and India, will continue to bring in immigrant workers. Handled correctly, he said, this could provide a "period of unprecedented prosperity".
Henry pointed to growth in several Asian countries, which he said will give a boost to the mining boom that will see it last for several more decades into 2050.
As a result, the Australian population will grow to over 35 million people by 2050, with Sydney, Melbourne and Brisbane to record the most growth.
While Sydney's and Melbourne's populations are set to grow by 54% and 74% respectively leading to populations of over seven million, Brisbane's will grow by a massive 106% to four million.
Henry emphasised the population growth will mean business opportunities for the exporting, manufacturing, natural resource and technology sectors, with the financial industry also set to grow.
"With the right decisions one can envisage a period of unprecedented prosperity," he said, saying cities will cope with the growth by innovating and creating new services. But he also warned the country will struggle to cope if new infrastructure is not developed.
He warned greater investment is needed to supply new infrastructure, and said a major problem will be the need for new accommodation to house the growing population.
"With a population of 22 million, we haven't managed to find accommodation with the environment," he said. "Our record has been poor, and in my view, we are not well placed to deal effectively with the environmental challenges posed by a population of 35 million."
"With less judicious decision... we could experience an extended period of extreme volatility, with no growth path proving sustainable."
Housing Industry of Australia chief economist Harley Dale says while population growth will deliver new opportunities for business, housing prices will continue to grow if supply does not meet demand.
"The impact this growth will have will very much demand on the success, or lack thereof, we have in boosting supply to meet demand. The longer we fail to create new dwelling stock as we need to each year, the greater the risk that this increased population will cause us a number of more physical and social infrastructure problems."
"At the end of the day, everybody needs somewhere to live. A fundamental social tenant is putting roofs over people's heads. If we're not keeping up with that rate, then that is a fundamental problem... and will affect everything else."
International property prices ‘to surge in Australia’
15/10/2009, Written by Jamie Musk, Halifax
International property prices ‘to surge in Australia’
Australian property prices should continue to rise strongly, despite a recent rise in interest rates, it has been suggested.
In an article on the subject, the Australian newspaper noted that a recent consumer sentiment survey found 74 per cent of consumers expecting house values to rise, compared with 53 per cent in May, despite the recent monetary policy tightening.
The paper suggested that the 1.9 per cent increase seen in August’s RP Data-Rismark capital city home price index is unlikely to be sustained, but noted that long-term trends are likely to push prices up.
It identified such factors as population growth, a boom in resources and rising gross domestic product, plus a supply-side shortage as too few homes are being built.
Earlier this month, the Reserve Bank of Australia raised the cash rate from three per cent to 3.25 per cent.
However, this is still a low level by recent Australian standards, with the level having been set at four per cent or higher throughout the last 20 years and as high as 7.25 per cent before September 2008.
International property prices ‘to surge in Australia’
Australian property prices should continue to rise strongly, despite a recent rise in interest rates, it has been suggested.
In an article on the subject, the Australian newspaper noted that a recent consumer sentiment survey found 74 per cent of consumers expecting house values to rise, compared with 53 per cent in May, despite the recent monetary policy tightening.
The paper suggested that the 1.9 per cent increase seen in August’s RP Data-Rismark capital city home price index is unlikely to be sustained, but noted that long-term trends are likely to push prices up.
It identified such factors as population growth, a boom in resources and rising gross domestic product, plus a supply-side shortage as too few homes are being built.
Earlier this month, the Reserve Bank of Australia raised the cash rate from three per cent to 3.25 per cent.
However, this is still a low level by recent Australian standards, with the level having been set at four per cent or higher throughout the last 20 years and as high as 7.25 per cent before September 2008.
Record August growth in home values despite first home buyer demand winding back
RP Data – Rismark Home Value Index Release
National property values jumped by almost 2 per cent in August in the largest monthly movement since the RP Data-Rismark Home Value Indices began in January 2005.
Using the rpdata.com (ASX: RPX) property database, which is Australia’s largest and includes over 170,000 sales during the first eight months of 2009, Australia’s housing recovery solidified during the month of August with strong capital gains registered across the country despite evidence of fading first home buyer numbers.
According to the “market-leading” RP Data-Rismark National Home Value Index (see Background on p4), home values in Australia rose by an exceptional 1.9 per cent during the month of August. This brings cumulative capital growth in the first eight months of 2009 to a better than expected 7.9 per cent. This is also the single highest monthly index result since the RP Data-Rismark National Home Value Index began in January 2005.
According to rpdata.com research director, Tim Lawless, the August results surprised on the upside and are indicative of very high levels of buyer confidence combined with low levels of listings.
“These buoyant conditions sit in striking contrast to the same time last year when values were falling, less than half of the auctions held cleared and sales volumes were at rock bottom. We are now seeing home values rising at a solid rate, almost 80 per cent of auctions are clearing, and sales volumes have bounced back significantly”, Mr Lawless said.
Rismark International managing director, Christopher Joye, added, “Australia’s housing market is being underpinned by the strongest population growth since 1971, record housing shortages, historically low mortgage rates, better than expected employment outcomes, and one of the world’s most profitable banking systems.”
Australian home values have now risen 3.8 per cent past their February 2008 peak. This rebound followed peak-to-trough falls in national home values of just 3.8 per cent in 2008, which compares exceptionally well with the 15 per cent and 30 per cent house price declines seen in the UK and US, respectively.
Dispelling concerns that the recovery is limited to first home buyers Mr Joye commented, “In contrast to claims that this is a first time buyer bubble, the cheapest 20 per cent of suburbs in Australia have actually underperformed both the mid-priced market and Australia’s 20 per cent most expensive suburbs since the housing market bottomed in December 2008.”
“As recently noted by the RBA, all major lenders now require a minimum 10 per cent deposit and are applying the strictest credit standards we’ve seen in over a decade. Australian housing credit growth has also been running at levels that are extremely low by historical standards and noticeably less than the growth experienced in the 1991 recession,” Mr Joye said.
Rpdata.com’s Tim Lawless concurred with Mr Joye and said that over the last three months the premium residential market increased in value by 4.5 per cent compared with a 3.4 per cent gain in the middle market and a 2.8 per cent improvement at the cheapest end. (Note: numbers in chart to right show changes since December 2008 in the cheap, middle market, and expensive suburbs.)
“Despite the strong gains, the bounce in the premium sector has not been enough to offset the peak to trough fall of 9.9 per cent between February 2008 and January 2009. Prices in Australia’s most expensive markets are still 1.1 per cent lower than at their peak.”
Mr Joye added, “While the resounding recovery in Australia’s housing market confirms our forecasts, we expect medium term growth rates to be more measured as mortgage rates normalise back to between 7-8 per cent. This would bring the cost of housing finance back in line with its 2000-01 levels, which is notably well below the searing 9.6% highs endured by borrowers in August 2008 care of the RBA.”
In closing Tim Lawless said that the upward momentum in Australian house prices is a critical economic signal from the market to builders and developers to encourage them to reinvest in producing new housing supply. This was a message reinforced by the RBA’s Dr Anthony Richards in a speech to CEDA yesterday: policymakers need to facilitate significant new investment in housing supply to alleviate Australia’s growing housing shortage, which ANZ and Westpac estimate has risen to around 200,000 homes.
“This price growth will also go a long way to comforting risk-averse lenders to start providing credit again to developers, which has been one of the main bottlenecks on the supply-side. And it will stimulate the reallocation of resources away from other sectors of the economy into much-needed housing investment.” Mr Lawless said.
Other key findings from the August RP Data-Rismark Index results:
Unit values (+2.1 per cent) have marginally outperformed house values (+1.8 per cent) in the month of August. Over the course of 2009, units (+8.5 per cent) have also generated slightly higher capital growth than houses (+7.7 per cent).
Most capital cities recorded robust gains in the month of August with every single city experiencing rises in home values during the first eight months of 2009.
After several years of subdued growth following the end of Australia’s last housing boom in 2003, which saw Australia’s “house price-to-income ratio” fall by nearly 20 per cent through to December 2008, home values in the two major capital cities, Melbourne and Sydney, have led the recovery in 2009 with total capital gains of 11.6 per cent and 8.6 per cent, respectively.
Following Melbourne, Darwin has been the next best performing capital city with growth of 9.7 per cent in 2009. Interestingly, Darwin also continues to deliver the highest rental yields, implying that the market may have room for further growth.
Home values in Canberra (+6.7 per cent), Brisbane (+5.2 per cent), Perth (+4.1 per cent) and Adelaide (+3.1 per cent) have also realised sustained gains in 2009.
As RP Data-Rismark correctly anticipated, residential real estate in Perth has experienced a recovery in 2009 after a period of falling prices since September 2007. While Perth dwellings have recorded 4.1 per cent growth in the first eight months of the year they still remain 3.6 per cent below their September 2007 peak.
National rental yields have softened slightly given the strong capital growth with the gross annualised rental yield for units being 5.1 per cent while house rental yields are slightly lower at 4.3 per cent.
Ends. Additional information – please contact Mitch Koper at RP Data on 0417 771 778 or Christopher Joye on 0414 980 264.
Key statistics, tables and graphs available in the PDF (308kb).
http://www.rpdata.com/images/stories/content/pressreleases/rp_data_rismark_home_value_index_september_30_2009.pdf
Go to www.ipsinvest.com for more Australian opportunities.
National property values jumped by almost 2 per cent in August in the largest monthly movement since the RP Data-Rismark Home Value Indices began in January 2005.
Using the rpdata.com (ASX: RPX) property database, which is Australia’s largest and includes over 170,000 sales during the first eight months of 2009, Australia’s housing recovery solidified during the month of August with strong capital gains registered across the country despite evidence of fading first home buyer numbers.
According to the “market-leading” RP Data-Rismark National Home Value Index (see Background on p4), home values in Australia rose by an exceptional 1.9 per cent during the month of August. This brings cumulative capital growth in the first eight months of 2009 to a better than expected 7.9 per cent. This is also the single highest monthly index result since the RP Data-Rismark National Home Value Index began in January 2005.
According to rpdata.com research director, Tim Lawless, the August results surprised on the upside and are indicative of very high levels of buyer confidence combined with low levels of listings.
“These buoyant conditions sit in striking contrast to the same time last year when values were falling, less than half of the auctions held cleared and sales volumes were at rock bottom. We are now seeing home values rising at a solid rate, almost 80 per cent of auctions are clearing, and sales volumes have bounced back significantly”, Mr Lawless said.
Rismark International managing director, Christopher Joye, added, “Australia’s housing market is being underpinned by the strongest population growth since 1971, record housing shortages, historically low mortgage rates, better than expected employment outcomes, and one of the world’s most profitable banking systems.”
Australian home values have now risen 3.8 per cent past their February 2008 peak. This rebound followed peak-to-trough falls in national home values of just 3.8 per cent in 2008, which compares exceptionally well with the 15 per cent and 30 per cent house price declines seen in the UK and US, respectively.
Dispelling concerns that the recovery is limited to first home buyers Mr Joye commented, “In contrast to claims that this is a first time buyer bubble, the cheapest 20 per cent of suburbs in Australia have actually underperformed both the mid-priced market and Australia’s 20 per cent most expensive suburbs since the housing market bottomed in December 2008.”
“As recently noted by the RBA, all major lenders now require a minimum 10 per cent deposit and are applying the strictest credit standards we’ve seen in over a decade. Australian housing credit growth has also been running at levels that are extremely low by historical standards and noticeably less than the growth experienced in the 1991 recession,” Mr Joye said.
Rpdata.com’s Tim Lawless concurred with Mr Joye and said that over the last three months the premium residential market increased in value by 4.5 per cent compared with a 3.4 per cent gain in the middle market and a 2.8 per cent improvement at the cheapest end. (Note: numbers in chart to right show changes since December 2008 in the cheap, middle market, and expensive suburbs.)
“Despite the strong gains, the bounce in the premium sector has not been enough to offset the peak to trough fall of 9.9 per cent between February 2008 and January 2009. Prices in Australia’s most expensive markets are still 1.1 per cent lower than at their peak.”
Mr Joye added, “While the resounding recovery in Australia’s housing market confirms our forecasts, we expect medium term growth rates to be more measured as mortgage rates normalise back to between 7-8 per cent. This would bring the cost of housing finance back in line with its 2000-01 levels, which is notably well below the searing 9.6% highs endured by borrowers in August 2008 care of the RBA.”
In closing Tim Lawless said that the upward momentum in Australian house prices is a critical economic signal from the market to builders and developers to encourage them to reinvest in producing new housing supply. This was a message reinforced by the RBA’s Dr Anthony Richards in a speech to CEDA yesterday: policymakers need to facilitate significant new investment in housing supply to alleviate Australia’s growing housing shortage, which ANZ and Westpac estimate has risen to around 200,000 homes.
“This price growth will also go a long way to comforting risk-averse lenders to start providing credit again to developers, which has been one of the main bottlenecks on the supply-side. And it will stimulate the reallocation of resources away from other sectors of the economy into much-needed housing investment.” Mr Lawless said.
Other key findings from the August RP Data-Rismark Index results:
Unit values (+2.1 per cent) have marginally outperformed house values (+1.8 per cent) in the month of August. Over the course of 2009, units (+8.5 per cent) have also generated slightly higher capital growth than houses (+7.7 per cent).
Most capital cities recorded robust gains in the month of August with every single city experiencing rises in home values during the first eight months of 2009.
After several years of subdued growth following the end of Australia’s last housing boom in 2003, which saw Australia’s “house price-to-income ratio” fall by nearly 20 per cent through to December 2008, home values in the two major capital cities, Melbourne and Sydney, have led the recovery in 2009 with total capital gains of 11.6 per cent and 8.6 per cent, respectively.
Following Melbourne, Darwin has been the next best performing capital city with growth of 9.7 per cent in 2009. Interestingly, Darwin also continues to deliver the highest rental yields, implying that the market may have room for further growth.
Home values in Canberra (+6.7 per cent), Brisbane (+5.2 per cent), Perth (+4.1 per cent) and Adelaide (+3.1 per cent) have also realised sustained gains in 2009.
As RP Data-Rismark correctly anticipated, residential real estate in Perth has experienced a recovery in 2009 after a period of falling prices since September 2007. While Perth dwellings have recorded 4.1 per cent growth in the first eight months of the year they still remain 3.6 per cent below their September 2007 peak.
National rental yields have softened slightly given the strong capital growth with the gross annualised rental yield for units being 5.1 per cent while house rental yields are slightly lower at 4.3 per cent.
Ends. Additional information – please contact Mitch Koper at RP Data on 0417 771 778 or Christopher Joye on 0414 980 264.
Key statistics, tables and graphs available in the PDF (308kb).
http://www.rpdata.com/images/stories/content/pressreleases/rp_data_rismark_home_value_index_september_30_2009.pdf
Go to www.ipsinvest.com for more Australian opportunities.
Wednesday, October 21, 2009
UK rates 'to stay low for years'
UK interest rates will stay low for years amid tax rises and spending cuts, according to an economic forecast.
The Centre for Economics and Business Research (CEBR) believes the rate will remain at its current 0.5% level until 2011 and not reach 2% until 2014.
The report predicted the pound will weaken further, falling to $1.40 and "possibly" below 1 euro.
Its forecast is based on the government managing to slash the UK budget deficit by £100bn over the next parliament.
It says that about £80bn of this would come from spending cuts, and a further £20bn from tax rises.
'Policy mix'
Such a squeeze on public finances would severely limit economic growth, meaning the Bank of England had to keep rates low to make borrowing money affordable, the CEBR argues.
"We are likely to see an exciting policy mix, with the fiscal policy lever pulled right back while the monetary lever is fast forward," said Douglas McWilliams, CEBR chief executive and one of the report's authors.
"Our analysis says that this ought to work. If it does so, we are likely to see a major rerating of equities and property which in turn should stimulate economic growth after a lag."
Last week the Bank of England held interest rates at a record low of 0.5% for the seventh consecutive month.
The CEBR added that the Bank programme to increase the amount of money in the economy - so-called quantitative easing - would increase by £75bn from the £175bn so far announced.
And it predicted that the UK economy would grow by 1.3% in 2010 - having shrunk by 4.3% this year.
The Centre for Economics and Business Research (CEBR) believes the rate will remain at its current 0.5% level until 2011 and not reach 2% until 2014.
The report predicted the pound will weaken further, falling to $1.40 and "possibly" below 1 euro.
Its forecast is based on the government managing to slash the UK budget deficit by £100bn over the next parliament.
It says that about £80bn of this would come from spending cuts, and a further £20bn from tax rises.
'Policy mix'
Such a squeeze on public finances would severely limit economic growth, meaning the Bank of England had to keep rates low to make borrowing money affordable, the CEBR argues.
"We are likely to see an exciting policy mix, with the fiscal policy lever pulled right back while the monetary lever is fast forward," said Douglas McWilliams, CEBR chief executive and one of the report's authors.
"Our analysis says that this ought to work. If it does so, we are likely to see a major rerating of equities and property which in turn should stimulate economic growth after a lag."
Last week the Bank of England held interest rates at a record low of 0.5% for the seventh consecutive month.
The CEBR added that the Bank programme to increase the amount of money in the economy - so-called quantitative easing - would increase by £75bn from the £175bn so far announced.
And it predicted that the UK economy would grow by 1.3% in 2010 - having shrunk by 4.3% this year.
London house prices surge past 2007 record high
• Asking prices in London jump 6.5% to £461,157
• FSA report to outline reform plans for mortgage lenders
* Buzz up!
* Digg it
* Zoe Wood
* guardian.co.uk, Monday 19 October 2009
* Article history
Foxtons estate agents window
Reseach by property website Rightmove revealed that asking prices for homes in the capital had jumped 6.5% compared with last year. Photograph: Dan Kitwood/Getty
Property asking prices in London have broken through the record high set in November 2007 as the drought of homes for sale around the country continues to distort the market. New research out today shows that the average asking price in London jumped 6.5% to £461,157 in the four weeks to 10 October, sailing through the high of £412,731 set in November two years ago.
The survey by the property website Rightmove also shows that asking prices in England and Wales are now higher than a year ago, after climbing 2.8% in the past month. However, any optimism about the speed of any housing market recovery is expected to be dampened by today's report from the Financial Services Authority, which will outline plans for reform of the mortgage lending industry.
The watchdog is expected to recommend stricter credit checks on applicants, as well as an end to self-certification deals. Some commentators believe such a clampdown could restrict house price growth for a generation.
In its survey, Rightmove said a paucity of homes coming on to the market fuelled a £6,188 rise in asking prices in England and Wales. The gain was the largest since February last year and means the average property price stood at £230,184, which is 0.2% more than during the same period of 2008. The company said it was the first time the survey had detected a year-on-year increase since June 2008.
The group warned that there were still some fundamental weaknesses within the market, with the march upwards of asking prices, particularly in London, attributed to buyers jockeying for position amid "severe stock shortages". Estate agents in the capital have also reported a surge of interest in multimillion-pound homes as City bankers once again decide how to spend their bonuses.
Miles Shipside, commercial director of Rightmove, said it was a "highly unusual" situation given the recession, adding: "Some agents are virtually 'sold out' and are reporting available stock levels in single figures. In this sort of market sellers quite naturally will be tempted to test buyer appetite at a higher figure."
Rightmove said 95,000 new homes were put up for sale in England and Wales during the month, 36% less than in the same month of 2007. All areas saw price increases during the month, except the north and East Anglia, where prices fell by 2.5%. London saw the biggest monthly gain of 6.5%, followed by Yorkshire and Humberside at 5.3% and the south-east at 3%. Average asking prices are now higher in London, the south-east, West Midlands, north-west and Wales than a year ago.
The number of mortgage products available has collapsed from 15,000 to 1,500 in just two years, according to Fathom Consulting, with mortgage approvals also down sharply. Many first-time buyers are frozen out of the market due to the hefty deposits and the industry fears that the proposals outlined in today's FSA mortgage market review could further affect demand.
It is understood, however, that the FSA has rowed back from imposing caps on loan-to-value or loan-to-income ratios and a ban on 100% mortgages, opting instead to crack down on risky lending, for example by forcing non-bank lenders to hold on to 5-10% of the loans they originate.
The FSA also wants lenders to ensure clients are more rigorously credit checked so they are not extended in debt they cannot afford. Buy-to-let mortgages are also expected to come under its supervision.
"House prices in the UK are affected by demand and a lack of supply, more so than elsewhere, and house-price bubbles are not caused by lax lending," said Robert Sinclair, director of the Association of Mortgage Intermediaries. "The regulatory structure needs to balance the need to protect consumers from unaffordable debt with their desire to buy a home of their own."
• FSA report to outline reform plans for mortgage lenders
* Buzz up!
* Digg it
* Zoe Wood
* guardian.co.uk, Monday 19 October 2009
* Article history
Foxtons estate agents window
Reseach by property website Rightmove revealed that asking prices for homes in the capital had jumped 6.5% compared with last year. Photograph: Dan Kitwood/Getty
Property asking prices in London have broken through the record high set in November 2007 as the drought of homes for sale around the country continues to distort the market. New research out today shows that the average asking price in London jumped 6.5% to £461,157 in the four weeks to 10 October, sailing through the high of £412,731 set in November two years ago.
The survey by the property website Rightmove also shows that asking prices in England and Wales are now higher than a year ago, after climbing 2.8% in the past month. However, any optimism about the speed of any housing market recovery is expected to be dampened by today's report from the Financial Services Authority, which will outline plans for reform of the mortgage lending industry.
The watchdog is expected to recommend stricter credit checks on applicants, as well as an end to self-certification deals. Some commentators believe such a clampdown could restrict house price growth for a generation.
In its survey, Rightmove said a paucity of homes coming on to the market fuelled a £6,188 rise in asking prices in England and Wales. The gain was the largest since February last year and means the average property price stood at £230,184, which is 0.2% more than during the same period of 2008. The company said it was the first time the survey had detected a year-on-year increase since June 2008.
The group warned that there were still some fundamental weaknesses within the market, with the march upwards of asking prices, particularly in London, attributed to buyers jockeying for position amid "severe stock shortages". Estate agents in the capital have also reported a surge of interest in multimillion-pound homes as City bankers once again decide how to spend their bonuses.
Miles Shipside, commercial director of Rightmove, said it was a "highly unusual" situation given the recession, adding: "Some agents are virtually 'sold out' and are reporting available stock levels in single figures. In this sort of market sellers quite naturally will be tempted to test buyer appetite at a higher figure."
Rightmove said 95,000 new homes were put up for sale in England and Wales during the month, 36% less than in the same month of 2007. All areas saw price increases during the month, except the north and East Anglia, where prices fell by 2.5%. London saw the biggest monthly gain of 6.5%, followed by Yorkshire and Humberside at 5.3% and the south-east at 3%. Average asking prices are now higher in London, the south-east, West Midlands, north-west and Wales than a year ago.
The number of mortgage products available has collapsed from 15,000 to 1,500 in just two years, according to Fathom Consulting, with mortgage approvals also down sharply. Many first-time buyers are frozen out of the market due to the hefty deposits and the industry fears that the proposals outlined in today's FSA mortgage market review could further affect demand.
It is understood, however, that the FSA has rowed back from imposing caps on loan-to-value or loan-to-income ratios and a ban on 100% mortgages, opting instead to crack down on risky lending, for example by forcing non-bank lenders to hold on to 5-10% of the loans they originate.
The FSA also wants lenders to ensure clients are more rigorously credit checked so they are not extended in debt they cannot afford. Buy-to-let mortgages are also expected to come under its supervision.
"House prices in the UK are affected by demand and a lack of supply, more so than elsewhere, and house-price bubbles are not caused by lax lending," said Robert Sinclair, director of the Association of Mortgage Intermediaries. "The regulatory structure needs to balance the need to protect consumers from unaffordable debt with their desire to buy a home of their own."
UK house prices show 1st annual gain in 16-mths-Rightmove
LONDON, Oct 19 (Reuters) - Asking prices for homes in England and Wales rose on an annual basis for the first in more than a year in October, property Web site Rightmove said on Monday, buoyed by a dearth of properties coming onto the market.
Asking prices rose 0.2 percent on the year -- the first annual rise since June 2008 -- taking them to an average 230,184 pounds.
On the month, asking prices rose 2.8 percent, the biggest increase since February 2008 and the largest for a month of October in six years, Rightmove said.
Other recent surveys have also shown house prices are rising again on a monthly basis, but the trend has mostly been driven by a lack of supply as homeowners prefer to sit out the downturn rather than accept a lower price for their property.
"Current price recovery is based on an unusually thin market with transaction levels still 54 percent down on 2007," Rightmove said. "Ongoing lack of supply is driven by home owners deciding not to move given the current economic backdrop."
Rightmove said London led October's gains, with prices up by 5.2 percent on the year and 6.5 percent on the month, taking the average asking price to a record high of 416,157 pounds.
"Lack of fresh stock is the driving factor behind this record high," Rightmove said.
Asking prices rose 0.2 percent on the year -- the first annual rise since June 2008 -- taking them to an average 230,184 pounds.
On the month, asking prices rose 2.8 percent, the biggest increase since February 2008 and the largest for a month of October in six years, Rightmove said.
Other recent surveys have also shown house prices are rising again on a monthly basis, but the trend has mostly been driven by a lack of supply as homeowners prefer to sit out the downturn rather than accept a lower price for their property.
"Current price recovery is based on an unusually thin market with transaction levels still 54 percent down on 2007," Rightmove said. "Ongoing lack of supply is driven by home owners deciding not to move given the current economic backdrop."
Rightmove said London led October's gains, with prices up by 5.2 percent on the year and 6.5 percent on the month, taking the average asking price to a record high of 416,157 pounds.
"Lack of fresh stock is the driving factor behind this record high," Rightmove said.
Why is the UK property sector racing ahead in London?
Monday 19th October 2009
The UK property sector would appear to have recovered in general but the London market is already back to pre-recession levels after such a short space of time. Despite the fact that the financial climate in the UK is still very much overcast it would appear that homebuyers are prepared to "bid up" for properties in and around the London area. So can this continue?
The truth is that seeing London property prices racing so far ahead has obviously given the impression to some people that the recession is well and truly over. However, if you take a step back from the situation and review the UK economy as a whole, the unemployment market, the mortgage market and the shortage of quality property in the UK, we have the potential of a nightmare scenario. What if the UK property market were to collapse in 2010? Are UK mortgage companies taking too much of a risk?
There is talk of mortgage arrangements at five times income in some areas of the country which is basically a recipe for disaster. Quite how we have arrived back at this situation so quickly is a mystery to many people and one which will concern the UK government and UK regulators.
The UK property sector would appear to have recovered in general but the London market is already back to pre-recession levels after such a short space of time. Despite the fact that the financial climate in the UK is still very much overcast it would appear that homebuyers are prepared to "bid up" for properties in and around the London area. So can this continue?
The truth is that seeing London property prices racing so far ahead has obviously given the impression to some people that the recession is well and truly over. However, if you take a step back from the situation and review the UK economy as a whole, the unemployment market, the mortgage market and the shortage of quality property in the UK, we have the potential of a nightmare scenario. What if the UK property market were to collapse in 2010? Are UK mortgage companies taking too much of a risk?
There is talk of mortgage arrangements at five times income in some areas of the country which is basically a recipe for disaster. Quite how we have arrived back at this situation so quickly is a mystery to many people and one which will concern the UK government and UK regulators.
London house prices rebound strongly
Monday 19th October 2009
Prominent property website Rightmove has today confirmed that London property prices, at least in some areas, have returned to the peaks of 2007 despite the fact that the UK economy is still under pressure. While this is good news in the longer term, many people believe the move has come too soon and could cause confusion and mayhem in the short to medium term.
As more and more property buyers enter the market it is well-known that quality properties are not yet coming onto the market in the numbers required to fulfil demand. This has seen the price of properties in affluent areas of London squeezed higher and higher with reports of a 13% increase over last month alone. There is no way this kind of improvement in the UK property market is sustainable in the short term with unemployment rising, the cost of living under pressure and more and more people falling deeper and deeper into debt.
To give you an idea of current asking prices, you can expect to pay upwards of £747,000 for a property in Hammersmith and Fulham and upwards of £1.89 million for a property in Kensington and Chelsea. The average property price in London has increased by 6.5% over the last month to around £416,000.
Prominent property website Rightmove has today confirmed that London property prices, at least in some areas, have returned to the peaks of 2007 despite the fact that the UK economy is still under pressure. While this is good news in the longer term, many people believe the move has come too soon and could cause confusion and mayhem in the short to medium term.
As more and more property buyers enter the market it is well-known that quality properties are not yet coming onto the market in the numbers required to fulfil demand. This has seen the price of properties in affluent areas of London squeezed higher and higher with reports of a 13% increase over last month alone. There is no way this kind of improvement in the UK property market is sustainable in the short term with unemployment rising, the cost of living under pressure and more and more people falling deeper and deeper into debt.
To give you an idea of current asking prices, you can expect to pay upwards of £747,000 for a property in Hammersmith and Fulham and upwards of £1.89 million for a property in Kensington and Chelsea. The average property price in London has increased by 6.5% over the last month to around £416,000.
400 new black estate agents for SA
Announcement
19 October 2009
Bank, Estate Agency Affairs Board, French govt join the cause of industry's racial transformation
As part of the transformation drive in the South African property sector, Absa Bank, in collaboration with the National Housing Finance Corporation, The Estate Agency Affairs Board and the French Development Agency, is overseeing the training of 400 black real estate agents.
Two-hundred of these trainees have already completed their theoretical training in accordance with the new educational dispensation for estate agents, and will graduate today.
"The project matches Absa's transformational agenda in that it directly empowers and equips black South Africans, while also adding value to the communities in which we operate," says Luthando Vutula, Managing Executive of Absa Home Loans.
"As the leading mortgage financier in South Africa, we continue to lead by example," Vutula added.
In tackling the shortage of trained estate agents in townships and other previously disadvantaged areas, the training project is boosting the cohort of agents who can speak to prospective home buyers and sellers in their own language.
Well-trained agents, who can communicate effectively with emerging property owners about home financing, play a key role in educating South Africans about home financing and property ownership. This enhanced awareness will help extend mortgage providers' reach into previously disadvantaged - and still under-borrowed - communities. Ultimately, this stimulates activity in a still relatively under-traded market segment.
"All in all, more informed decisions will underpin the development of the property market and will help breathe life into property values once the cycle turns," says Vutula.
Vutula expects meaningful recovery in the property market by the first half of 2010, a trend which is being signalled by the Absa House Price index. Although overall house price movements are still negative, the declines are slowing markedly.
Notably, the affordable segment of the housing market (houses of between 40 and 80 square metres, with values up to R430 000) continues to clock up positive house price growth, albeit far more muted than the pace reported early last year. Year-on-year house price growth in the affordable segment has plummeted from nearly 15% in the first quarter of 2008, to just under 2% in the second quarter of 2009.
"Contrary to general perception the Affordable Housing portfolio is performing well relative to the other segments within the Absa Home Loans stable. In order to tap into the township market Absa Home Loans has designed a secondary market strategy wherein we address specific issues to unlock the market potential such as valuation methology & specific secondary market proposition thereby allowing home owners to access home loan finance to improve and renovate their homes.
Price changes in this market segment appear to be stabilising, thanks to a succession of interest rate cuts and a measure of relaxation in banks' lending criteria in the third quarter of this year. The trend has helped preserve the positive equity - the excess of property values over mortgage values - in the affordable market segment.
In line with the goals of the Property Charter, the property sector and the estate agency industry face the challenge of drawing as many trained black estate agents into a recovering property market - and especially into the affordable housing market - as possible.
"This project does just that," says Vutula. "It instils practical skills and entrepreneurial thinking into a group of people who are excited about industry prospects. It also bolsters Absa's goal of seeing more South Africans - especially those from previously disadvantaged communities - owning their own homes and building their personal wealth."
The training project is focused initially in Gauteng, KwaZulu-Natal and the Western Cape and has been designed to cater to the education.
19 October 2009
Bank, Estate Agency Affairs Board, French govt join the cause of industry's racial transformation
As part of the transformation drive in the South African property sector, Absa Bank, in collaboration with the National Housing Finance Corporation, The Estate Agency Affairs Board and the French Development Agency, is overseeing the training of 400 black real estate agents.
Two-hundred of these trainees have already completed their theoretical training in accordance with the new educational dispensation for estate agents, and will graduate today.
"The project matches Absa's transformational agenda in that it directly empowers and equips black South Africans, while also adding value to the communities in which we operate," says Luthando Vutula, Managing Executive of Absa Home Loans.
"As the leading mortgage financier in South Africa, we continue to lead by example," Vutula added.
In tackling the shortage of trained estate agents in townships and other previously disadvantaged areas, the training project is boosting the cohort of agents who can speak to prospective home buyers and sellers in their own language.
Well-trained agents, who can communicate effectively with emerging property owners about home financing, play a key role in educating South Africans about home financing and property ownership. This enhanced awareness will help extend mortgage providers' reach into previously disadvantaged - and still under-borrowed - communities. Ultimately, this stimulates activity in a still relatively under-traded market segment.
"All in all, more informed decisions will underpin the development of the property market and will help breathe life into property values once the cycle turns," says Vutula.
Vutula expects meaningful recovery in the property market by the first half of 2010, a trend which is being signalled by the Absa House Price index. Although overall house price movements are still negative, the declines are slowing markedly.
Notably, the affordable segment of the housing market (houses of between 40 and 80 square metres, with values up to R430 000) continues to clock up positive house price growth, albeit far more muted than the pace reported early last year. Year-on-year house price growth in the affordable segment has plummeted from nearly 15% in the first quarter of 2008, to just under 2% in the second quarter of 2009.
"Contrary to general perception the Affordable Housing portfolio is performing well relative to the other segments within the Absa Home Loans stable. In order to tap into the township market Absa Home Loans has designed a secondary market strategy wherein we address specific issues to unlock the market potential such as valuation methology & specific secondary market proposition thereby allowing home owners to access home loan finance to improve and renovate their homes.
Price changes in this market segment appear to be stabilising, thanks to a succession of interest rate cuts and a measure of relaxation in banks' lending criteria in the third quarter of this year. The trend has helped preserve the positive equity - the excess of property values over mortgage values - in the affordable market segment.
In line with the goals of the Property Charter, the property sector and the estate agency industry face the challenge of drawing as many trained black estate agents into a recovering property market - and especially into the affordable housing market - as possible.
"This project does just that," says Vutula. "It instils practical skills and entrepreneurial thinking into a group of people who are excited about industry prospects. It also bolsters Absa's goal of seeing more South Africans - especially those from previously disadvantaged communities - owning their own homes and building their personal wealth."
The training project is focused initially in Gauteng, KwaZulu-Natal and the Western Cape and has been designed to cater to the education.
USA Foreclosures Hit All-Time High!
October 19th, 2009 by Marco Santarelli
Just when you thought foreclosure filings were stabilizing, they hit another all-time high with almost 938,000 homeowners filing in the third quarter, according to Realty Trac. This is a 5% increase from the previous quarter.
Six states account for 62% of the nations foreclosures: California, Florida, Arizona, Nevada, Illinois and Michigan accounted for 62 percent of the nation’s total foreclosure activity in the third quarter. That accounts for 579,541 properties receiving foreclosure filings in the six states combined.
Although California’s foreclosure activity decreased almost 2% from Q2 there were still 250,054 properties that received a foreclosure filing. That was a 10% drop in default notices but a 4% increase in scheduled auctions and 12% increase in REOs.
Florida continues to maintain the second highest foreclosure activity with 156,924 filings — a 23% year-over-year increase and 1% over Q2. Scheduled auctions increased 5% and REOs increased 16% over the previous quarter.
Arizona had 50,342 foreclosure filings during the third quarter of this year — the third highest in the country. This was a 5% increase over the previous quarter.
Nevada, with 47,925 foreclosure filings, held the number four spot nationwide. Nevada had a 5% increase over the previous quarter (like Arizona), and a 25% increase year-over-year.
Illinois had 37,270 properties receive a foreclosure filing. Michigan had 37,026 properties receive a foreclosure filing. Both states experienced increasing foreclosure activity from the previous quarter and previous year.
Other states among the nation’s 10 highest were Georgia (33,385), Texas (29,838), Ohio (29,645), and New Jersey (18,108).
What we are observing is a slow down in foreclosure activity in the southern sand states, but an increase in the crisis as it quickly spreads up through the Midwest.
Just when you thought foreclosure filings were stabilizing, they hit another all-time high with almost 938,000 homeowners filing in the third quarter, according to Realty Trac. This is a 5% increase from the previous quarter.
Six states account for 62% of the nations foreclosures: California, Florida, Arizona, Nevada, Illinois and Michigan accounted for 62 percent of the nation’s total foreclosure activity in the third quarter. That accounts for 579,541 properties receiving foreclosure filings in the six states combined.
Although California’s foreclosure activity decreased almost 2% from Q2 there were still 250,054 properties that received a foreclosure filing. That was a 10% drop in default notices but a 4% increase in scheduled auctions and 12% increase in REOs.
Florida continues to maintain the second highest foreclosure activity with 156,924 filings — a 23% year-over-year increase and 1% over Q2. Scheduled auctions increased 5% and REOs increased 16% over the previous quarter.
Arizona had 50,342 foreclosure filings during the third quarter of this year — the third highest in the country. This was a 5% increase over the previous quarter.
Nevada, with 47,925 foreclosure filings, held the number four spot nationwide. Nevada had a 5% increase over the previous quarter (like Arizona), and a 25% increase year-over-year.
Illinois had 37,270 properties receive a foreclosure filing. Michigan had 37,026 properties receive a foreclosure filing. Both states experienced increasing foreclosure activity from the previous quarter and previous year.
Other states among the nation’s 10 highest were Georgia (33,385), Texas (29,838), Ohio (29,645), and New Jersey (18,108).
What we are observing is a slow down in foreclosure activity in the southern sand states, but an increase in the crisis as it quickly spreads up through the Midwest.
Tuesday, October 20, 2009
Latest Webinar Recording of what is happening in Australia?
http://www.internationalpropertysolutions.com/Documents/2009-10-14%2019.01%20Offshore%20Investing%20_%20Focus%20on%20Australia.wmv
Scott Picken, CEO from IPS runs through everything in the Australian Property market and we also have Richard Dunn, Oz Invest's Acquisition Manager, live from Australia (3:30am in the morning) to tell us exactly what is happening in the property market.
Richard goes through some very exciting opportunities in the pipeline, including all major cities like Sydney.
If Offshore Investment is something you are interested in, and Australia is something you are considering, then this is not a presentation to miss.
http://www.internationalpropertysolutions.com/Documents/2009-10-14%2019.01%20Offshore%20Investing%20_%20Focus%20on%20Australia.wmv
Come join us live on the 27th of Oct in JHB and the 5th of Nov in Pretoria. Click here - http://www.ipsinvest.com/Events.aspx
Scott Picken, CEO from IPS runs through everything in the Australian Property market and we also have Richard Dunn, Oz Invest's Acquisition Manager, live from Australia (3:30am in the morning) to tell us exactly what is happening in the property market.
Richard goes through some very exciting opportunities in the pipeline, including all major cities like Sydney.
If Offshore Investment is something you are interested in, and Australia is something you are considering, then this is not a presentation to miss.
http://www.internationalpropertysolutions.com/Documents/2009-10-14%2019.01%20Offshore%20Investing%20_%20Focus%20on%20Australia.wmv
Come join us live on the 27th of Oct in JHB and the 5th of Nov in Pretoria. Click here - http://www.ipsinvest.com/Events.aspx
Wednesday, October 14, 2009
Aus Property prices to rise by 23 percent, says QBE LMI
Watch movie - http://money.ninemsn.com.au/article.aspx?id=875432
Go to www.ipsinvest.com for more opportunities in Australia.
By Emma Thelwell, ninemsn Money
Property prices across Australia are expected to grow by as much as 23 percent over the next three years, as upgraders and investors pile back into the market.
Low interest rates and a shortage of affordable housing, coupled with growth in rental rates, will continue to drive up house prices - despite the threat of higher borrowing costs, according to the QBE Lenders' Mortgage Insurance (QBE LMI) Housing Outlook 2010-2012.
Adelaide, where property is the most affordable, is expected to see the strongest price gains, clocking a 23 percent rise over the next three years.
Meanwhile, housing shortages in Sydney and Melbourne should drive growth of 21 percent and 19 percent respectively, LMI predicts.
Recent strong growth in Darwin will be tempered by the weakness in the resources sector, although homes should still enjoy price surges of up to 17 percent.
Price growth in Brisbane and Hobart is expected to be dampened by risks to the local economy, with property in both cities seen rising in value by 15 percent.
Perth is expected to continue to suffer as the mining sector slows, and the stalling job market could hit Canberra, leading to more modest property price rises of just 12 percent over the next three years in both cities.
Ian Graham, chief executive of QBE LMI said the outlook was particularly good for first home buyers who have recently joined the housing ladder, and should also lure more investors back to the market.
"The surge in first home buyer demand is now slowly permeating through to greater demand from upgraders who are trading over to their next dwelling after selling to the buoyant first home buyer market," he said.
"The strong rental environment and stabilisation of prices is also beginning to attract investors back into the market."
Activity from both groups should pick up over the remaining months of 2009, said Mr Graham, propelling demand next year and picking up the slack in first time buyer demand after the First Home Owner Grant ends in December.
While low interest rates have helped the property market back to its feet after heavy losses last year, Mr Graham warned that a fragile economy and the continued high cost of borrowing will limit short term price gains.
Prices are not expected to pick up speed until the latter half of 2010, looking ahead to 2011 and 2012.
Plus, the danger remains that as the RBA looks to raise interest rates in coming months, the banks will push up their mortgage rates accordingly.
The gap between the variable mortgage rate and the cash rate has widened from an average 1.8 percent in June 2007 to a current 2.85 percent, according to LMI.
While interest rates are expected to hover around 3.5 percent in 2010, Mr Graham warned that banks may hike their rates further in an effort to protect their profit margins as the costs remain tight.
"The possibility still exists that banks could raise their housing variable rate independently of any increase in the cash rate by the RBA prior to this, reflecting the increased cost of external funding and the need to maintain their margins," he said.
The number of first time buyers is expected to drop back from an all time high of 200,000 in 2009, to 150,000 next year, as borrowing costs and house prices climb.
LMI expects interest rates – currently set at 3.25 percent - to rise from 3.5 percent in June 2010 to 4.25 percent by June 2011, before settling at 5 percent by June 2012.
The variable mortgage rate will rise accordingly, from 6.3 percent in June 2010 to 7.45 percent by June 2012, LMI predicts.
"There is a risk that housing stress will be experienced by this group when interest rates eventually rise", Mr Graham warned.
While first time buyer demand will drop back, a "clear recovery" is beginning to emerge in lending to upgraders and investors, Mr Graham said.
"Which is likely to continue to gather momentum in the coming months, and take up the baton as the main drivers of demand once the First Home Owners' Grant expires at the end of 2009."
Go to www.ipsinvest.com for more opportunities in Australia.
Go to www.ipsinvest.com for more opportunities in Australia.
By Emma Thelwell, ninemsn Money
Property prices across Australia are expected to grow by as much as 23 percent over the next three years, as upgraders and investors pile back into the market.
Low interest rates and a shortage of affordable housing, coupled with growth in rental rates, will continue to drive up house prices - despite the threat of higher borrowing costs, according to the QBE Lenders' Mortgage Insurance (QBE LMI) Housing Outlook 2010-2012.
Adelaide, where property is the most affordable, is expected to see the strongest price gains, clocking a 23 percent rise over the next three years.
Meanwhile, housing shortages in Sydney and Melbourne should drive growth of 21 percent and 19 percent respectively, LMI predicts.
Recent strong growth in Darwin will be tempered by the weakness in the resources sector, although homes should still enjoy price surges of up to 17 percent.
Price growth in Brisbane and Hobart is expected to be dampened by risks to the local economy, with property in both cities seen rising in value by 15 percent.
Perth is expected to continue to suffer as the mining sector slows, and the stalling job market could hit Canberra, leading to more modest property price rises of just 12 percent over the next three years in both cities.
Ian Graham, chief executive of QBE LMI said the outlook was particularly good for first home buyers who have recently joined the housing ladder, and should also lure more investors back to the market.
"The surge in first home buyer demand is now slowly permeating through to greater demand from upgraders who are trading over to their next dwelling after selling to the buoyant first home buyer market," he said.
"The strong rental environment and stabilisation of prices is also beginning to attract investors back into the market."
Activity from both groups should pick up over the remaining months of 2009, said Mr Graham, propelling demand next year and picking up the slack in first time buyer demand after the First Home Owner Grant ends in December.
While low interest rates have helped the property market back to its feet after heavy losses last year, Mr Graham warned that a fragile economy and the continued high cost of borrowing will limit short term price gains.
Prices are not expected to pick up speed until the latter half of 2010, looking ahead to 2011 and 2012.
Plus, the danger remains that as the RBA looks to raise interest rates in coming months, the banks will push up their mortgage rates accordingly.
The gap between the variable mortgage rate and the cash rate has widened from an average 1.8 percent in June 2007 to a current 2.85 percent, according to LMI.
While interest rates are expected to hover around 3.5 percent in 2010, Mr Graham warned that banks may hike their rates further in an effort to protect their profit margins as the costs remain tight.
"The possibility still exists that banks could raise their housing variable rate independently of any increase in the cash rate by the RBA prior to this, reflecting the increased cost of external funding and the need to maintain their margins," he said.
The number of first time buyers is expected to drop back from an all time high of 200,000 in 2009, to 150,000 next year, as borrowing costs and house prices climb.
LMI expects interest rates – currently set at 3.25 percent - to rise from 3.5 percent in June 2010 to 4.25 percent by June 2011, before settling at 5 percent by June 2012.
The variable mortgage rate will rise accordingly, from 6.3 percent in June 2010 to 7.45 percent by June 2012, LMI predicts.
"There is a risk that housing stress will be experienced by this group when interest rates eventually rise", Mr Graham warned.
While first time buyer demand will drop back, a "clear recovery" is beginning to emerge in lending to upgraders and investors, Mr Graham said.
"Which is likely to continue to gather momentum in the coming months, and take up the baton as the main drivers of demand once the First Home Owners' Grant expires at the end of 2009."
Go to www.ipsinvest.com for more opportunities in Australia.
Saturday, October 10, 2009
Australia looking good in global housing stakes
Australias property market has defied the downturn and market conditions look healthy compared with international markets.
The last time RP Datas Property Pulse commented on international markets was about this time last year in response to speculation that Australias housing market would follow the same downwards trend as the US and UK. At that time we suggested comparing these markets was like comparing chalk and cheese. There were (and still are) fundamental differences such as the strength of Australias financial sector, the imbalance between Australia's housing supply and demand, our economic outlook and our current monetary environment.
Needless to say, the Australian residential property market weathered the GFC storm quite well with national home values falling by just 3.8 percent from peak to trough. Since values bottomed in December last year national home values have increased a further 3.8 percent beyond the most recent peak.
Finally there is some good news for our most comparable markets. As confidence returns to international markets, housing prices in the US, UK and New Zealand appear to have turned the corner. From peak to trough US house prices fell by 23.6 percent (based on the First American House Price Index), UK prices were down 22.6 percent (based on the Halifax Index), and New Zealand values fell by 9.6 percent (based on the House Price Index from Property IQ). Since hitting the bottom US values are up 5.7%, UK values have improved 4.2% and New Zealand home values are up 1.3%.
Over the last five years the New Zealand market has provided the best annualised return of the four countries compared. Despite the recent value falls recorded between January 08 and April 09 the New Zealand market has provided an annual capital gain 5.9 percent compared with Australia's annualised capital growth of 5.6 percent. The UK housing sector returned just 0.1 percent per annum and the US provided a negative rate of growth of -1.5 percent per annum.
Comparing some of the key factors which are likely to impact on the residential property markets around the nation; it appears that Australia is well placed to record further growth in housing values.
Over 2009 Australia is likely to be the only advanced economy (as defined by the International Monetary Fund) to record a positive growth in the gross domestic product. The IMF estimated in their latest World Economic Outlook that Australian real GDP growth would be 0.7 percent at the end of 2009 before accelerating to 2.0 percent in 2010. This estimate is well above the average for advanced economies where real GDP growth is estimated to be -3.4 percent in 2009 and 1.3 percent in 2010.
Unemployment in Australia is also projected to remain well below the average rate of unemployment forecast for the world's advanced economies. The IMF estimates Australia’s rate of unemployment will reach 6.0 percent in 2009 (Australia's unemployment rate is currently 5.8 percent after reaching a low of 3.9 percent in February 2008) and 7.0 percent in 2010 substantially less than the 8.25 per cent estimated in the Government's May budget and also well below the forecast average rate for advanced economies which the IMF projects to be 9.3 percent by 2010.
Australia's financial markets are also in comparatively healthy shape. Australia's largest banks enjoy a AA rating from Standard and Poor's and mortgage defaults are less than 0.5 percent. Although interest rates are set to rise further, mortgage rates remain well below the historical average of 8.8 percent over the last 20 years. The fact that interest rates are about to rise can be construed as a strong testament to the health of the domestic economy.
There are a variety of other factors that will assist in propelling Australian property values upwards. The disconnect between demand and supply, which has been well documented, will be the primary driver of housing prices over the coming years. This is arguably the most significant difference between the Australian and US housing markets whilst the US market is well and truly over supplied, the Australian market place is suffering from a lack of new homes being constructed.
The factors outlined above set Australia apart from other countries and provide an insight as to why the domestic real estate market has remained relatively buoyant when compared with other western nations.
Go to www.ipsinvest.com for more opportunities in Australia.
The last time RP Datas Property Pulse commented on international markets was about this time last year in response to speculation that Australias housing market would follow the same downwards trend as the US and UK. At that time we suggested comparing these markets was like comparing chalk and cheese. There were (and still are) fundamental differences such as the strength of Australias financial sector, the imbalance between Australia's housing supply and demand, our economic outlook and our current monetary environment.
Needless to say, the Australian residential property market weathered the GFC storm quite well with national home values falling by just 3.8 percent from peak to trough. Since values bottomed in December last year national home values have increased a further 3.8 percent beyond the most recent peak.
Finally there is some good news for our most comparable markets. As confidence returns to international markets, housing prices in the US, UK and New Zealand appear to have turned the corner. From peak to trough US house prices fell by 23.6 percent (based on the First American House Price Index), UK prices were down 22.6 percent (based on the Halifax Index), and New Zealand values fell by 9.6 percent (based on the House Price Index from Property IQ). Since hitting the bottom US values are up 5.7%, UK values have improved 4.2% and New Zealand home values are up 1.3%.
Over the last five years the New Zealand market has provided the best annualised return of the four countries compared. Despite the recent value falls recorded between January 08 and April 09 the New Zealand market has provided an annual capital gain 5.9 percent compared with Australia's annualised capital growth of 5.6 percent. The UK housing sector returned just 0.1 percent per annum and the US provided a negative rate of growth of -1.5 percent per annum.
Comparing some of the key factors which are likely to impact on the residential property markets around the nation; it appears that Australia is well placed to record further growth in housing values.
Over 2009 Australia is likely to be the only advanced economy (as defined by the International Monetary Fund) to record a positive growth in the gross domestic product. The IMF estimated in their latest World Economic Outlook that Australian real GDP growth would be 0.7 percent at the end of 2009 before accelerating to 2.0 percent in 2010. This estimate is well above the average for advanced economies where real GDP growth is estimated to be -3.4 percent in 2009 and 1.3 percent in 2010.
Unemployment in Australia is also projected to remain well below the average rate of unemployment forecast for the world's advanced economies. The IMF estimates Australia’s rate of unemployment will reach 6.0 percent in 2009 (Australia's unemployment rate is currently 5.8 percent after reaching a low of 3.9 percent in February 2008) and 7.0 percent in 2010 substantially less than the 8.25 per cent estimated in the Government's May budget and also well below the forecast average rate for advanced economies which the IMF projects to be 9.3 percent by 2010.
Australia's financial markets are also in comparatively healthy shape. Australia's largest banks enjoy a AA rating from Standard and Poor's and mortgage defaults are less than 0.5 percent. Although interest rates are set to rise further, mortgage rates remain well below the historical average of 8.8 percent over the last 20 years. The fact that interest rates are about to rise can be construed as a strong testament to the health of the domestic economy.
There are a variety of other factors that will assist in propelling Australian property values upwards. The disconnect between demand and supply, which has been well documented, will be the primary driver of housing prices over the coming years. This is arguably the most significant difference between the Australian and US housing markets whilst the US market is well and truly over supplied, the Australian market place is suffering from a lack of new homes being constructed.
The factors outlined above set Australia apart from other countries and provide an insight as to why the domestic real estate market has remained relatively buoyant when compared with other western nations.
Go to www.ipsinvest.com for more opportunities in Australia.
UK Property Market Recovery
UK Property Market Recovery
by Melissa Chappell, published October 9, 2009 -
www.propertyinvestingoverseas.com
The UK property market appears to be slowly recovering from the severe drop the sector has experienced in recent times. Although the market does not appear ready to spring back to its former glory, signs of recovery are slowly relieving homeowners of a large burden.
The recovery has been established from the latest housing sales statistics released recently, displaying increases in all areas of sales. Calculating the statistics of the number of average sales in the three month period until the end of July, the trimester resulted in an average of 2 additional sales to the previous trimester in the months ending in June.
While the increase in the average number of sales is quite low, the fact that sales are increasing monthly, provides a positive outlook for the remainder of the year. Some debates have emerged from the release of the statistics relating to the under supply of housing currently on the market. This shortage of available housing for sale is presumed by analysts to be from owners preferring to hold onto their properties whenever possible, waiting for the market to improve.
Interest rates, restrictions on mortgage lending criteria and growing unemployment are claimed to be the main causes of mortgage arrears, urgent sales and repossessions. Incidentally they are the same areas, along with an increase in the general economy, required to turn around in order to assist with market recovery.
Negative equity seems to be the biggest factor facing UK homeowners in the current market, with mortgage debt higher than the home’s value. If the current growth figures do not continue to rise in the coming months, around 1.3 million homeowners could be affected before the recovery of the economic crisis.
The general overall outlook for UK housing predict that the market will stabilise in 2011, yet reports vary as to whether 2010 and the remainder of 2009 will see a drop, or slow but steady growth. The acceleration in growth is expected to see housing prices increase by around 20% in 2014 compared with the present pricing situation.
Sustained growth is on the wish list of all UK homeowners, hoping to escape the current desperate situation. Those wishing to leap onto the property ladder, taking advantage of undervalued or repossessed homes have been restricted by the current mortgage market. With the majority of lending providers reluctant to offer more than 75% LTV, accessing the initial deposit has made entering the market difficult.
The slow recovery of the housing market following 18 months of continuously falling prices has been hindered by the rental market, providing cheaper options in comparison to mortgage repayments. Expected to be rectified by the end of the year, reforms in the sector should see a continued positive outlook, with current growth rates sparking hope across the nation.
by Melissa Chappell, published October 9, 2009 -
www.propertyinvestingoverseas.com
The UK property market appears to be slowly recovering from the severe drop the sector has experienced in recent times. Although the market does not appear ready to spring back to its former glory, signs of recovery are slowly relieving homeowners of a large burden.
The recovery has been established from the latest housing sales statistics released recently, displaying increases in all areas of sales. Calculating the statistics of the number of average sales in the three month period until the end of July, the trimester resulted in an average of 2 additional sales to the previous trimester in the months ending in June.
While the increase in the average number of sales is quite low, the fact that sales are increasing monthly, provides a positive outlook for the remainder of the year. Some debates have emerged from the release of the statistics relating to the under supply of housing currently on the market. This shortage of available housing for sale is presumed by analysts to be from owners preferring to hold onto their properties whenever possible, waiting for the market to improve.
Interest rates, restrictions on mortgage lending criteria and growing unemployment are claimed to be the main causes of mortgage arrears, urgent sales and repossessions. Incidentally they are the same areas, along with an increase in the general economy, required to turn around in order to assist with market recovery.
Negative equity seems to be the biggest factor facing UK homeowners in the current market, with mortgage debt higher than the home’s value. If the current growth figures do not continue to rise in the coming months, around 1.3 million homeowners could be affected before the recovery of the economic crisis.
The general overall outlook for UK housing predict that the market will stabilise in 2011, yet reports vary as to whether 2010 and the remainder of 2009 will see a drop, or slow but steady growth. The acceleration in growth is expected to see housing prices increase by around 20% in 2014 compared with the present pricing situation.
Sustained growth is on the wish list of all UK homeowners, hoping to escape the current desperate situation. Those wishing to leap onto the property ladder, taking advantage of undervalued or repossessed homes have been restricted by the current mortgage market. With the majority of lending providers reluctant to offer more than 75% LTV, accessing the initial deposit has made entering the market difficult.
The slow recovery of the housing market following 18 months of continuously falling prices has been hindered by the rental market, providing cheaper options in comparison to mortgage repayments. Expected to be rectified by the end of the year, reforms in the sector should see a continued positive outlook, with current growth rates sparking hope across the nation.
Australian Jobs Data Boosts Asian Markets
Hana R. Alberts and Robert Olsen, 10.08.09, 05:50 AM EDT
Resources and banks stocks rise as investors await U.S. September retail sales.
HONG KONG -- Asian markets rose Thursday as evidence of economic recovery sprang from Australia, South Korea and Japan.
Australia's unemployment rate dropped in September, news that came on the heels of the central bank's decision to raise interest rates Wednesday.
South Korea posted positive economic data on exports to China, department store sales and credit card usage ahead of its own expected interest-rate announcement on Friday. The Baltic Dry index, which measures shipping by sea, reached its highest level in seven weeks.
Investors, however, remained cautious as they await reports of September retail sales in the U.S., an indicator of whether a key segment of consumer demand worldwide is growing or shrinking.
The jobs data out of Australia -- that payrolls added 40,600 jobs during September rather than cutting the predicted 10,000 -- boosted both the Aussie dollar and Sydney-traded stocks.
Resources and banks stocks rise as investors await U.S. September retail sales.
HONG KONG -- Asian markets rose Thursday as evidence of economic recovery sprang from Australia, South Korea and Japan.
Australia's unemployment rate dropped in September, news that came on the heels of the central bank's decision to raise interest rates Wednesday.
South Korea posted positive economic data on exports to China, department store sales and credit card usage ahead of its own expected interest-rate announcement on Friday. The Baltic Dry index, which measures shipping by sea, reached its highest level in seven weeks.
Investors, however, remained cautious as they await reports of September retail sales in the U.S., an indicator of whether a key segment of consumer demand worldwide is growing or shrinking.
The jobs data out of Australia -- that payrolls added 40,600 jobs during September rather than cutting the predicted 10,000 -- boosted both the Aussie dollar and Sydney-traded stocks.
Fitch: UK House prices will fall another 20%
Simon Lambert, This is Money
8 October 2009
House prices will fall a further 20% once the current false dawn for a property market recovery ends, claims ratings agency Fitch.
The ratings agency has reiterated its believe that UK house prices will see a peak to fall trough of 30%, taking the average value based on then Nationwide index down to £130,000.
It forecasts a W-shaped pattern for the property market as house prices double-dip after a mini-revival.
The prediction represents another 20% drop for the property market, with average house prices standing at £162,000 on the index, having rallied from a recent low of £148,000 in February.
Prices are currently down 13% on the £186,000 peak seen in October 2007, but Fitch says UK property remains heavily overvalued and has further to fall.
'The UK's average house price to income ratio remains significantly higher than the long term average,' said Brian Coulton, Head of Global Economics at Fitch Ratings.
'A 30% fall from the peak of October 2007 would bring this ratio back in line with the long term average. In comparison, the house price declines in the recession of the early 1990's saw the average house price to income ratio fall below the long term trend.'
Fitch is the latest organisation to warn of further falls for UK house prices, following similar forecasts by property consultancy Jones Lang LaSalle, the Ernst & Young ITEM Club and the Economic and Social Research Council.
Rising unemployment, low wage inflation and continuing tight mortgage criteria are expected to further contribute to depressing the property market and house price reports returning to registering falls.
The major UK property price indices have all registered gains in recent months, with Nationwide showing prices rising six times in seven months, and Halifax reporting prices on a three-month basis rising as fast as in early 2007.
Land Registry figures, based on completed sales, have shown falls tailing off and slight monthly growth, and homebuyer mortgages have climbed steadily from a low point last winter, although they remain well below the long-term average.
Fitch says that despite the recent signs of life attractive mortgage deals for those with deposits of less than 20% remain scarce and lenders it has spoken to have also reported tightening other criteria when vetting potential borrowers.
It added that if mortgage availability stabilises at current deposit requirement limits, then with an average home costing £162,000, a first-time buyer would need £32,000 in cash to buy a house. A homemover would require this amount in deposit and equity.
The figure remains resolutely high when compared to the typical pre-tax salary of £25,000, according to the Office of National Statistics. However, Council of Mortgage Lenders figures show that the average homemover individual or joint salary is £45,500 and has stood at about £40,000 since 2006, while the average first-time buyer individual or joint salary is £32,500, and has stood at between £30,000 and £35,000 since mid-2004.
Alastair Bigley, Head of UK Residential Mortgage Backed Securities at Fitch, says: 'Despite the fact that a global economic recovery is underway, the economic fundamentals do not auger well for a sustained strong recovery in the UK housing market.
'Although households are reducing debt and increasing savings, the upfront cost of house purchase for first-time buyers is likely to stifle housing demand.'
Nationwide House Prices Sept 1999 to Sept 2009
8 October 2009
House prices will fall a further 20% once the current false dawn for a property market recovery ends, claims ratings agency Fitch.
The ratings agency has reiterated its believe that UK house prices will see a peak to fall trough of 30%, taking the average value based on then Nationwide index down to £130,000.
It forecasts a W-shaped pattern for the property market as house prices double-dip after a mini-revival.
The prediction represents another 20% drop for the property market, with average house prices standing at £162,000 on the index, having rallied from a recent low of £148,000 in February.
Prices are currently down 13% on the £186,000 peak seen in October 2007, but Fitch says UK property remains heavily overvalued and has further to fall.
'The UK's average house price to income ratio remains significantly higher than the long term average,' said Brian Coulton, Head of Global Economics at Fitch Ratings.
'A 30% fall from the peak of October 2007 would bring this ratio back in line with the long term average. In comparison, the house price declines in the recession of the early 1990's saw the average house price to income ratio fall below the long term trend.'
Fitch is the latest organisation to warn of further falls for UK house prices, following similar forecasts by property consultancy Jones Lang LaSalle, the Ernst & Young ITEM Club and the Economic and Social Research Council.
Rising unemployment, low wage inflation and continuing tight mortgage criteria are expected to further contribute to depressing the property market and house price reports returning to registering falls.
The major UK property price indices have all registered gains in recent months, with Nationwide showing prices rising six times in seven months, and Halifax reporting prices on a three-month basis rising as fast as in early 2007.
Land Registry figures, based on completed sales, have shown falls tailing off and slight monthly growth, and homebuyer mortgages have climbed steadily from a low point last winter, although they remain well below the long-term average.
Fitch says that despite the recent signs of life attractive mortgage deals for those with deposits of less than 20% remain scarce and lenders it has spoken to have also reported tightening other criteria when vetting potential borrowers.
It added that if mortgage availability stabilises at current deposit requirement limits, then with an average home costing £162,000, a first-time buyer would need £32,000 in cash to buy a house. A homemover would require this amount in deposit and equity.
The figure remains resolutely high when compared to the typical pre-tax salary of £25,000, according to the Office of National Statistics. However, Council of Mortgage Lenders figures show that the average homemover individual or joint salary is £45,500 and has stood at about £40,000 since 2006, while the average first-time buyer individual or joint salary is £32,500, and has stood at between £30,000 and £35,000 since mid-2004.
Alastair Bigley, Head of UK Residential Mortgage Backed Securities at Fitch, says: 'Despite the fact that a global economic recovery is underway, the economic fundamentals do not auger well for a sustained strong recovery in the UK housing market.
'Although households are reducing debt and increasing savings, the upfront cost of house purchase for first-time buyers is likely to stifle housing demand.'
Nationwide House Prices Sept 1999 to Sept 2009
UK Base Rates left unchanged at 0.50%
Written by Paul Guest
UK - The Bank of England kept interest rates on hold at 0.50% today for the seventh consecutive month. The minutes of last month’s Monetary Policy Committee (MPC) meeting showed that all nine members of the MPC voted unanimously to keep base rates at a record low of 0.50% and continue with its quantitative easing (QE) programme at £175 billion.
UK residential property
James Thomas, Head of Residential Development and Investment at Jones Lang LaSalle, commented: “House prices increased by 1.0% in September according to Nationwide, the seventh consecutive month of positive growth, with average prices having now returned to those seen a year ago. Improved sentiment and a lack of properties available for sale have been the key drivers of recovery combined with demand in London from overseas purchasers attracted by the weakness of sterling.”
“Our view is that the current upward trend in house prices is unsustainable and that prices are likely to contract by a further -7% during 2010. The prospects for house prices going forward will be dependent on the speed of economic recovery and will be heavily influenced by constrained credit conditions and the impact of rising unemployment.”
UK commercial property
Paul Guest, Head of EMEA Research at Jones Lang LaSalle, said: “Investor confidence in commercial property continues to improve and this is feeding through to rising prices as an increasing pool of investors from both inside the UK and around the world compete for the limited amount of prime stock that is on the market at the present time. This investor demand has spread across the various property types and the UK institutions and property companies are now in the market looking to buy. We expect commercial property to generate positive returns for the remainder of 2009.”
“We would caution investors, however, that the occupational market conditions favour the tenant with rents continuing to fall across many markets, vacancies high, incentives high and over-renting a major feature of the market. Safeguarding income will be crucial in out-performing in a market where investor confidence may well run ahead of the underlying economic drivers of performance.”
“Tenants are not necessarily well placed to take advantage of current conditions as the economic turmoil has left them in a position of defensive demand; that is they are making use of breaks and expiries to drive down costs through lease re-gears and/ or exit surplus buildings. Their decision making is still predominantly focused on the ability to reduce costs, optimise capital and / or differentiate between core and no-core operations, geographies and headcount. The market ramifications of this are low levels of take-up, sluggish demand and tenant led supply.”
Saturday, 10. October 2009
UK - The Bank of England kept interest rates on hold at 0.50% today for the seventh consecutive month. The minutes of last month’s Monetary Policy Committee (MPC) meeting showed that all nine members of the MPC voted unanimously to keep base rates at a record low of 0.50% and continue with its quantitative easing (QE) programme at £175 billion.
UK residential property
James Thomas, Head of Residential Development and Investment at Jones Lang LaSalle, commented: “House prices increased by 1.0% in September according to Nationwide, the seventh consecutive month of positive growth, with average prices having now returned to those seen a year ago. Improved sentiment and a lack of properties available for sale have been the key drivers of recovery combined with demand in London from overseas purchasers attracted by the weakness of sterling.”
“Our view is that the current upward trend in house prices is unsustainable and that prices are likely to contract by a further -7% during 2010. The prospects for house prices going forward will be dependent on the speed of economic recovery and will be heavily influenced by constrained credit conditions and the impact of rising unemployment.”
UK commercial property
Paul Guest, Head of EMEA Research at Jones Lang LaSalle, said: “Investor confidence in commercial property continues to improve and this is feeding through to rising prices as an increasing pool of investors from both inside the UK and around the world compete for the limited amount of prime stock that is on the market at the present time. This investor demand has spread across the various property types and the UK institutions and property companies are now in the market looking to buy. We expect commercial property to generate positive returns for the remainder of 2009.”
“We would caution investors, however, that the occupational market conditions favour the tenant with rents continuing to fall across many markets, vacancies high, incentives high and over-renting a major feature of the market. Safeguarding income will be crucial in out-performing in a market where investor confidence may well run ahead of the underlying economic drivers of performance.”
“Tenants are not necessarily well placed to take advantage of current conditions as the economic turmoil has left them in a position of defensive demand; that is they are making use of breaks and expiries to drive down costs through lease re-gears and/ or exit surplus buildings. Their decision making is still predominantly focused on the ability to reduce costs, optimise capital and / or differentiate between core and no-core operations, geographies and headcount. The market ramifications of this are low levels of take-up, sluggish demand and tenant led supply.”
Saturday, 10. October 2009
Rate rise may boost commercial property in Aus
ANGELA HARPER
October 7, 2009
The latest interest rate rise spells tough times for those battling mortgage stress but could be a boon for commercial property investment.
On Tuesday the Reserve Bank of Australia (RBA) increased interest rates by 25 basis points to 3.25 per cent.
Queensland Premier Anna Bligh said the interest rate rise was an encouraging sign of economic optimism but was a blow for homeowners struggling to meet repayments.
"For those feeling mortgage stress any interest rate rise is tough news," she told reporters on Wednesday.
"What Queensland property market needs is some restoration of confidence in investors in large scale commercial projects."
Large scale retail, office buildings and some major high-rise projects had suffered from lack of investor confidence during the downturn.
Queensland treasurer Andrew Fraser said the RBA's increase signalled that it was official - economic recovery is underway.
"The three per cent cash rate, the lowest ever, was described for a long time by the (RBA) governor as an emergency setting," Mr Fraser told parliament.
"Moving from this setting was inevitable.
"History will be the judge of whether it has the timing right."
Ray White real estate property group chairman Brian White said a small rise in official rates shouldn't hurt the housing market.
Consumers' confidence had flowed through to the recovering housing market after Australia's economy held up under the strain of the global financial crisis.
"This 0.25 per cent rate rise was expected, it was just a matter of when and people will anticipate rates will return to more traditional levels," he said.
"I think we can afford a couple of interest rate rises and the confidence in the economy and the real estate market will override any concerns about where rates are headed."
October 7, 2009
The latest interest rate rise spells tough times for those battling mortgage stress but could be a boon for commercial property investment.
On Tuesday the Reserve Bank of Australia (RBA) increased interest rates by 25 basis points to 3.25 per cent.
Queensland Premier Anna Bligh said the interest rate rise was an encouraging sign of economic optimism but was a blow for homeowners struggling to meet repayments.
"For those feeling mortgage stress any interest rate rise is tough news," she told reporters on Wednesday.
"What Queensland property market needs is some restoration of confidence in investors in large scale commercial projects."
Large scale retail, office buildings and some major high-rise projects had suffered from lack of investor confidence during the downturn.
Queensland treasurer Andrew Fraser said the RBA's increase signalled that it was official - economic recovery is underway.
"The three per cent cash rate, the lowest ever, was described for a long time by the (RBA) governor as an emergency setting," Mr Fraser told parliament.
"Moving from this setting was inevitable.
"History will be the judge of whether it has the timing right."
Ray White real estate property group chairman Brian White said a small rise in official rates shouldn't hurt the housing market.
Consumers' confidence had flowed through to the recovering housing market after Australia's economy held up under the strain of the global financial crisis.
"This 0.25 per cent rate rise was expected, it was just a matter of when and people will anticipate rates will return to more traditional levels," he said.
"I think we can afford a couple of interest rate rises and the confidence in the economy and the real estate market will override any concerns about where rates are headed."
Chinese Million-dollar sales force up property prices
FORGET the "for sale" sign, the new catch-cry in Melbourne's leafy suburbs is "duoshao qian".
Victoria's top real estate agents have begun hiring Mandarin-speaking salesmen to cash in on the property boom.
Translated, "duoshao qian" means "how much"? And it's a question being asked more than ever before, The Herald Sun reports.
Leading agents say more than 30 per cent of their stock is bought by families from mainland China.
"This calendar year 34 per cent of our sales went to mainly Chinese buyers compared to 15 per cent last year. We're up 125 per cent overall," Jellis Craig director Scott Patterson said.
"Demand is so strong we've got two native speaker agents starting next week."
Related Coverage
* Homes bonanzaHerald Sun, 20 Sep 2009
* Bonus sparks auction blitzHerald Sun, 19 Sep 2009
* Fears homes are rallying on shaky groundNEWS.com.au, 22 Aug 2009
* Will sell if price is rightHerald Sun, 8 Aug 2009
* Home buyers in tight spotThe Australian, 1 Aug 2009
Some agents say the boom grew when the Federal Government eased foreign investment rules on property last year.
"There's been an incredible surge from Chinese buyers since the rules for foreign ownership of real estate were relaxed by the Government to allow foreign citizens to buy established homes worth more than $300,000," buyers' advocate Mal James said.
"You could say that's the key driver and single reason for the property boom in Victoria especially for homes in the $1 million-$4 million range and it's also the catalyst for so many Chinese buyers."
Mr James says his clients are facing competition from cashed-up Chinese buyers, especially in Kew, Canterbury and Balwyn. There is also Asian interest in Toorak, Malvern and East Malvern.
He says the Chinese are attracted by areas with quality private schools.
The Asian buying spree is pushing up prices and adding to the housing shortage.
"There's no doubt it's adding about 15 per cent to prices and creating a shortage because the buyers are not selling out of an existing home," Mr Patterson said.
Australia permitted 4015 foreign investors to buy homes worth an estimated $2.97 billion in 2007-08, Foreign Investment Review Board research shows.
Victoria had the highest approvals of any state, soaring to 2238 last year, almost double that of the year before. A rise is expected for 2009.
Former plastic surgeon and financial planner Jin Shang will be Jellis Craig's first Mandarin-speaking agent from next week, and he can't wait.
"China is the world's strongest economy and Australia's major trading partner," he said.
"Chinese want residential properties here because they feel comfortable in Australia's multicultural environment and they know it has one of the world's best education systems."
Victoria's top real estate agents have begun hiring Mandarin-speaking salesmen to cash in on the property boom.
Translated, "duoshao qian" means "how much"? And it's a question being asked more than ever before, The Herald Sun reports.
Leading agents say more than 30 per cent of their stock is bought by families from mainland China.
"This calendar year 34 per cent of our sales went to mainly Chinese buyers compared to 15 per cent last year. We're up 125 per cent overall," Jellis Craig director Scott Patterson said.
"Demand is so strong we've got two native speaker agents starting next week."
Related Coverage
* Homes bonanzaHerald Sun, 20 Sep 2009
* Bonus sparks auction blitzHerald Sun, 19 Sep 2009
* Fears homes are rallying on shaky groundNEWS.com.au, 22 Aug 2009
* Will sell if price is rightHerald Sun, 8 Aug 2009
* Home buyers in tight spotThe Australian, 1 Aug 2009
Some agents say the boom grew when the Federal Government eased foreign investment rules on property last year.
"There's been an incredible surge from Chinese buyers since the rules for foreign ownership of real estate were relaxed by the Government to allow foreign citizens to buy established homes worth more than $300,000," buyers' advocate Mal James said.
"You could say that's the key driver and single reason for the property boom in Victoria especially for homes in the $1 million-$4 million range and it's also the catalyst for so many Chinese buyers."
Mr James says his clients are facing competition from cashed-up Chinese buyers, especially in Kew, Canterbury and Balwyn. There is also Asian interest in Toorak, Malvern and East Malvern.
He says the Chinese are attracted by areas with quality private schools.
The Asian buying spree is pushing up prices and adding to the housing shortage.
"There's no doubt it's adding about 15 per cent to prices and creating a shortage because the buyers are not selling out of an existing home," Mr Patterson said.
Australia permitted 4015 foreign investors to buy homes worth an estimated $2.97 billion in 2007-08, Foreign Investment Review Board research shows.
Victoria had the highest approvals of any state, soaring to 2238 last year, almost double that of the year before. A rise is expected for 2009.
Former plastic surgeon and financial planner Jin Shang will be Jellis Craig's first Mandarin-speaking agent from next week, and he can't wait.
"China is the world's strongest economy and Australia's major trading partner," he said.
"Chinese want residential properties here because they feel comfortable in Australia's multicultural environment and they know it has one of the world's best education systems."
The population boom will drive the next property cycle in Aus
Author: Michael Yardney on 7 October 2009
If you are considering investing in property, you can't be blamed for wondering which way to turn considering all the mixed messages in the media.
In the one camp are those who suggest we are entering a new property cycle and property prices will once again boom, and in the other are the doomsayers who suggest that our property markets will lose value now that interest rates have bottomed (yesterday's rate rise notwithstanding) and the first home owners grant boost has ended.
But those pundits who predict Australia's property markets will collapse and property values will fall will once again be proven wrong.
And here is why....
Figures recently released by the Australian Bureau of Statistics showed that Australia's population grew by 2.1% to 21,779,000 in the 12 months to 31st March. To provide some perspective, Australia's population growth has never been this high. In fact, this level of growth has not been seen since the baby boom of the 1960s.
And this is at a time when we are experiencing a housing shortage!
But even more significant was the Federal Government's upgraded population forecasts suggesting that our country's population is expected to grow by 65% to over 35 million people by 2049. In fact, Australia is poised to be the world's fastest growing industrialised nation over the next four decades, with a rate of population growth higher even than India. This is around 7 million more than estimated two years ago and as population growth is one of the main drivers of our property markets (as it constitutes demand for housing) this will have a significant impact on our property markets.
Currently about 70% of Australians live around our major capital cities and it is likely that this will increase to closer to 80% in the future. Right now, one in six Australians are living in Melbourne and one in five in Sydney. All these people moving into our major cities will create a property boom of untold proportions. About 40% of the dwellings that will be around in 20 years time, in 2030, haven't even been built yet.
This growth will underpin our property markets and ensure property values keep rising like they have for the last 100 years. Obviously this tremendous growth will also create enormous strain on our cities infrastructure especially in the areas of transport, roads and water.
Of course over the next 40 years we'll also have a few more recessions and probably another depression, so it won't be all smooth sailing. But it does mean that those who predict Australia's property markets will collapse and property values will fall will once again be proven wrong.
Michael Yardney is a best selling author and one of Australia's leading experts in wealth creation through property.
If you are considering investing in property, you can't be blamed for wondering which way to turn considering all the mixed messages in the media.
In the one camp are those who suggest we are entering a new property cycle and property prices will once again boom, and in the other are the doomsayers who suggest that our property markets will lose value now that interest rates have bottomed (yesterday's rate rise notwithstanding) and the first home owners grant boost has ended.
But those pundits who predict Australia's property markets will collapse and property values will fall will once again be proven wrong.
And here is why....
Figures recently released by the Australian Bureau of Statistics showed that Australia's population grew by 2.1% to 21,779,000 in the 12 months to 31st March. To provide some perspective, Australia's population growth has never been this high. In fact, this level of growth has not been seen since the baby boom of the 1960s.
And this is at a time when we are experiencing a housing shortage!
But even more significant was the Federal Government's upgraded population forecasts suggesting that our country's population is expected to grow by 65% to over 35 million people by 2049. In fact, Australia is poised to be the world's fastest growing industrialised nation over the next four decades, with a rate of population growth higher even than India. This is around 7 million more than estimated two years ago and as population growth is one of the main drivers of our property markets (as it constitutes demand for housing) this will have a significant impact on our property markets.
Currently about 70% of Australians live around our major capital cities and it is likely that this will increase to closer to 80% in the future. Right now, one in six Australians are living in Melbourne and one in five in Sydney. All these people moving into our major cities will create a property boom of untold proportions. About 40% of the dwellings that will be around in 20 years time, in 2030, haven't even been built yet.
This growth will underpin our property markets and ensure property values keep rising like they have for the last 100 years. Obviously this tremendous growth will also create enormous strain on our cities infrastructure especially in the areas of transport, roads and water.
Of course over the next 40 years we'll also have a few more recessions and probably another depression, so it won't be all smooth sailing. But it does mean that those who predict Australia's property markets will collapse and property values will fall will once again be proven wrong.
Michael Yardney is a best selling author and one of Australia's leading experts in wealth creation through property.
Of Interest Rates and Exit Strategies - Aus leads the way!
By MARTIN HUTCHINSON and NICHOLAS PAISNER
New York Times
Published: October 6, 2009
Australia is sometimes known as the “lucky country.” Its success in fiscal and monetary policy, though, has more to do with skill. If other countries had followed the Aussie way in the good times, the financial crisis would have been less bad. But it’s not too late to follow a good example.
Skip to next paragraph
The Reserve Bank of Australia increased its target for overnight interest rates by 0.25 percentage point on Tuesday, to 3.25 percent. It was the first central bank among the G-20 nations to push rates up since the crisis began. But then Australian interest rates were generally relatively high before the crisis — the policy rate stayed above 5 percent from 2003 on, peaking at 7.25 percent in 2008.
Australia also followed a conservative fiscal policy, paying off almost all its public debt. That gave it more room for fiscal and monetary stimulus during the downturn. Technically, Australia avoided recession, growing in both the first two quarters of 2009. The global rise in mineral prices has further benefited its economy. It wasn’t too hard for the Reserve Bank to decide to tighten.
Other countries don’t have Australia’s advantages. But the current fashionable policy combination of heavy fiscal stimulus, extraordinary liquidity measures and interest rates below the level of inflation have caused sharp run-ups in global commodity, bond and stock prices. Such policies could eventually prove inflationary.
Other nations’ “exit strategies” shouldn’t start with a withdrawal of liquidity. The two worst recessions in United States history, those of 1837-43 and 1929-41, were both fueled by liquidity shortages that led to prolonged deflation. If central banks worldwide cut back liquidity now, without increasing rates, they would risk something similarly dismal.
But raising interest rate targets — without ending other liquidity programs — presents no such danger. Doing that would reduce the upward price pressure on financial assets. And weaker bond markets would force governments to get serious about budget deficits rather than borrowing more.
With asset bubbles deflating and deficits declining, liquidity could be withdrawn slowly, without starving the private-sector economy of necessary finance. Then the rest of the world would start to look a bit more like that lucky place down under.
Property Deals Return
Real estate deals are back — to a point. The British retailer Tesco and the European banks HSBC and BBVA have notched almost $3 billion of sale-and-leaseback deals in two weeks. The three are hardly distressed sellers. But a thawing in the commercial property market is giving them a chance to tidy up their balance sheets.
At first glance, HSBC seems to be selling its United States headquarters on Fifth Avenue cheaply to an Israeli conglomerate, IDB. The $330 million price tag puts a juicy 13 percent rental yield on this prime piece of Manhattan real estate in the first year. But IDB’s opportunistic move is a risky one. After 12 months, HSBC will vacate a third of the building.
For HSBC, the deal delivers only a modest profit. But it allows the bank to release capital tied up in property and redeploy it in its core operating business. The move is also consistent with HSBC’s stated belief that the world faces a double-dip recession. Similar deals may lie in store for its offices in London and Paris.
The Tesco and BBVA deals look richer for them. Tesco is selling £514 million ($817 million) of property at yields of 5 to 6 percent. For the buyers of 948 BBVA branches, yields will probably be closer to 6 percent, according to a person familiar with the situation. Again, the proceeds can be put to more profitable use in the companies’ operating businesses.
While they may not be getting bargains, the buyers in these cases are securing multi-decade leases offering inflation protection. That’s an attractive combination when the economic outlook remains uncertain and huge stimulus measures threaten inflation eventually.
Banks and other companies remain under pressure to tidy up their balance sheets. And while the short-term outlook for commercial real estate is far from assured, buyers are returning to the market.
The latest entrant is France’s BNP Paribas Real Estate, with a new £150 million ($238 million) fund meant for deals in Britain. The recent flurry of sale-and-leaseback deals looks set to continue.
MARTIN HUTCHINSON and NICHOLAS PAISNER
For more independent financial commentary and analysis, visit www.breakingviews.com.
New York Times
Published: October 6, 2009
Australia is sometimes known as the “lucky country.” Its success in fiscal and monetary policy, though, has more to do with skill. If other countries had followed the Aussie way in the good times, the financial crisis would have been less bad. But it’s not too late to follow a good example.
Skip to next paragraph
The Reserve Bank of Australia increased its target for overnight interest rates by 0.25 percentage point on Tuesday, to 3.25 percent. It was the first central bank among the G-20 nations to push rates up since the crisis began. But then Australian interest rates were generally relatively high before the crisis — the policy rate stayed above 5 percent from 2003 on, peaking at 7.25 percent in 2008.
Australia also followed a conservative fiscal policy, paying off almost all its public debt. That gave it more room for fiscal and monetary stimulus during the downturn. Technically, Australia avoided recession, growing in both the first two quarters of 2009. The global rise in mineral prices has further benefited its economy. It wasn’t too hard for the Reserve Bank to decide to tighten.
Other countries don’t have Australia’s advantages. But the current fashionable policy combination of heavy fiscal stimulus, extraordinary liquidity measures and interest rates below the level of inflation have caused sharp run-ups in global commodity, bond and stock prices. Such policies could eventually prove inflationary.
Other nations’ “exit strategies” shouldn’t start with a withdrawal of liquidity. The two worst recessions in United States history, those of 1837-43 and 1929-41, were both fueled by liquidity shortages that led to prolonged deflation. If central banks worldwide cut back liquidity now, without increasing rates, they would risk something similarly dismal.
But raising interest rate targets — without ending other liquidity programs — presents no such danger. Doing that would reduce the upward price pressure on financial assets. And weaker bond markets would force governments to get serious about budget deficits rather than borrowing more.
With asset bubbles deflating and deficits declining, liquidity could be withdrawn slowly, without starving the private-sector economy of necessary finance. Then the rest of the world would start to look a bit more like that lucky place down under.
Property Deals Return
Real estate deals are back — to a point. The British retailer Tesco and the European banks HSBC and BBVA have notched almost $3 billion of sale-and-leaseback deals in two weeks. The three are hardly distressed sellers. But a thawing in the commercial property market is giving them a chance to tidy up their balance sheets.
At first glance, HSBC seems to be selling its United States headquarters on Fifth Avenue cheaply to an Israeli conglomerate, IDB. The $330 million price tag puts a juicy 13 percent rental yield on this prime piece of Manhattan real estate in the first year. But IDB’s opportunistic move is a risky one. After 12 months, HSBC will vacate a third of the building.
For HSBC, the deal delivers only a modest profit. But it allows the bank to release capital tied up in property and redeploy it in its core operating business. The move is also consistent with HSBC’s stated belief that the world faces a double-dip recession. Similar deals may lie in store for its offices in London and Paris.
The Tesco and BBVA deals look richer for them. Tesco is selling £514 million ($817 million) of property at yields of 5 to 6 percent. For the buyers of 948 BBVA branches, yields will probably be closer to 6 percent, according to a person familiar with the situation. Again, the proceeds can be put to more profitable use in the companies’ operating businesses.
While they may not be getting bargains, the buyers in these cases are securing multi-decade leases offering inflation protection. That’s an attractive combination when the economic outlook remains uncertain and huge stimulus measures threaten inflation eventually.
Banks and other companies remain under pressure to tidy up their balance sheets. And while the short-term outlook for commercial real estate is far from assured, buyers are returning to the market.
The latest entrant is France’s BNP Paribas Real Estate, with a new £150 million ($238 million) fund meant for deals in Britain. The recent flurry of sale-and-leaseback deals looks set to continue.
MARTIN HUTCHINSON and NICHOLAS PAISNER
For more independent financial commentary and analysis, visit www.breakingviews.com.
Australian Home-Loan Approvals Drop for Second Month
Australian Home-Loan Approvals Drop for Second Month (Update2)
By Jacob Greber
Oct. 7 (Bloomberg) -- Australian home-loan approvals fell in August for a second straight month as demand from first-time house buyers cooled.
The number of loans granted to build or buy houses and apartments dropped 0.6 percent to 62,718 from July, when they fell a revised 2.2 percent, the statistics bureau said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg was for a 0.5 percent decline.
Governor Glenn Stevens raised the benchmark interest rate from a 49-year low yesterday and signaled further increases in coming months as the economy strengthens. Approvals may slide further after the government reduced grants to first-time buyers of as much as A$21,000 ($18,700) at the start of this month.
“We expect the paring back of the first-home owners grant, coupled with the likelihood of further interest rate hikes, to temper appetite for housing finance,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney.
The Australian dollar was unchanged at 88.91 U.S. cents at noon in Sydney from just before the report was released. The two-year government bond yield fell 1 basis point to 4.44 percent. A basis point is 0.01 percentage point.
First-home buyers accounted for 24.7 percent of dwellings that were financed in August, down from 25.3 percent in July and a record 28.5 percent in May, the statistics bureau said today.
Government Handouts
Treasurer Wayne Swan last year tripled to A$21,000 a grant to first-time buyers of new homes, and doubled to A$14,000 payments for those purchasing existing dwellings. In May, he extended the increases through to the end of September, when they were partially reduced. The payments will be cut to their original level of A$7,000 at the end of this year.
Governor Stevens raised the benchmark interest rate to 3.25 percent from 3 percent yesterday and said it is “now prudent to begin gradually lessening the stimulus provided by monetary policy.”
Investors have a more than 74 percent expectation Stevens will raise borrowing costs in November by another quarter point, according to interbank futures on the Sydney Futures Exchange at 8:47 a.m.
Concern that a surge in demand for home loans, which had a record run of monthly gains between last October and June, may be stoking a property bubble are among reasons the central bank raised borrowing costs yesterday. The increase followed a record 4.25 percentage points of rate cuts between September 2008 and April.
House Prices
House prices jumped 7.9 percent this year through August, property monitoring company RP Data-Rismark said on Sept. 30.
Anthony Richards, head of economic analysis at the Reserve Bank of Australia, said last week that house prices may surge too fast, hurting low-income families seeking to buy or rent homes.
“The risk is that we might move toward undesirably strong growth in Australian housing prices,” Richards said on Sept. 29. “We would not want to see very strong growth in housing prices -- that would be unhelpful from a social perspective.”
A separate report published earlier today showed Australia’s building industry expanded in September for the first time in 18 months. An index published by the Australian Industry Group and Housing Industry Association rose 8.4 points to 50.8 from August.
The total value of loans rose 0.7 percent to A$22.8 billion, today’s home-loans report showed.
The value of lending to owner-occupiers declined 1.7 percent in August. The value of loans to investors who plan to rent or resell homes advanced 7.6 percent.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Last Updated: October 6, 2009 21:17 EDT
By Jacob Greber
Oct. 7 (Bloomberg) -- Australian home-loan approvals fell in August for a second straight month as demand from first-time house buyers cooled.
The number of loans granted to build or buy houses and apartments dropped 0.6 percent to 62,718 from July, when they fell a revised 2.2 percent, the statistics bureau said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg was for a 0.5 percent decline.
Governor Glenn Stevens raised the benchmark interest rate from a 49-year low yesterday and signaled further increases in coming months as the economy strengthens. Approvals may slide further after the government reduced grants to first-time buyers of as much as A$21,000 ($18,700) at the start of this month.
“We expect the paring back of the first-home owners grant, coupled with the likelihood of further interest rate hikes, to temper appetite for housing finance,” said Su-Lin Ong, senior economist at RBC Capital Markets Ltd. in Sydney.
The Australian dollar was unchanged at 88.91 U.S. cents at noon in Sydney from just before the report was released. The two-year government bond yield fell 1 basis point to 4.44 percent. A basis point is 0.01 percentage point.
First-home buyers accounted for 24.7 percent of dwellings that were financed in August, down from 25.3 percent in July and a record 28.5 percent in May, the statistics bureau said today.
Government Handouts
Treasurer Wayne Swan last year tripled to A$21,000 a grant to first-time buyers of new homes, and doubled to A$14,000 payments for those purchasing existing dwellings. In May, he extended the increases through to the end of September, when they were partially reduced. The payments will be cut to their original level of A$7,000 at the end of this year.
Governor Stevens raised the benchmark interest rate to 3.25 percent from 3 percent yesterday and said it is “now prudent to begin gradually lessening the stimulus provided by monetary policy.”
Investors have a more than 74 percent expectation Stevens will raise borrowing costs in November by another quarter point, according to interbank futures on the Sydney Futures Exchange at 8:47 a.m.
Concern that a surge in demand for home loans, which had a record run of monthly gains between last October and June, may be stoking a property bubble are among reasons the central bank raised borrowing costs yesterday. The increase followed a record 4.25 percentage points of rate cuts between September 2008 and April.
House Prices
House prices jumped 7.9 percent this year through August, property monitoring company RP Data-Rismark said on Sept. 30.
Anthony Richards, head of economic analysis at the Reserve Bank of Australia, said last week that house prices may surge too fast, hurting low-income families seeking to buy or rent homes.
“The risk is that we might move toward undesirably strong growth in Australian housing prices,” Richards said on Sept. 29. “We would not want to see very strong growth in housing prices -- that would be unhelpful from a social perspective.”
A separate report published earlier today showed Australia’s building industry expanded in September for the first time in 18 months. An index published by the Australian Industry Group and Housing Industry Association rose 8.4 points to 50.8 from August.
The total value of loans rose 0.7 percent to A$22.8 billion, today’s home-loans report showed.
The value of lending to owner-occupiers declined 1.7 percent in August. The value of loans to investors who plan to rent or resell homes advanced 7.6 percent.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Last Updated: October 6, 2009 21:17 EDT
Australia Helped by Rate Increase as Stocks Advance
Australia Helped by Rate Increase as Stocks Advance (Update3)
By Eric Martin
Oct. 7 (Bloomberg) -- Mining companies and brewers are benefiting from an Australian economy that is growing so fast the central bank suddenly raised interest rates, buoying the currency and giving global investors another reason to favor Down Under among the world’s hottest markets.
Huntington Asset Advisers’ Madelynn Matlock bought shares of Foster’s Group Ltd., the nation’s largest beermaker, on speculation consumer spending will increase. Scott Davidson of Absolute Asia Asset Management Ltd. said his company may add to holdings such as BHP Billiton Ltd. and Rio Tinto Group as metals rise. Money managers say the S&P/ASX 200 Index is poised to extend gains as it heads for the steepest annual return since 1993, beating equity gauges for the U.S. and world.
“If you bought stocks that you thought were exposed to economic growth, you can feel more confident that you made the right decision,” said Matlock, manager of the International Equity Fund at Huntington, which oversees $15 billion. “What the Australian central bank is tacitly saying is we’re pretty confident our economy is on firm-enough footing to withstand an increase in rates.”
Australia raised its benchmark rate yesterday, becoming the first country in the so-called Group of 20 nations to boost borrowing costs since the start of the credit crisis, after it avoided a recession and Reserve Bank Governor Glenn Stevens said the “risk of serious economic contraction” had passed. Gross domestic product will rise 0.7 percent this year, bucking the 3.4 percent slide for advanced economies, the International Monetary Fund said last week.
Stocks, Dollar
The S&P/ASX 200 climbed 2.3 percent to 4,695.70 at the close of trading in Sydney today. The gauge added 0.4 percent yesterday and the local currency jumped to the highest level in 14 months after Stevens increased the overnight cash rate target to 3.25 percent from 3 percent. Only one of 20 economists surveyed by Bloomberg News forecast the move.
Signs the worldwide recession is easing have helped push the Australian measure up 26 percent this year, exceeding gains of 22 percent in the MSCI World Index and 17 percent in the Standard & Poor’s 500 Index. The S&P/ASX 200 plunged as much as 54 percent to last year’s low from a record 6,828.7 on Nov. 1, 2007, mirroring declines that erased $37 trillion from global equity markets.
Stevens said the nation is likely to expand “close to trend over the year ahead,” and inflation will remain near the bank’s target range of between 2 percent and 3 percent. He cut the benchmark rate by a record 4.25 percentage points between September 2008 and April to cushion Australia against fallout from the global credit squeeze.
Currency Gains
The Australian dollar rose to 89.38 U.S. cents as of 7:06 p.m. in Sydney from 87.62 cents just before the decision was announced. The two-year government bond yield gained 3 basis points to 4.41 percent. A basis point is 0.01 percentage point.
Matlock, based in Cincinnati, said stocks dependent on consumer spending were cheap after A$20 billion in government handouts to households helped fuel a 1 percent expansion in Australia’s GDP in the first half of this year. The S&P/ASX 200 Consumer Discretionary Index traded for 4.7 times annual earnings last November, the lowest since at least 2001, according to data compiled by Bloomberg.
Matlock, who declined to discuss specific holdings, owns shares of Foster’s, according to Bloomberg data. The brewer climbed 12 percent from a nine-month low in April after turning profitable in the six months ended in June thanks to higher sales of new beers such as Pure Blonde.
Too Cheap
“We felt there was going to be growth in the economy based on consumer activity, and the market was discounting something less than what we’re likely to see,” Matlock said.
Davidson, director of research at Absolute Asia, said his firm owns BHP and Rio Tinto, which climbed 24 percent and 103 percent this year, respectively, as copper prices about doubled. Davidson’s company is considering investing more money in Australia, he said in a telephone interview.
“Domestic economic conditions are favorable, and we’re also encouraged about the outlook for commodities,” said Davidson, whose firm manages more than $800 million as director of research at Absolute Asia in Singapore.
Computer-related stocks and financial companies have gained the most on the Australian Stock Exchange this year, climbing 45 percent and 36 percent, respectively. Melbourne-based consultant SMS Management & Technology Ltd. added 199 percent, including a 7.8 percent advance on Aug. 19 after Credit Suisse Group AG raised the stock to “neutral” from “underperform.”
Financial Index
Six of the 10 best-performing shares in the S&P/ASX 200 Financial Index are property-related firms, including Rhodes, New South Wales-based Australand Property Group, a developer of residential land. Macquarie Group Ltd., the Sydney-based investment bank that lost 62 percent last year, has rebounded 95 percent in 2009 for the financial index’s eighth-best advance.
In contrast with the U.S. and euro region, property values in Australia have climbed this year. House prices increased 7.9 percent in the first eight months of 2009, RP Data-Rismark, a property-monitoring company, reported Sept. 30.
The economy is forecast to post just one quarter of contraction since more than $1.6 trillion of global credit losses spurred the first simultaneous recessions in the U.S., Europe and Japan since World War II. After shrinking 0.6 percent in the third quarter, Australia will grow 2.3 percent next year and 3.5 percent in 2011, economists’ estimates compiled by Bloomberg show.
The central bank may have acted too soon because the world economy is still in a recession, according to Prasad Patkar, a fund manager at Platypus Asset Management. Higher interest rates may stymie the recovery, he said.
‘Too Early’
“There’s a risk that they’ve gone too early,” said Patkar, who helps manage $1.2 billion at Platypus in Sydney. “The Australian economy has done quite well compared with what was expected of it, but the risk is potentially from a much weaker than expected global economy.”
Stevens said yesterday that future rate increases will be done “gradually.” A report tomorrow will show the unemployment rate rose to 6 percent last month from 5.8 percent, according to the median estimate in a Bloomberg News survey.
The Reserve Bank scrapped its forecast in August for the economy to contract this year, instead predicting GDP will jump 0.5 percent. The bank expects growth will accelerate to 2.25 percent in 2010 and 3.75 percent in 2011.
“What probably surprised people was the optimism on the outlook for the economy,” said Michael Kerley, director of pan- Asian equities at Henderson Global Investors Ltd., which oversees about $3 billion in the Asia-Pacific region, in a phone interview. “If that proves right, the domestic story in Asia looks pretty solid.”
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
Last Updated: October 7, 2009 04:16 EDT
By Eric Martin
Oct. 7 (Bloomberg) -- Mining companies and brewers are benefiting from an Australian economy that is growing so fast the central bank suddenly raised interest rates, buoying the currency and giving global investors another reason to favor Down Under among the world’s hottest markets.
Huntington Asset Advisers’ Madelynn Matlock bought shares of Foster’s Group Ltd., the nation’s largest beermaker, on speculation consumer spending will increase. Scott Davidson of Absolute Asia Asset Management Ltd. said his company may add to holdings such as BHP Billiton Ltd. and Rio Tinto Group as metals rise. Money managers say the S&P/ASX 200 Index is poised to extend gains as it heads for the steepest annual return since 1993, beating equity gauges for the U.S. and world.
“If you bought stocks that you thought were exposed to economic growth, you can feel more confident that you made the right decision,” said Matlock, manager of the International Equity Fund at Huntington, which oversees $15 billion. “What the Australian central bank is tacitly saying is we’re pretty confident our economy is on firm-enough footing to withstand an increase in rates.”
Australia raised its benchmark rate yesterday, becoming the first country in the so-called Group of 20 nations to boost borrowing costs since the start of the credit crisis, after it avoided a recession and Reserve Bank Governor Glenn Stevens said the “risk of serious economic contraction” had passed. Gross domestic product will rise 0.7 percent this year, bucking the 3.4 percent slide for advanced economies, the International Monetary Fund said last week.
Stocks, Dollar
The S&P/ASX 200 climbed 2.3 percent to 4,695.70 at the close of trading in Sydney today. The gauge added 0.4 percent yesterday and the local currency jumped to the highest level in 14 months after Stevens increased the overnight cash rate target to 3.25 percent from 3 percent. Only one of 20 economists surveyed by Bloomberg News forecast the move.
Signs the worldwide recession is easing have helped push the Australian measure up 26 percent this year, exceeding gains of 22 percent in the MSCI World Index and 17 percent in the Standard & Poor’s 500 Index. The S&P/ASX 200 plunged as much as 54 percent to last year’s low from a record 6,828.7 on Nov. 1, 2007, mirroring declines that erased $37 trillion from global equity markets.
Stevens said the nation is likely to expand “close to trend over the year ahead,” and inflation will remain near the bank’s target range of between 2 percent and 3 percent. He cut the benchmark rate by a record 4.25 percentage points between September 2008 and April to cushion Australia against fallout from the global credit squeeze.
Currency Gains
The Australian dollar rose to 89.38 U.S. cents as of 7:06 p.m. in Sydney from 87.62 cents just before the decision was announced. The two-year government bond yield gained 3 basis points to 4.41 percent. A basis point is 0.01 percentage point.
Matlock, based in Cincinnati, said stocks dependent on consumer spending were cheap after A$20 billion in government handouts to households helped fuel a 1 percent expansion in Australia’s GDP in the first half of this year. The S&P/ASX 200 Consumer Discretionary Index traded for 4.7 times annual earnings last November, the lowest since at least 2001, according to data compiled by Bloomberg.
Matlock, who declined to discuss specific holdings, owns shares of Foster’s, according to Bloomberg data. The brewer climbed 12 percent from a nine-month low in April after turning profitable in the six months ended in June thanks to higher sales of new beers such as Pure Blonde.
Too Cheap
“We felt there was going to be growth in the economy based on consumer activity, and the market was discounting something less than what we’re likely to see,” Matlock said.
Davidson, director of research at Absolute Asia, said his firm owns BHP and Rio Tinto, which climbed 24 percent and 103 percent this year, respectively, as copper prices about doubled. Davidson’s company is considering investing more money in Australia, he said in a telephone interview.
“Domestic economic conditions are favorable, and we’re also encouraged about the outlook for commodities,” said Davidson, whose firm manages more than $800 million as director of research at Absolute Asia in Singapore.
Computer-related stocks and financial companies have gained the most on the Australian Stock Exchange this year, climbing 45 percent and 36 percent, respectively. Melbourne-based consultant SMS Management & Technology Ltd. added 199 percent, including a 7.8 percent advance on Aug. 19 after Credit Suisse Group AG raised the stock to “neutral” from “underperform.”
Financial Index
Six of the 10 best-performing shares in the S&P/ASX 200 Financial Index are property-related firms, including Rhodes, New South Wales-based Australand Property Group, a developer of residential land. Macquarie Group Ltd., the Sydney-based investment bank that lost 62 percent last year, has rebounded 95 percent in 2009 for the financial index’s eighth-best advance.
In contrast with the U.S. and euro region, property values in Australia have climbed this year. House prices increased 7.9 percent in the first eight months of 2009, RP Data-Rismark, a property-monitoring company, reported Sept. 30.
The economy is forecast to post just one quarter of contraction since more than $1.6 trillion of global credit losses spurred the first simultaneous recessions in the U.S., Europe and Japan since World War II. After shrinking 0.6 percent in the third quarter, Australia will grow 2.3 percent next year and 3.5 percent in 2011, economists’ estimates compiled by Bloomberg show.
The central bank may have acted too soon because the world economy is still in a recession, according to Prasad Patkar, a fund manager at Platypus Asset Management. Higher interest rates may stymie the recovery, he said.
‘Too Early’
“There’s a risk that they’ve gone too early,” said Patkar, who helps manage $1.2 billion at Platypus in Sydney. “The Australian economy has done quite well compared with what was expected of it, but the risk is potentially from a much weaker than expected global economy.”
Stevens said yesterday that future rate increases will be done “gradually.” A report tomorrow will show the unemployment rate rose to 6 percent last month from 5.8 percent, according to the median estimate in a Bloomberg News survey.
The Reserve Bank scrapped its forecast in August for the economy to contract this year, instead predicting GDP will jump 0.5 percent. The bank expects growth will accelerate to 2.25 percent in 2010 and 3.75 percent in 2011.
“What probably surprised people was the optimism on the outlook for the economy,” said Michael Kerley, director of pan- Asian equities at Henderson Global Investors Ltd., which oversees about $3 billion in the Asia-Pacific region, in a phone interview. “If that proves right, the domestic story in Asia looks pretty solid.”
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.
Last Updated: October 7, 2009 04:16 EDT
Another British Housing Bubble?
Wealthy buyers are fueling the recent rise in prices, as Savills points to a second downturn in U.K. property.
LONDON -- Don't believe the hype about a recovery in the British housing market. Recent surveys--including one by Halifax on Tuesday--have pointed to month-on-month home price increases, leading some excited property sellers to think the worst is over.
But British property firm Savills has been quick to dismiss hopes of a sustainable recovery. According to Carrie Scrivener-Leask, associate director of research at the firm, the U.K. housing market will experience a W-shaped recovery.
"Although there's been growth in the property market, we don't see how that growth can be sustained with the current state of the economy and unemployment still on the rise," Scrivener-Leask said, adding that Savills did not expect a sustainable recovery before 2011 or even 2012.
U.K. unemployment rose to 7.9% for the three months to July, according to the National Statistics Office. Euro zone unemployment is currently at 9.6% and the U.S. jobless rate stands at 9.8%.
Her views emerged on the day that British lender Halifax said house prices had risen by 1.6% in September, the third-consecutive monthly increase and the fifth so far this year.
But even Halifax believes this recovery is only short-term.
LONDON -- Don't believe the hype about a recovery in the British housing market. Recent surveys--including one by Halifax on Tuesday--have pointed to month-on-month home price increases, leading some excited property sellers to think the worst is over.
But British property firm Savills has been quick to dismiss hopes of a sustainable recovery. According to Carrie Scrivener-Leask, associate director of research at the firm, the U.K. housing market will experience a W-shaped recovery.
"Although there's been growth in the property market, we don't see how that growth can be sustained with the current state of the economy and unemployment still on the rise," Scrivener-Leask said, adding that Savills did not expect a sustainable recovery before 2011 or even 2012.
U.K. unemployment rose to 7.9% for the three months to July, according to the National Statistics Office. Euro zone unemployment is currently at 9.6% and the U.S. jobless rate stands at 9.8%.
Her views emerged on the day that British lender Halifax said house prices had risen by 1.6% in September, the third-consecutive monthly increase and the fifth so far this year.
But even Halifax believes this recovery is only short-term.
Subscribe to:
Posts (Atom)
Posts
