The Australian Bankers Association’s launch in recent days of the site shows the Big Four banks are on high alert for a rocky 2012 with a sharp rise in defaults.

Association CEO Steven Munchenberg admitted economic uncertainty had been a key factor in the move.

“We don’t know what’s going to happen in Europe and in Australia, but it’s better we start to think about making sure we’re prepared for whatever happens,” he said.

He confirmed it was the first time the banks had set up a site to deal with customer hardship on mortgages and other financial products like credit cards and personal loans.

The European financial crisis, the two-speed Australian economy and rising unemployment levels in places like western Sydney are already starting to affect the viability of bank loans.

Mr Munchenberg said banks were aware sectors of the economy had been “struggling” in a local economy dominated by mining.

The government last week forecast unemployment would increase to 5.5 per cent by mid-2012. However, in parts of western Sydney, the jobless rate is above 7 per cent.

Recent Reserve Bank reports have pointed to a higher ratio of “non-performing loans” and people falling behind on mortgage repayments in recent months.

The banks’ site – www.doingittough.info – directs those who are financially stressed to click on icons of their individual banks to go straight through to “hardship websites” for each institution. It also contains financial health checklists testing whether customers are at risk of loan default.

Mr Munchenberg claimed these measures were to ensure customers were not in over their heads.

Banks, he said, had no desire to foreclose on homes.

Source: news.com.au

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Standard & Poor’s, the world’s biggest ratings agency, has changed its ratings criteria in response to criticism in wake of the global financial crisis in 2008, reported The Daily Telegraph.

ANZ, Commonwealth Bank, National Australia Bank and Westpac were each cut one notch to AA-minus, the fourth-highest credit rating on S&P’s scale.

Macquarie Group was cut by two levels to BBB, the ninth-highest grade. Standard Chartered Plc’s rating was increased one level to A-plus, the fifth-highest rating.

The ratings methodology, which S&P began revising after the bankruptcy of Lehman Brothers, now puts more emphasis on the strength of each nation’s banking system. Each country is assigned a grade that serves as a starting point for its banks, S&P Managing Director Craig Parmelee said November 29.

The move is tipped to pile pressure on the nation’s top banks, with the funding costs for Australia’s banks already starting to surge.

In July, a research report from Deutsche Bank suggested Commonwealth Bank, Westpac, ANZ Bank and National Australia may need to sell about $144 billion of bonds in the 12 months ending in June 2012.

The news comes as fellow ratings agency Moody’s yesterday warned that Australia’s banking system faces “crucial challenges” over the coming year, with global investors to potentially snub the banks as funding costs climb and the world economy slows.

The ratings agency has warned that the health of the system likely hinges on “how severe and how protracted any contagion from the European sovereign crisis may be”.

Senior vice president Patrick Winsbury said customer deposits had been “growing faster than loans as deleveraging continues, allowing the major banks to reduce their reliance on offshore wholesale funding”.

“The longer-term structural changes associated with increased investment in the resource sector are likely to pressure certain industries and regions, keeping credit impairment levels above the extreme lows of the pre-crisis period,” the note said.

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And the system is vulnerable to increases in unemployment and a contraction in bank lending as a consequence of Australia’s high house prices and levels of household debt, according to ratings agency Moody’s.

It has also warned that the health of the system likely hinges on “how severe and how protracted any contagion from the European sovereign crisis may be”.

But Moody’s has praised the stability of the local banks and says their balance sheets are far stronger than when investment bank Lehman Brothers collapsed in 2008.

Senior vice-president Patrick Winsbury said customer deposits had been “growing faster than loans as deleveraging continues, allowing the major banks to reduce their reliance on offshore wholesale funding”.

Moody’s is maintaining its stable outlook for the Australian banking system based on the strength of the banks’ books and the domestic economy.

In a note to investors, it warned that the strength of the resources sector meant interest rates were likely to remain elevated and the Australian dollar strong even in the event of a crisis in other sectors.

“The longer-term structural changes associated with increased investment in the resource sector are likely to pressure certain industries and regions, keeping credit impairment levels above the extreme lows of the pre-crisis period,” the note said.

Separately yesterday, a leading executive in the retail sector – one of the industries suffering most in the patchwork economy – warned of economic difficulties ahead.

Bunnings and Officeworks managing director John Gillam said another financial crises may be unfolding.

Speaking in Perth, Mr Gillam said he had a “funny feeling GFC wave two” was coming but said his company was prepared.

“In all my time I don’t think we’ve ever been in better shape nor have we been hungrier,” Mr Gillam said.

Source : news.com.au

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Australian Competition and Consumer Commission commissioner Joe Dimasi concedes drivers are suspicious of rip-offs, but stands by the conclusions. “We have scrutinised this to death,” Mr Dimasi told the Herald Sun. A major ACCC report released yesterday warns that growing global demand for oil, more expensive supply and a potential global price on carbon means steep costs are a “new reality”.

The appreciating Australian dollar spared motorists from a record high average of $1.70 a litre in May. This would have been the retail price had the Aussie dollar been US86c. Instead, the price reached $1.47c. “The era of cheap oil and, therefore, cheap petrol and diesel, appears over,” the report declares.

The ACCC found no evidence of excessive profits by refiners, wholesalers or retailers, but it plans to “closely watch” for any illegal price cycle collusion in Melbourne and other capital cities, in a move welcomed by the RACV. “The ACCC remains concerned about the level of co-ordination apparent in the price cycles and is analysing the likely effects of this behaviour on outcomes for consumers,” the report states. But angry drivers accused the watchdog of being “toothless” and a “joke”. CommSec economists recently queried whether falls in the wholesale price were fully passed on at the bowser.

The ACCC report found unleaded fuel was about 8c a litre more in 2010-11, compared with a year earlier. This matched movements in the Singapore international benchmark and reflected global factors, including Middle East political unrest and a strong Asian economy. Petrol companies earned about 2.2c a litre profit for all petrol products and 1.2c for regular unleaded. Mr Dimasi said: “The people making the big profits are the guys that own the oil.” Australian prices were among the lowest in the OECD, only behind Mexico, the US and Canada.

Source: news.com.au

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The review, headed by former South Australian Cabinet minister Jane Lomax-Smith, stated a blanket 40:60 ratio would be “more equitable” because students would receive the same proportional subsidy regardless of their course choice. This was one of the 29 recommendations in the report, released by the Federal Government yesterday, which confirmed Australian universities were underfunded.

The new ratio was recommended to be introduced only for new students. “The panel has observed that labour market shortages are not necessarily addressed by modifying student contribution amounts,” the report stated. The Government expects to commence its response next year.

University of Adelaide Vice-Chancellor Professor James McWha said it was encouraging to see such an “unequivocal conclusion” that universities were underfunded. “Further analysis will be necessary to determine the impact,” he said.

Source: news.com.au

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Despite the Government’s top economic advisory board finding it was too expensive to put a GST on overseas shopping, a taskforce has been formed to figure out if the job can be done more cheaply, the Courier-Mail reported.

At the moment, goods bought overseas worth less than $1000 are tax-free.

Retail giants have been agitating for cheaper items to be hit with the GST to create a level playing field as the industry struggles to cope with online shopping.

The Productivity Commission found it would cost taxpayers $1.2 billion to collect just $500 million worth of tax if online shoppers were forced to pay a GST on items bought overseas worth $100 or more.

While Assistant Treasurer Bill Shorten yesterday admitted it didn’t “make economic sense” to impose such a tax “at this stage”, he didn’t rule it out.

He announced the taskforce yesterday to examine whether it was possible to “lower the cost of collecting the tax”. The taskforce is expected to report within six months.

The Productivity Commission also found Queensland was one of the nation’s most restrictive states when it came to trading hours.

It called for retail hours to be fully deregulated in all states, paving the way for shopping around the clock.

Mr Shorten said that was a matter for state governments but that COAG would consider zoning regulations which made it difficult for new businesses to establish themselves.

Source: www.news.com.au

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Areas classified as hot spot also have transformation appeal – new transport infrastructure (making it more accessible) or a series of major new construction projects (creating jobs and generating demand for rent).

With Australia’s property market continuing to soften, house listings have increased and auction clearance rates have plummeted.

That’s good news for potential home buyers who have been patiently waiting for the heat to come off  the market.

But buying a cheap house in the wrong area can be a costly mistake, says Michael Yardney, Metropole Property Investment Strategists director.

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“It’s harder to find a hot spot in a flat market and they often refer to emotionally driven areas with quick gains, making them risky and speculative,” Mr Yardney says.

Instead he says look for areas offering strong sustainable growth.

“Seek out suburbs with location and infrastructure undergoing gentrification or a facelift that – suburbs in a cycle where younger people moving in and renovating.”

Marrickville in Sydney’s inner west  is a prime example, he says.

“A few years ago it was looked down upon because it was home to many older people but it has undergone a generational change in the past few years. Younger people have moved in and given the suburb a facelift.”

Transport

The quicker and easier it is to get from a suburb to the CBD and surrounding regions, the more value that suburb will have.

Young people in particular don’t want to spend time travelling “so look for major infrastructure such as transport links bringing people closer to populated areas”, Mr Yardley says.

Upmarket suburbs where prices have fallen, such as some eastern Sydney suburbs, may also be tomorrow’s long-term hotspots.

“You may not be able to afford the top end of the market but look for the ugly ducklings, opt for a balcony rather than a backyard to enter the market in those locations.”

“Consider apartments in these luxury suburbs where prices are soft, because they are close to the CBD, close to water and offer the inner-city lifestyle.”

RP DATA data says real estate gems can still be found in any economic climate – even when there is a period of low growth forecast.

Potential buyers should seek out areas where the market has performed well in the medium to long term (three to five years), and for properties with high gross rental yields, short sale times and minimal vendor discounting.

RP DATA research shows solid growth in suburbs 10km outside capital cities, where real estate is more affordable.

Middle-ring suburbs along major transport spines top its list of strong performers, indicating that buyers are rating both the price and commuting time high in their priorities.

What to look for

Regional

Affordable inland dwellings within easy driving distance to a  city or the beach.

Inner-city

There are certain places that always perform well and grow steadily over time. They are typically inner-city suburbs with cafes, restaurants and shopping centres near amenities like schools, hospitals and transport.

The ripple effect

When there’s a boom, it starts with the prime suburbs. When the prime suburbs become too expensive for people to afford, they go to neighbouring areas that are more affordable, and when they get too expensive people move into next neighbouring suburb.

Transport infrastructure

Accessibility is one of the most important features a suburb can have. The quicker and easier it is to get from a suburb to the CBD and surrounding regions, the more value that suburb will have. So things like trains, buses, bridges and particularly motorways can add big value to a suburb.

Ugly ducklings

These are the suburbs that were once shunned by property buyers as they were run-down and old. However, if they’re well positioned, they can transform into swans and become trendy inner-city hubs. The key factor here is the potential for the suburb to change.

Urban renewal and government decisions

These are generally areas that are transformed by government agencies from being run down or even industrial areas into vibrant and prestigious residential hubs.

Australian Property Investor surveyed property experts for their picks of tomorrow’s hot spots.

HOT SPOTS

New South Wales

BAULKHAM HILLS, NSW

Median price: $600,000 (H); $437,000 (U)

Location: Northwest Sydney

Population: 34,490

Victoria
BALACLAVA, VIC

Median price: $863,000 (H); $451,000 (U)

Location: Inner south Melbourne

Population: 5035

Queensland

FORTITUDE VALLEY, QLD

Median price: $686,000 (H); $393,000 (U)

Location: Inner north Brisbane

Population: 6192

Tasmania

MOONAH, TAS

Median price: $275,000 (H); $180,000 (U)

Location: Inner north Hobart

Population: 5084

South Australia

CLEARVIEW, SA

Median price: $360,000 (H); $301,000 (U)

Location: Inner north Adelaide

Population: 3170

ACT

AINSLIE, ACT

Median price: $705,000 (H); $645,000 (U)

Location: Inner north Canberra

Population: 5320

Western Australia

SOUTH PERTH, WA

Median price: $715,000 (H); $418,000 (U)

Location: Inner south Perth

Population: 11,301

Source:  news.com.au

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Economists and motoring experts have fingered the falling Aussie dollar as the culprit to our fuel woes, and things could get worse.

“Petrol prices are unlikely to ease any time soon,” said Commsec chief Craig James on Tuesday.

“And combined with declines in property and share prices and a weaker Aussie dollar, consumers are likely to remain reluctant to spend, keeping pressures on retailers.”

Nearly half of Brisbane’s petrol stations are selling unleaded fuel for 154.9 cents per litre today – a whopping spike of 17 to 18 cents.

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Sydney’s Thursday high was 152.9 cents, with prices in Melbourne reaching 151.9.

Hobart is the costliest place to fill up the tank, with a peak price of 155.9 cents reported by motormouth.com.au, while Canberra is the only capital centre to stay below the 150-mark.

At 8am (AEDT) today, the Aussie dollar was trading at 96.54 US cents – up on yesterday’s close of 95.50 US but down on a fortnight ago.

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Peter Whiteford, of the social policy research centre at the University of NSW who was an economist for the Organisation for Economic Co-operation and Development, told a national tax summit the cheapest accommodation for someone seeking a one bedroom apartment was in Wyong on the Central Coast near Sydney or Melton South on Melbourne’s fringe.

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“If you had an unemployment payment and rent assistance, after you paid your rent you would have $16.50 a day for everything else and looking for work,” he said.

Fourteen years ago the newstart allowance was 91 per cent of the single pension, today it is 65 per cent and is projected to fall to 33 per cent reported the Herald.

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Alarming figures that point to a hidden crisis in the property market reveal 5427 vendors lost an average of $54,000 on investments gone wrong in the three years to July, reported the Herald Sun.The Melbourne CBD, Southbank and Docklands are the state’s leading loss-making suburbs.

One out of every 20 properties sold in those locations had lost their owner money, according to the data from a property research firm.

But the losses are not limited to the flats-dominated inner-city market, with the figures also showing vendors losing millions in popular family areas.

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These suburbs include Point Cook, Roxburgh Park, Frankston, Reservoir, Carrum Downs, Glen Waverley, Hawthorn and Elwood.

Residex, a property information firm that collates data on real estate markets throughout Australia, compiled its analysis after sifting through the results of 268,000 sales recorded with the Valuer General.

It is the first time the firm has crunched the numbers on Victoria, meaning it could not make historical comparisons.

The losses are even more startling given that the city’s median house price rose by around 30 per cent over the same period.

A breakdown of the top 10 loss-making suburbs is heavy with inner-city locations as well as some of Melbourne’s most expensive postcodes.

At the top of the list is the CBD, where 427 properties were sold for less than what the vendor paid.

Southbank recorded 213 loss-making sales, Docklands 92, St Kilda 92, Carlton 91, Hawthorn 85, South Yarra 70, Brighton 61, Elwood 61 and Point Cook 57.

The figures come as Melbourne limps into its traditional spring selling period, with little more than half of all properties selling at auction.

The market has been battered by seven interest rate rises since April 2009, which have added about $85 a week to a $350,000 mortgage.

Yesterday, almost 600 properties were auctioned, but only achieved a clearance rate of 54 per cent.

Residex chief executive John Edwards said the number of vendors burned in property sales would eclipse 6000 if stamp duty and transaction costs were taken into account.

Mr Edwards, who has monitored the nation’s property market for 25 years, said the pain for Melbourne home owners was far from over.

By the time the market bottoms at the end of next year, Residex expects the city’s median house price to have shed 15 per cent. Families living in a $500,000 home can expect to see $75,000 wiped from its value.

“The adjustment process in Melbourne is just beginning,” Mr Edwards said.

“I won’t be surprised to see Melbourne suffer more than any other capital city in Australia. It has got the highest volume of surplus stock in the country and as the manufacturing industry further turns down the city will suffer from more unemployment than any other capital.”

JPP Buyer Advocates’ Catherine Cashmore said many of those who had lost money in property purchases would have been short-term investors, both local and foreign, buying off-the-plan, inner-city apartments.

“There is a surplus of high-rise developments and they tend to lose value before they gain value,” she said. “Nine times out of 10, off-the-plan developments are overpriced. They are priced on speculative value.

“When you go to sell you are also in a situation where no one wants to buy your lived-in apartment because there are always brand new ones coming on to the market in those postcodes.”

About 55 per cent of houses in Melbourne are now worth double what their owners paid, RP Data found. Interest-rate watchers are predicting a Melbourne Cup day interest-rate cut of 0.25 per cent by the Reserve Bank.

AMP Capital chief economist Shane Oliver said while homeowners will welcome the cut, it will take several more to inject any life into the state’s property market.

“We will need a few more cuts before housing picks up,” Oliver said.

Source:  www.news.com.au

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