As expected first home buyers have set a record last year for the largest ever increase of purchasing homes. With the government boosted grant it has been no surprise that many first home buyers took the opportunity to get on the property ladder. However as with everything there is no doubt with that 2010 will see the biggest drop in home buyers since records began.

FIRST-HOME buyers leapt to the highest level on record during last year, with 191,000 Australians taking their first step on the property ladder.
Last year saw almost 70,000 more first-home buyers pile into the market than in 2008, a 55 per cent leap, according to property research firm RP Data.

The jump is directly linked to the government doubling the first-home buyers grant to $14,000 for existing dwellings and increasing the handout to $21,000 for new dwellings. The grant boost was phased back in December, The Australian reported.

The government’s boosted grant was announced in October 2008, providing a stimulus during the global financial crisis.

But adding to the equation was interest rates at 49-year lows.

Cameron Kusher of RP Data said the month that recorded the highest owner-occupier finance commitments was May, when 28.8 per cent of the commitments were from first-home buyers.

“During 2009, owner-occupiers took out finance for approximately 739,000 dwellings, of which 26 per cent was taken out by first-home buyers and the remaining 74 per cent came from non-first-home buyers,” Mr Kusher said.

“It’s no real surprise that first-home buyers were so active during 2009, given that the government was
offering the First Home Owners Grant Boost.”

Western Australia was the most popular state for first-home buyers last year. State government incentives of low or no stamp duty also boosted the market, as did a softening in property values during 2008.

Mr Kusher said that between 1992 and 2009 there was an average of just over 116,000 first-home buyers annually.

“Not only was the level of activity during 2009 the highest on record, it was 64 per cent greater than the long-term average level of activity,” he said.

During December last year, after the first-home buyers grant had been reduced, first-home buyers made up 21 per cent of the owner-occupier market, just 1 per cent higher than the historical average.

“We would expect that during 2010 they will sit at a similar, if not lower, level than the historical average,” Mr Kusher said.

“By anticipating that first-home buyers will at least fall back to historic average levels during 2010, we expect to see a turnaround in rental markets, with higher rents throughout the year, and expect that with less competition, investors will become more active in the marketplace.”

On a state-by-state basis, the second-greatest proportion of home loans for first-home buyers was found in Victoria (26.9 per cent), followed by NSW (26.8 per cent).

The markets that had the lowest proportion of first-home buyers during 2009 were South Australia (20.6 per cent), Northern Territory (21.1 per cent) and the ACT (22 per cent).

If you are looking for personal finance and like the majority of Australians finding it hard then you might be in for a change. Reports in the media suggest that the way your credit score is compiled and viewed by credit agencies and leading lenders is about to change.FOR too long, banks and other lenders have judged your credit risk based on failed applications and defaults, but that is changing.

Positive credit reporting is coming, and if you are a good bill payer, you should be able to use it to your advantage.

Many Australians don’t understand how their credit report is compiled and are unaware of the information credit providers use to make their lending decisions.

At present, your credit report will list all loan applications but not whether they were approved, any defaults of more than 90 days and bankruptcies.

Essentially all the bad stuff. The good stuff won’t be counted until 2011.

Financial planner Joel Palmer of Palmer Portfolios says every time you apply for finance or default on a payment, the details are recorded in a database that is accessed by all financial institutions.

“If you apply for 27 credit cards in two months, or miss a few too many payments, you’ll end up with a black mark against your name and find it next to impossible to obtain new finance,” he says.

“Positive credit reporting forces banks and credit card companies to report our good qualities, not just the bad.

“Let’s say you’ve had a home loan for 15 years, never missed a payment, and always had your credit card under control.

“If Australia had a positive credit reporting system, you would then show up on the database as an extremely good credit risk.

“The major benefit for you is that banks will then be falling over themselves to lend you money.”

Credit reporting agency Dun & Bradstreet’s chief executive, Christine Christian, says positive credit reporting is used in the US and other developed countries.

“People think paying an overdue debt will remove the listing from their credit report: This is untrue. Negative records such as collection accounts, late payments and bankruptcies stay on your credit report for up to seven years, even if you pay them off,” she says.

Ms Christian says people wrongly think low-value or non-bank debts are less important than big ticket items such as a home mortgage.

“The size of the debt and its source is irrelevant all negative payment behaviours will be listed on your credit report,” she says.

Anyone can access a free copy of their credit report through a credit reporting bureau.

Article: news.com.au

You have probably realised without talking or mentioning to anyone that rental prices have stayed put in the last 12 months. This is a big change from 2008 when rental prices suddenly shot up. Report from the Australian Property Monitors are indicating that rental prices in 2010 are on the way back up. News.com.au reports: RENTS across Australia stagnated and in some cases even fell in the December quarter, but are expected to rise later this year.

A report to be released by Australian Property Monitors today says last year was the weakest for national rental growth since 2002.

The two per cent increase nationally was well down on the average rate of 12 per cent for 2007 and 2008, The Australian reports.

APM economist Matthew Bell said rises in median rents in Perth, Adelaide and Canberra for the December quarter were not enough to offset flat rental markets in Sydney, Melbourne and Brisbane. But he said December was likely to be the last quarter of flat rental growth.

Factors that would help the rental markets included the end of the boosted first-home buyers grant, brighter employment prospects, strong house price growth and low vacancy rates.

High population growth, climbing interest rates and taxes, and low supply would also support rental increases.

Mr Bell predicted Sydney rents would increase by at least double the 2009 rate of 2.2 per cent and Melbourne’s rents should rise by five to seven per cent after a flat year.

He also predicted Perth median house rents could climb 11 per cent this year, in line with the average growth rate of 12.4 per cent experienced since 2003, while Brisbane rents should lift by about eight per cent.

While APM flags a strong lift in rents is likely this year, property managers and landlords reported that the market had remained soft so far this month, which is typically the busiest month for the rental market.

Chris Rolls, managing director of the Gold Coast and Brisbane residential property manager Rental Express, said: “We have found this is the slowest start to the year for the last five years.”

Mr Rolls, who owns a four-bedroom rental property in Brisbane suburb Kelvin Grove, said the contract for the property came up for renewal in 10 days and he had opted to keep the rent at $520 a week in the hope that the current tenants would not leave.

“The risk is that if you increase the rent, and they don’t pay it and instead move out, I won’t get the same rent. It was top rent 12 months ago,” Mr Rolls said.

News.com.au

With the Aussie dollar at record highs against other major currencies e.g. the British Pound and the US Dollar you have to wonder whether these highs are good or bad for a. the Australian economy, b. the Australian investor and c. the Australian consumer. FOLLOWING a strong surge on world currency markets, economists are tipping the Australian dollar will reach parity with the greenback in the next three to six months. It would be the first time the local currency has reached $US1 since it was floated in 1983.

The relatively strong performance of the local economy is one reason the local currency is flavour of the month, they say, along with the increasing likelihood of more interest rate rises from the Reserve Bank, tipped again as early as next month, and booming global commodity prices.

Last week the dollar hit a 25-year high against the British pound and a two-year high against the euro. It rallied hard against the greenback and, at around 92 US cents, appears set to test the $US1 landmark, according to AMP Capital Investors chief economist Shane Oliver.

But Dr Oliver says that, despite the many benefits a strong dollar offers – and it is certainly one of the best times in a long while to be booking a European or US holiday – there are some downsides.

”Generally speaking, a strong currency is a sign of a strong economy and a strong currency is good in terms of our overseas purchasing power,” he says. ”But it does have some negative impacts akin to monetary tightening in some areas – it makes it tougher for domestic businesses to compete, it makes it harder for exporters, and it hits tourism.”

CommSec chief economist Craig James says the Australian tourism industry is in for a tough time because this currency shift is likely to lead to more Australians heading overseas for holidays and fewer international visitors to our shores. But he points to other advantages a strong dollar has delivered: ”It has kept the petrol price down – without the stronger currency the petrol price would be much higher.”

Mr James says the dollar was the world’s fourth-strongest currency against the greenback last year; rising 21 per cent, it was beaten only by the Seychelles rupee (up 30 per cent), the Brazilian rand (up 25 per cent) and South African rand (up 22 per cent).

”There are always winners and losers when the currency moves like this but it was not bad news for retailers, importers, car buyers and motorists,” he says.

But for farmers, the news is decidedly mixed. While the equipment a farmer uses is mainly imported and will now be cheaper, those who sell produce such as wheat, meat and livestock on international markets are considerably less competitive.

”Thankfully we produce the sorts of goods that are not produced at the same quality in other parts of the world,” says Mr James, but he agrees the strong dollar has only made things harder in the bush.

Austock senior client adviser Michael Heffernan says Australia’s other major exporter, the resource industry, is less affected by the rising dollar than it may seem on the surface because ”the dollar generally goes up when world commodity prices go up”.

The balance of trade is, of course, dramatically affected by the strength of the local currency – it makes exports harder and imports cheaper – and Australia has been posting a monthly trade deficit since May last year.

But Dr Oliver says this is as much a reflection of the coal and iron ore price negotiations with Japan that led to markedly lower export prices from April last year.

”Now we have gone into a trade deficit but it looks like those prices are going to come back,” he says.

Dr Oliver predicts price rises of about 30 per cent in iron ore and 50 per cent in coal at the next round of negotiations with Japan, and these will start from April.

Mr James says that despite the strengthening local currency, Australian imports actually fell 18 per cent year on year in November, the biggest drop on record.

It seems that the rise in the dollar has reduced the value of Australian imports and as yet we have not started buying considerably more of these imported goods at the cheaper prices. ”Overall, it’s good for retailers because they don’t pass on all the cost savings so it helps their profit margins; and for media stocks, too, when they are buying imported content,” Mr James says.
Making the most a strong dollar

There are many ways to take advantage of our surging currency, says Austock senior client adviser Michael Heffernan.

■ Line up an overseas trip so you can cash in some of your $As for more foreign currency – you might even be able to afford a coffee in London at the moment!

■ Invest in overseas shares using local funds – European and US companies offer better relative value the more the $A strengthens.

■ Buy local shares that benefit from a strong $A; for instance major retailers such as Harvey Norman that sell a lot of imported goods – it’s usual that they don’t pass on all the price benefits from a stronger $A, which boosts their profit margins.

■ But he saves his most interesting idea for last: “Perhaps the best thing you could do would be to go and buy some real estate in the US – it’s a depressed market that has just got cheaper in $A terms. So why not go and get some real estate down in Malibu – you might do really well!”

Article: Sydney Morning Herald

There is no surprise that interest rates are on the up, and it would seem that most of us have had plenty of warning so that we can budget for the festive period; however some customers of Westpac would not have budgeted for their massive 45 base point hike. Is this morally right just before Christmas, is right that some banks surprise customers, will customers ditch Westpac?These questions have been ciculating the media this week.

HERE are 400 million reasons to switch banks – Westpac will pocket more than $400 million a year from this week’s merciless pre-Christmas interest rate hike, ripping the cash bonanza straight out of the pockets of struggling homeowners.
And if its rival banks follow suit later this week, the total fortune from the banks’ grubby grab for funds will total a staggering $1.3 billion.

The bank earned the ire of the public and political leaders on Tuesday for an act of epic greed – a shock 0.45 per cent interest rate hike, almost double the Reserve Bank’s 0.25 per cent increase, The Daily Telegraph reports.

According to figures revealed by Citigroup analysts yesterday, that extra 0.20 per cent cushion is worth a cool $402 million annually. If the Commonwealth Bank also raises its variable rate by 0.45 per cent this week, it will steal an extra $436 million from home loan customers.

Daily Telegraph, 10 Aug 2009..End of sidebar. Return to start of sidebar.
Westpac’s three big rivals remained holed up in their bunkers yesterday debating whether to mirror the 0.45 per cent hike and cash in at their customers’ expense.

It is widely expected they will, as early as today.

If they do, the only positive homeowners can glean from such collective thievery is that it may deter the Reserve Bank from lifting its cash rate in February. Effectively, the major banks would have already done the work for it.

Aussie chairman John Symond yesterday urged fed-up home loan customers at Australia’s big banks to end their apathy and leave for a better deal.

“People are apathetic and they think they’ll get a reasonable deal from the major banks and the banks play on that safety factor. If people got off their arse, they could save up to 1 per cent on the rate they are paying,” Mr Symond said.

“The banks have never ever been good at being Father Christmas.”

Despite the lack of public understanding of the bank’s move, Westpac chief executive Gail Kelly refused to talk publicly yesterday to explain her reasoning and define why the bank said its funding costs have increased, when its own statements clearly state their loan margins are increasing.

She again opted for side-kick executives to take the flak and answer the tough questions over the controversial move.

The South African-born CEO, who earned $10.6 million last year and is a mother of four, was not at her palatial two-storey home in St Ives when The Daily Telegraph visited yesterday.

A young woman who answered the door to the home on Torokina Ave said Ms Kelly was in Melbourne.

Neighbours in the leafy North Shore street said they were not concerned by recent interest rate rises.

“I didn’t even know rates had gone up,’ one woman said. “My husband looks after all that.”

Instead of Ms Kelly fronting the bank yesterday, it was her deputy Peter Hanlon, the same man who last month waxed lyrical about Westpac’s improved customer service due to the long-awaited return of bank managers.
That was a public relations victory. Yesterday, he presided over a public relations disaster.

When asked what he would say to customers considering leaving the bank, he essentially admitted the lender had borrowers over a barrel.

Why? Because its competitors would take Westpac’s lead and probably raise rates by a similarly gargantuan amount.

“They shouldn’t be spooked,” Mr Hanlon said. ” Banks work in the same market. I advise them to wait because I have no doubt other banks will move.”

Mortgage broker Loan Market Group said yesterday Westpac’s decision to lift rates at a greater pace than the RBA cash rate would not be a first.

The group’s executive chairman Sam White said the lack of competition in the loan market, or as he suggested the “concentration of power”, would lead to further excessive rises.

Meanwhile, major mortgage broker Australian Finance Group revealed yesterday it had seen a dramatic fall in the number of homebuyers choosing fixed interest rate mortgages.

It said the mortgages it wrote in November recorded the lowest proportion at fixed rates in more than five years, at just 2.1 per cent of total applications.

The group said the decline proved many borrowers did not see the “to fix or not fix” dilemma as a question of insurance against possible rate rises but were more focused on repayments.

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Economists’ forecasts had centred on a 0.5 per cent decline in the number of owner-occupier commitments in the month.

A downwardly-revised 2.2 per cent fall in demand for home loans in July ended nine straight months of growth.

Notably, first time buyers were again less active in the home loan market, making up 24.7 per cent of mortgages in August.

This was down from a record 28.5 per cent in May, lifted by the federal government’s more generous first homeowners grant.

The grant was wound back to $10,500 for established homes and to $14,000 for new properties from October 1.

Article Source: News.com.au

THE big banks have moved to increase interest rates on standard variable home loans in what is likely to be the first of many rate hikes. Westpac and Commonwealth Bank are the latest to announce rate hikes, raising standard variable rates.
Surprising jobs figures today suggest Tuesday’s rate rise by the Reserve Bank is the first of many as the economy springs back to health.

Economists now rate the chance of an interest rate hike on Melbourne Cup day – the next time the RBA meets – as a certainty.

“The September labour force data was unequivocally strong and reinforces our forecast for a follow up 25-basis-point rate hike in November,” Westpac analysts said.

Financial markets have rallied and predicted there is a 97 per cent prospect that the RBA will raise the official cash rate by another 0.25 percentage points, The Australian reported.