PREDICTIONS FOR 2013

This will probably be my last posting for 2012 so I will take this opportunity to thank all my clients and subscribers for their ongoing support over the past year. I wish everyone a very Merry Christmas and a safe a happy holiday period and look forward to catching up with everyone in 2013.

Now on to business

Everyone is asking what my predictions are for 2013 and up until now I have tried to avoid making such predictions.

I am expecting next year to be a better market, especially with the latest official interest rate cut taking rates to a record low and the experts predicting further cuts in 2013. However, in the past interest rate cuts would have a profound effect on the property market but the effect of this round of cuts has been softened by the banks not passing them on in full. 

That being said, since the cuts last week I have noticed an increase in the level of buyer enquiry, especially in the lower end of the market.

I am starting to think (or at least hoping) that we are nearing the final stages of a buyers’ market and hopefully over the next 12 months prices are going to rise. If you are a buyer looking to get into the market, upgrade or buy an investment, now is the perfect time. With fixed interest rates in the low 5% bracket you no longer need sky high rents to make your investment pay for itself.

I won’t talk too much about statistics other than to say Auction clearance rates have been over 60% for pretty much the past 2 to 3 months which indicates some stability and confidence in the market.

I know many people at this time of year begin to make plans for the following year and one of the items on the agenda is property. Both buying and selling.

As I said earlier, if you are thinking of buying now is a great time and the low interest rates are too good to resist. 

If you are thinking of selling it may be worth your while using the holiday period to prepare your home for sale or if you are ready to sell but think you need to wait until after the holiday period then you may in fact be wrong. The holiday period presents a perfect opportunity to take a soft approach to selling your home. I find that over December and January there are still plenty of buyers around: ex-pats returning home to visit family, people from out of town looking to buy a city pad or investment or simply local buyers looking to get into the market, upgrade or downsize.

Last Christmas holiday period I sold 40% of my February 2012 listings before the end of January using this approach.

IT'S TIME TO GET INTO THE REAL ESTATE MARKET: Terry Ryder

By Terry Ryder

www.propertyobserver.com.au
Thursday, 06 December 2012

 

This is as good as it gets, folks. It’s time to stop procrastinating and get into the real estate market. 

The Reserve Bank’s latest reduction in the official interest rate, which will probably translate into a 20 basis point decrease in mortgage rates, is the icing on a cake that’s pretty tasty for property buyers. 

The ingredients of the cake include higher incomes, lower prices, greatly improved affordability and interest rates at GFC levels, against a background of solid economic performance, low unemployment and, at long last, rising consumer confidence. 

According to the figures that comprise the HIA-CBA Housing Affordability Index, the median dwelling price is 5% lower than it was two years ago.

In the same time frame, average weekly earnings have risen 7.45%, while the interest rate marker they use has dropped from 7.12% in March 2011 to 6.03% in September 2012. Since September, we have had two interest rate reductions from the RBA. 

So we have had seven consecutive quarters of improving affordability, followed by the rate cuts in October and earlier this week. 

Figures from Mortgage Choice show that, since October 2011, the average standard variable rate has reduced from 7.79% to 6.6% (prior to this week’s RBA cut). Monthly repayments on a typical $300,000 loan over 30 years have fallen from $2,158 to $1,916, a saving of $242 per month. 

Looked at another way, those who have maintained their repayments at October 2011 levels will have reduced their loan terms by close to eight years, saving well over $100,000 in interest over the life of the loan. 

Buyers have been responding to the improving situation – gradually but steadily – with loan commitments to owner-occupiers up 5.5% in the past 12 months and loans to investors up 4%. 

But surveys have suggested many consumers were awaiting another trimming of the official interest rate before getting into the market. Now they’ve got their Christmas present. 

So the fence-sitters are all out of excuses. It’s really not going to get any better than this. 

Capital city prices have stopped falling and are now trending up in most the big cities. We have now had six interest rate cuts since October 2011 and we are unlikely to get more any time soon. 

Everything you’ve been waiting for is now in place. Stop mucking around and get active.

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.

RBA DELIVERS SOME CHRISTMAS CHEER WITH DECEMBER RATE CUT

By Larry Schlesinger, www.propertyobserver.com.au

The Reserve Bank has cut the cash rate to 3% today, as tipped by most economists.

The new setting is the lowest the cash rate has been since a period from April to September 2009, following the GFC.

Traditionally, the RBA is reluctant to cut rates in December, doing so at less than a third of December monetary policy meetings going back to 1990.

A 25 basis point rate cut, if passed on in full by lenders will save a borrower with a 25-year mortgage of $300,000 about $48 per month.

“The Reserve Bank has boosted consumer confidence in time for what is traditionally the most expensive season of the year. Even though rate cuts won’t be filtered through to most variable mortgage holders until January, borrowers are likely to feel more positive about spending money this Christmas," says Michelle Hutchison, spokesperson for financial comparison website RateCity.com.au. 

“Borrowers with a typical $300,000 mortgage can expect to save about $40 in monthly repayments from next month as most lenders are likely to pass on 20 basis points. But there’s a significant difference between what lenders will pass on and the interest rates they offer.

“For instance, following the last rate cut in October, lenders passed on between 4 and 25 basis points according to RateCity. Variable interest rates range from 5.4% up to 7.2%, which is worth about $352 in extra monthly repayments for a $300,000 home loan (over 30 years).

“If you have time off over Christmas, borrowers should take advantage of their spare time by finding out how much your lender passed on, what your interest rate is and how it measures up to the rest of the home loan market.”

The RBA would have taken into account a benign inflation rate, house prices flat and manufacturing sector continuing to contract at a sharp pace and flat retail sales in October.

Earlier today, the ABS reported that building approvals fell 7.8% in October, greater than expectations of a 1.6% fall.

Mortgage holders must now wait to hear over the next few days how much of the rate cut will be passed on by lenders to borrowers.

 

ANZ mortgage holders have a long wait - until Friday the 14 December - to hear if the bank will reduce its variable rates as part of its independent interest rate decision on the second Friday of every month.

Speaking to David Koch on Sunrise last week, Aussie Home Loans boss John Symond said he did not expect the banks to pass on the full rate cut, but probably 20 out of 25 basis points.

The Reserve Bank’s monetary policy committee will next meet in February – there is no meeting in January.

CENTURY 21 RESNEKOV REALTY OFFICE PROFILE

RBA PREDICTS INCREASES IN DWELLING INVESTMENT

The Reserve Bank of Australia’s head of economic analysis, Jonathan Kearns, recently gave a speech entitled ‘The Outlook for Dwelling Investment’ that provided some interesting insights into the future of Australia’s residential property market. In particular, he forecasted that ongoing demand for new housing will drive increasing dwelling investment over the coming years.

According to Mr Kearns, low vacancy rates in Australia’s rental markets are a telling indicator of the significant demand that already exists for new dwellings:

“Tightness in the rental market will generally be indicative of tightness in the overall property market. While the typical owner-occupier property will differ in many ways, there is significant interconnection between the markets for owner-occupier and rental properties,” he said.

Commenting on why these market factors have not been reflected in construction rates, Mr Kearns said that ”while the number of dwellings constructed each year hasn’t grown, the size, quality and relative cost of each dwelling has.”

Furthermore, Mr Kearns noted that developers’ exposure to risk has increased in recent times, off the back of increasing regulation and greater involvement with community infrastructure provision – an area that had traditionally resided with various levels of government

Mr Kearns concluded that dwelling investment would likely increase at a relatively moderate rate in the medium-term, supported by demands for new housing:

“So what is the outlook for dwelling investment? While the long-run decline in the average number of people per household seems to have tapered off at least partly for demographic reasons, the strong population growth in recent years and the relatively low rate of dwelling construction suggest that there is sufficient demand for housing in the economy that an increase in supply could easily be absorbed.

“Overall, it looks likely that dwelling investment will pick up at a relatively moderate rate in the medium term. How quickly and how strongly of course remain important questions for understanding the impact on the overall economy.”