22nd Oct, 2003
Yield is the amount of rent you receive from an investment property in a year, expressed as a proportion of the purchase price. Gross yield excludes rates, strata levies and maintenance, which also eat into your rental income.
Many real estate advisors recommend you pay an amount commensurate with a rental return of 4% for a property. So if the yield is less than 4%, it's possible you paid too much for the property, rather than a case of setting the rent too low.
21st Oct, 2003
The Reserve Bank of Australia (RBA) left interest rates on hold for the 16th consecutive month in October.
With the Australian dollar reaching over US69 cents, its highest value since November 1997, analysts’ predictions on the likelihood of an interest rate rise this year are mixed. Some forecasts say rates are unlikely to rise this year, while others predict the RBA will increase rates before Christmas.
This sends a clear message to investors that household debt needs to be reduced. This is backed up by the latest ING Melbourne Institute Household Savings and Investment report, which shows less than half of all households save any income, and 9% draw on current savings to make ends meet.
Economic forecaster BIS Shrapnel predicts that interest rates may rise to 10% within three years. If rates do hit double digits, average weekly repayments will rise a further $109 by 2006.
If these interest rate rises go ahead and the housing market subsequently contracts, BIS predicts the Australian economy will accelerate rapidly between 2004 and 2006. Many financial advisors suggest risk-averse borrowers consider locking in interest rates, such as 6.49% for five years. Splitting a loan into fixed and variable portions may also appeal to some borrowers looking for a safe option.
21st Oct, 2003
The AMP Bank/Real Estate Institute of Australia Home Loan Affordability Indicator (HLAI) reveals that housing affordability only improved in the Northern Territory and Western Australia in the June quarter.
The HLAI measures the percentage of household income required to meet the average mortgage repayment on an average-priced property.
A decrease in affordability signals that house prices are rising faster than average incomes. The size of the average home loan has also increased, making Australian housing the least affordable it has been for 13 years.
During the June quarter, the average Australian home loan rose 5.9% to a record high of $187,542.
Fewer first home buyers also entered the market. Only 13.9% of all home buyers were first home buyers in the quarter, down 3.7% on the September 2002 quarter.
21st Oct, 2003
New South Wales Home loan affordability fell by 6.7%. The size of the average home loan increased to $228,576, making it the highest in Australia. One-third of the average NSW household income now goes towards servicing the average home loan.
Victoria Home loan affordability fell by 1.9% in the quarter, and 8.8% over the 12 months to June 2003. The size of the average home loan increased by 4.7%, as did monthly loan repayments. The proportion of household income required to meet these repayments increased slightly to 26.6%. The number of home loans issued increased by 9.8%.
Australian Capital Territory Home loan affordability fell by 7.1%. Median house prices rose by 15.1%, home loan amounts rose by 10% and the number of home loans issued increased by 1.6%.
Northern Territory Home loan affordability increased by 13%. This was due to a drop in the median house price, an increase in the median weekly household income and a drop in monthly loan repayments.
Queensland Home loan affordability fell by 2.5%. It now takes 26.9% of household income to meet average loan repayments. The number of home loans issued rose by 7.5%.
South Australia Home loan affordability fell by 3%. The size of the average home loan rose by 4.1% and the proportion of income required to service this loan increased by 2.4%. The number of new home loans issued rose by 13%.
Tasmania Home loan affordability fell by 3%. The average home loan increased by 3.6%, as did the average monthly loan repayment, to 20.1% of total household income.
Western Australia Home loan affordability rose by 1.7%. The average household income increased by 2.7% so the proportion of household income necessary to service the average loan fell from 23.6% to 23.2%. The number of home loans issued rose by 15.6%.
20th Oct, 2003
The Housing Industry Association (HIA) predicts the home renovation market will grow by around 5% to June 2004, to a $19.6 billion per year industry. The HIA’s National Outlook for the September quarter also predicts a further 4% growth the following year, with the industry predicted to turn over $20.4 billion by June 2005.
The HIA attributes the home renovation boom to a shortage of land in capital cities, rising home equity, and the increased cost of buying, selling and moving house.
But the HIA says activity in the building industry for new homes will ease slightly in the next two years. The HIA expects new home starts to fall by around 7% to 158,000 this financial year, and a further 7% to 147,000 next financial year.
HIA Chief Economist Simon Tennant says, “Ongoing land supply shortages in many capital cities at a time when Australia’s net overseas migration is at its highest level on record – up 9.4% to 149,000 in the year to March – will keep home prices steady and building activity solid for the next few years.”
15th Oct, 2003
The Australian Bureau of Statistics (ABS) reports that the value of residential building approvals in July 2003 rose by 3.1%
Residential building approvals reached 10,271 in July (seasonally adjusted). This was a 1% fall on the number of residential approvals issued in June 2003, but an overall increase of 3.5% for the year.
Queensland received the largest number of residential building approvals, up by 12.6% on last year. The second-largest rise was 7.3% in Victoria, followed by 3.9% in South Australia.
14th Oct, 2003
Australia\'s population is continuing to grow. The Australian Bureau of Statistics estimates that the 20th million Australian has been born.
Reaching a population of 20 million is a milestone. But the rate of growth is turning.
Australia\'s birth rate is now below the replacement rate, that is the number of babies needed to exceed the death rate.
Demographers beieve that the population will stagnate over the next 50 years. One demographer, Bernard Salt, has predicted that the population would expand by only about six million in the next 50 years.
1st Oct, 2003
The number of first home buyers entering the market fell to a record low in June, the Australian Bureau of Statistics has reported.
First home buyers constituted just 13.9% of borrowers in June 2003, compared to 25.8% in June 2001.But despite this drop, the number of loans issued in June rose by 4.1% to 57,633. The size of the average home loan also rose by $3,500 to reach $174,500. And the value of lending for renovations increased by 2.1% to reach $495 million.
The fall in the number of first home buyers and housing affordability in general is under much discussion. Prime Minister John Howard is also applying pressure on the states to reduce what he calls their stamp duty bonanza on property transactions.
22nd Sep, 2003
While the media speculated last year that the real estate bubble would burst, we haven't seen that happen at all. After a slight correction in the last quarter of last year, auction clearance rates are back up to 70% to 80%. House prices in particular are also higher, especially in the $2M plus bracket.
Vacancy rates have fallen to 3.9% again, which is especially welcome news in the inner city where they were above 5% last year. The fall is due to the fact that the first home owners grant absorbed most of the original eligible buyers, leaving renters in the market. The supply of new property has slowed while the natural population growth of the city has continued.
If you have money to invest right now, consider your alternatives. The share market is 15% down over the last 12 months so one dollar invested would give you 85 cents today. The banks are offering 2% to 3% return on your money. Meanwhile, property is the only asset class showing growth.
Investing in property doesn't give the 6% to 7% return it once did. You're more likely to see a 3% to 4% return after costs. But add 5% to 10% growth per annum, and you're getting around a 10% increase on your money.
Real estate is also a safe investment. If the conflict with Iraq continues we'll see slower global growth. Interest rates will stay low, easing mortgage repayments. Also, the fact that property is less liquid than shares protects it. Property-owners don't jump on the net and sell houses the way share-investors do. Property-owners are much less reactive than share-investors. Going forward, I predict a very positive 2003 for property investors.
17th Sep, 2003
Changes to the Consumer Credit Code (effective from July 1, 2003) now require all fixed term credit providers to publish a single percentage figure, called a Mandatory Comparison Rate, in all advertising, on credit applications and in loan offices.
"This rate includes the interest rate, the amount of the loan, the repayment frequency, the term of the loan, as well as known fees and charges levied by the lender, except for government charges" according to the Queensland Office of Fair Trading.
"By making lenders use the same calculations to promote their products, consumers will be able to make more informed choices by comparing apples with apples" Fair Trading said.