First-home buyers must think more creatively if they want to enter the property market, say Mark Armstrong and David Johnston.

It seems that barely a week goes by without another gloomy statistic confirming how hard it is to enter the property market.

The latest analysis from the HIA and Commonwealth Bank shows that affordability for first-home buyers fell a dizzying 10.3 per cent in the 12 months to March this year.

It’s no good simply hoping that the situation will improve because it probably won’t. If anything, 2007 marks the start of a new property cycle in which prices will begin to increase after a lull of several years.

So what can you do about it? Here are three ways to think more creatively about your first home and get into the market sooner.

1. Location first; property second. As much as it hurts to take off those rose-coloured glasses, the fact is that your first property doesn’t have to be your dream home. Just as it will take many years to build your career experience and nail that dream job, so it will take a long time to build enough equity to buy your dream home.

Your first home can be a vital springboard towards achieving that goal. The trick is to buy in a location where property values are growing at the same rate as the location you ultimately want to live in.

2. Live at home and rent it out. If you’re living with your parents and paying little or no board or rent, it’s worth considering buying your first property as an investment, rather than a home to live in.

3. Pool your resources. These days, more first-home buyers are beating the affordability blues by joining forces with family members. Lenders are offering family equity loans, enabling parents to access the equity in their homes and help their children to raise a deposit. If you take out this kind of loan, your parents will be guarantors and therefore financially liable if you can’t make the repayments, so it’s important that they understand their obligations.

Clubbing together with friends and lodging a joint loan application could also increase the amount you can borrow and make it easier to get into the market. If you buy with friends, make sure you think ahead about what you will do if someone wants to sell their share.

No matter what route you take to enter the property market, it’s worth remembering one thing. To maximise your equity, it’s best to hold the property for the full duration of a property cycle, or around seven to 10 years.

For the full report, please visit www.theage.com.au

Source: The Age

Home loans to build new properties have slumped to a year low, as high property prices and long council approval processes deter would-be builders.

House prices in NSW remain prohibitively high, prompting a 2.6 per cent fall in the number of residents taking out a loan in May.

NSW remains the only state where the average new mortgage is more than $250,000, Bureau of Statistics figures show.

The Labor leader, Kevin Rudd, yesterday promised to work with state and territory governments to speed up council approvals on development applications.

Mr Rudd said delays of up to 12 months could add up to 15 per cent to the cost of a house, due to “holding charges” imposed by lenders on developers for delays.

“If we can standardise and streamline the development approval process across Australia, we can take up to 15 per cent of the cost off housing across the country,” he said.

“Delays and disputes in the development application process are crippling the nation and hurting the small home owner,” he said.

But the Prime Minister, John Howard, insisted low interest rates remained the best solution to housing affordability.

“The truth is that the cost of servicing out of your disposable income the average housing loan is in fact lower now than it was in 1989,” he said.

With housing affordability continuing to dominate political debate, expectations are rising that home buyers will be offered some concessions before the coming election.

The latest housing figures show first-home buyers are struggling to get a foot in the door. Their representation among all new borrowers fell to 16.6 per cent in May, well below the historical norm of 21 per cent.

The average loan for a first home buyer hit a record of $238,500 in May.

The lack of new construction offers little hope for first home buyers hoping for prices to fall.

The chief economist at UBS, Scott Haslem, said: “The fact that by number, loans for construction are still weak overall suggests to us that upward pressure will remain on house prices and rents.”

For the full report, please visit www.smh.com.au

Source: The Sydney Morning Herald

The political squabble over what to do about housing affordability seems pretty clear cut.

You can do nothing and let natural market forces take their course, or – as Labor is doing – be seen trying to do something about the problem.

Either way, it is a complex problem that isn’t going to be solved in a hurry and, as the government argues, it is not just an issue that can be solved by throwing more money at it.

The housing affordability crisis has been building up a head of steam since last November’s interest rate rise, an increase which proved the final straw for some homebuyers, particular those that were sucked into the property boom at the start of the decade.

Mortgage rates sit at a six-year high after eight increases since 2002, including four since the last federal election.

Add to that rising house prices, the push for skilled immigration as the jobless rate continues to sink ever lower, and a sluggish residential building sector, and it becomes clear why the country’s housing stock has become stretched and why first home buyers are finding it tough.

Renters are also feeling the pinch in the absence of adequate private and public housing, and are confronted with soaring rents.

As such, the housing industry and lobby groups welcomed the federal opposition’s initiative in announcing it will host a National Housing Affordability Summit later this month in Canberra, bringing together representatives from the finance and property development industries and state governments.

The government says it has no intention of lifting the grant again, a handout that has already gone to 995,000 Australians.

It prefers the more natural market forces approach, saying that with rental vacancies as low as they are, this will start encouraging people to increase the stock again by building more houses, which in turn will help lower rent costs.

But it also says it wants the states and territories to release more land for building homes, as well as cut stamp duties, as they should have done under the GST agreement.

For the full report, please visit www.smh.com.au

Source: The Sydney Morning Herald

If you think rents are high now, this could shock you: one property expert thinks most landlords are undercharging.

While prices have been on the climb, Rental Express director Chris Rolls said many landlords have a lack of marketing information and were charging too little – not too much.

The median weekly rent for a two bedroom flat in Brisbane rose 12 per cent in the past twelve months, while the cost of renting a three bedroom house increased by 9.8 per cent.

But the climate of the rental market has changed so dramatically in recent years that some investors were stuck in the past, Mr Rolls said.

When changes to superannuation laws were announced, a wave of investors sold their properties and shifted the proceeds into superannuation – tax-free.

That mass exodus, coupled with soaring property values, spiralling vacancy rates and increased demand makes the market very attractive for investors.

However many haven’t realised just how attractive, Mr Rolls said.

“Many agents and owners live by a standard rent increase of $5 or $10 per week each time the lease expires,” he said.

“This just doesn’t make sense in a market where rental prices are increasing by up to 15 per cent annually.”

Owners are getting a better return on their investments than in the past 10 years, and the trend was expected to continue, he said.

HowMuchRent.com.au is an independent valuation resource that calculates expected rental income.

Landlords enter the details of their property, which is sent to an independent agent in the area.

“It’s really useful for owners who think they should be getting more for their property, and particularly useful for those who are considering buying a property as an investment,” Mr Rolls said.

For the full report, please visit www.brisbanetimes.com.au

Source: Brisbane Times

Generation Xers living in the outer suburbs of major Australian cities will struggle to manage their mortgage repayments if interest rates rise this year, the head of the federal government’s financial education board says.

It is feared Treasurer Peter Costello’s tax cuts for lower and middle income earners could be eaten away with just one rate rise.

Reserve Bank of Australia (RBA) data out on Friday shows bank account savings continue to rise at their highest levels since February 1990 when interest rates stood at 17 per cent.

Economists predict rates will climb by the end of 2007 to stop inflation rising above its longstanding two to three per cent target zone.

The Financial Literacy Foundation’s advisory board chairman Paul Clitheroe said people in their thirties, who can only remember good economic times, would have trouble meeting mortgage repayments if rates were to go up.

Friday’s RBA financial aggregates show broad money, which includes bank and building society account savings, grew by 12.4 per cent in the year to May.

Since October 2006, annual broad money savings had grown at rates last reached in February 1990.

“It does suggest that borrowing groups as a whole are more cautious,” Mr Blythe said.

For the full report, please visit www.smh.com.au

Source: The Sydney Morning Herald

Inflation likely rose in June as the higher cost of fruit, rent, as well as holiday travel and accommodation, pushed overall consumer prices higher, new private sector figures show.

The TD Securities-Melbourne Institute monthly inflation gauge, which provides a guide to official quarterly inflation figures, rose 0.2 per cent in June to 114.03 index points.

The gauge suggests the annual pace of consumer price inflation will have risen to 2.6 per cent in the year to June, taking the rate back into the top half of the Reserve Bank of Australia’s (RBA) inflation target band of two to three per cent.

The findings showed prices rose in 26 expenditure groups, fell in 17 and remained unchanged in 47 for a net balance of nine price rises.

The cost of fruit, rent and holiday travel rose the most in June, while vegetables, automotive fuel and alcohol became cheaper.

TD Securities senior strategist Joshua Williamson said the appreciating Australian dollar was preventing stronger inflation by keeping the cost of imported goods down.

But domestic prices continued to pose a threat to inflation, he said.

Prices of tradable goods had risen 0.3 per cent in June, compared with a solid 4.1 per cent rise in domestic inflation.

“The worrying implication is that domestic inflation will remain elevated and even increase further,” Mr Williamson said.

Annual headline inflation stood at 2.4 per cent in the March quarter, down from 3.3 per cent in the December quarter.

Mr Williamson said the RBA would likely wait for the release of the June quarter CPI figures on July 25 before making a decision on interest rates.

For the full report, please visit www.theage.com.au

Source: The Age

Australians are now less likely to own their own home outright and more of them are paying one off.

The latest data from the 2006 census, released last week by the Australian Bureau of Statistics (ABS), shows the median household income in Australia last year was $1,000 – $1,199 per week, up from the 1996 median of $600 – $699.

However, Australians are now less likely to own their own home outright and more of them are paying one off.

In 2006, 33 per cent of homes were fully owned, down from 41 per cent, and almost one-third were still being purchased, up from one-quarter.

Rented properties accounted for 27 per cent.

For the full report, please visit www.brisbanetimes.com.au 

Source: Brisbane Times

The riverside suburb of Newstead has topped the list of Brisbane’s highest earning postcodes.

In just five years, the average individual weekly income in Newstead has jumped nearly $150 to $1016 per person, closely followed by the inner city with $932, Pullenvale with $890, and Fig Tree Pocket with $878.

Census data shows the biggest income changes have occurred in the newly-trendy suburbs of Bulimba, Kangaroo Point and Wakerley, which all ranked in the top 20 wealthiest suburbs per weekly income compared to the 2001 Census.

Last on the list were Inala and Redland Shire, where the average person earns less than $340 per week.

The Australian Bureau of Statistics has warned the figures do not take into account CPI adjustments since 2001, but they do paint a picture of the shifting landscape and increasing affluence of Brisbane, where record population growth is having an impact.

The River City is now the fastest growing capital in the country.

While the Australian Bureau of Statistics is yet to release full employment data, figures out today reveal the average Brisbanite is better off than the average Australian – taking home $516 in their weekly pay packet, or $50 more than the rest of the country.

Weekly household income is also up to $1111 compared to the national average of $1027.

For the full report, please visit www.brisbanetimes.com.au

Source: Brisbane Times

The Reserve Bank of Australia left interest rates unchanged this morning at 6.25 per cent, but the chances of a rate rise this year are growing.

Yesterday, HSBC chief economist John Edwards said the Reserve Bank would not raise rates, but the board certainly would have discussed the possibility.

While none of the 17 economists surveyed by AAP expected the RBA to raise rates, seven expect a rise before the end of the year, while most agree the risk of a rise will have significantly increased in 2008.

Dr Edwards says there is a high risk domestic demand and output will outperform expectations in the next eighteen months, fuelling inflation.

Underpinning this risk will be the likelihood of a bumper grain harvest following the consistent winter rains, a slight pick-up in housing construction, and expansion in the NSW economy, which accounts for one third of national output, Dr Edwards says.

Furthermore, he says, solid household disposable incomes and consumption are expected remain, with the government’s new tax cuts coming into effect this week.

He says business investment and resource output also look set to beat prior forecasts.

Despite only a slow pick up in wages growth, which fuels inflation by giving consumers more money to spend, and a decline in core inflation since the middle of last year, Dr Edwards says the current official interest rate of 6.25 per cent is not enough to hold back inflation.

“For all these reasons, the consensus at Tuesday’s board discussion should be shifting toward a recognition that the cash rate will need to go higher,” he said yesterday.

Mr Capurso says the RBA had indicated that an unexpectedly strong global economic backdrop, a faster-than-expected pick up in domestic demand and a further tightening in labour market conditions would shift the risk of inflation higher.

“All those preconditions are now in place,” he said.

For the full report, please visit www.smh.com.au

Source: The Sydney Morning Herald

The housing affordability crisis has deepened, with Melbourne rents rising at the fastest pace for almost a decade.

Before a conference of housing ministers in Darwin, a State Government report reveals growing numbers of renters are being pushed out of inner-city areas by soaring housing costs.

Median weekly rents in Melbourne leapt by an inflation-adjusted 6 per cent over the year to March, the biggest annual jump since early 1998.

The report, by the Victorian Office of Housing, found that only 28 per cent of new rental agreements were affordable for lower-income households, the worst figures on record.

It is not only renters who are struggling.

Other figures have shown it is now more difficult to buy a home than at any time since 1983, after booming prices and four interest rate increases since the previous election.

Prime Minister John Howard yesterday continued to direct blame for the housing situation towards the states for failing to release sufficient land for development.

But the states have accused the Commonwealth of shirking on its overarching responsibility.

State Housing Minister Richard Wynne said the figures clearly showed that the Commonwealth Rent Assistance scheme was not working.

The report found that during the March quarter, vacancy rates in Melbourne hit a new low of just 1.2 per cent, compared with 3.7 per cent five years ago.

Australians for Affordable Housing spokesman David Imber said he was deeply concerned that inner Melbourne had become unaffordable for a swath of society.

“We do risk seeing a divided city and a real loss of social mix, particularly in inner areas,” Mr Imber said. “Meanwhile, public transport and petrol costs are really biting people who have to work in the city.”

For the full report, please visit www.theage.com.au

Source: The Age