Thursday, July 8, 2010

Latest Property News from Ted Hanson

Friday 09 July 2010
Quote of the Week

"Kind words can be short and easy to speak, but their echoes are truly endless." ~Mother Teresa~

Rates on hold
Mortgage holders welcomed the Reserve Bank's decision this week to keep interest rates on hold for another month.

This means that the Official Cash Rate remains at 4.5 per cent for this month and interest rates to borrowers stay at "around their average levels of the past decade", according to RBA Governor Glenn Stevens.

In a statement announcing the Board's decision, Governor Stevens hinted that any further changes would depend on what happens in both the global and Australian economies in the next few months.

"Pending further information about international and local conditions for demand and prices, the Board views this setting of monetary policy as appropriate", Governor Stevens said.

Dwelling approvals fall in May

The total number of dwellings approved fell in May for the second month in a row, according to figures released this week by the Australian Bureau of Statistics (ABS). Building Approvals.

This month's fall was due to an 18.8 per cent decrease in `private sector other' dwellings approved.

According to the ABS, New South Wales (-9.8 per cent), Victoria (-3.0 per cent), Queensland (-8.6 per cent), Western Australia (-13.9 per cent) and Tasmania (-24.8 per cent) recorded less dwelling approvals this month, while South Australia recorded 30.6 per cent more dwelling approvals.

Private sector houses approved rose 1.7 per cent due to a large increase in Victoria (14.5 per cent). This leap was cancelled out by falls in New South Wales (-1.2 per cent), Queensland (-8.2 per cent), South Australia (-0.3 per cent) and Western Australia (-3.6 per cent).

The value of total building approved rose 2.7 per cent in May in seasonally adjusted terms.

The value of total residential rose by 0.1 per cent and non-residential rose by 9.1 per cent.

Six steps to smarter borrowing

New legislation in relation to consumer credit means that from this week, home loans, personal loans, credit cards, consumer leases, overdrafts and line of credit accounts, among other products and services, will be regulated by ASIC under a single, nationally consistent regime.

As it assumes responsibility for these new laws, which are designed to better protect the interests of borrowers and improve standards across the industry, ASIC has offered borrowers some practical guidance on dealing with credit and managing debt.

ASIC's Senior Executive Director Financial Literacy, Consumers and Retail Investors, Delia
Rickard, said that with so many credit products on offer, some people do not get the right product that best suits their needs, some end up paying more than they need to while others borrow a lot more than they can afford to repay, particularly when it comes to home loans, and this places them at risk.

`Getting into debt is easier than getting out of it", Ms Rickard said.

"Our six steps to smarter borrowing highlight practical things to think about and do before consumers sign a credit contract and while they are repaying a debt.

`ASIC also stresses the importance of taking action early if consumers start to experience difficulty in making repayments and explain what to do if you are experiencing financial hardship', she advised.

1. Work out if you can afford to borrow

Before you borrow, use FIDO's budget planner to see exactly where your money goes now and how much you could afford in repayments. Remember to allow for interest rate rises and anything that might affect income in the future (for example, changing jobs or starting a family).

2. Shop around for the best deal

If you decide to borrow, take the time to compare interest rates, product features and fees and charges. Even a small difference in the interest rate can make a big difference to what you have to repay.

3. Know who and what you're dealing with

Check that the person or organisation you're dealing with is registered or licensed with ASIC. Make sure you know what you're signing up for before you go ahead (check the terms and conditions of any loan contract, including penalties for missed repayments or for paying off a loan early).

4. Keep up with your repayments

Keep your repayments up-to-date and make extra payments when you can to save on interest, subject to the conditions of your loan. Try to pay off the entire amount owing on your credit card each month (or as much as possible). Check for fees or charges if you're thinking of transferring your credit balance to another card, consolidating your loans or refinancing.

5. Get help if you can't pay your debts

It's important to act quickly if you're having trouble making repayments. Keep paying what you can afford. Even though it can be difficult to face the problem, ignoring it will only make things worse. Contact your credit provider without delay. There are places you can go for help like financial counselling or free legal advice.

6. Complain if things go wrong

Try to resolve any problem with your credit provider or broker first. If you aren't satisfied, take your complaint to an independent dispute resolution scheme. You can also complain to ASIC online or phone ASIC's Infoline on 1300 300 630.

ASIC has recently released an information pack including a new booklet, Credit, loans and debt: stay out of trouble when you borrow money and factsheets covering topics like home loans, debt management and what to do if you're in trouble, interest free deals, payday lending and other high-cost credit. It is available by phoning ASIC or on FIDO, ASIC's website for consumers and investors.

No more `no deposit'
Borrowers now need to find larger deposits on their loans as home loan lenders tighten credit restrictions, mortgage broker AFG said this week.

Loan to Value Ratios (LVRs), which express a loan as a proportion of a property value, reached a national low of 61.6 per cent in June 2010 - the lowest since the AFG Mortgage Index began in 2004.

During the first half of 2009, LVRs were typically around 73 per cent. They have been in steady decline ever since.

On the demand side, first home buyers, who typically have smaller deposits and therefore high LVRs, have halved as a market sector from 19.5 per cent in June 2009 to just 9.5 per cent in June 2010.

On the supply side, lenders are demanding higher deposits from potential homebuyers. In addition, mortgage insurers, who provide cover to lenders for loans at higher risk of default, are increasingly insisting that buyers have deposits of around 20 per cent.

LVRs were lowest in Western Australia (59.3 per cent), South Australia (60.3 per cent) and Queensland (61.4 per cent), but higher in Victoria (63.2 per cent) and New South Wales (65.5 per cent).

Internal analysis at AFG showed mortgage activity shifting away from the resource states of Queensland, WA and South Australia during the past six months as fears of a super mining tax dented consumer confidence.

Meantime Victoria and New South Wales have performed above expectations as investors in particular have responded to increased housing demand from a growing population.

Off the wallpaper

Did anyone fall for that Back to the Future Day hoax this week? Turns out the photo of Marty McFly's time machine console showing the arrival date as 05/07/2010 was just a `photoshopped' image.

Indeed, we may not yet be living in the future as imagined in the Back To The Future movies, but we're a lot closer to it than we were 25 years ago. In the vein of things futuristic, a collection launched this year called Off The Wall brings `old-school' 2D wallpaper into a 3D world.

Offering function as well as decor, the concept consists of two elements - the wallpaper itself and the underlying 3-dimensional shapes made from acrylic sheets that form the structure of shelves and lampshades. Each shape has its own stylised accompanying wallpaper conjuring different visual effects.

Lockdown at a high price

How can the asking price for three lock-up garages be the same as for a five-bedroom detached house currently on the market?

Like it or not, location still reigns supreme in the property market, and even on the coattails of a recession the most decrepit structures are fetching top dollar based on their prime position.

The rundown garage block in London has been placed on the market for just under AU$2M, making it "Britain's most expensive lock-ups", the UK Telegraph reported recently. A few notable neighbours include actor Jude Law, celebrity chef Jamie Oliver, actress Gwyneth Paltrow and singer Gwen Stefani.

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