The Obama administration has launched a new program that will help the depressed US housing market, including state and local housing finance agencies to borrow from the US Treasury.
According to Reuters, the program aims to restart a source of mortgage financing for first time and low income buyers that have been shut out of the market by lending constraints.
"Through this initiative, the administration aims to help... jump start new lending to borrowers who might not otherwise be served and to better support the financing costs of their current programs," US treasury secretary Timothy Geithner said in a statement.
According to the Virginia Housing Development Authority, state and local housing finance agencies have only been able to issue approximately $4 billion in tax exempt bonds, compared to $16 billion annually about two years ago.
Tuesday, October 20, 2009
FHBs retreat from market but sector still robust
The record level of purchases by first home buyers have started to taper down and will continue to do so in the months ahead, according the Real Estate Institute of Australia (REIA).
REIA president David Airey said he expects to see the number of first home buyers drop back down to normal levels after seeing a 50 per cent increase on the usual market number over the last financial year.
"The reduction in first time buyers will certainly have an effect in the $250,000 to $450,000 price range, which is typically where these buyers aim for.
“Properties in this range could see sales decline but it will be a limited affect and probably not noticeable until the first quarter of next year," Mr Airey said.
According to Mr Airey the boost, not interest rates, will have the biggest effect on first home buyers.
"While interest rates are a worry, responsible lenders have been pricing in interest rate rises for quite some time when they calculate the borrowing capacity of first home buyers,” he said.
"Given that we have been expecting up to about a two percentage point increase for some time, it should be in the capacity of most people."
Resi consumer advocate Lisa Montgomery agreed with Mr Airey and said the 25 basis point increase was not enough of a rise to truly affect first home buyers.
"It might make some people more cautious but it shouldn't knock too many out of the market altogether,” she said.
"Buyers really need about a 2 per cent buffer to keep them prepared for further rises over the next one to two years.
"I think those first home buyers in play at the moment will stay in play until they lock in a purchase. Winding back the boost payments for these buyers really isn't going to make much of a difference either.
"With low-end prices at $300,000-plus, the cut-back of a few thousand dollars in a bonus grant should not stop anyone from making their purchase.”
REIA president David Airey said he expects to see the number of first home buyers drop back down to normal levels after seeing a 50 per cent increase on the usual market number over the last financial year.
"The reduction in first time buyers will certainly have an effect in the $250,000 to $450,000 price range, which is typically where these buyers aim for.
“Properties in this range could see sales decline but it will be a limited affect and probably not noticeable until the first quarter of next year," Mr Airey said.
According to Mr Airey the boost, not interest rates, will have the biggest effect on first home buyers.
"While interest rates are a worry, responsible lenders have been pricing in interest rate rises for quite some time when they calculate the borrowing capacity of first home buyers,” he said.
"Given that we have been expecting up to about a two percentage point increase for some time, it should be in the capacity of most people."
Resi consumer advocate Lisa Montgomery agreed with Mr Airey and said the 25 basis point increase was not enough of a rise to truly affect first home buyers.
"It might make some people more cautious but it shouldn't knock too many out of the market altogether,” she said.
"Buyers really need about a 2 per cent buffer to keep them prepared for further rises over the next one to two years.
"I think those first home buyers in play at the moment will stay in play until they lock in a purchase. Winding back the boost payments for these buyers really isn't going to make much of a difference either.
"With low-end prices at $300,000-plus, the cut-back of a few thousand dollars in a bonus grant should not stop anyone from making their purchase.”
Swan hits out at stimulus jibes
Federal treasurer Wayne Swan has hit back at claims by the opposition that the fiscal policy was instrumental in the official cash rate rise.
Former treasurer Peter Costello suggested the stimulus policy was a ‘low quality’ outlay and said the government should have relied on higher welfare payments rather than discretionary spending.
However, Mr Swan has backed his decisions, citing the Access Economics report released yesterday which showed the stimulus policy had helped shield Australia from the worst of the recession.
Mr Swan said the coalition wanted to see interest rates stay at their 50 year lows forever, but “they cannot and those opposite know it,” he said.
The treasurer pointed to recent comments by Reserve Bank of Australia governor Glenn Stevens which suggested that interest rates had risen on the back of a recovering economy.
Former treasurer Peter Costello suggested the stimulus policy was a ‘low quality’ outlay and said the government should have relied on higher welfare payments rather than discretionary spending.
However, Mr Swan has backed his decisions, citing the Access Economics report released yesterday which showed the stimulus policy had helped shield Australia from the worst of the recession.
Mr Swan said the coalition wanted to see interest rates stay at their 50 year lows forever, but “they cannot and those opposite know it,” he said.
The treasurer pointed to recent comments by Reserve Bank of Australia governor Glenn Stevens which suggested that interest rates had risen on the back of a recovering economy.
Monday, October 19, 2009
Small businesses suffer as lending tightens
Small business owners are struggling under tighter credit conditions and higher interest rates, despite the improving economic outlook.
According to a report in today’s The Australian Financial Review banks are charging small businesses almost double the margin that large businesses pay over the official cash rate and well over double the margin charged to home borrowers.
Figures from the Australian Bureau of Statistics (ABS) show that the average cost of bank finance to small businesses in August was 7.2 per cent – 4.2 percentage points over the official cash rate.
With bank margins on mortgages rising back to pre-crisis levels, the federal government has warned the banks against moving their rates by more than the Reserve Bank of Australia’s (RBA) shifts to the official cash rate.
"I've made it very clear [that] the government expects the banks to behave in the way in which they should behave and the way in which they've traditionally behaved – that is, that they will pass on the official cash rate increase and no more," treasurer Wayne Swan said last week.
However, smaller business may receive no such luxury with the Commonwealth Bank of Australia’s (CBA) executive general manager of small business Symon Brewis-Weston saying business lending is kept entirely separate from mortgages.
“Unless you see some abatement in that wholesale funding marketing, whether it’s two or three months, you will see some place move beyond any move in the official cash rate,” Mr Brewis-Weston told the daily.
According to Mr Brewis-Weston, large businesses have lower lending rates because the companies can access money through equity markets by issuing commercial paper.
According to a report in today’s The Australian Financial Review banks are charging small businesses almost double the margin that large businesses pay over the official cash rate and well over double the margin charged to home borrowers.
Figures from the Australian Bureau of Statistics (ABS) show that the average cost of bank finance to small businesses in August was 7.2 per cent – 4.2 percentage points over the official cash rate.
With bank margins on mortgages rising back to pre-crisis levels, the federal government has warned the banks against moving their rates by more than the Reserve Bank of Australia’s (RBA) shifts to the official cash rate.
"I've made it very clear [that] the government expects the banks to behave in the way in which they should behave and the way in which they've traditionally behaved – that is, that they will pass on the official cash rate increase and no more," treasurer Wayne Swan said last week.
However, smaller business may receive no such luxury with the Commonwealth Bank of Australia’s (CBA) executive general manager of small business Symon Brewis-Weston saying business lending is kept entirely separate from mortgages.
“Unless you see some abatement in that wholesale funding marketing, whether it’s two or three months, you will see some place move beyond any move in the official cash rate,” Mr Brewis-Weston told the daily.
According to Mr Brewis-Weston, large businesses have lower lending rates because the companies can access money through equity markets by issuing commercial paper.
Coastal markets to enjoy future growth
Now is the best time for potential property buyers to grab a coastal bargain, according to RP Data’s national research director Tim Lawless.
Mr Lawless is encouraging prospective buyers to take a good look at the coastal regions while house prices are relatively low and competition subdued.
“Based on our findings, the indications are clear that this market is now turning. I believe that many of these lifestyle markets have seen the worst of times,” he said.
According to figures from RP Data, the number of home sales has increased by 37 per cent since bottoming twelve months ago and the time it takes to sell a property is becoming shorter.
Mr Lawless said this turnaround in market conditions is coming from a low base and most coastal lifestyle markets still represent opportunistic buying.
Generally he believes that prices are still lower that what they were last year and the level of negotiation to be had by the buyer is still typically higher than what they would experience in the metro areas.
“The popular coastal markets are still much more affordable than they once were and market conditions are still in favour of the buyer. For these reasons now may be a good time to be positioning in the market for future growth,” he said.
Mr Lawless is encouraging prospective buyers to take a good look at the coastal regions while house prices are relatively low and competition subdued.
“Based on our findings, the indications are clear that this market is now turning. I believe that many of these lifestyle markets have seen the worst of times,” he said.
According to figures from RP Data, the number of home sales has increased by 37 per cent since bottoming twelve months ago and the time it takes to sell a property is becoming shorter.
Mr Lawless said this turnaround in market conditions is coming from a low base and most coastal lifestyle markets still represent opportunistic buying.
Generally he believes that prices are still lower that what they were last year and the level of negotiation to be had by the buyer is still typically higher than what they would experience in the metro areas.
“The popular coastal markets are still much more affordable than they once were and market conditions are still in favour of the buyer. For these reasons now may be a good time to be positioning in the market for future growth,” he said.
Clearance rates dip in major cities
Weekend auction clearances dropped slightly in Sydney and Melbourne over the weekend, with both cities achieving less than 80 per cent, according to Australian Property Monitors.
In Melbourne, 183 of the 239 properties up for auction were sold for a clearance rate of 75.3 per cent – down from the 79.3 per cent recorded last weekend.
In Sydney, $98.6 million in property was sold for a clearance rate of 62.2 per cent. Of the 206 properties listed for auction 145 were sold.
A four bedroom house in Castlecrag registered the highest sales price of $1.84 million; while a two bedroom unit in Warwick Farm was cheapest at $151,000.
While Sydney’s 62.2 per cent clearance rate was significantly higher than the 49.2 per cent recorded this time last year, it was still a fall from the 65.0 per cent recorded last weekend.
Adelaide and Brisbane achieved similar clearance rates over the weekend, achieving 53.1 per cent and 50.0 per cent respectively.
In Adelaide, 17 of the 30 properties listed for auction were sold for a combined total of $9.6 million, while 15 of the 29 properties listed in Brisbane were sold for $9.0 million.
In Melbourne, 183 of the 239 properties up for auction were sold for a clearance rate of 75.3 per cent – down from the 79.3 per cent recorded last weekend.
In Sydney, $98.6 million in property was sold for a clearance rate of 62.2 per cent. Of the 206 properties listed for auction 145 were sold.
A four bedroom house in Castlecrag registered the highest sales price of $1.84 million; while a two bedroom unit in Warwick Farm was cheapest at $151,000.
While Sydney’s 62.2 per cent clearance rate was significantly higher than the 49.2 per cent recorded this time last year, it was still a fall from the 65.0 per cent recorded last weekend.
Adelaide and Brisbane achieved similar clearance rates over the weekend, achieving 53.1 per cent and 50.0 per cent respectively.
In Adelaide, 17 of the 30 properties listed for auction were sold for a combined total of $9.6 million, while 15 of the 29 properties listed in Brisbane were sold for $9.0 million.
NAB changes Homeside price structure
National Australia Bank Broker (NAB Broker) has changed the structure of its Homeside brand, revising the way it calculates Homeside HomePlus variable rate loans.
Effective immediately, the new HomePlus variable rate loan will be based on a customer’s total Homeside lending and the Loan to Value Ratio (LVR) on the new application.
For new loan applications with total Homeside lending of $250,000 or more, and where the LVR is up to 75 per cent, the new rate will be 5.22 per cent p.a.
NAB Broker’s head of broker sales John Flavell said the new rate reflected NAB’s ability to create specific solutions for brokers via its broker-only brand Homeside.
“Brokers are in a good position to identify customers that fit the lower LVR profile and offer them this low rate solution,” Mr Flavell said.
“Typically loans with lower LVRs do not require a valuation (with a contract of sale) or mortgage insurance, and are on average more straightforward to underwrite.
“This means we can process these loans very quickly where all supporting documentation is provided upfront, and so deliver a great service experience to brokers and their clients.
“It also means that the cost of application processing for these loans is lower than for higher LVR applications,” he said
Effective immediately, the new HomePlus variable rate loan will be based on a customer’s total Homeside lending and the Loan to Value Ratio (LVR) on the new application.
For new loan applications with total Homeside lending of $250,000 or more, and where the LVR is up to 75 per cent, the new rate will be 5.22 per cent p.a.
NAB Broker’s head of broker sales John Flavell said the new rate reflected NAB’s ability to create specific solutions for brokers via its broker-only brand Homeside.
“Brokers are in a good position to identify customers that fit the lower LVR profile and offer them this low rate solution,” Mr Flavell said.
“Typically loans with lower LVRs do not require a valuation (with a contract of sale) or mortgage insurance, and are on average more straightforward to underwrite.
“This means we can process these loans very quickly where all supporting documentation is provided upfront, and so deliver a great service experience to brokers and their clients.
“It also means that the cost of application processing for these loans is lower than for higher LVR applications,” he said
Unemployment to peak at 6.8pc: Access Economics
Australia’s unemployment rate is expected to reach 6.8 per cent in mid-2010, a far cry from the 9 per cent predicted by some analysts earlier this year.
According to Access Economics’ September business outlook, Australia’s job market is more flexible than it has been in past recessions, with people losing hours rather than jobs.
The report also said the Reserve Bank of Australia (RBA) would lift interest rates by 2 percentage points over the next 18 to 24 months, with cash rates reaching 5 per cent by early 2011.
“The economy is slowly returning to normal, and that return to ‘normal’ in the economy means a return to ‘normal’ for interest rates,” the report said.
“Recovery will see underlying inflation back at or above 3 per cent by early 2011. And the economy can expect to see growth in the economy back at 3 per cent – trend – at about the same time.”
According to Access Economics’ September business outlook, Australia’s job market is more flexible than it has been in past recessions, with people losing hours rather than jobs.
The report also said the Reserve Bank of Australia (RBA) would lift interest rates by 2 percentage points over the next 18 to 24 months, with cash rates reaching 5 per cent by early 2011.
“The economy is slowly returning to normal, and that return to ‘normal’ in the economy means a return to ‘normal’ for interest rates,” the report said.
“Recovery will see underlying inflation back at or above 3 per cent by early 2011. And the economy can expect to see growth in the economy back at 3 per cent – trend – at about the same time.”
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