New home sales improve slightly in Oct

New home sales improve slightly in Oct

 ninemsn > Money > News and analysis  29/11/2010 11:12:01 AM

New homes sales improved slightly in October, led by an increase in sales of detached houses, a survey shows. The HIA Jeld Wen new home sales report shows new home sales increased by 2.4 per cent in October while detached home sales increased by three per cent. The October rise follows a downward revision in September where a 0.6 per cent gain became a 1.7 per cent decline, the survey of Australia's largest 100 builders showed on Monday. Sales of multi-units fell by 2.6 per cent in October.

"Over the three months to October 2010, total seasonally adjusted new home sales fell by nine per cent to be down by 17 per cent when compared to the three months to October last year," the report said.

Private building approvals fell by six per cent while new home loans were down by four per cent over the three months to September 2010. "A combination of dampened demand and restrictive supply side conditions has generated a situation where Australia's recovery in new home starts will likely prove to have only lasted four quarters, five quarters at most," the report said.

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Sell your house: how to sell for more

Should you stay or should you go?

Deposit bonds

Real estate insider trading

Sell your house: use an agent or do it yourself?

Ireland's Bank Collapse and the Domestic Property Bubble

PM says bailout 'best deal available'

29/11/2010 8:54:01 AM

Ireland's crippled banks will immediately receive 10 billion euros ($A13.6 billion) under an international bailout and will be subject to a "fundamental downsizing", the government said Sunday.

The banks, brought down by toxic debts and a slide in investor confidence, will be able to draw on a total of 35 billion euros (46.5 billion dollars) out of an 85-billion-euro package from the European Union and the International Monetary Fund.

Analysts said the bailout would effectively see the nationalisation of Allied Irish Banks and ramps up the state's holdings in Bank of Ireland. Anglo Irish Bank has already been taken into public ownership.

"The program provides for a fundamental downsizing and reorganisation of the banking sector," Irish Prime Minister Brian Cowen told a press conference in Dublin after a deal was reached in Brussels.

"This will lead to a smaller banking system more proportionate to the size of the economy, capitalised to the highest international standards with renewed access to normal market sources of funding and focused on strongly supporting the recovery of the economy." Ireland's banking sector has been badly hit by years of reckless lending that has been exposed by the collapse of a domestic property bubble. The capital injections into Ireland's banks come on top of the 31.5 billion euros already paid in by the government in 2010 and will further increase the Irish government's debt. "Given the extent of the impairments on the Irish banking sector balance sheet, I would suggest they are hopeful rather than certain this will be enough," said analyst Charles Diebel at British banking group Lloyds TSB. "Clearly it is always about confidence and this should be enough to restore a degree of confidence in Ireland and in particular Irish sovereign debt." Dublin is providing 17.5 billion euros under the new bailout package, half of the total money going into the banks. Ajai Chopra, deputy director of the IMF's European Department, told a press conference in Dublin that the bailout was "largely designed by the Irish authorities". Under the 35 billion euros in loans offered to the banks, 25 billion euros will form part of a contingency fund should the lenders need more than the initial injection of 10 billion euros. Cowen's government had already announced a week ago that Irish lenders would undergo new stress tests just a few months after they controversially passed key European tests on their financial health.

Back in July, the Bank of Ireland and Allied Irish Banks (AIB) passed European stress tests designed to see if they would cope with another financial crisis. However, Ireland's economic climate has since worsened and AIB recently revealed that its customer deposits had plunged 13 billion euros since January.

Rating agency Standard & Poor's had on Friday lowered the credit standing on four big Irish banks, saying they were struggling to obtain interbank finance. It also warned of ripple effects on some banks based in Northern Ireland and one with links to London. S and P said its decisions followed "a turbulent period for the Irish banking system, which in our view has led to the fortunes of the Irish sovereign (debt) becoming increasingly entwined with those of its banking system".

Brisbane, QLD Property Auction Results - realestate.com.au

Brisbane, QLD Property Auction Results - realestate.com.au

"Quarterly Bank Performance," Aussie banks have a combined $1.45 trillion in housing loans

--Rogers pointed out that Ireland's banks borrowed up to 80% of Irish GDP to fund that country's property boom. A lot of the loans went to developers as well as individual borrowers. When the property market went bust after the banks soon turned to the European Central Bank for repeated helpings of credit to delay the inevitable. This week, the inevitable arrived.

--Could such a thing happen here? Well, according to the June issue of APRA's always-scintillating "Quarterly Bank Performance," Aussie banks have a combined $1.45 trillion in housing loans. The report says, "The banks showed a 4.0 per cent decrease in total assets over the year to 30 June 2010, driven predominantly by falls in other assets. Total housing loans increased by 12.3 per cent to $1,145.0 billion over the year."
--Hmm. So total housing loans (assets) for banks are about equal to total GDP. Now keep in mind Aussie banks have not borrowed all that money from abroad. Just some of it (quite a lot of it). This is one reason why Australia's net foreign debt is around $670 billion. The housing boom has been financed with foreign money.
--That's not a problem, unless foreign money gets expensive or is no longer as forthcoming. As long as you can sell bonds to foreign borrowers you're alright. But it's a bit of a worry for the major banks, based on the charts below from the RBA, that foreigners may not be as keen to buy bonds issued by Aussie banks, although keep in mind the banks might not be keen to sell debt right now either when they can raise money through equity financing.

--All three charts show that conventional and unconventional debt instruments have all declined as a source of funding since the GFC.  The government has stepped in the Residential Mortgage Backed Securities (RMBS) market to support non-bank lenders and offer other sources of competition for bank lending. But for the most part, the unconventional sources of asset securitisation haven't recovered to their pre-crisis highs.

--Which brings us to covered bonds. No, it's not a new type of underwear. It's a source of funding for banks which uses deposits as collateral against default. In other words, the bank sells a security and the buyer of the security is first in line to be paid from bank deposits in the event that the bank is wound up.
--You might wonder why a lender would have first access to bank deposits ahead of, say the depositor himself (you). And that's a fair question. It's also why covered bonds are a bit controversial. Putting creditors ahead of depositors in line for the distribution of assets would be a public relations disaster.
--But it would only be a disaster if the bank is actually wound up and creditors (the buyers of covered bonds) get your money while you (the depositor) get nothing. And of course, if a bank sources just a small portion of its funding from covered bonds, it doesn't represent a mortal threat to depositors and their deposits (you and your money in the bank).
--Yet it's telling that the Gillard government and Treasurer Wayne Swan are considering the introduction of covered bonds in Australia. Joe Hockey likes this idea, which should scare you even more. It's a bi-partisan agreement on how to put housing even more at the epi-centre of Australia's economy. Anytime politicians from the major parties agree on something, it's bound to be bad for you.
--The Big Four would claim that covered bonds are an additional source of funding for the housing boom that allows banks to lower borrowing costs to Australians because it lowers their aggregate cost of funding. But remember, the collateral for the bonds is your money in the bank.
--What could possibly go wrong?
--Well, hypothetically, a fall in bank asset values (housing crash) would raise concerns about bank liquidity and lead to doubts about the likelihood of a bank paying out on its covered bonds. This is what has happened in Ireland.
--When Anglo-Irish Bank had ratings on its covered bonds cut by Moody's, it showed that the Irish banks increasingly at the mercy of the ECB for continuous funding and that alternate sources of funding were tapped out. It also meant that the collateral for the bonds was in doubt, and forced the Irish government to try to make it good.
--This last point is really the most important. Covered bonds were just the last in a long-line of ideas to keep Ireland's housing boom going beyond all bounds of normality. Once the money ran out to keep prices inflating, the housing market collapsed and took the entire banking sector with it. This is how housing hijacks an economy.
--So what does all this have to do with Australia? Well, in our view, Australia's market has been partially hijacked by housing. Covered bonds would only make the bubble bigger, which would make housing even more unaffordable and lead to bigger losses down the track.
--The recourse to covered bonds is being sought to keep the housing bubble from deflating. The banks, having exhausted the supply of first buyers, need to find new sources of funding to offer new mortgage products. And they might be worried that the traditional sources of funding are getting more expensive and more reluctant to feed Australia's bubble.
--The big risk with covered bonds is that they get abused as cheap of way of sourcing funding for reckless lending. It works as long as house prices go up and up. But if house prices fall, then not only are depositors imperilled, but the government will be asked to help the banks with more cash to pay off investors. And when the value of bank loans exceeds GDP, not even the government can make that good.
--Of course that could never happen here.
--By the way, covered bonds are legal now in New Zealand. In fact, kiwi banks are selling the bonds denominated in foreign currency, which you think would expose them to massive currency risk. Incidentally, Aussie banks have a heaping helping of assets. We'll get the figures for you tomorrow.
--- And finally, get a load of this from Dow Jones Newswires overnight: Standard & Poor's Monday shifted its outlook on New Zealand's foreign currency credit rating to negative from stable, warning on the country's dependence on offshore markets to fund its banking network and putting a spotlight on the its tepid economic recovery.
--Hmmn.

Do House Prices Ever Drop

This Article From Money Morning Australia,

I know we've give the property drum a big old banging recently.  But a number of readers - both property bulls and bears - have mentioned that they don't ever recall a time when house prices have fallen.
And that isn't it a fact that house prices double every 7-10 years.  They even say that they've seen charts or seen the numbers that prove this.  That if you work out the price of a house from 100 years ago and then double it every 7-10 years you get roughly today's median price.
We've no doubt many have taken the effort to do such a thing.  However it's not an entirely accurate method.
Particularly because if you include the credit-fuelled boom of the last twenty-odd years where house prices have tripled and even quadrupled, it distorts prior periods when house price growth wasn't as strong.
To show you what I mean, take a look at the following chart that we've cobbled together:

Source: Money Morning

The blue line is a scenario of zero growth per decade between 1900 and 1970 - just to point out that we're using random numbers and random dates - and then 100% growth for the next decade, 50% for the next, 66% for the next, and 100% for the final period.
That takes the 10,000 starting point to 100,000 after 110 years.
In contrast the red line is a constant level of growth of 23.29% per decade.  The final number is almost exactly the same - 100,048.
The point is, just by taking the starting number and the end number (red line) you can create the impression of a steady, gradual and constant increase.
But if you look at the real numbers (blue line) it shows a period of no growth at all, followed by a rapid surge in a relatively short period of time.
Got it?  Good.  Now let's look at some real numbers rather than pretend ones.
It wasn't easy to find to be honest.  We recalled seeing a chart showing long-term Sydney house prices a year or so ago, but couldn't remember where we'd seen it.
Anyway, a bit of searching around on the interweb - obviously it would have been quicker if the NBN was here - and we found what we were looking for.
It was on the stubbornmule.net blog.  The writer of the blog had cobbled together a chart based on numbers he (or she) had gotten from Dr. Nigel Stapledon, economist at the University of New South Wales.
There were actually three interesting charts which I'll replicate here with a link back to the stubbornmule blog.
The first was this one:

It shows a chart similar to our blue line above.  No growth followed by a massive spike.  Case closed.  Or is it?  Let's look at the next chart:

This chart actually shows a steady and constant growth rate of 9% since the mid 1950s.  Importantly, regardless of that period of growth, prior to that point, house prices were relatively flat during the previous seventy years.
But the last chart was the really interesting one.  It shows Sydney house price movements adjusted for inflation:

You've still got the price spike, but importantly, taking into account consumer price inflation the growth rate is only 3.1% per annum as opposed to the non-inflation adjusted 9% per annum.
But more important than that is if you take into account the fact that the CPI underplays the real level of price and monetary inflation, house price growth since the 1950s would be no better than inflation - probably worse.
But even more important than that is the period prior to the mid-1950s, where house prices were volatile and were by no means doubling in value every 7-10 years.  In fact, looking at the chart there are just as many periods of house prices falling as there are of house prices rising.
So what caused the sudden take off in house prices from the mid-1950s onwards?  I mean, that's prior to the massive price inflation we saw in the stock market in the 1980s by a good 25 years.
It's prior to the end of the Bretton Woods agreement by nearly 20 years too.
Dr. Stapledon appears to put the reason down to... nope, not credit but government interference.  Stapledon is quoted as claiming, "The evidence presented in this thesis of the lift in the cost of fringe land in the major urban areas provides prima facie evidence that supply factors have been a significant factor explaining the upward trajectory in house prices in Australia since the mid 1950s."
Does that counter our claim that the house price bubble is a result of a debt bubble and little else?
Not really.  Certainly as with everything, the interference of government does distort the market.  That's a fact.  That's the case whether it's housing, stock markets or book markets.
But if you look at the last chart again, the price increase from the early 1960s until the 1970s - and maybe into the early 1980s - isn't too extreme compared to price movements in prior decades.  And neither are the price advances after that.
The conclusion you can draw is that government interference kick started the boom and then the appearance of easy credit and liberal lending standards gave it an extra boost.
The crucial difference is that in prior decades the market had fluctuated between periods of strength and weakness with no overall real gain in prices over seventy-odd years.
These periods of price inflation and deflation obviously helped contain expectations about house prices.  In fact we'll guess that no-one would have even seen their house as an investment.  It was viewed as a dwelling to live, and potentially an asset to pass on to the next generation... but not in the belief that it would be a tidy inheritance for the next generation to sell, but rather that it would give them somewhere to live.
Yet the period since the 1960s has seen an almost constant increase in prices.  It's that phenomenon which has created the bubble that has now popped.
It's that period which has created the housing Ponzi, where expectations are that prices will always go up and therefore the more leverage the better.
But just like every other bubble in history, even the intervention of government hasn't prevented this bubble from popping.
History tells you that with any market buyers and sellers will act to achieve a market price.  Absent government manipulation you'll see prices fluctuate.  In many cases, absent government manipulation you'll actually see prices fall - technology is the obvious example.
But when governments intervene to the scale that they have with housing for the last fifty-odd years then you ultimately end up with the mother of all bubbles - the Australian housing bubble.
The consequence is that rather than the last fifty years seeing rises and falls in house prices, all you've seen is house price gains.  That doesn't mean the falls have gone away, but rather that they've been bottled up for one almighty pop.
Cheers.
Kris Sayce
For Money Morning Australia

Aussie Banks "Unique System To Keep Dwelling Prices High"

Saturday, 20 November 2010 – Melbourne, Australia
By Kris Sayce

Well reader, I have to say it, today your editor read the most ridiculous article we've ever read on Australia's now-popped house price bubble.
And believe me, that takes some doing. There's been a heck of a lot of rubbish written over the years, but the article we read today trumps the lot.
What makes it worse is that it wasn't written by some half-baked real estate agent or a rabid property spruiker. No, it was written by someone who many believe is one of the most respected financial journalists in Australia - Robert Gottliebsen.
As his biography on the Business Spectator website points out:

"When it comes to Australian business media, one name is synonymous with trust, integrity and depth of knowledge that surpasses all others, that name is Robert Gottliebsen. Robert Gottliebsen is an Associate editor for Business Spectator and was the original AFR Chanticleer and founder of Business Review Weekly (BRW) Magazine."

He's a commentator that many in the mainstream respect. Although based on the article he wrote yesterday, he looks to be past his sell-by date.
In his article Mr. Gottliebsen expressed sympathy for a view put forward by Bendigo and Adelaide Bank chairman Rob Johanson. Mr. Johanson was commenting on proposals by the socialist Green Party to prevent Australia's banks from raising rates any higher than rate moves by the Reserve Bank of Australia (RBA).

Mr. Johanson said:

"None of us... who can remember trying to buy a house in the 1970s would want to have to go through or go back to that situation for funding.

"With my wife I bought my first house in 1967 and I remember vividly what it was like in the 1970s. Getting a housing loan from the bank was extremely difficult and as a result house prices were very low because you had to assemble deposits many times current requirements."

Mr. Gottliebsen then offers his opinion on what makes the current Australian housing market so special:

"It might not be intentional, but in Australia banks have developed a unique system to keep dwelling prices high. They are liberal in granting housing loans, so there is a strong consumer demand for houses."

We're dumbfounded, but we'll continue:

"By restricting the supply and boosting the demand, banks keep dwelling prices high. If the Greens' proposal were enacted and we had further increases in the cost of funds overseas - which many are predicting - then the current high house price arrangement would be blown apart...

"I am delighted that neither the government nor opposition are going down that path."

At least we should be grateful for one thing from Mr. Gottliebsen's truly mind-blowingly dumb article, and that's the admission from a mainstream insider that the current housing and banking relationship would be "blown apart" if it wasn't for house price manipulation by the banks and government.

But of course, it's too late to worry about that. As I wrote earlier this week, the house price bubble has already popped and it'll be blown apart regardless of whether the Greens' policy gets up or not.

But quite frankly we find it extraordinary that not only would a banking executive claim it was terrible that people had to "assemble deposits" to buy a house, but it's equally bizarre that a so-called respected journalist would cheer the fact that Aussie banks have "a unique system to keep dwelling prices high."

Clearly they prefer how the market is rigged right now. Where those - we'll assume - such as Mr. Johanson and Mr. Gottliebson who bought their homes in the 1960s and 1970s and who have benefited from two decades of loose bank lending and cheap credit feel weak at the knees at the thought of house prices returning back to their pre-boom levels.

Much better for house prices to remain high, for banks to be "liberal in granting housing loans", and for current homebuyers to be paying 60% or 70% of their income in interest to the banks

I mean think about it. Think about the difference. In the 1960s or 1970s buyers would have saved a deposit. They would have had money sitting in a bank account accumulating interest.

Importantly, they would have been debt free. And, they would have had savings set aside for a rainy day or to put down as a deposit for a house.
Today, buyers are bribed and suckered in to the market by banks thanks to artificially low interest rates and taxpayer funded giveaways such as the first home buyers bribe.

And rather than having a healthy bank balance of savings for a rainy day or for a deposit, well, they've already got a house so they don't need a deposit, and with 60% or 70% of their income going on mortgage repayments they don't have a bean left to put towards savings anyway.

They're living the life of a pauper, but at least they're doing it in style... if that's possible!
But don't worry guys, because apparently in Australia "banks have developed a unique system to keep dwelling prices high."

Don't you believe it. The market has cracked and the baby-boomers who thought they could profit at the expense of youngsters going deeply into debt will soon find the smile wiped off their faces.

Perhaps Gottliebsen's name used to be synonymous with trust, integrity and depth of knowledge, but not after that article. We thinks it's time for Gottliebsen to hang his head in shame and hang up his boots to let someone with a bit of common sense take over.

The Big 4 Bank Bashing

Informed Debate

Bank bashing has become very confusing lately {Click on Links}. (Business Day) reckons "Australia's big four banks have fattened their margins while complaining about being squeezed, new figures suggest." (The Australian) reports "the RBA said it expected [increases in mortgage rates] because of rising funding costs and had taken them into account in its monetary policy settings."

Logic tells you that either the RBA or the "new figures" are wrong. Faith in central bankers is never well placed, so let's look at who came up with the contradicting figures. Oh look, it's APRA, the Australian Prudential Regulatory Authority (potentially one step worse than the central bank).

Australian Institute director Richard Denniss explains the APRA figures: "It's like making hamburgers. If meat accounts for a third of your costs and the price of meat goes up 10 per cent, you shouldn't be expected to put up the price of the hamburgers by 10 per cent."

The man who first explained APRA to your editor used to say "the Labor party couldn't run a hot dog stand". It seems the RBA couldn't run a hamburger stand. This is where it gets really funny: "The Australian Bankers Association confirmed the [APRA] calculations were correct. But it said they didn't reflect banks' actual cost of funds."

"To be honest we can't work this out," said chief executive Steven Munchenberg. "Performing the same calculation we get the same result, but I know it is not right because if it was we would have been being beaten to a pulp with this by the government and the opposition."

Bankers who can't calculate their margins, but regulators who can?

Foreign Investment

How's (this) for a chart?

Source: FIRB

The concert goers in Mullumbimby may have cheered around us back in 2007 as Kevin of Eumundi got elected. Few of them read the Daily Reckoning between smoking various substances and so few of them knew what was to come. It wasn't a great time to be elected to say the least.

Now, several years on, Julia is stuck with the impressive jump in foreign investment depicted above. Not that it's her fault. But how will voters see it?

More rate rises on the cards, says OECD

• From: AAP  November 19, 2010 7:09AM

• Australia's recovery 'will need further rate rises'
• 'Mining boom is fuelling economic recovery'
• OECD report forecasts economic growth

AUSTRALIA'S strong recovery from the global economic downturn, fuelled by the mining boom, means the Reserve Bank of Australia (RBA) will have to continue to raise its official cash rate, the Organisation for Economic Cooperation and Development (OECD) says.

The OECD also said the global recovery has become more hesitant, but low interest rates in many countries suggest this "soft patch" is unlikely to persist for too long. In its semi-annual Economic Outlook report, released overnight, the OECD said Australia's projected growth was likely to require a further tightening of monetary conditions to ensure that a non-inflationary recovery remained on track. The OECD is forecasting Australian economic growth at 3.6 per cent in 2011 and 4.0 per cent in 2012, after 3.3 per cent in 2010. "OECD projections include further tightening of monetary policy to moderate demand pressures and rein in the level of inflation, which is relatively high at the beginning of the cycle," the Paris-based institution said. The RBA's increase in the cash rate this month to 4.75 per cent was the seventh rise since October 2009. The OECD expects inflation to remain near the top of end the RBA's two to three per cent target band - 2.8 per cent in 2011 and 2.9 per cent in 2012. More broadly among the 33 OECD countries, growth is forecast to expand by 2.3 per cent next year and 2.8 per cent in 2012, with inflation at a subdued 1.5 per cent and 1.4 per cent, respectively. "The global recovery is continuing to recover, but progress has become more hesitant," the think tank said. "With monetary policies remaining accommodative even as fiscal consolidation becomes widespread, the present soft patch in output growth is not projected to persist for long." Australia's unemployment rate is expected to fall below five per cent after mid-2011 and to 4.7 per cent in 2012, compared with 5.4 per cent as of October this year.
This is well below the expected OECD average of 8.1 per cent next year and 7.5 per cent the following year. The OECD said increased business investment should be the main engine room of Australian economic growth. "The strength of demand from major Asian countries and the terms of trade will favour the mining sector, whose expansion should have a knock-on effect on the rest of the economy," the OECD said. "These developments will probably compensate for weaker (government) demand and stimulate job creation, which should support household incomes and consumption." The OECD said this positive outlook, associated with the development of China, could boost confidence and produce even stronger than expected growth in domestic demand.
"However, this scenario might also be adversely affected by renewed financial turbulence in the OECD area or by an unexpected slowdown in the Chinese economy," it said. As in a more in-depth analysis of Australia by the OECD released last Sunday, the latest report urged reforms in the housing and infrastructure sectors to reduce bottlenecks that the mining boom was likely to exacerbate.

RBA Gets Defensive On Rate Hikes

Reserve Bank of Australia deputy governor Ric Battellino has defended rate hikes / File Source: The Australian

THE central bank has defended its most recent interest rate rise, saying the "early, modest tightening" was a pre-emptive move to guard against future inflationary pressures.

Reserve Bank of Australia (RBA) deputy governor Ric Battellino says inflation is now "broadly in the middle of the target range". But over the medium term, as economic growth picks up, inflationary pressures are "more likely to be upward than downward", he says. "For this reason, the board of the Reserve Bank decided at its meeting earlier this month that it would be prudent to make an early, modest tightening to guard against such an outcome,'' Mr Battellino said in a speech on economic developments in Perth yesterday. This was consistent with the bank's forward-looking approach to monetary policy which "on balance" had helped keep the economy on a sustainable path, he said.
The RBA raised the cash rate by 25 basis points to 4.75 per cent at its November board meeting.
Minutes from the meeting show the central bank made a pre-emptive upward rate move to counter the future threat of inflation. Mr Battellino said it was understandable that spare capacity was limited as the Australian economy had now grown more or less without interruption for about 20 years. "This means that the economy cannot grow much above its potential rate without causing a rise in inflation,'' he said in the speech. "With a large amount of money continuing to flow into the country over the next couple of years as a result of the resources boom, the challenge will be to manage the economy in a way that keeps economic growth on a sustainable path, with inflation contained. "This is what the bank is trying to do.''
The RBA expects the Australian economy will continue to grow at a "solid pace" over the next couple of years, with growth picking up to an "above trend rate". Overall, the economy was "doing well," with the number of jobs continuing to increase while the unemployment was falling, Mr Battellino said. He said the growth of the world economy over the past year had resulted in a significant lift in commodity prices, particularly iron ore and coal, which had risen in recent weeks.
However, he said it was difficult to predict how long the mining boom would last. The increase in terms of trade had now surpassed the 2008 peak and added $25 billion to the Australian economy.
He said recent commodity price outcomes had caused the RBA to revise up its forecasts.
Both China and India were going through a phase of development which was very intensive in the use of steel - a phase he said had taken other countries up to 20 years to move through. "It is likely that China, and more particularly India, will have strong demand for steel for quite some time yet,'' Mr Battellino said. He said the household saving ratio had picked up from the low levels it fell to earlier this decade, but non-residential building remained weak. While the bulk of adjustment had already occurred in the Australian commercial property market, finance for commercial property development remained "tight", he said. Looking abroad, Mr Battellino said global economic growth for the year had been strong and 2010 figures were likely to show the world economy grew by about 4.75 per cent in 2010. The US household sector was still in "very poor shape", while the US corporate sector was in "pretty good shape". Government debt problems were most acute in Europe and the situation had "deteriorated noticeably" in recent weeks. Asia, on the other hand, was a "bright spot" for the global economy, but inflation could become a significant policy issue in if growth remained strong, he said.

A third of real estate sales are for houses under $350,000 as cautious buyers play safe

• by Michelle Hele  From: The Courier-Mail  November 20, 2010 12:00AM

QUEENSLAND home buyers are being cautious with their cash with more than a third of sales for houses priced under $350,000.
Quarterly median house price figures released today by the Real Estate Institute of Queensland show that sales of homes priced at less than $350,000 had grown in the September quarter. At the same time the number of buyers spending up big - more than $2 million - was down, with only 22 transactions.
Despite the low number of multi-million-dollar sales, five new suburbs made it on to the $1 million median this quarter - Burbank, Chandler, Pullenvale, St Lucia and New Farm. Brisbane's median house price is now $531,170 - down 1.3 per cent on the previous quarter but 12.5 per cent higher over the year. Despite an abundance of properties on the market, almost a third of the 145 suburbs in the Brisbane statistical division did not record enough sales to provide the REIQ with a reliable median for the September quarter. Ten sales are needed to set the median house price. REIQ managing director Dan Molloy said that while volumes were down and there were some drops in median house prices over the quarter - the median fell in 59 Brisbane suburbs - the year-on-year picture was much better.
Inala topped the list for price growth in Brisbane over the quarter at 45.5 per cent, although the figure was affected by government sales in the area. St Lucia had the highest price growth for the year with a 35.1 per cent increase, although it recorded an 8.5 per cent drop for the quarter. Strong performers in Brisbane were mostly suburbs in the middle ring and upgrader suburbs. Gold Coast median house prices took a dive over the quarter dropping 3 per cent to $480,000 but year on year recorded a reasonable 8.5 per cent increase. The area had some stand-out performers over the quarter, with medians in Biggera Waters jumping 38.4 per cent and Runaway Bay and Benowa up nearly 30 per cent. Broadbeach Waters and Burleigh Heads took a battering with drops of more than 20 per cent, while Surfers Paradise values dropped over the year and quarter. Mr Molloy said that given the current conditions the Gold Coast results were fairly good. "The Gold Coast performance has been held back I guess because of the tourism issues and the Australian dollar," He said that while there was a lower volume of sales throughout the state, prices seemed to be holding up reasonably well.

There is a lot of stock at the moment and some sellers are obviously having to adjust their expectations in terms of prices. I think what we are going to see is in the next couple of quarters we will start to see these sellers becoming a bit more philosophical (about prices)," Mr Molloy said the September quarter figures were affected by interest rate increases and uncertainty surrounding the outcome of the federal election. There also was an absence of first-home buyers and investors.

High-Speed Rail Plan: Brisbane to Gold Coast in 21 minutes

Tony Moore   November 19, 2010 - 5:38AM   Brisbane Times

High-speed trains are already operating in countries like China. A proposal for high-speed trains would see the commute between Brisbane and the Gold Coast slashed to just 21 minutes, but the reality could be some time off.
A future Very Fast Train service, travelling at 350km/h, would also reduce the commute to the Sunshine Coast by three quarters, from 128 minutes to just 31 minutes. It would use technology currently being embraced in Europe.
However, unless a federal government study due in July 2011 prioritises the idea, the concept was still 30 to 40 years away.  Infrastructure Partnerships Australia chief executive Brendan Lyon, in Brisbane yesterday for talks with state and local infrastructure authorities, said introducing high-speed rail in eastern Australia in stages was the best way forward. "Cooroy to Brisbane, or Brisbane to the Gold Coast would be the most sensible way to introduce it," he said. "You need to ascertain, once and for all whether high speed rail is going to have a future in Australia and where it is going to run." The implications of an east coast High Speed Rail system to southeast Queensland were outlined in the East Coast High Capacity Infrastructure Corridors report, prepared by consultants AECOM for IPA. The report found that the introduction of a train running at 160 km/h from Cooroy - inland from Noosa - to Brisbane's CBD would lure commuters, boosting rail travel from 6 to 35 per cent of trips. The faster the train, the more likely commuters would be to use it - at 350 km/h, the train would likely attract 84 per cent of commuters, while just 12 per cent would make the trip in a car. On the Gold Coast it would have a similar impact on car traffic. Today, 93 per cent of journeys between the Gold Coast and Brisbane are done by car, taking advantage of the widened Pacific Motorway. Just seven per cent of trips are by rail.
However a train travelling at 350 km/h would attract 27 per cent of commuters. The study shows there are clear commuter advantages in southeast Queensland for VFTs, despite high-speed rail requiring separate lines that could not connect to existing lines. The east coast HSR project would cost about $80 billion, with AECOM's report showing acquiring the land corridor from Melbourne to the Sunshine Coast would cost about $13.7 billion.
Delaying the land purchase would push the property price cost to $57 billion by 2030. Mr Lyon said the time should be spent carefully defining where the HSR should be built. "No-one is saying that we should have a high speed rail network down the east coast of Australia now," he said. However, he said the route should be identified and preserved. A route allowing "straight corridors" meant trains could travel up to 350 km/h.
"At that speed high speed rail is competitive with air travel because it goes straight, city to city," Mr Lyon said.
He said HSR led to regional development, allowing important infrastructure to cater for population growth.
"The experience in Europe shows extensive regional development opportunities," Mr Lyon said. France, Spain, Japan, Taiwan, Britain, Portugal and China are just a few of the countries with high-speed rail. Federal Infrastructure Minister Anthony Albanese, who announced a $20 million study into HSR during the federal election campaign, said the IPA/AECOM study was a worthwhile start. "But we have a much more detailed report coming as a result of our election commitment – $20 million - to look in great detail at all of the challenges and to look at, importantly, the economics and financing of any high speed rail proposal," he said. The first stage of the report is due July 2011 and to be finalised late in 2011. This week, brisbanetimes.com.au has shown Brisbane road traffic peak hour is creeping increasingly earlier as people struggle to get to work. Engineers Australia this week gave Queensland a C- for its progress on roads, saying building and maintenance was not keeping up with demand.

Brisbane Prepares To Welcome Home Aussie Heroes.

Nicholas Bolton   -    November 19, 2010 - 4:11PM   Brisbane Times

About 1500 army personnel will have an emotional homecoming in Brisbane tomorrow as the city welcomes the 7th Brigade home from active duty. Police expect large crowds to line the route through the city centre and have urged people to plan their journey and allow sufficient time for travel. The officers and soldiers, recently returned from eight-month deployments will be joined by the remainder of the 2500-strong Enoggera-based brigade.
At the same time, the 2nd/14th Light Horse Regiment (Queensland Mounted Infantry), one of the brigade's eight units, will conduct a mounted drive past in their array of armoured vehicles to celebrate their 150th anniversary.
Captain Alastair McPherson of the 7th Brigade said the parade was important for a number of reasons.
“It's significant tomorrow because it's the welcome home of troops from Afghanistan, [East] Timor and Iraq, so basically you had the Brigade supporting all three major operations that the [Australian Defence Force] were involved in,“ Captain McPherson said. “Secondly, it's also a parade that's about celebrating the 150th birthday of the 2nd/14th Light Horse Regiment (Queensland Mounted Infantry). “It's not very often that we get to march through the streets of Brisbane for special events, and for us to be able to thank the people of Brisbane is pretty important for us.” The Light Horse Regiment, one of Australian Army's oldest units, will march behind six horses as a mark of respect for the six Australian soldiers killed in Afghanistan during the deployment. Led by the Australian Army Band, the march will step off from the South Bank Cultural Forecourt, across Victoria Bridge, along. Adelaide Street - Creek Street - and conclude at  157 Ann Street.The parade will begin at 10am, with a civic reception to follow at 10.45am.

Infrastructure Charges Taskforce recommendations to government

November 18, 2010  Brisbane Times 1. Maximum standard charges to be set for standard planning regime.
2. Maximum standard charges to be differentiated by development type/residential development type.
3. Local governments to have the discretion to apply a revenue subsidy to the maximum charge.
4. Queensland Government to subsidise requirement for Local Function Charges (LFCs) to apply for 3 years.
5. Standard charges to be set for 3 years.
6. Maximum standard infrastructure charges to be escalated annually.
7. Standard planning regime infrastructure charges to be monitored and an ex post evaluation conducted.
8. A deferred payment option to be introduced for standard charges.
9. Standard charge information to be accessible.
10. Queensland Government to be responsible for determining the standard infrastructure charge.
11. A maximum standard infrastructure charge to be set for residential development, of between $20,000 and $30,000 per house..
12. Standard charge – non-residential options to be considered under a standard planning regime.
13. Regulated infrastructure contributions to be disconnected from the plan for trunk infrastructure.
14. LGAQ to explore appropriate improvements to the administration of infrastructure charges.

Falling House Prices 'A Fallacy'

By: Marissa Calligeros  Brisbane Times                    November 19, 2010 - 3:17PM

New house prices in Queensland will not be affected by the introduction of capped infrastructure charges, one property analyst says.  Premier Anna Bligh yesterday announced a decision to reduce developer levies, with industry leaders claiming the move could see new house prices fall by up to $20,000.
The Infrastructure Charges Taskforce, established in March following the government's Population Growth Summit, made 14 recommendations for sweeping reform in the development industry, including halving infrastructure charges from $40,000.

 But property analyst Michael Matusik said it was highly unlikely home buyers would benefit from the reduction.

"This is just moving the deck chairs on the Titanic. We should expect more of these [government] furphies as we get closer to the state election," he said. "What drives prices up [and down] is availability of credit, followed by job creation or losses ... and confidence and supply." Mr Matusik said the reduction in levies could bring down the price of a new dwelling by four per cent, although it was an unlikely outcome. "Developers operate in the private realm and they can charge whatever they like - a few bucks 'saved' in lower infrastructure charges will have [no] real influence on the setting of end prices," he said. According to developers, current infrastructure charges increase building costs by 35 per cent. Urban Development Institute of Australia state president Warren Harris said the reduction in charges was the first necessary step towards address housing affordability. "It was going to get worse and worse and drive affordability further south," he said. "This measure is a first step in the right direction." Although Mr Harris said the government needed to also address development approval times.
"While we are sitting for two, three or four years waiting for approvals there is a whole churn of holding costs that are being added back to projects," he said. "We would be happy for the implementation stage to roll around fairly quickly to get the affordable outcomes." Mr Matusik said the number of vacant lots of land across the state had increased 25 per cent in the past year to 2850, leading to discounted development site sales. Property Council of Queensland executive director Kathy MacDermott said the reduction in infrastructure charges would fuel competition in the market and drive down house prices. “Viability will be improved not only through a reduction in current infrastructure charges in some locations, but the provision to pay these charges at the time of delivery – not up-front in a project – will result in reduced holding cost expenses for developers," she said. “Increased market competition will ensure savings achieved from the reform will be passed on to the home buyer."  regardless of the impact on buyers the reduction in the charges will slash the government's revenue from property development. In the past financial year, the state government received revenue from property taxes of $3.5 billion, according to the Property Council.

Selling your house: how much is it worth?

Find The Right Real Estate Agent 

Finding the right real estate agent can make up to a 5 per cent difference in the price you will get for your home. And given an agent generally charges between 2 per cent and 4 per cent in commission, every dollar counts. Of course the more your house sells for the greater the commission, but a higher price will still deliver more.

 Say your house sold for $300,000 through one agent and you paid 2 per cent commission. After the deal you would end up with $294,000 in your pocket. If the agent had managed to squeeze 5 per cent more out of the buyer ($315,000) then after 2 per cent commission of $7,300 you would have $307,700. "I do believe that a good estate agent can deliver up to 5 per cent more than an average one because they have better negotiating skills and experience so won't give away your property at any price," 
Remember the old saying “You get what you pay for”. 
The question is how do you know whether you have a good real estate agent or not?
 And one of the worst ways is by choosing  the agent telling you your property is worth the highest price. Before you choose an agent, I suggest you get an independent valuation of your property. The Australian Valuers Institute can recommend a valuer. "An independent valuer has no vested interest," Once you know the true valuation of your home then you can approach agents in your area. When they give you a price, ask them how they have reached that figure. They should give you a comparative market analysis showing you the sales of several similar properties in your area. You might be given a single figure or a range for the expected selling price. By law a range cannot have more than a 10 per cent spread so they might say it is in the range of $285,000 to $315,000 where the $30,000 difference is 10 per cent. An independent valuation should mean you can recognise when an agent tries to win your listing by over quoting.  If an Agent is going to lie to you about the price what else is He or She going to lie to you about.
Ways to sell your property

You should also consider how you plan to sell your property. Will it be by private treaty or by auction? This decision will depend partly on the location of your home and the popularity of auctions in your area but it’s also a matter of personal choice.

Those against auctions believe that you don’t get your full price for a property as you start from a low point and work your way up while with private treaty you set the price and then work down.

Selling a property is a major operation. If you do your homework first then you will know what to expect from your agent—unless of course you choose to sell it privately.

Fees

Advertising is luck and Marketing is skill.  Costs associated are usually over and above the commission although in some cases you may be able to negotiate no sale, no fee. When you are choosing your agent, you will need to take into account the fees and charges and what they exactly entail. Agency fees are negotiable as are any associated advertising and marketing costs.
Some agencies charge a flat rate while others a percentage of the sale price. Either way the amount must be recorded in the authority-to-sell contract that you will sign before your home is put on the market. GST is payable on the fee.

Auction of Luxury Homes Flop

November 9, 2010  Bloomberg, Reuters
An auction of luxury homes held at the Sydney Opera House last night raised just $4.1 million, much less than the $30 million vendors were hoping for, less than a week after borrowing costs increased.
Only two out of the 11 homes were sold. The Ray White Group, which organised the auction, is in talks with potential buyers and expects to sell three more properties in "the next couple of days", chairman Brian White said after the event.
Mr White said he had hoped to sell at least five of 11 houses at the auction. The properties included 10 homes in NSW, five of which are in Sydney. The houses are valued at between $2 million and $10 million each and are worth an estimated $30 million altogether.
The auction included a penthouse overlooking Sydney Harbour in an apartment complex that is home to Hollywood actor Russell Crowe, but in the end only two rural homes sold on the night.
The auction was a test of demand for a housing market which the International Monetary Fund said might be overvalued by as much as 15 per cent.

The event took place less than a week after the Reserve Bank raised its benchmark interest rate by a quarter of a percentage point to 4.75 per cent and said it welcomed a cooling in house prices.
"We've been a little bit crash-tackled by the interest rate increase last week," Mr White said. "The Reserve Bank seemed to give the indication that they were keen to keep the lid on prices, and that's not what buyers want to hear. That's a very bearish sentiment."  
The properties were marketed in Australia and Asia and drew interest from bidders based in Singapore, China and Indonesia.
However, overseas buyers, typically more interested in waterfront Sydney property, were quieter than usual, auctioneer Sam Kelso said.
"The overseas buyers are more concerned about the Aussie dollar," he said. "It isn't buying as much as it was six months ago."  
The two properties sold at the auction were a $2.55 million riverfront development in Birdwood, 400 kilometres north of Sydney, and a $1.56 million country home in Mittagong, in the southern highlands of NSW. The auction was organised as more sellers were putting prime properties up for sale than in the first quarter, Ray White said. The company plans to hold an auction every November and March.

Victorian home owners losing it all

By Mark Dunn  From: Herald Sun  November 17, 2010 11:00PM

More than 11,000 Victorian homes have been repossessed in the past five years. Picture: Marzolla Dean Source: Herald Sun

LENDERS have moved to seize almost 11,000 Victorian properties worth about $2.5 billion in the past five years.
Foreclosure actions by major banks, second-tier and non-bank lenders to repossess homes, units and land resulted in an average of 2629 people threatened with losing their properties each year since 2006, according to Supreme Court data.
The Victorian Sheriff's Office was called in to evict 321 people to enforce sales by banks and finance companies last year and 500 people in 2008-2009 - a peak year of 3080 foreclosures actions.

The Sheriff's Office said a number of possession warrants issued in 2009-2010 were against individuals who held more than one property, an indication investors were being hit as well as first home buyers and others facing mortgage stress after seven Reserve Bank rate rises in the past year.

Related Coverage

• ANZ blinks ... on fixed mortgages Herald Sun, 8 days ago
• $16m bank boss 'feels your pain' Perth Now, 8 days ago
• Miss a payment, lose your house Courier Mail, 6 Nov 2010
• Freddie Mac notches narrower loss The Australian, 4 Nov 2010
• US probes illegal foreclosure claims The Australian, 7 Oct 2010

Commonwealth Bank customer Mirna Francis, who represented herself in the Supreme Court last month, lost her attempt to prevent a forced sale of her Hood Crescent, Fawkner unit going ahead as the bank moved to recover a $281,407 plus interest loan.

The property is due for auction on November 27 and is among others the bank is calling in with warrants of possession approved since March over loans ranging from $395,000 to more than $1 million, according to court files. National Australia Bank, Westpac and ANZ have also moved to recover outstanding loans by seeking foreclosure. The CBA, ANZ and others ask customers facing mortgage stress to contact them well before it gets to repossession stage. "Home loan repossession is a last resort for the bank and we work with customers to avoid this," a CBA spokeswoman said.

"It is not in the best interests for our customers or the bank. "The bank has a hardship unit for customers who are facing financial difficulty or for those whose circumstances have changed."The ANZ said of its 850,000 mortgage holders, less than 250 foreclosures had occurred last year and 13,000 customers had received hardship assistance. Michael Hamilton of R & R Real Estate in Narre Warren expects the number of foreclosures to rise next year. He said the recent rate rises and Christmas would be enough to force some homeowners out. Those seeking assistance can phone their banks, 

Mortgage Stress in Australia

6th Annual Demographia International Housing Affordability Survey:2010

Ratings for Metropolitan Markets Australia = Canada = Republic of Ireland

New Zealand = United Kingdom = United States (Data for 3rd Quarter 2009)

NEW MORTGAGE SHARE OF GROSS MEDIAN INCOME

By Dr. Tony Recsei

The political importance of housing affordability in the 2007 federal election was indicated in a Fitch Ratings analysis commissioned by The Sydney Morning Herald Constituencies with greater mortgage stress voted particularly strongly for the winning Labor Party. Moreover, the rate of home repossessions was determined to be a better predictor of electoral margins than either high unemployment rates or lower average incomes. Then Labor Party national secretary Tim Gartrell noted a solid movement toward his party of voters with “just above” the average mortgage repayment of $1,400 to $1,600 per month. A new mortgage on a median priced house is now well above this level, suggesting that the issue of housing affordability could emerge as an even more crucial political issue in the years to come. The new government has indicated concern about the issue. Federal Housing Minister Tanya Plibersek has noted that “we are not building enough homes” and particularly noted the problem of land supply, saying “We still have problems in Australia with housing supply. There is no question of that”, adding: “We need to make sure that we have got enough affordable land to build on, both in green fields and in fill sites” Additional attention is indicated by the Council of Australian Governments, which intends to develop a national housing supply and housing affordability agenda

 The Demographia International Housing Affordability Survey employs the "Median Multiple" (median house price divided by gross annual median household income) to rate housing affordability
EXECUTIVE SUMMARY 

Demographia Housing Affordability Rating Categories
Rating	Median Multiple
Severely Unaffordable	5.1 & Over
Seriously Unaffordable	4.1 to 5.0
Moderately Unaffordable	3.1 to 4.0
Affordable	3.0 or Less

Historically, the Median Multiple has been remarkably similar among the nations surveyed, with median house prices being generally 3.0 or less times median household incomes. This affordability relationship continues in many housing markets of the United States and Canada. However, the Median Multiple has escalated sharply in Australia, Ireland, New Zealand and the United Kingdom and in some markets of Canada and the United States in recent years.