Declining interest rates and rising income spur improving housing affordability

Declining interest rates and rising income spur improving housing affordability

A new report released last week shows an improvement in overall housing affordability over the June quarter with the positive development seen in seven out of eight Australian states and territories.

The latest edition of the Adelaide Bank/REIA Housing Affordability Report, released last week by the Real Estate Institute of Australia, provides a comprehensive update for the sector using the latest data for the June Quarter 2015.

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RBA's Submission on Home Ownership in Australia - Interesting Reading.

RBA’s Submission on Home Ownership in Australia – Interesting Reading.

The  Reserve  Bank  was recently invited  to  make  a  submission  to the House  of  Representatives  Standing  Committee  on  the  Inquiry  into  Home Ownership in Australia.

The  Bank  recognised  the  importance   of   housing   to   the   people   of   Australia.   Shelter   is   a   fundamental   human   need,   and  purchasing  the  home  one  lives  in  is  usually  the  largest  financial  investment  a household  will  make.

The  affordability  of  suitable  housing  is,  appropriately,  a  central  concern  of  government  policy,  and  it  has   been   the   subject   of  several inquiries   over   the   years,   most   recently   the   Senate   Economics  References  Committee  Inquiry (The  Senate  2015).

Housing  tenure  – whether  a  household  owns or rents the  home  they  live  in  – is  an  important  aspect  of  people’s  experience  of  their  home.

The  key  messages  of  this  submission  are  as  follows.

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Lending figures suggest heat coming out of housing market

Lending figures suggest heat coming out of housing market

The latest housing finance figures released today by the Australian Bureau of Statistics (ABS) reflect flat lending activity for housing suggesting that the heat is coming out of the housing market.

The Real Estate Institute of Australia (REIA) says the figures for May 2015 show, in trend terms, that the number of owner-occupied finance commitments fell by 0.2 per cent. This fall follows nine consecutive months of increases through to March. If refinancing is excluded, in trend terms for May, the number of owner-occupied finance commitments fell by 0.9 per cent.

REIA President, Neville Sanders says, “Decreases were recorded in all states and territories except for South Australia, the Australian Capital Territory and the Northern Territory. The Northern Territory had the largest increase of 0.9 per cent. The largest decrease was recorded in Tasmania – down 1.1 per cent.”

“In trend terms, the number of new dwellings purchase commitments increased by 1.1 per cent while new dwelling construction decreased by 0.6 per cent and the purchase of established dwellings decreased by 0.2 per cent. The value of investment housing commitments again increased -by 1.1 per cent.”

“The proportion of first home buyers, as part of the total owner-occupied housing finance commitments, increased marginally to 15.9 per cent compared to 15.8 per cent in April and follows the March figure of 15.7 per cent which was the lowest since July 2004.”

“The lending figures indicate a market that is moderating with May 2015 being the fourteenth consecutive month of modest drops in lending levels if refinancing is excluded.”

“The moderating housing lending suggest any concerns of an over heating property market should be laid to rest and also allay fears of an imminent bubble,” concluded Mr Sanders.

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Australian Median House Price Exceeds $650,000

Australian Median House Price Exceeds $650,000

The Real Estate Institute of Australia (REIA) says that Australia’s housing market continued its growth in the first quarter of 2015, according to the latest Bendigo Bank/REIA Real Estate Market Facts publication.

The REIA President Neville Sanders says, “The weighted average, capital city median price increased by 2.4% for houses and 1.5% for other dwellings.”

“The weighted average,median house price for the eight capital cities is now $658,608 and with exception of Brisbane and Perth all capitals contributed to the increase.

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Australia’s most affordable suburbs within 20km of the CBD

Australia’s most affordable suburbs within 20km of the CBD

As the cost of housing within the inner-city of Australia’s capitals continues to rise, potential buyers are looking further afield to get into the property market.

Middle ring suburbs – those within 10-20km from the city centre – are proving an attractive option for many. These established suburbs often offer greater amenities than those suburbs located further out from the CBD.

Middle-ring suburbs typically offer more affordable housing than the inner-city suburbs. Buyers may also find larger lot sizes for houses and a lower density unit landscape.

While overall amenity may not be as significant as within the inner 10km ring, because they are well established suburbs and still close to the city centre they are typically well catered for with regards to amenities and infrastructure.

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Better Apartments' planning scheme reduces market choice and increases cost

Better Apartments’ planning scheme reduces market choice and increases cost

The cost of constructing a new building in Sydney, Melbourne and Brisbane is comparable, so why is there such a dramatic difference in the price of apartments?

By mandating minimum apartment sizes in Sydney after the implementation of the SEPP 65, the result was an increase in the number of bright, large, luxurious apartments, absolutely – but only for those who could afford to live in them.

Developers immediately lost out on yield in their proposed developments and delivering projects simply became too expensive. This drove down supply and as a result, drove up prices to an unsustainable level.

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Who is really taking advantage of negative gearing

Who is really taking advantage of negative gearing?

MORE than one million Australians are now embracing negative gearing to the tune of an $8 billion annual tax break.

But according to new research by the Australia Institute think tank, its use has spread from traditional Liberal seats to “battler” suburbs held by Labor, The Australian reports.

The single biggest group of people using negative gearing live in the Labor heartland of Canberra, including 18,200 voters in the electorate held by opposition assistant Treasury spokesman Andrew Leigh.

The heaviest users, however live in government electorates held by Tony Abbott and cabinet ministers including Joe Hockey and Malcolm Turnbull.

The report highlights the political challenge now facing both parties in any attempt to wind back negative gearing and an associated tax break on capital gains.

Who is really taking advantage of negative gearing

“People in Liberal Party seats on average were likely to get the largest benefit from negative gearing,” said Australia Institute senior economist Matt Grudnoff told The Australian.

“Those in Labor seats were second and significantly further back are those in Nationals seats.”

The research was conducted using calculations by the National Centre for Social and Economic Modelling, which matched postcode data from Australian Taxation Office statistics with electorates.

According to the research, more than half of the tax breaks by dollar value go to households in the top 10 per cent of the country when ranked by income.

Grattan Institute chief executive John Daley said: “Most of the benefits in financial terms and most of the cost to the government goes to high-income earners. The idea that you keep negative gearing to look after middle Australia, given where the cost goes, is bizarre.”

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First home buyers switch off, investor activity moderates

First home buyers switch off, investor activity moderates

The Real Estate Institute of Australia (REIA) says adjusted data released on February 11th on Australia’s first home buyer levels shows a still disappointing figure,

REIA CEO, Amanda Lynch says, “REIA has previously lobbied the Australian Bureau of Statistics to review the method used to estimate first home buyer levels and we were pleased to see the release last week of its long-awaited discussion paper.

However the adjusted figures released today do little to ease concerns within the industry that this vital group is dropping out of the market.”

“The figures shows first home buyer levels stand at 14.5per cent for December. While the revisions have increased the proportion of first home buyers by around two percentage points, the figure is the lowest since May 2004 and shows a steady decline since May 2012.”

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Should you buy new or renovate a do-upper

Should you buy new or renovate a do-upper?


Is renovating the way to go?

If you’re a fan of reality show The Block, then renovating may jump out as a great idea.

The great thing about renovating is the ability to inject your personality into your home. Do you want an airy, open-plan living room and dining area with a bold feature wall? Or perhaps a master bedroom with a window alcove for reading and a generous walk-in wardrobe speaks to you.

Plus, you may be able to secure a property in a great suburb for a steal. If you’re focussed on a particular location, this may be a good way to get a foot in on a trendy neighbourhood.

There are downfalls to renovating, though.

If you buy a property that’s in dire need of a significant makeover, you may have tradies hanging around for quite some time. If you’re at work or socialising with your other half a lot, this may not be an issue. But if you’ve got young kids or enjoy chilling out at home during evenings and weekends, then you may find this quite disruptive. You may even need to fork out for alternative accommodation in the meanwhile, which could put a real dent in your savings account.

Secondly, there are some renovations you can complete yourself. But when it comes to electrical wiring, plumbing and substantial building work, you’re relying on — and paying — others. So it’s essential to budget very carefully and put deadlines in place.

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How profitable is your home

How profitable is your home?

At some stage, your home may well be too small or big for your needs. Or perhaps the size is right, but you want to live in a neighbourhood with better amenities or in a suburb with excellent schools for the kids. If you’re paying off a home loan for a house located in an area experiencing solid capital growth, you may even make a profit when you sell!

According to the most recent RP Data Pain and Gain report, 91 percent of all home re-sales during the second quarter earned a gross profit.

In fact, nearly one in three (30.5 percent) of home sellers at least doubled their purchase amount when re-selling! Referring to this bracket of sales, RP Data elaborated:

“The gross profit on these re-sales was $14.4 billion and the average gross profit per profit making transaction was $225,830.”

Are you living in a hot spot?

RP Data analysed re-sale statistics in states’ capital cities and regional areas. The area with the lowest proportion of re-sales that made a loss was Sydney (2.7 percent), followed by Perth (4.8 percent) and regional Northern Territory (6.4 percent).

In regional Western Australia, 43.4 percent of homes sold during the June quarter made a profit of 100 percent or greater, followed by Perth (40.3 percent), Melbourne (36.8 percent), Darwin (34.5 percent) and regional Northern Territory (33.9 percent).

So if you’re living in any of these locations, there’s a strong chance you could profit when you sell. But what about on a more local scale?

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