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Auctions results beating last year as property industry continues recovery

Auctions results beating last year as property industry continues recovery

The property market has delivered yet another weekend of solid results with clearance rates above 60%, adding to hope that a prolonged period of economic stability and interest rate cuts will continue to send prices higher.

The news follows the release of figures from RP Data which showed prices increased 1.2% in September, while the RBA cut interest rates two weeks ago – and is expected to do so again next month.

And in a big sign of confidence, a key indicator in the Westpac consumer sentiment survey found more people are optimistic about buying a house, even though overall consumer confidence is still mild.

According to the Real Estate Institute of Victoria, Melbourne recorded a clearance rate of 62%. Although that’s down from last week’s 62%, it still manages to beat last year’s corresponding rate of 54%.

There were 578 auctions reported, and a further 690 are expected next weekend. And in Sydney, results were similar, with Sydney recording 58% on 606 auctions, compared to 60% last week and 55% last year.

Australian Property Monitors economist Andrew Wilson says the results are, once again, encouraging – but the industry isn’t getting too hopeful too soon.

“Certainly, the market is building on some reasonable momentum,” Wilson told SmartCompany this morning.

Auctions results beating last year as property industry continues recovery

“But markets remain mixed, and consumer sentiment is still reasonably fragile. There is no doubt confidence is returning, and we’re seeing higher listings, but I think it’s still going to take time.”

“At the very least, it’s holding.”

Wilson says the market doesn’t need a jolt of confidence, but rather a steady rise in optimism which can only be achieved through stability in international financial markets, and possibly another interest rate cut next month.

“The Reserve Bank is certainly on watch with regard to the international economy and concerns over the strength of the resources boom. We’re seeing those underlying drivers right now, but it will just take time.”

“There’s nothing to get too excited about just yet. But it’s starting to build momentum.”

Story by Patrick Stafford Story Source:

New house sales reach a 15-year low

New house sales reach a 15-year low

New house sales fell to a 15-year low in August, underscoring the mixed picture for the housing market.

The Housing Industry Association new home sales report fell by 5.3 per cent in August, after a 5.6 per cent drop in July, led lower by a “persistently weak” detached house market.

HIA said new house sales fell 5.8 per cent in August, while apartments fell 2.5 per cent.

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Borrowers pay off mortgages faster than average

Borrowers pay off mortgages faster than average

Australians have an unusual habit of paying off their mortgages much faster than borrowers in most other rich nations, a valuable trait that gives households a safety buffer were the economy to slow sharply.

Around half of all borrowers are ahead on mortgage payments, the Reserve Bank reported today, a level only reached by Canada among developed nations.

“In this way, many households have a buffer that they could temporarily draw on to stay current on their loan repayments if their incomes were to fall,” the central bank said in its semi-annual report on financial stability.

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Savings the key to first home survey

Savings the key to first home: survey

If the global financial crisis has made Australians more savings-aware, then first-home buyers are taking it one step further by increasing their minimum deposit and waiting longer to buy.

The latest RAMS First Home Buyers’ Pulse Check Survey 2012 also showed the importance of family support, with 53 per cent of first-home buyers saying they had asked relatives to help them put together a deposit.

More than half (55 per cent) said they were living at home while saving to buy, including those who intended to buy in the next three months.

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How to Prepare your Home for Spring

How to Prepare your Home for Spring

Spring is the time of the year when the trees bloom and the home environment needs fresh and proper cleaning after a long cold winter. Spring, indeed, has always been by tradition the most appropriate time of the year to do a thorough “Spring Clean”. However, as you can see, there is much more than just home cleaning that you can and should do in Spring.

This is the time when there is some warmth seeping back into the atmosphere. As such, it is the time to push back the shutters and welcome the fresh air and sunshine into your home.

Here is a cross-section of services that you should consider when preparing your home for Spring.

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Stepping stones to a little garden of calm

Stepping stones to a little garden of calm

Mindfulness is the latest buzzword in psychology and self-help books. “Basically it’s a state of awareness where one is fully attentive to the present moment and it can be practised through meditation,” psychologist Sarah Edelman says.

Enter Japanese gardens: with their tranquil, meditative feel, they are the perfect fit for this centuries-old Buddhist tradition. And the good news for space-challenged urbanites is that they work well in confined areas such as courtyards or balconies.

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DIY Floating floors

DIY: Floating floors

Floating Floors can really enhance a room if they are installed carefully.

Floating floors can be a relatively cheap, quick and easy update for your floors, the trick to getting a great floor is, as usual, all in the preparation.

Through all the fickle trends of the last century, one style of flooring has consistently triumphed: floorboards.

They come in so many different types, shades and widths of timber, that you’ll never be hard up finding a timber floor that suits. However, they can be expensive.

A much cheaper and often more practical alternative is an engineered timber floating floor. It’s literally a floor that “floats” on top of your existing one.

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Housing finance shows little response to rate cuts

Housing finance shows little response to rate cuts

Real Estate Institute of Australia (REIA) President, Ms Pamela Bennett says the June housing figures released by the Australian Bureau of Statistics (ABS) show there’s been little response to the interest rate cuts of May and June.

Housing finance figures for June 2012 show, in trend terms, that the number of finance commitments has declined by 0.1 per cent, making this is the sixth consecutive month of decreases.

“In trend terms, increases were recorded in Western Australia, Victoria, Tasmania, South Australia and the ACT. All other states and territories recorded decreases. The largest decrease in New South Wales (down 1.4 per cent in trend terms) while the largest increase was in Tasmania (up 1.9 per cent in trend terms),” said Ms Bennett.

Housing finance shows little response to rate cuts

“Increases were evident for the construction of new dwellings (up 0.7 per cent in trend terms) and the number of commitments for the purchase of new dwellings (up 2.4 per cent in trend terms). The commitments for the purchase of established dwellings fell by 0.3 per cent (in trend terms),” she continued.

The number of first home buyers, as a percentage of total owner occupied housing commitments, increased to 18.3 per cent in June 2012 compared to 17.8 per cent in May 2012. The long-run average proportion is 20.2 per cent.

The value of investment housing commitments fell by 0.4 per cent, in trend terms in June, the fourth consecutive month that it has declined.

“These housing finance data indicate the RBA should have reduced interest rates yesterday as the market has not responded to the two previous cuts. The message for next month’s RBA meeting is abundantly clear,” Ms Bennett concluded.

Apartments boost new home sales

Apartments boost new home sales

New home sales edged up for the third straight month in June following the Reserve Bank’s most recent interest rate cut in the same month.

The Housing Industry Association’s new home sales report showed a 2.8 per cent rise in new home sales, driven by a 15.7 per cent surge in apartments and townhouses. In May, new home sales rose 0.7 per cent.

“But all the action has been in the multi-unit sector,” said HIA chief economist Harley Dale.

Stamp duty concessions in the first half of the year in NSW drove a 30.8 per cent increase in apartments and units in that time.

“Detached housing, which still accounts for 70 per cent of new housing starts in Australia, was disappointing,” said Mr Dale.

Standalone houses sales rose by 0.7 per cent in June, following a 2 per cent drop in May, the HIA said.

House sales plunged 9.6 per cent in Victoria and 11 per cent in Queensland in June, while surging 23.5 per cent in Western Australia. They rose 2 per cent in New South Wales in the month.

Home loans and auction clearance rates, both leading indicators of demand for real estate, have remained mixed despite the nearly 100 basis points in cuts passed along from banks to borrowers after the string of RBA rate cuts since November.

Apartments boost new home sales

Clearance rates have hovered around 60 per cent in Sydney and Melbourne in recent weeks, well below the highs of 80 per cent seen two years ago. Home loan applications, meanwhile, dropped 1.2 per cent in May.

HIA said that over the quarter, house sales were down 6.2 per cent in New South Wales and 21.1 per cent in Queensland, while jumping 9.8 per cent in Victoria ahead of the end of the state new home buyers grant boost.

In Western Australia, changes to the building act in that state sent new house sales 9.3 per cent higher in the quarter.

Auction clearance rates in Sydney rose to 60.5 per cent last weekend, from 59.8 per cent the week before, according to Fairfax-owned Australian Property Monitor. In Melbourne, the clearance rate was 61 per cent, from 59 per cent the weekend before.

Story by Chris Zappone, Reporter, Business Day

Stay out of the stress zone on your home loan

Stay out of the stress zone on your home loan

If you’re thinking about taking out a new home loan remember this: there’s a big difference between what the banks say you can borrow and how much you should.

The common definition of ”mortgage stress” is this: if you spend more than 30 per cent of your pre-tax income on your home loan repayments, then you are officially in the danger zone. That ratio looks pretty outdated when you look at the numbers from the recent ABS census, which show that three in 10 mortgagees meet this definition.

Data source:

Data source:

In fact, a quick tour of the major banks’ online calculators by Smart Investor Money suggests they are happy to burden you with a mortgage that would lead you to handing up to 45 per cent of your gross income – and closer to 60 per cent of your take-home pay – on repayments (take a look at our shadow shopping exercise in ”How much the banks will lend you” above.)

What you need to understand is that the banks’ calculators use a ”dollar-plus” model of assessing your capacity to repay. As long as you have a dollar left over after taking into account the proposed repayments (including an interest rate buffer of a percentage point or two) other debt obligations and living costs, the loan is – theoretically – yours.

It’s easy to see that the big unknown here is the level of expenses. Some calculators ask for your estimated monthly expenses. But all use a back-up measure of how much you need to pay them back and just scrape by, based on something called the Henderson Poverty Index and, more recently, the Household Expenditure Measurement.

If you are at this line you are essentially in baked-beans-for-dinner territory.

”You don’t want to go anywhere near that,” says the research and insights director at, Andrew Duncanson. ”That means you can pay it back, but it probably means it’s going to be uncomfortable.”


”My argument has always been that people aren’t very good assessors of their ability to pay,” says the principal solicitor at the Consumer Credit Legal Centre of NSW, Katherine Lane. ”They just go into the bank and ask for what they can get, and then work out what house fits that price,” she says.

That puts the cart before the horse, and is exactly the wrong thing to do. The right way to approach a home loan is to do a thorough budget. Once you have a good handle on what is coming in and going out – and where – then you can make a proper assessment of how much you can afford to repay, and therefore the size of the loan.

”I would encourage people to use an independent calculator, such as the ones at, rather than the calculators on the banks’ websites,” says the director of policy and campaigns at Consumer Action Law Centre in Melbourne, Gerard Brody.

Stay out of the stress zone on your home loan


Building a buffer into your budget is crucial. Take our young couple above. They are probably planning on starting a family in the coming years – could they do so while being close to what is considered the poverty line for a childless couple? What if one lost their job or got sick? Or if interest rates doubled?

”Definitely try to be realistic about what you’re buying to meet you and your family’s needs without having to get too big a loan,” Lane says. ”Be realistic about having children, studying, or changing jobs.

”If all that fails and you really need the house and you need to borrow the maximum, do that but be absolutely motivated to bring the housing loan down as quickly as possible. Nobody in Australia knows whether they are going to have a job or not in the future. It can happen to anyone.”

Mortgage overload: what the banks will actually lend you

A young couple want to break into the property market. They head online to get an idea of how much they can afford to borrow. The Commonwealth and Westpac tools are straightforward. They put in their annual gross incomes – $60,000 and $40,000 – with no extra income or debts and $10,000 in combined credit card limits. Press of a button and – bingo – they discover they could borrow $478,000 with Westpac and $539,000 with CBA over 25 years and at rates of 6.89 per cent and 6.8 per cent, respectively.

ANZ and NAB’s tools are slightly more sophisticated: they ask for a general monthly expenses figure. Put in $2800 and our young couple discover they can borrow $502,000 from ANZ and $481,000 from NAB. In the same ballpark as the previous two.

All those numbers are high. But it’s when you look at the monthly repayments that the load becomes clear. The monthly obligations range from $3340 to $3740. After compulsory minimum super and income tax, the couple bring home about $6400 a month. On those amounts they would be committing from a bit more than half to almost three-fifths of their disposable income on meeting their repayments. If you factor back in the $2800 for monthly general expenses, that leaves a slender buffer of a few hundred dollars between them and struggle town.

Story by Patrick Commins, story source: