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LATEST NEWS FROM SNAP PROPERTY BUYING SUPPORT |
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30/11/09 |
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Fixed rates stop in their tracks |
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For the first time in the last 12 months - the big 4 banks AND the next half a dozen larger lenders ALL left their fixed rates untouched during November. This is an event that only happens once every year or two so is worth stopping to consider.
The most likely reason for this pause (shared across 10 major lending institutions no less, and across 1, 2, 3, 4 and 5 year rates) - is the common belief that the future outlook for interest rate rises is no longer likely to trend up as quickly as some analysts initially predicted.
With fixed rates having jumped relatively quickly (starting in April / May this year) - the gap between the average fixed rate and the average standard variable rate had grown from a point of parity in April 2009 - to a gap of 1.35% at the start of November. Looking back further than April 2009 - the average fixed rate has been almost half a percent LOWER than the average standard variable for around 2 years. Eventually - the fixed had to plateau and allow the variable to catch up - and that is what we are finally starting to see now.
Before you go out and celebrate though - remember that the fixed is a predictor and moves ahead of the variable. So even though it is still 1.1% higher than the variable, that means we have a number of variable rate rises to endure (and ultimately some smaller fixed rises too) before overall rate growth ceases, the fixed and variable intersect again, and we find ourselves at the start of the next downward cycle.
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30/09/09 |
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Melbourne Auction Clearance Rates - bye bye 80% |
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After peaking at 85.5% in June, Melbourne Auction Clearance rates have dropped every month since and for November managed just 80.1%.
This is now a 5 month long trend and signals the approach of some much needed stability in our housing markets.
Unfortunately, due to the Christmas and New Year break, the statistics of December and January will not be reliable - so we will have to wait until the end of February 2010 before we get a real indication of what lies ahead. One thing is almost certain though - after 7 months of consitent clearance rates above 80% during 2009, we are now overdue for a return to a more sustainable figure in the seventies for 2010.
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31/08/09 |
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What does NAB know that the others don't? |
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In a time when virtually every lender has raised all their fixed rates - NAB has left their 5 year rate untouched for the third month in a row.
This is substantially against the trend - which has seen most banks raise their 5 year rates at least once in the June - August period. Even more interesting is the fact that NABs 5 year rate is now cheaper than their 4 year rate.
There are two possible explanations for this. (1) NAB is about to raise their 5 year rate or (2) NAB believes that rates will peak and begin to drop away again in the next 4 years - with an average across the period of around 7%. Whilst I would like to believe that the second option is true - I think it more likely that we will see a "correction" in the NAB 5 year rate in the near future (bringing it back into line with the other majors).
One other interesting aside (whilst talking about rates) - the ANZ quietly DROPPED their 10 year rate by 0.2% during August. This is the first such drop by any of the majors in 2009. Perhaps ANZ sees light at the end of the interest rate tunnel too?
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31/08/09 |
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Auction Clearance Rates drop again in August |
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Another small drop in clearance rates in August (-0.3%) now sees the clearance rate a full 1% lower than the peak of 85.5% in June.
This reinforces the likelihood that we have seen the top for this cycle and will soon (after a period of stability at these relatively high clearance rates) see clearance rates returning to a lower yet more reasonable and sustainable level over the medium term.
With 2200 auctions planned in Melbourne over the next three weekends (more than we have had in any three consecutive weekends in 2009) - it will be interesting to see whether this small drop in clearances is amplified due to the greater volumes.
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31/07/09 |
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Auction Clearance Rates dropped in July |
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For the first time in over 9 months, Melbourne auction clearance rates have actually dropped - if only by a small margin (just 0.7%).
This puts an end to a 9 month streak of upward movement in the clearance rate statistic. However, rather than being a sure sign of plunging clearance rates in coming months - my impression is that it is just a signal that we have perhaps finally reached the top.
First Home Buyer activity has started to slow and the popular selling season of Spring is just around the corner (bringing with it a much needed increase in listings). We these factors in play we will hopefully see competition easing a little further come September.
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13/5/09 |
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Federal Budget - Good News for Property Investors |
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As a Buyers Advocate, I have a range of clients who are all at different stages of the investing cycle. Some have just started looking for their first investment property. Others have bought a single property and may be happy to sit tight with that one for the medium term. Yet others have bought one or two properties in the past 6 months and may now be looking for the next one – but also pondering about whether now is the right time to dive in again. Regardless of what stage you are at – I hope that my thoughts below might be of some benefit to you.
Regarding property investment and the recent deluge of first home buyers into the market - the big take-out from the Federal Budget last night is not so much about what the Federal Government is doing, as what the Victorian State Government has already announced.
Consider the following summary table I have just finished putting together – it depicts the First Home Buyer Grants / Boost across both Federal & Victorian State Governments:
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Now until 30/6/09 |
1/7/09 – 30/9/09 |
1/10/09 – 31/12/09 |
1/1/2010 – 30/6/2010 |
| New Home Grant – State Gov’t |
$5,000 |
$11,000 |
$11,000 |
$11,000 |
| New Home Grant – Federal Gov’t |
$21,000 |
$21,000 |
$14,000 |
$7,000 |
| Total New Home Grants |
$26,000 |
$32,000 |
$25,000 |
$18,000 |
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| Established Home Grant – State Gov’t |
$3,000 |
$2,000 |
$2,000 |
$2,000 |
| Established Home Grant – Federal Gov’t |
$14,000 |
$14,000 |
$10,500 |
$7,000 |
| Total Established Home Grants |
$17,000 |
$16,000 |
$12,500 |
$9,000 |
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| Gap between new and established |
$9,000 |
$16,000 |
$12,500 |
$9,000 |
My reading of the table above is as follows:
- In the period 1/7/09 – 30/9/09, there will be a considerable incentive (almost 80% greater incentive than currently exists) for first home buyers to buy a new property as compared to an established property
- This incentive drops back on 1/10/09 – but still sees first home buyers who buy new, receiving a benefit that is $12,500 greater than those who buy existing
- The minimal difference of just -$1,000 for first home buyers who purchase an existing property pre-June 30 (compared to those that purchase July 1 – Sep 30 2009) should see some leveling off of the panic buying that has recently been observed in the market (they now have almost 5 months to buy – not 6 weeks)
Based on all of this, I would think that the purchase of an established dwelling for investment that occurs in the following time periods will each have benefits which did not exist before the recent budget announcements:
- Now until June 30 2009 – Decrease in panic buying from first home buyers should see less competition and more reasonable prices paid. Some will wait for July 1 and look at buying new, others will not have to rush to buy before June 30
- July 1 – September 30 2009 – Potential for repeat of the panic buying scenario as the 30 September deadline approaches will be tempered by two things. One – more first home buyers choosing new over existing due to massive one time $32,000 grants. Two – less panic as the boost does not disappear on Sep 30 2009 (as first home buyers have been fearing it might on June 30), it merely halves from $7k to $3.5k
- October 1 – Dec 31 2009 – New home incentive is still double the established home incentive. This additional $12.5k should see continued leaning towards new homes for first home buyers. The loss of $3.5k of boost (established homes) will also see some first home buyers no longer able / willing to enter the market (unless buying new).
- January 1 2010 onwards – First home buyer activity should be restored to normal levels once more – across both new and established dwellings
Bottom line – whilst a complete removal of the first home buyer boost (post June 30) would have seemed like an ideal outcome from the federal budget (it would have provided a sudden dramatic drop in first home buyer activity and a good reason to jump into the market from July 1), in the short term it may also have impacted prices negatively for those of us who already own investment properties. Instead, the way the government has structured things has actually presented an unexpected opportunity for those investors looking to make a purchase right now (pre June 30) – and then a positive landscape for purchases and growth right across the next 12 months.
For those who are happy with what they have and are not looking for any more properties right now, the news is all good. Any predictions of property prices plummeting due to the sudden and complete removal of the First Home Owners Boost – should now be tempered due to the gradual reduction of the boost over time. During this time, I believe that investor activity will continue to grow and fill the void left by exiting first home buyers With record low interest rates, record high rents and record low vacancy rates – the only thing stopping the investing masses from getting out there is the fear of losing their job (despite the fact that 91.5% of people are expected to KEEP their jobs) or the fact that they are spending too much time listening to the doom and gloom talk on the news and current affairs programs each night. This should mean that those with investment properties already should not suffer any considerable downward price impacts over the next 12 months (quite the opposite I would hope) – and that anyone waiting to invest and crossing their fingers and hoping for cheaper prices in the next 6 or 7 months may well be waiting in vain.
I hope this information is of some help to you. I have spent a great deal of time considering the impacts of first home buyers on property prices (and – as a Buyers Advocate – competing with them on purchases in the market) – and I see last night’s budget as a definite good news story for investors.
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31/3/09 |
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Reading the Rates |
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Don’t read too much into this (like you - I have no crystal ball) – but here are some observations from my latest round of analysis of interest rates.
Ø Despite the aggressive variable drops of recent months, the 10 year fixed rate at most major banks has not dropped since December (and one bank actually put theirs up in the last few weeks). 10 year rates are always slow to change – but movements (especially upward) give a hint as to where the banks see future 1-5 year rates going
Ø The best 1,2,3 year fixed rates (4.99% to 5.19%) are still dropping – but at a much slower rate
Ø The press are starting to talk about another possible month of no further interest rate cuts (very different to 6 weeks ago when the papers were full of talk regarding a half percent drop in March and more in April – June)
Ø The share market has (even if only temporarily) put on a bit of a burst in the last couple of weeks – which (if sustained) could lead to improved consumer confidence and spending increases (and less pressure on the RBA to drop interest rates further)
There is no way to predict the future. Rates could drop WAY lower (as was being popularly predicted just a few weeks ago), could stay in their current (relative) holding pattern for months, or could even start to rise (as has happened in a couple of - as yet - isolated cases recently).
I guess the message is this – at some stage in the future there will be risk-averse people who have been enjoying low variable interest rates – that kick themselves for not having locked in at the 4.99%-6% rates on offer for 1-5 year fixed terms. I know that my own properties are currently neutral to positive in their cashflow (as are the majority of my clients) – but I also know that it can’t last forever.
If you are the type of person that is happy to ride the variable wave – then there is nothing to be done (other than rejoice in the current low rates – and pray for even more drops). However, if you are more cautious, then keep your eyes and ears open for signs/news of the economic recovery that is bound to ultimately result in increased interest rates. When that news starts getting traction – speak to your financial advisor, bank or mortgage broker nice and early (even if only to find out what options might exist for you at that time).
For now – enjoy the cashflow!
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15/2/09 |
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15% Discount on Buyers Advocate Fees |
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To kick-off 2009 - I have reduced all of my Buyers Advocate purchase fees by 15%.
This 15% discount applies to both my engagement fee and any services fees related to the purchase of both investment properties and owner occupied homes for all my new clients.
For a $500,000 property – this represents a saving of over $1,500.
There is no alteration to the scope of services provided or the attention your purchase will receive. As always, I am fully committed to exceeding all client expectations and finding you the right property, at the right time, for the optimum price.
If you would like to know more – or want to take advantage of a free / no obligation appointment to discuss your particular needs –
contact Scott Caddaye on (03) 9779-4884
or by email info@snaponline.com.au
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15/2/09 |
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2009 - The Year of the Positive Cashflow Property |
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It’s hard to believe it now – but just 6 months ago the standard variable interest rate was around 9.6%. It had been carried to these lofty heights over a 6 year period – as a result of a record 12 consecutive upward movements by the Reserve Bank. Now in February 2009 - with variable interest rates up to 3.9% lower - a huge chunk has been cut away from property investors’ outgoings.
Consider the following hypothetical example:
An investor bought a house using a $400,000 interest only loan in August 2008 when the variable interest rate was around 9.6%. At that point, they would have allowed $38,400 for their expected annual interest bill. With the standard variable rate now as low as 5.74% - that same investor now only needs to budget $22,960 for their annual interest bill (a drop of around 40% or $15,400). Add to this that the investor is likely to still be experiencing increases in their rental income – and you can see how quickly the tide has turned in favour of positive cashflow opportunities.
For more details on Positive Cashflow Properties (and a fully worked recent real life example) - read the full article in my Jan/Feb Newsletter.
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15/2/09 |
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Invest Now or Wait? |
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Despite a constant bombardment in the media – with opinions divided about whether to buy now or wait – my short answer and personal philosophy is simple. My personal investment strategy is governed by a cliché – “it is not TIMING the market that counts – it is TIME IN the market that is important”. As far as I am concerned – the best time to buy an investment property is as soon as you can afford to. Get into the market and hold property – it is as simple as that.
I know that there are some times and places where this will not always apply (eg. the NSW market has always been a lot more volatile – forcing investors there to pay closer attention to timing) – but in Melbourne where we experience a much more even year on year shift in property prices (and with few exceptions – an upward shift) – it really comes down to "time in" the market. Melbourne’s only recent exception to this rule has been particularly evident in premium properties (however, with most investors holding more modestly priced properties, 2008’s pain at the top end has been most acutely felt by owner occupiers).
For more details on Property Investment timing (including a table comparing positives and negatives) - read the full article in my Jan/Feb Newsletter.
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30/12/08 |
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A BIG THANKYOU to all my Buyers Advocate Clients in 2008 |
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As we get ready to welcome the new year - I would like to say a sincere thank you to all my clients from 2008. I have met some absolutely delightful people this year (you all know who you are) and you have each helped me continue to grow my passion for property and property investing. I am grateful to you all.
In 2009 I look forward to optimising your investment property returns (through Total Care) and - for some - expanding your portfolios via further property purchases.
Please take time over the holiday period to celebrate what you have achieved in 2008. To my clients who bought their first investment property - you have become one of just 6.5% of Australians who own investment property. For those that bought their second and third properties - you are now among a group of less than 2% of Australians who own two or more investment properties.
Congratulations to each and every one of you.
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30/12/08 |
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What was the BIGGEST Property Investor News Item for 2008? |
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By far the biggest news item for property investors in 2008 was interest rates. The biggest cost for an investor is interest - so when the Reserve Bank reduces that cost by over 40% in just 4 months it is cause for celebration.
For anyone that braved the negativity of the global credit crisis and took the leap into property investment in 2008 - congratulations. Your counter-cyclical investing places you securely in on the ground floor of the next property recovery and boom cycles. Even better - with the Reserve Bank gift that keeps on giving - your holding costs in 2009 will be far lower than any analysts dreamed would be possible back in mid 2008.
For those existing property investors that held their nerve (and their properties) throughout the high interest rates and plateauing prices of 2008 - congratulations to you too. You have weathered the storm and come out the other side into a bright world of low interest rates, high immigration, low vacancy rates and fast-rising rent returns.
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14/11/08 |
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After months of non-competitive interest rates, Homepath has finally been put out of its misery. |
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Commonwealth's brave venture into the world of online loan provision is at an end. After being completely uncompetitive across all of 2008 - Homepath has ceased offering home loans completely. Their web site advises customers "we are not taking any new applications" and "we've appointed Commonwealth Bank, our parent company, to be our agent and to provide loan maintenance services to all our HomePath customers. So going forward, you will need to contact the Commonwealth Bank for all your enquiries and transactions on your home loan."
That leaves just one major online lender - "one direct" - and even they seem to be struggling to compete with the big four on fixed rates.
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31/10/08 |
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Comm Bank and HSBC carve up to 1.84% off 1 & 2 yr fixed rates |
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Fixed rates are plunging faster than the value of the Aussie dollar - with the last fortnight seeing Comm Bank cut their 1 & 2 year rates by 1.7%, and HSBC slicing 1.84% off their own 1 & 2 year rates.
One strange exception to this rate cutting frenzy is online lender Home Path who have fixed rates that are up to 2.6% HIGHER than our traditional bricks and mortar banks. For example, Home Path's 2 year fixed rate is a lofty 9.49% - Westpac is offering 6.89% for that same duration.
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13/10/08 |
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Westpac 3 year fixed rate - an amazing 6.99% |
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Not content with their already market-leading fixed rates - Westpac has this morning slashed up to another 1.1% off their fixed rate home loans.
The new rate for a 3 year home loan is now just 6.99% - representing the lowest 3 year rate in over two years. The 1, 2, 4 & 5 year rates have all dropped as well - to a very tempting 7.19%.
These dramatic drops will almost certainly end the record low uptake of fixed loans that we have been seeing over the last 3-6 months. Fixed rate loans fell out of favour when the variable seemed destined to keep on rising - but the sudden reversal of the variable now sees the fixed rate racing downward at an accelerated rate.
These dramatic rate drops, coupled with record population growth, record low vacancy rates and large increases in rent returns, clearly demonstrate that the bottom of the property market is now behind us and we have entered a new period of upturn and growth.
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07/10/08 |
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Reserves Slashes 1.0% from Official Interest Rate |
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In a move more drastic than any we have seen in over 16 years - today the Reserve Bank slashed 1.0% from the official interest rate. Whilst experts and analysts debated the likelihood of a 0.5% cut (against the less likely 0.25% reduction) - NO ONE (with the possible of the Reserve themselves) saw anything like a 1.0% cut coming. Although, there was one bank that just might have anticipated a cut this big - and that is Westpac. Just 3 weeks ago, Westpac slashed their fixed rate loans to levels not seen for around 12 months (a sure sign of their belief that the variable was going to drop ... and drop fast).
The last time rates moved down at such an accelerated rate was August 1994 (when the official rate dropped from 7.0% to 5.5%).
This is "champagne cork-popping" news for struggling home owners, and should provide a significant impetus to any intending property investors. |
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30/09/08 |
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Buyers Advocates and Buyers Agents – the new spokespeople of the real estate industry? |
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Buyers advocates have long been seen in print in investor magazines such as Your Investment Property and Australian Property Investor – generally offering balanced and unbiased advice on topics ranging from where to buy and what to buy, to how much to pay and how to negotiate the best deal. However, in recent weeks they have started to pop up in more mainstream media as virtual spokespeople for the real estate industry.
It has now become the norm for the Melbourne Sunday Age to interview multiple Buyers Agents on the results of the auctions of the previous day. Buyers Advocates are also being interviewed on prime time television (David Morrell was on Melbourne’s Today Tonight just last night).
With over 60% of home purchases in the United States being managed by a Buyers Advocate, it now seems that the Australian real estate industry is starting to embrace these relative newcomers onto the Australian scene too. |
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30/09/08 |
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Fixed rates sprint past the variable in a downhill race to the bottom |
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In the July – Sep 2008 quarter, the variable rate has dropped a meagre 0.25%. In that same span of time though, fixed rates have dropped by up to 1.5% - more than 6 times the reduction that we have seen in the variable.
The average discounted variable rate as at Sep 30 2008 is 8.72%, but the average fixed rate is just 8.46% (and in some places as low as 7.99%). This is the first time in well over 12 months that the average fixed rate has been lower than the average discounted variable – a sure sign of where the banks believe the variable is soon to go (down … way down).
Variable vs Fixed Rates
As a Buyers’ Advocate – I see the impact of this on the ground when searching out deals. Where two or three months ago I could buy the optimum property in a suburb with little or no competition, I am now having to out-bid (or act extremely quickly) to steal a march on the growing number of buyers and investors that are starting to return to the market.
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28/09/08 |
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Attention all intending property investors – the bottom of the Melbourne property market has happened? If you blinked, you may have missed it. |
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For anyone still waiting on the sidelines contemplating when might be the right time to enter the Melbourne property market – I have good news and bad news. The bad news is that the right time was probably a couple of months back. The good news is that most people haven’t realised this yet, so there are still plenty of opportunities to bag a property bargain before the masses return to the market.
We have just come through a period of records including record low vacancy rates, record low auction clearance rates, a record run of 12 consecutive interest rate increases and record population growth. We are now entering a new period where house prices that have been flat are starting to grow again, where fixed interest rates are returning to levels not seen in over 12 months, where auction clearance rates are back on the rise – and where demand for rental accommodation remains at previously unseen levels (driving rents ever higher).
As a Buyers’ Agent – I see the impact of all of these positive indicators on the ground when searching out deals. Where two or three months ago I could buy the optimum property in a suburb with little or no competition, I am now having to out-bid (or act extremely quickly) to steal a march on the growing number of buyers and investors that are starting to return to the market.
With share prices all over the place right now - there has never been a better time to lock in some consistency and stability by turning to bricks and mortar. |
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16/09/08 |
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Westpac SLASHES Fixed Rates – knocks even the online lenders off their perches |
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In the same time that they have delicately trimmed their variable rate by a barely noticeable 0.25%, Westpac has taken an axe to their full suite of fixed rate loans with massive cuts across the board.
Online lender One Direct has been the leader in low fixed rates for over 12 months – but Westpac has now knocked them off their throne in the two, three, four and five year loans (with Westpac rates up to 0.4% below the online lender’s best effort).
Westpac’s fixed rates have dropped back to levels not see for almost 12 months, with their three, four and five year rates now at a bargain basement 7.99% (for borrowings over $150,000).
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31/08/08 |
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Fixed rates now on par with the discounted variable |
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All the major banks have dropped their fixed rates - DRAMATICALLY - during August.
With cuts of up to 1.1% the banks have all sent a clear signal - that they expect the variable rate to drop, and drop considerably, over the coming months.
These cuts have altered a long term trend - where fixed rates have tracked consistently above the discounted variable. Now - the average fixed rate is identical to the average discounted variable rate.
Variable vs Fixed Rates |
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1/6/2008 |
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Tide Gathers Momentum |
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Westpac’s downward move last month looks to have sparked a trend, with two more lenders jumping on board. In what can only be a good sign for intending purchasers, NAB and ING Direct have both shifted selected fixed rates down during May. Who will be next? |
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22/05/08 |
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Is The Tide Turning? |
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Westpac DROPPED their 3 year fixed rate in April. This was their first reduction in a fixed rate in well over 12 months. In fact, only one other bank has reduced a fixed rate in the last 18 months – when ANZ made a short-lived change to their 2 and 3 year rates in September / October 2007. Other than these exceptions, fixed rates have been steadily climbing for over a year and a half now.
While it is certainly not time to start popping the champagne corks, intending property buyers should take heart that a drop in fixed rates is often an indicator that the banks believe the variable rate is peaking, and likely to fall in the medium term future. |
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21/05/08 |
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Shifting Sentiments |
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In a sign that we may be at the peak of the rate cycle – Victorian borrowers turned their backs on fixed rate loans in April, opting for variable loans in increasing numbers. Previous months saw up to 35% of Victorian borrowers fixing the loans, but in April this percentage plunged dramatically to a low of 21%.
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At SNAP, we are always on the lookout for the details that will make a difference to your property purchase. We have gathered years of historical property analysis detail - including interest rate movements across all the major lenders and across all fixed and variable loans.
