RBA leaves cash rate unchanged for March
RBA leaves cash rate unchanged for March
Posted on Tuesday, March 03 2015 at 1:51 PM
In a move many industry experts had been predicting, the Reserve Bank of Australia (RBA) announced today that it will not be amending the cash rate, so it still stands at 2.25 per cent.
It was felt by many that the
RBA would wait at least a month to see what effect the February cuts had had.
Governor Glenn Stevens said
in his statement: “The available
information suggests that growth is continuing at a below-trend pace, with
domestic demand growth overall quite weak. As a result, the unemployment rate
has gradually moved higher over the past year. The economy is likely to be
operating with a degree of spare capacity for some time yet. With growth in
labour costs subdued, it appears likely that inflation will remain consistent
with the target over the next one to two years, even with a lower exchange
rate.”
He went on: “Credit is recording
moderate growth overall, with stronger growth in lending to investors in
housing assets. Dwelling prices continue to rise strongly in Sydney, though
trends have been more varied in a number of other cities over recent months.
“The Bank is working with other
regulators to assess and contain risks that may arise from the housing market.”
He also noted that the Australian
dollar has declined noticeably against a rising US dollar, though less so
against “a basket of currencies”, and remains above most estimates of its
fundamental value. While conceding that a lower exchange rate is likely to be
needed in the near future to achieve balanced growth, he said: “The Board judged that, having
eased monetary policy at the previous meeting, it was appropriate to hold interest
rates steady for the time being.”
Westpac chief economist Bill
Evans, who rightly predicted February’s cut, had said that a major
cost in delaying the next interest rate cut for another month or more was that
the Australian dollar might start responding to a benign rates outlook.
Domain Group’s Andrew
Wilson, who did not anticipate last month’s move by the RBA, had predicted a
March cut, citing poor
recent data, particularly unemployment. He said: “The new easing cycle must maintain
momentum to be effective given the marginal level of cuts and conservative
mindset of consumers.”
According
to comparison website finder.com.au, of the 37 experts questioned on their
predictions for the March announcement, 16 (43 per cent) were predicting a cut.
Those that felt movement was
unlikely at this stage said they believed the most recent cut needed more time
to filter through the economy before the Reserve Bank would cut again.
In the finder.com.au Monthly
Reserve Bank Survey, BIS Shrapnel’s Richard Robinson said: “They’ll hold to
avoid overheating the housing market and to keep their powder dry for when they
might want to ‘encourage’ another drop in the exchange rate.”
Onthehouse.com.au’s Peter
Boehm says: “You need more than a 0.25 per cent drop in interest rates to
materially stimulate the economy.”
China cut
its interest rate by 25 basis points at the weekend.
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Overseas buyers fees described as insufficient
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Overseas buyers fees described as insufficient
Posted on Friday, February 27 2015 at 4:36 PM
A Federal Government proposal to charge foreign buyers application fees each time they buy property in Australia is ‘tickling around the edges’ – and it won’t tackle the ‘seismic’ changes in Melbourne’s housing market according to one buyers’ agent.
Mal James, of James
Buyer Advocates in Melbourne, says 50 to 75 per cent of properties on the books
of some real estate agents are now being sold to overseas buyers. He says the
latest Government proposal won’t slow the influx of international buyers
snapping up properties in Melbourne.
“This has serious ramifications. In many cases,
we are seeing local buyers almost giving up because the market has changed so
dramatically,” James says.
“And it’s not just young homebuyers who are
missing out. Middle-aged buyers and middle class Australians are also being
priced out of the market. For people climbing the ladder, the only choice is to
be pushed further and further away from the city and into the outer suburbs.”
James says the government proposal to charge
foreign buyers a $5,000 application fee to buy property of less than $1
million, and $10,000 for every extra $1 million in the purchase price won’t
have any impact on wealthy overseas investors. The proposed fees apply whether
potential purchasers are successful or not.
“Do you really think a $10,000 or $20,000 fee is
going to bother a Chinese buyer of a $3 million or $4 million home?” he asks.
He cites the sale of a property in the Scotch
Hill precinct this week as a prime example of the pressures created by overseas
buyers. The five-bedroom home in Kembla Street sold before auction for $5.35
million. James says the seven bidders vying for the home were all of Asian
background.
He says this pressure cooker effect has also
been seen in Balwyn and North Balwyn, where some property prices are now on a
par with Bayside suburbs, such as Hampton. Ten years ago, he says, Bayside
prices were 50 per cent higher until the eastern suburbs began attracting
Chinese and Indian buyers.
Policy changes in 2008 made it easier for
overseas buyers to purchase property and were the start of the seismic shift, he
adds.
“We all loved it in 2008 … but now it’s
significantly changing the game.
“Is it healthy to have a lot of money coming
into a market segment that’s distorting values significantly? When the rules
changed in 2008 the dam was broken and it has never been patched up.
“There needs to be a fuller understanding of the
problem. At the moment many young people, many middle class Australians and
even upper class Australians, are being priced out of their own markets.
“If you’re an older
person downsizing now, you’ve hit Tattslotto. You’ll dismiss what I’m saying
because you’re getting a huge windfall.
“But people climbing
the property ladder are facing significant and very real problems.”
Read more on this GREAT DEBATE in the April
issue of API magazine, in shops from Monday.
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Government to toughen foreign investment laws
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Government to toughen foreign investment laws
Posted on Wednesday, February 25 2015 at 12:09 PM
The Federal Government is looking to implement fees and beef up controls around foreign investment in property.
The
Prime Minister’s office has released details designed to put property purchased
by foreign investors under the microscope.
“Australia’s foreign investment policy for
residential real estate is designed to increase Australia’s housing stock.
“This policy remains
appropriate, but a lack of compliance and enforcement of the rules over recent
years is threatening the integrity of the framework,” the release says.
The
government is concerned some foreign investors are breaking existing rules, and
they’re looking to a specialist unit to deal with the issue.
“The government intends to establish a
small, specialised compliance and enforcement area within the Australian
Taxation Office to identify and investigate breaches.”
New
penalties have been introduced for breaches of the legislation.
The
plan includes introducing an application fee attached to each investment
proposals
“The application fees will fund increased
enforcement activity and ensure that the cost of administering the foreign
investment framework is not borne by the Australian taxpayer.”
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Depreciation claims to be found everywhere
Depreciation claims to be found everywhere
Posted on Monday, February 23 2015 at 12:39 PM
A list of the unusual landmarks and structures that have generated additional cash flow for their owners through the use of tax depreciation schedules has been revealed by tax depreciation specialist BMT.
The world’s largest rocking horse in South
Australia, the Sydney Polo Club, and the iconic Melbourne Star ‘Observation
Wheel’ are just some of the unique landmarks and items for which tax
depreciation claims have been made to uncover savings.
“Servicing a large range of commercial property
owners across Australia has meant working with some unique, and sometimes
unusual, buildings in the process,” BMT managing director Brad Beer says.
“Many people would be surprised by some of the
plant and equipment inside these buildings which qualify for tax depreciation
deductions, allowing their owner to claim back significant amounts when lodging
their tax return.”
The Big Rocking Horse in South Australia, as an
example, stands at over 18 metres tall and attracts about 300,000 visitors every
year.
Though most non-residential buildings erected
before 1982 aren’t eligible to claim capital works deductions, the owners of
the Rocking Horse (constructed in 1981) were able to claim on much of the plant
and equipment that comprised the unusual structure.
According to BMT, there’s a common
misunderstanding among property owners and investors that older buildings won’t
qualify for any depreciation deductions at all.
“We hear property owners and investors tell us
time and again that they never considered making depreciation claims due to the
age of their building. However, even in the case of older buildings, there can
still be many pockets of savings due to the depreciation of plant and equipment
items,” Beer says.
“Each of these three properties were able to
generate tens of thousands of dollars in extra deductions for their
respective owners.
“Furthermore, there was no need for the owners
to outlay any cash in order to attain this additional cash flow, as
depreciation is a non-cash deduction meaning it does not require any expense to
be made in order for it to be claimed.”.
The owners of Melbourne Star’s 120-metre tall
Observation Wheel were able to claim on a number of the fixtures inside the ferris
wheel’s pods, which passengers ride to take in the 40 kilometre-plus views.
The horse stalls and shelters, dams, pumps,
silos, fencing and plethora of other horse-related paraphernalia were also
claimed by owners of the Sydney Polo Club, which has previously hosted The Bachelor contestants and assorted
visiting royalty.
BMT believes many property owners and investors
remain unaware of the extent to which they might be able to claim depreciation
on the plant and equipment assets in their own buildings.
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Is there an ‘investor frenzy’ going on?
Is there an ‘investor frenzy’ going on?
Posted on Friday, February 20 2015 at 10:30 AM
Recent data from the Australian Bureau of Statistics (ABS) confirms that investors in the property market are increasing rapidly and gathered even more pace during December 2014.
CoreLogic
RP Data’s research analyst Cameron Kusher says: “Data over December 2014 shows that finance commitments reached a record
high at $12.6 billion in investor housing finance commitments, up 6.0 per cent
from November 2014. Simultaneously, the value of investor housing finance
commitments was 18.8 per cent higher in December 2014 than it was in December
2013.
“As a proportion of the
total value of housing finance commitments, investors accounted for 41 per cent
of all commitments in December 2014 (including refinanced loans), a result
slightly shy of the record high of 41.2 per cent recorded in October 2003.
“To put the rise in investor activity into
perspective, in December 2012, investors committed to $7.6 billion compared to
$12.6 billion currently, a rise of 66 per cent over the two years – the largest
rise over a two-year period since December 2003.
“ABS
investor housing finance commitments data report an overwhelming majority of
investor housing finance commitments are for the purchase of existing homes,”
Kusher continues.
Year-on-year,
the value of investor housing finance commitments has increased by 59.8 per
cent for newly constructed properties compared to 16.1 per cent for established
properties.
ABS
lending finance data provides insight into investor housing finance commitments
by state that, unlike the national data, isn’t seasonally adjusted. All states
recorded a greater value of commitments in December 2014 than they did in
December 2013. Year-on-year, the increases were recorded at 34.1 per cent in
New South Wales, 30.3 per cent in Victoria, 8.6 per cent in Queensland, 14.1
per cent in South Australia, 4.5 per cent in Western Australia, 8.3 per cent in
Tasmania, 10.6 per cent in the Northern Territory and in the Australian Capital
Territory, 43.0 per cent.
Kusher
notes that investment is largely focused within NSW and to a lesser degree
Victoria.
“These
results provide a proxy for the capital cities of these states (Sydney and
Melbourne). These two capital cities have recorded the greatest increases in
home values over the past year and have also recorded the lowest rental yields.
This seems to indicate that the majority of investment activity is premised on
expectations of capital growth rather than rental return.”
Investor commitments by
state
• NSW – 45.3%
• Victoria – 26.8%
• Qld – 13.1%
• South Australia – 3.3 %
• Western Australia – 8.8 %
• Tasmania – 0.4%
• Northern Territory– 0.8%
• ACT – 1.4%
Source: CoreLogic RP Data,
ABS
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Property a major player in retirement plans
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Property a major player in retirement plans
Posted on Wednesday, February 18 2015 at 3:07 PM
Property investment is seen as a way to boost superannuation retirement savings by most Australians, according to a survey by ING Direct.
The financier has released
figures showing Australians believe their superannuation will provide just only
around one-third of their retirement nest egg with pensions, savings and
property filing out the top four income sources.
Property investment is
expected to provide almost eight per cent of retirement saving according to the
research.
John Arnott, an executive
director at ING Direct, says superannuation should play a bigger role in
retirement plans.
“Working Australians are
contributing almost one tenth of their salary into super every year.
“That’s a significant investment
over a working life and yet people still have limited belief in their super to
support their retirement.”
Arnott says Australians seem
more comfortable with traditional forms of investment.
“It all comes down to a fear
of the unfamiliar.
“We don’t see or hear about
our super every day, so we put our faith in things we know – things like
property and savings.”
A breakdown of the
Australian retirement nest egg as sourced from ING Direct reflects:
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Lending showing real strength
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Lending showing real strength
Posted on Monday, February 16 2015 at 4:14 PM
Australians sure are in the home-buying frame of mind it would seem – backed up by recent statistics releases as well as some figures from customer-owned financial institution CUA – it lent its customers a record $1.8 billion in the second half of 2014.
The value of new loans to customers from July 1
to December 31, 2014 was up by around 75 per cent – or $800 million – compared
to the corresponding six-month period the previous year according to general manager,
products and marketing, Jason Murray.
He says that on the back of strong lending
results for July to September, CUA finished the year with three consecutive
record-breaking months for lending.
“In December alone we issued $373 million in
new loans, with more than 95 per cent of that being for housing. That’s the highest
value for new lending in one month that CUA has ever achieved in our 70-year
history,” Murray says.
“The record-breaking run started in October
when we issued a massive $350 million in new loans.
“In November, we broke that record with $357
million of new loans. And we topped it yet again in December.
“Mortgage brokers are also contributing to our
lending growth, generating close to half of our new loans, which reflects a
trend across the industry. Consumers are increasingly using comparison services
and brokers for everything from hotel bookings to insurance, and banking is no
different.”
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Prices up, volumes down in WA
Prices up, volumes down in WA
Posted on Monday, February 09 2015 at 4:24 PM
Data released by the Real Estate Institute of Western Australia (REIWA) indicates a steadying state market.
After
being a superstar of Australian property for many years, the December quarter
2014 statistics show the WA market continues to consolidate.
According
to REIWA, Perth house price lifted marginally during the quarter to settle at a
median of $553,000.
David
Airey, president of REIWA, says Perth has shown positive price gains over the
past 12 months as well.
“It
looks like Perth will have experienced growth of around 4.6 per cent when
compared to 2013.”
Sales
volumes are, however, down which continues a trend initiated in March 2013.
“Turnover
for the December quarter is about 14 per cent below the 15-year average.
“The
distribution of sales within various price ranges was pretty steady, although
there was greater activity in the more affordable $400,000 to $450,000 range,
as well as some increased sales with homes over $1 million.”
REIWA
found the increase in sales with more expensive properties was more notable
through the western suburbs, the coastal edge of the City of Stirling and the
City of Melville.
“While
most of the outer areas popular with first homebuyers saw a decline in
activity, Kwinana and Serpentine-Jarrahdale were exceptions.
“In
fact, Kwinana saw a notional six per cent lift in median house price, probably
due to the increased number of sales from brand new stock.”
Overall,
Airey says the slowdown in the mining and resources sector was causing the
population growth rate to fall.
“This
situation is likely to affect the housing market for all of 2015, but we should
have a clearer picture of trends by the end of the March
quarter.”
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Renovations not on the radar
Renovations not on the radar
Posted on Monday, February 02 2015 at 10:57 AM
According to a study commissioned by financial comparison site Finder.com.au, Australian homeowners are dodging renovations funded by the equity in their mortgage because it’s just too difficult.
The survey
of more than 1,000 homeowners found that the vast majority (90 per cent) have
never refinanced their home to renovate. Of those who haven’t refinanced to
renovate their home, only 17 per cent would consider it.
Almost three
in four (73 per cent) homeowners think it would be difficult to refinance their
mortgage to renovate and 14 per cent find the idea
overwhelming, with women slightly more overwhelmed than men.
Michelle
Hutchison, money expert at Finder.com.au, says she’s not surprised by the findings, given the decline
in borrowers financing home loans for alterations and additions.
“Many
borrowers are dodging the idea of refinancing their home to renovate because
they just don’t know where to start.
“We found
that the value of home loans being financed for alterations and additions
averaged $352 million per month for the past five years (since January 2010).
It’s almost halved compared to over a decade ago, hitting a peak of almost $640
million in one month in 2003.
“It’s not
surprising when our survey found that most people are in the dark with the
costs and value a reno will add,” she says.
The survey found that more than one in three homeowners who
haven’t refinanced to renovate are unsure how much
it would cost, if they can afford to, how much value it would add or where to
start.
Of those who have refinanced to renovate,
the vast majority (93 per cent) had concerns whether they could afford to, what
their mortgage repayments would be and their biggest concern was how much value
it would add.
More than two in five homeowners (42 per cent)
are worried about rising interest rates, as unlocking equity to renovate means
borrowers will have a bigger mortgage with higher repayments.
“The problem with refinancing to renovate
is that every household is different,” Hutchison says. “Everyone has different
financial situations, mortgage sizes, equity and work needing or wanting to be
completed. The amount of money people want to spend can also vary
significantly.
“It doesn’t need to be overwhelming if
you want to unlock equity to renovate your home,” she adds.
National average
costs for renovation jobs
Source:
Finder.com.au, Australian Institute of Architects
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First homebuyer numbers rise after reporting error found
Posted on Wednesday, February 04 2015 at 4:51 PM
Prepare to see an upswing in first time buyer data – but not for reasons you might think.
The
Australian Bureau of Statistics (ABS) has confirmed an inaccuracy in the
reporting of first homebuyer numbers that’s impacted its analysis.
The
ABS says an investigation revealed some lenders weren’t including first
homebuyers in their reports if they weren’t receiving the First Home Owners Grant
(FHOG).
The
FHOG is a one-off grant for first homeowners introduced in July 2000.
State and Territory
governments have progressively restricted the FHOG to new homebuyers only.
Those purchasing
established property were no longer eligible and had been excluded from
financial institution reports.
Jackie
Hodge, an ABS spokesperson, admits the underreporting has impacted their analysis.
“The ABS has published first homebuyer loan figures since the early 1990s
and initially we thought the fall off in first homebuyer loans over the last
two years was due to reduced affordability arising from changes in grants,
rising house prices, increased investment housing loan activity and general
economic conditions.
“However, subsequent analysis and follow-up with
lenders has confirmed that the drop was partly due to under-reporting by some
lenders.”
The ABS estimates the number
of loans to first homebuyers currently being reported is approximately 80 per
cent of the total number of loans to first homebuyers.
The ABS is now working with lenders to ensure
more accurate reporting.
The graph below
illustrates the impact of the adjustments to previously published estimates.
Source:
Australian Bureau of Statistics
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