Posts Tagged ‘First Home Owners Grant’

First home buyers were an extremely important element in the property market recovery during 2009. This week we look at exactly what impact first home buyers had on the market in 2009 and how their gradual slowdown in demand may affect the market in 2010.

See John Symonds from Aussie Homeloans talk about the effect of the First Home Owners Grant in 2009…

During 2009, 191,000 first home buyers took the opportunity to become home owners across Australia. It’s no real surprise that first home buyers were so active during 2009 given that the Government was offering the First Home Owners Grant Boost, interest rates were at almost 50 year lows, some State Government’s were offering additional incentives such as low or no stamp duty on more affordable property purchases and properties had become more affordable during 2008 thanks to a fall in values. The volume of first home buyers during 2009 represented the highest annual volume of buyers on record and saw a 55% increase on first home buyer activity compared to the previous year.

Between 1992 and 2009 there was an average of just over 116,000 first home buyers annually. Not only was the level of activity during 2009 the highest on record it was 64% greater than the long-term average level of activity.

Many people claimed that the active first home buyer market was artificially inflating prices however, it is important to look at just how much of the market first home buyers accounted for. During 2009, owner occupiers took out finance for approximately 739,000 dwellings of which 26% was taken out by first home buyers and the remaining 74% came from non first home buyers. Obviously first home buyers accounted for a much greater portion of the market during 2009 than they have in the past however, their portion still paled in comparison to non first home buyers.

Importantly, this data doesn’t include investors. The ABS doesn’t publish volumes of investor finance but it does publish the total value which shows that the amount spent on residential property by investors was worth more than 25% of the value of all housing finance during 2009. This result combined with the proportions for owner occupiers split between first home buyers and non first home buyers show that even though first time buyers were extremely active during 2009 compared to previous years, they still only accounted for a relatively small portion of the overall market, likely to be around 15% of the whole market.

On a month by month basis during 2009, first home buyer activity peaked at 28.5% of all owner occupier finance during May 2009. As the graph shows, following the peak and once the First Home Owners Grant Boost in full was removed, the proportion of first home buyers in the market fell sharply. During December 2009 first home buyers made up 21% of the owner occupier market. Historically, first home buyers have accounted for around 20% of the owner occupier finance market and we would expect that during 2010 they will sit at a similar if not lower level than the historical average.

On a state by state basis first home buyers during 2009 were generally most active within Western Australia where on a month by month basis they averaged 28.4% of housing finance commitments during 2009. The second greatest proportion of home loans for first home buyers was found in Victoria (26.9%), followed by New South Wales (26.8%). The markets which saw the lowest proportion of first home buyers during 2009 were: South Australia (20.6%), Northern Territory (21.1%) and the ACT (22.0%). When looking at the results of the most recent month you can see the impact of the slowdown in first home buyer activity with each state seeing fewer first home buyers during December 2009 than witnessed during December 2008.

Although first home buyers still only accounted for a relatively minor portion of all housing finance commitments during 2009, the impact of the greatest ever level of first home buyer activity was certainly felt across the rental market. Such a significant influx of first home buyers to home ownership eased rental pressure and has been a factor contributing to falling rental rates in many regions during the second half of 2009. With an expectation that first home buyers will at least fall back to historic average levels during 2010 we anticipate a turnaround in rental markets with higher rents likely to become evident this year. We also anticipate that investors will become more active in the marketplace due to less competition, particularly from first and second home buyers, brought on by the higher interest rate environment.

This article is an extract from RP Data Property Pulse, and is brought to you by Raine & Horne Glenelg your Glenelg Real Estate Agents and Glenelg Property Management Specialists

Read the latest comments from Angus Raine CEO of Raine & Horne about the hike in interest rates…

The decision by the Reserve Bank of Australia (RBA) to increase the official cash rate by 25 basis points proved the major talking point for the property market in October.

The increase pushes the central bank’s cash rate to 3.25 per cent and the RBA governor Glenn Stevens said the increase was as a result of Australia’s continuing growth.

Raine & Horne CEO Angus Raine says the increase was the market’s worst kept secret, given the regular snippets of more favourable economic news coupled with the fact interest rates remain at historic low levels.

Nevertheless with the financial markets pricing in more rate rises by Christmas, the Raine & Horne chief is not convinced home owners can stomach more increases, especially as the Federal Government is also phasing out the First Home Owners Grant Boost (FHOB).

To this end, the Real Estate Institute of Australia says when a similar stimulus package was phased out in July 2002, the presence of first home buyers in the market fell by around 38% from 13,000 to 8,000 per month.

See what John Symonds of Aussie Homes has to say…

However Mr Angus Raine remains cautiously optimistic for the property market despite the challenges. “After an interest rate hike, people usually go back to the drawing board and work out what they can afford. There’s usually a time lag of a few weeks and then they’ll go out hunting again.”

REIA President David Airey is squarely in Mr Raine’s camp, and says caution is required regarding further decisions on rates.

“While the economic indicators suggest that Australia is on the way to recovering from the impact of the global financial crisis, these are early and tentative signs and we should be wary not to slow economic growth by increasing interest rates prematurely,” said Mr Airey.

PriceFinder Chief Operating Officer Kent Lardner, says, most home buyers need to be aware of inter­est rate movements, and urges them to allow for a servicing buffer for loan repayments of up to 3%.

 “The rise in interest rates is a positive sign of a strengthening economy. From PriceFinder’s perspective, our biggest concern over the last 12 months has been jobs losses and the effect that could have on property markets.”

 “The good news on the job front to-date will continue to help buyer confidence and even with the expected interest rate rises in the coming 12 months, our rates will still be relatively low,” adds Mr Lardner.

This article was republished from Raine & Horne Terraine October 2009.

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Monika Bonet is the Principal of Raine & Horne Glenelg, your Glenelg Real Estate Agent and Property Management expert.

RP Data – Rismark Home Value Index Release

National property values jumped by almost 2 per cent in August in the largest monthly movement since the RP Data-Rismark Home Value Indices began in January 2005. 

Using the rpdata.com (ASX: RPX) property database, which is Australia’s largest and includes over 170,000 sales during the first eight months of 2009, Australia’s housing recovery solidified during the month of August with strong capital gains registered across the country despite evidence of fading first home buyer numbers.

According to the “market-leading” RP Data-Rismark National Home Value Index (see Background on p4), home values in Australia rose by an exceptional 1.9 per cent during the month of August. This brings cumulative capital growth in the first eight months of 2009 to a better than expected 7.9 per cent. This is also the single highest monthly index result since the RP Data-Rismark National Home Value Index began in January 2005.

According to rpdata.com research director, Tim Lawless, the August results surprised on the upside and are indicative of very high levels of buyer confidence combined with low levels of listings.

“These buoyant conditions sit in striking contrast to the same time last year when values were falling, less than half of the auctions held cleared and sales volumes were at rock bottom.  We are now seeing home values rising at a solid rate, almost 80 per cent of auctions are clearing, and sales volumes have bounced back significantly”, Mr Lawless said.

Rismark International managing director, Christopher Joye, added, “Australia’s housing market is being underpinned by the strongest population growth since 1971, record housing shortages, historically low mortgage rates, better than expected employment outcomes, and one of the world’s most profitable banking systems.”

Australian home values have now risen 3.8 per cent past their February 2008 peak. This rebound followed peak-to-trough falls in national home values of just 3.8 per cent in 2008, which compares exceptionally well with the 15 per cent and 30 per cent house price declines seen in the UK and US, respectively.

Dispelling concerns that the recovery is limited to first home buyers Mr Joye commented, “In contrast to claims that this is a first time buyer bubble, the cheapest 20 per cent of suburbs in Australia have actually under performed both the mid-priced market and Australia’s 20 per cent most expensive suburbs since the housing market bottomed in December 2008.”

“As recently noted by the RBA, all major lenders now require a minimum 10 per cent deposit and are applying the strictest credit standards we’ve seen in over a decade. Australian housing credit growth has also been running at levels that are extremely low by historical standards and noticeably less than the growth experienced in the 1991 recession,” Mr Joye said.

Rpdata.com’s Tim Lawless concurred with Mr Joye and said that over the last three months the premium residential market increased in value by 4.5 per cent compared with a 3.4 per cent gain in the middle market and a 2.8 per cent improvement at the cheapest end. (Note: numbers in chart  to right show changes since December 2008 in the cheap, middle market, and expensive suburbs.)

“Despite the strong gains, the bounce in the premium sector has not been enough to offset the peak to trough fall of 9.9 per cent between February 2008 and January 2009.  Prices in Australia’s most expensive markets are still 1.1 per cent lower than at their peak.”

Mr Joye added, “While the resounding recovery in Australia’s housing market confirms our forecasts, we expect medium term growth rates to be more measured as mortgage rates normalise back to between 7-8 per cent. This would bring the cost of housing finance back in line with its 2000-01 levels, which is notably well below the searing 9.6% highs endured by borrowers in August 2008 care of the RBA.”

In closing Tim Lawless said that the upward momentum in Australian house prices is a critical economic signal from the market to builders and developers to encourage them to reinvest in producing new housing supply. This was a message reinforced by the RBA’s Dr Anthony Richards in a speech to CEDA yesterday: policymakers need to facilitate significant new investment in housing supply to alleviate Australia’s growing housing shortage, which ANZ and Westpac estimate has risen to around 200,000 homes.

“This price growth will also go a long way to comforting risk-averse lenders to start providing credit again to developers, which has been one of the main bottlenecks on the supply-side. And it will stimulate the reallocation of resources away from other sectors of the economy into much-needed housing investment.” Mr Lawless said.

Other key findings from the August RP Data-Rismark Index results:

Unit values (+2.1 percent) have marginally outperformed house values (+1.8 percent) in the month of August. Over the course of 2009, units (+8.5 percent) have also generated slightly higher capital growth than houses (+7.7 percent).

Most capital cities recorded robust gains in the month of August with every single city experiencing rises in home values during the first eight months of 2009.    

After several years of subdued growth following the end of Australia’s last housing boom in 2003, which saw Australia’s “house price-to-income ratio” fall by nearly 20 percent through to December 2008, home values in the two major capital cities, Melbourne and Sydney, have led the recovery in 2009 with total capital gains of 11.6 per  cent and 8.6 per  cent, respectively.

Following Melbourne, Darwin has been the next best performing capital city with growth of 9.7 per  cent in 2009. Interestingly, Darwin also continues to deliver the highest rental yields, implying that the market may have room for further growth.

Home values in Canberra (+6.7 percent), Brisbane (+5.2 percent), Perth (+4.1 percent) and Adelaide (+3.1 percent) have also realised sustained gains in 2009.

As RP Data-Rismark correctly anticipated, residential real estate in Perth has experienced a recovery in 2009 after a period of falling prices since September 2007. While Perth dwellings have recorded 4.1 percent growth in the first eight months of the year they still remain 3.6 per  cent below their September 2007 peak.

National rental yields have softened slightly given the strong capital growth with the gross annualised rental yield for units being 5.1 percent while house rental yields are slightly lower at 4.3 percent.

This article republished from RP Data -- Rismark

Watch this Youtube Video about how Raine & Horne Glenelg can help you with all of your investment needs…

Monika Bonet is the Principal of Raine & Horne Glenelg, your Glenelg Real Estate Agent and Property Management expert.

Raine & Horne SA is helping property investors have a greater understanding of their buying power thanks to an advertising system new to Australia. 

The ‘Select Invest +’ advertisements list an indicative weekly ownership actual for the property by taking into account a range of factors including mortgage repayments, tax deductions and rental returns. 

The program and its associated cost calculations has been designed and reviewed in conjunction with Fair Trading, Trade Practices, Finance and Land Agents Acts to ensure compliance, clarity and legitimate benefits for both buyers and sellers. 

Raine & Horne Financial Services spokesperson John Martin said the new advertising method will provide new and existing investors with a realistic view of how the purchase would affect their hip pocket. 

“Property investment is still high on the priority list for South Australians, with property prices still affordable and good rental returns,” Martin said. 

“The most common question that I am asked is how much will an investment property really cost per week or per month.” 

“Once investors, particularly first timers, see just how much an investment property could cost – it either encourages them to do so or stops them from making a big financial decision that may not be viable.” 

The program is anticipated to effect how real estate property is advertised nationwide and is yet another exciting Australian first in less than 12 months from Raine & Horne’s South Australian Team. 

Raine & Horne SA CEO Kevin Magee said in the current climate it made sense to give investors a greater understanding of the financial aspect of buying rental properties. 

 “For me the most exciting aspect of this program is that with all indicative ownership costs being based on a couple having a combined yearly income of $100,000, it goes a long way to demystifying property investment and make it much more understandable and consequently accessible to everyone, not just those on high incomes.”

This story was brought to you by Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Glenelg Property Management Experts – We’ll look after You.

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Buying and owning your first home can be complicated. Monika Bonet Principal of Raine & Horne Glenelg explained; “First home buyers can do well in the property market right now, with lower interest rates, favourable house prices and the government’s extension of the First Home Owners Grant till September 2009, but buying a first home can be a very daunting experience for most first home owners. I have found there are three common mistakes that first home owners make. ”

Here are Monika’s top three common mistakes every first home owner should try to avoid.

1.                  Not setting a budget and knowing how much you can afford?

Do a budget. Work out how much can you afford. There is no point looking at mansions if you can only afford to buy a unit. As a general guide, your mortgage repayments should not exceed 30 percent of your before-tax income.

2.                   Not researching the additional fees like stamp duty and mortgage insurance?

When it comes to buying a home there’s more to it than just a deposit. To avoid any last-minute surprises, you should allow to add in approximately 5% of the purchase price for fees like stamp duty, conveyancing fees and mortgage insurance. Get your mortgage broker or bank to give you a breakdown and estimate of these fees before you make offers.

3.             Not doing your homework?

Many first home owners don’t do their homework before they start looking. To get the best home at the lowest price, you must know the median prices for the suburbs you can afford to buy in. Also, you must be clear what type of property are you after. Are you after a house, or a unit? Be clear on this as it makes it easier by limiting your search to a few suburbs.

This story was brought to you by Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Glenelg Property Management Experts – We’ll look after You.

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The Budget delivered last week had fewer surprises than we’d been expecting with nothing specific for investors however some great news for First Home Owners.

FHOG Grant

The First Home Owners Grant (FHOG) has been extended for a short time with a step down approach adopted. The rates of FHOG allowance are as follows:

For First Home owners to take advantage, they will require a signed contract before the specified dates and need to settle within a certain time period, feel free to discuss this with me for more information.

This story was brought to you by Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Property Management Experts – We’ll look after You.

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Smart investors are taking advantage of temporary rental vacancies by renovating and upgrading their properties.

According to the Real Estate Institute of SA (REISA), increasing levels of home ownership by First Home Owners had led to a rise in rental vacancies in many parts of Adelaide over the last 12 months.

Like any asset, an investment property required periodic maintenance and experienced property owners were using this time to protect their investment.

Regular maintenance of rental properties is essential in order to maintain the value of an investment – both in terms of the capital value and the rental returns.

During the course of any property investment, the rental market will experience highs and lows relating to purchasing trends and population movements. Current market conditions create an ideal opportunity for property owners to ensure their investment is properly looked after.

Eight years ago, Will and Kate Burton rented out their older-style flat in the inner eastern suburbs when they moved into a larger home further from the CBD.

The Burtons say that for almost all of that time their flat has been occupied.

When a long-term tenant vacated the property recently, the Burtons decided it was time to undertake some renovations, not only to improve their chances of renting, but also to improve the value of their investment.

“When we first lived there 12 years ago we did some minor renovations and redecorating. Now it looks a bit tired, particularly compared to some of the newer apartments in the area,” Kate said.

The couple decided to use the time the property was vacant to upgrade and repair, and spoke to their property manager about what improvements they could make to attract quality tenants and to improve the property’s value.

“I think our flat has a lot of charm and I know many people prefer the older style of flat. We didn’t want to do any renovations that detracted from the style, but we did want it to look fresh and bright,” Kate said.

“Some things we can do ourselves, like repainting, ripping up the carpet and polishing the floorboards, and upgrading the security. We’re also looking at upgrading the kitchen and bathroom – not spending a fortune but repainting and replacing some worn and dated fittings,” she said. “I think it is important to look after the place anyway and if the property looks good I think tenants are also more inclined to look after it.”

A poorly maintained residence didn’t encourage good tenants. It also reduces rental returns and devalues the property in the long term.

Apart from the property owner’s legal obligation to keep a rental property in good shape, by regularly upgrading and maintaining the property you might be able to charge a higher rent, particularly when the market picks up again. Using a temporary vacancy to maintain your investment property might mean you are able to turn a down time into a period of greater profitability.

This story was brought to you by Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Property Management Experts – We’ll look after You.

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Buying and owning investment property can be complicated. We’ve all heard stories about investors who pay too much for a property, or who end up with the tenant from hell living in their property. But by avoiding a few simple mistakes investing in property can be a pleasure not a pain. So here are the seven mistakes every landlord should try to avoid.

1. Not having insurance

For property investors a full comprehensive insurance policy is a must and should cover burglary, fire, glass damage, storm and tempest damage. A public liability policy should also be included as part of your insurance package. It is also very worthwhile considering a specialised landlord protection insurance policy which covers you for malicious damage to your property of for loss of rent if your tenant leaves the premises without giving proper notification. When it comes to insurance it’s worth remembering that policy premiums are tax deductible for property investors.

2. Not having an interest only loan

Only the interest component of any loan repayments you make for an investment property are tax deductible, therefore if you have an interest only loan the total amount of any loan repayments you make are deductible. This has many financial and cash flow benefits for investors because it requires less of your income to hold the property.

3. Buying at the wrong time

Timing is one of the most important elements in a successful property investment. Property moves in cycles from boom times into times of stagnant or even falling values. Ideally investors should try to buy when the property cycle is down as this will help to increase purchasing power and maximise benefits from future capital growth.

4. Not claiming interest

If you borrow money from any source to buy an investment property, make sure you claim the interest on your tax return.

5. Buying with emotion

As much as you might like to buy a luxury penthouse in a resort style location, when it comes to investing in property we have to forget about our desires and think about the financial consequences of our decision. After all it’s the rental value that determines the economic worth of a property, so instead of asking “would I live in this property”, ask “who will live in it”. If the area where the property is located has a good history of strong rental demand and its rent is set at a level that the majority of people who live in the area can afford and it’s close to facilities that the local population demand, then you’re on the right track to making a sound choice of investment property.

6. Not inspecting your property regularly

Whether or not you have a real estate agent managing your property it’s a good idea to inspect your property at regular intervals. This way you’ll be able to see the condition of the property and be in a better position to determine whether or not you need to carry out any repairs or general maintenance. It also gives you an opportunity to see how the tenants are caring for the property.

7. Not having a professional property manager

With changes to legislation and technology the business of managing rental property is becoming more and more complicated. A thorough knowledge of property law, investment analysis and other related skills are required to maximise returns and successfully manage investment property. A professional property manager also knows there is a careful balance to ensure a property remains attractive to the market whilst maximising investment returns.

If you can possibly avoid these mistakes you’ll be well on your way to ensuring your investment property performs well to provide you with medium and long term capital growth with a minimum of headaches.

This Article is brought to you by Raine & Horne Glenelg – Your Glenelg Real Estate Agents and Property Management Experts – We’ll look after You.

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The Federal Government’s decision to increase the first homebuyer’s grant from $7,000 to $14,000 for existing homes and $21,000 for those buying new homes is set to stimulate the Australian property market.

Raine & Horne Glenelg Principal Monika Bonet said the FHOG boost, which has been available to eligible first home buyers since 14 October 2008, was welcome news for home buyers and particularly young families looking to escape the rental treadmill. “This should also have the added benefit of releasing more rental properties into the tight rental market.”

 “Increasing the grants for brand new homes to $21,000 from $7,000 will improve supply in new housing,” Mr Magee said. “The combination of this increase in the first homebuyers’ grant and the drop in interest rates will boost the market.”

 “It is also set to provide some much needed respite for mortgage belt suburbs of Adelaide’s southern suburbs, including Morphett Vale, Noarlunga, Seaford and right along the coast to Aldinga,” he added.

 However Monika warned first homebuyers to use the grant for homes, rather than impulse purchases. “It will mean a smaller mortgage, as long as people use the money for that purpose. In these difficult times first homebuyers should spend the money wisely,” he said. New homeowners should also note the additional assistance is only available until 30 June, 2009.”

 While the government initiative is a boon for the property market, Raine & Horne CEO Mr Angus Raine said further decreases in interest rates and new housing development – particularly in the bigger cities of Sydney, Brisbane and Melbourne – was needed to get the economy moving. “In Sydney people have been sitting on their hands for several years so there is pent-up demand,” he said.

Mr Raine says the beefed up FHOG is also set to help more Australians off the rental treadmill. “By getting more Aussies into their own homes also frees up the supply of rental properties, which may create some respite from the historically low vacancy rates.”

The call for more housing has also been backed by ANZ Chief Economist Saul Eslake, who said there were not enough houses in Australia to meet demand. “We haven’t built enough dwellings to meet underlying demand, which has been pushed up by rising levels of immigration,” Mr Eslake said. “As a result we actually have a significant backlog of unmet underlying demand for housing, as also indicated by the upward pressure on rents in recent years,” he said.

 In a bid to further boost the housing sector, the Government introduced the First Home Savers Account in early October for anyone aged 18-65 who has not previously owned a home. The Government will contribute an extra 17 per cent on top of money deposited into these accounts up to the value $5,000. This equates to a potential contribution of $850 per year. Real Estate Institute of Australia (REIA) president Noel Dyett said the First Home Savers Account would help increase the amount of new housing stock in the market. “This new initiative will help to promote a culture of saving among a new generation of Australians that will reduce their reliance on debt in the future,” Mr Dyett said.

Related Stories:-

• Tight Market, Low Interest rates, and Beefed Up First Home Owners – Proves Excellent News For residential Property Markets in 2009  – Read More
• Will Kevin Rudd give the thumbs up on extending the First Home Owners Grant – Here’s the gossip?  Read More

This Article is brought to you by Raine & Horne Glenelg – Your Glenelg Real Estate Agent and Property Management Expert – We’ll look after You.

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