SO YOU'VE heard that mortgage exit fees have been banned and banks, led by National Australia Bank, are cutting or axing many hated fees and charges.
But beware. Banks are busily replacing that lost income with new fees and higher charges.
Some are clear, upfront and easy to avoid for savvy bank customers who are prepared to compare and switch products. Others will be hidden and passed along the supply chain to consumers who will be unable to dodge them, bank analysts say. The total bank fee take last year was down for the first time, but only slightly, according to the latest Reserve Bank data.Banks raked in $4.25 billion, down 16 per cent, in bank fees levied on households, but their total fee take remained steady, falling just $14 million or less than 1 per cent."Only exception (penalty) fees have gone down," said Damian Smith, chief executive of financial comparison service RateCity.
"Other types of bank fee income have gone up to largely make up for that lost fee income.
"Ongoing fees for maintaining a mortgage have gone up, for example. In 2009, ongoing fees on mortgages listed on our database averaged $165, and now they average $240 per year. That's a rise of $75." Commonwealth Bank, ME Bank, Greater Building Society and Aussie Home Loans have announced increased upfront fees on some of their variable rate home loans recently.
Those fee increases come as exit fees disappear from the market. As of yesterday, all lenders have ceased charging exit fees on their variable mortgages, compared with just 56 per cent on June 1, according to RateCity. The highest average increase in upfront fees was $600, by the Commonwealth Bank, which lifted upfront fees across its suite of mortgages from $64 to $664 on average, Mr Smith said.
However, over the whole mortgage market, the average upfront fee on a standard variable mortgage has gone up just $32, from $374.40 in June to $406.40 now, according to data supplied by RateCity.
At the same time, early exit fees have gone down an average of $326."And upfront fees are both more readily comparable and 'negotiable' than exit fees," Mr Smith said.
Borrowers refinancing to get a better deal are a big driver of growth in the mortgage market, he said.
"We believe that removal of exit fees is the key driver behind this greater level of switching."
Fees on credit cards are changing as well and will change further as new consumer credit protection laws kick in this year.Credit card late-payment and over-limit penalty fees have gone down, but other credit card fees have gone up in recent years. "Some credit card 'exception fees' have dropped," said Mr Smith. "Others, such as ongoing fees, have increased. "For instance, in 2008, the average annual credit card fee (out of all cards that charge a fee) was $78.52, and now it's $92.45. "That's an increase of nearly $14, or around 18 per cent, in just three years, which is more than double the inflation rate over that same time."
The number of credit cards with annual fees has also risen. Three years ago, more than a quarter (28 per cent) of credit cards being offered to Australian consumers carried no annual fee.
Now just 31 credit cards, or 13 per cent, have no annual fee. Another 18 credit cards waive the annual fee if the cardholder meets a minimum spend each month, usually $1000.
Mr Smith recommends comparing your credit card rates and charges with some of the low-rate, low-fee cards now on the market.
Saturday, July 23, 2011
Thursday, July 21, 2011
Inflation and the housing market
There is mounting evidence to suggest that Australia’s housing market rests at a critical juncture. The evolution of Australian dwelling values since 2000 and 2006, respectively show the latest innovation in the housing cycle, where overall Australian home values have tapered by a modest 2.3%. So the question here is what lies ahead?
Sydney dwelling values have massively underperformed the rest of the Australian market over the last 11 years or so according to current data even though the Perth and Brisbane housing markets have suffered 7.5% and 5.9% declines in the past year, they have actually been our two best-performing conurbations over the past 11 years.
The near-term destiny of Australia’s housing market very much depends on next week’s second-quarter inflation numbers. If inflation is low, the RBA will likely be on the sidelines for the rest of the year. It can argue that it was vindicated for not responding to the very high first-quarter results, and will in any event be downgrading its economic growth forecasts for 2011, which were always on the high side.
Talk in the media will galvanise more firmly around rate cuts. Consumers will start to scale back their still extraordinarily hawkish interest rate views with 84% anticipating rate hikes. Given the average Australian thinks he will be hit by two or more rate hikes in the next 12 months, it is no surprise that underlying economic conditions have been so soft.
In this low-inflation scenario with no future hikes and the prospect of cuts, the forecast predicts that Australia’s housing market has the ability to start grinding out very modest capital growth, which, of course, should be complemented by healthy rental returns
In the less favourable alternative, where inflation next week is reported high – at, say, 0.8% for the quarter or more the central bank will be very much on the interest rate warpath. That means the likelihood of a rate hike, or hikes, before the year is out and the hold that the RBA currently has on Australia’s housing market will only tighten.
The divergence of beliefs between economists and the financial markets are that ANZ’s interest rate forecasts contrasted against the futures market’s expectations. Whereas the futures market is predicting rate cuts, ANZ thinks we will get hikes.
Who is right? That all depends on inflation. So, if you are looking to buy but have not found a place yet, you should be hoping for a high inflation outcome, which will inevitably result in persistent, interest rate-induced pressure on prices. If, on the other hand, you are looking to sell, you should be praying for a low number next week
Sydney dwelling values have massively underperformed the rest of the Australian market over the last 11 years or so according to current data even though the Perth and Brisbane housing markets have suffered 7.5% and 5.9% declines in the past year, they have actually been our two best-performing conurbations over the past 11 years.
The near-term destiny of Australia’s housing market very much depends on next week’s second-quarter inflation numbers. If inflation is low, the RBA will likely be on the sidelines for the rest of the year. It can argue that it was vindicated for not responding to the very high first-quarter results, and will in any event be downgrading its economic growth forecasts for 2011, which were always on the high side.
Talk in the media will galvanise more firmly around rate cuts. Consumers will start to scale back their still extraordinarily hawkish interest rate views with 84% anticipating rate hikes. Given the average Australian thinks he will be hit by two or more rate hikes in the next 12 months, it is no surprise that underlying economic conditions have been so soft.
In this low-inflation scenario with no future hikes and the prospect of cuts, the forecast predicts that Australia’s housing market has the ability to start grinding out very modest capital growth, which, of course, should be complemented by healthy rental returns
In the less favourable alternative, where inflation next week is reported high – at, say, 0.8% for the quarter or more the central bank will be very much on the interest rate warpath. That means the likelihood of a rate hike, or hikes, before the year is out and the hold that the RBA currently has on Australia’s housing market will only tighten.
The divergence of beliefs between economists and the financial markets are that ANZ’s interest rate forecasts contrasted against the futures market’s expectations. Whereas the futures market is predicting rate cuts, ANZ thinks we will get hikes.
Who is right? That all depends on inflation. So, if you are looking to buy but have not found a place yet, you should be hoping for a high inflation outcome, which will inevitably result in persistent, interest rate-induced pressure on prices. If, on the other hand, you are looking to sell, you should be praying for a low number next week
Monday, July 18, 2011
Westpac ratecuts
Westpac’s chief economist Bill Evans has shocked the market by forecasting a series of interest rate cuts.
Mr Evans said low consumer sentiment could force the Reserve Bank of Australia to slash the official cash rate by up to 1 per cent in 2012.
“We were all talking not long ago that rates could go up, but if the consumer remains subdued there may be interest rate reductions and if that occurs that would be a very strong stimulus for the consumer to save less and spend a little bit more,” he said.
But it seems not everyone shares Mr Evans’ view on rates.
Last week ANZ’s head of Australian economics and property research Ivan Colhoun said he expects the Reserve Bank to keep the official cash rate on hold at 4.75 per cent until February 2012, when it will start raising rates again.
Mr Evans said low consumer sentiment could force the Reserve Bank of Australia to slash the official cash rate by up to 1 per cent in 2012.
“We were all talking not long ago that rates could go up, but if the consumer remains subdued there may be interest rate reductions and if that occurs that would be a very strong stimulus for the consumer to save less and spend a little bit more,” he said.
But it seems not everyone shares Mr Evans’ view on rates.
Last week ANZ’s head of Australian economics and property research Ivan Colhoun said he expects the Reserve Bank to keep the official cash rate on hold at 4.75 per cent until February 2012, when it will start raising rates again.
Thursday, July 14, 2011
Home prices predicted to fall
Home prices are predicted to fall over the next 12 months after a sharp decline in the expected value of Victorian houses dragged the national forecast lower, says a new report.
The National Australia Bank NAB residential property index, which predicts houses prices, rents and real estate market conditions over the coming year, said national home prices would drop by 1.4 per cent in the 12 months from June, reversing an earlier prediction that home values would rise 0.6 per cent in the 12 months from last March.
In New South Wales, the NAB index declined from 39 points in March to 18 points in June, making it the strongest state in the national market.
For Victoria, however, the index plunged to minus 16 in the June quarter from a positive 23 point reading in the March quarter."There has also been a notable deterioration in house price expectations across the country since our last survey," said NAB chief economist Alan Oster.The June quarter's expectations were pushed lower by Queensland, where respondents predicted a 2.3 per cent fall over the year, and Victoria, where they saw a 2.1 per cent slide.But in sobering news for homeowners elsewhere, the survey predicted house prices would drop in all states except Western Australia, where values were forecast to rise by 0.2 per cent over the year. Homes in New South Wales would fall by a modest 0.7 per cent, while South Australian homes would lose 1.7 per cent.
After performing strongly in 2010 the Australian housing market shifted into a lower gear in 2011. Auction clearance rates have hovered in the 50 per cent range in New South Wales and Victoria, down from the highs of 80 per cent seen last year, and borrowers appeared to be less willing to take out large loans for fear of interest rates rising.RP Data said in June that national home prices have slumped 2.7 per cent in the first five months of the year.
The survey, drawn from the opinions of real estate agents, managers, property developers, and other industry voices, said tighter lending criteria and higher interest rates were the two major burdens on the market in the June quarter."Housing affordability was also identified in the current survey as a 'significant' constraint and was viewed as being most problematic in Victoria and Western Australia," the report said."The sustainability of house price gains was also cited as a 'significant' concern, with these concerns highest in Western Australia and NSW."In Queensland the index sank to minus 27 in June from minus 5 in March. In South Australia, the index moved from minus 8 to minus 6 in the same period, while in WA it remained in positive territory, moving from 12 in the March quarter to 5 in June.
The NAB survey also showed rental yields softening over the year, falling to 1.3 per cent in June from 1.7 per cent in March.
The National Australia Bank NAB residential property index, which predicts houses prices, rents and real estate market conditions over the coming year, said national home prices would drop by 1.4 per cent in the 12 months from June, reversing an earlier prediction that home values would rise 0.6 per cent in the 12 months from last March.
In New South Wales, the NAB index declined from 39 points in March to 18 points in June, making it the strongest state in the national market.
For Victoria, however, the index plunged to minus 16 in the June quarter from a positive 23 point reading in the March quarter."There has also been a notable deterioration in house price expectations across the country since our last survey," said NAB chief economist Alan Oster.The June quarter's expectations were pushed lower by Queensland, where respondents predicted a 2.3 per cent fall over the year, and Victoria, where they saw a 2.1 per cent slide.But in sobering news for homeowners elsewhere, the survey predicted house prices would drop in all states except Western Australia, where values were forecast to rise by 0.2 per cent over the year. Homes in New South Wales would fall by a modest 0.7 per cent, while South Australian homes would lose 1.7 per cent.
After performing strongly in 2010 the Australian housing market shifted into a lower gear in 2011. Auction clearance rates have hovered in the 50 per cent range in New South Wales and Victoria, down from the highs of 80 per cent seen last year, and borrowers appeared to be less willing to take out large loans for fear of interest rates rising.RP Data said in June that national home prices have slumped 2.7 per cent in the first five months of the year.
The survey, drawn from the opinions of real estate agents, managers, property developers, and other industry voices, said tighter lending criteria and higher interest rates were the two major burdens on the market in the June quarter."Housing affordability was also identified in the current survey as a 'significant' constraint and was viewed as being most problematic in Victoria and Western Australia," the report said."The sustainability of house price gains was also cited as a 'significant' concern, with these concerns highest in Western Australia and NSW."In Queensland the index sank to minus 27 in June from minus 5 in March. In South Australia, the index moved from minus 8 to minus 6 in the same period, while in WA it remained in positive territory, moving from 12 in the March quarter to 5 in June.
The NAB survey also showed rental yields softening over the year, falling to 1.3 per cent in June from 1.7 per cent in March.
Friday, July 8, 2011
Property listings
Property listings remain some 25% higher within Australia’s capital cities than last year, and 29% higher across the country, according to RP Data.
The 50,854 new house and unit listings over the past month take the total for sale across Australia to 279,605. There were 217,442 listings across Australia this time last year.
“Less than 48% of total listings nationally are within the capital cities,” RP Data research director Tim Lawless said earlier this month. New listings saw 50,854 properties added over the past month, with the capital city new listing volumes 2.8% higher than the same period last year.
As the winter hibernation sets in the number of new properties advertised for sale increased by 1.8% across the country in the last four weeks, compared to the previous four weeks ending 26 June 2011.
Queensland has the highest number of total listings at 86,188, followed by 73,673 in NSW.
The number of new properties advertised for rent has fallen by 2.7% over the past four weeks.
Capital city new rental listings fell by 3.1%.
Despite the fall, new rental listings nationally are 14.3% higher than the same time last year, and in the combined capital cities they are 11.9% higher.
Rental listings remain at much higher levels than the same time last year, up 12.8% nationally and 10.7% in the capital cities, Lawless said.
This article first appeared on Property Obsever, Australia's top site for property investment news
The 50,854 new house and unit listings over the past month take the total for sale across Australia to 279,605. There were 217,442 listings across Australia this time last year.
“Less than 48% of total listings nationally are within the capital cities,” RP Data research director Tim Lawless said earlier this month. New listings saw 50,854 properties added over the past month, with the capital city new listing volumes 2.8% higher than the same period last year.
As the winter hibernation sets in the number of new properties advertised for sale increased by 1.8% across the country in the last four weeks, compared to the previous four weeks ending 26 June 2011.
Queensland has the highest number of total listings at 86,188, followed by 73,673 in NSW.
The number of new properties advertised for rent has fallen by 2.7% over the past four weeks.
Capital city new rental listings fell by 3.1%.
Despite the fall, new rental listings nationally are 14.3% higher than the same time last year, and in the combined capital cities they are 11.9% higher.
Rental listings remain at much higher levels than the same time last year, up 12.8% nationally and 10.7% in the capital cities, Lawless said.
This article first appeared on Property Obsever, Australia's top site for property investment news
Monday, June 27, 2011
what do low clearance rates mean?
Australia wide, the delinquency rate has climbed from around 1.4 per cent to 1.79 per cent. It may be low in comparison to Europe and America, but it’s a figure the Reserve Bank of Australia should be paying close attention to because it seems there are other distressed vendors flying under the radar and trying to bail out before they get to the delinquency stage.
According to RP Data the average time Australians stay in their homes is 7.5 years, although in the established suburbs of Melbourne – close to the water and city – it’s 9.1 years. However there seem to be increasing numbers of vendors selling prime real estate after only one or two years of residence (something I’m seeing more and more often when I research the sales history of homes). In many cases these homes are struggling to sell, with days on market stretching into months as vendors try to achieve their ‘wish price’ (a return on investment) in flat conditions. These are often people who purchased when interest rates were low and now rates have climbed they find themselves labouring to make the repayments.
Investment in real estate is a long-term game plan, so trying to get a return on price one or two years down the line is a gamble no one should take, or be forced to take. Therefore in a flat market, with the possibility of interest rate rises rising on the horizon, paying the right price and insuring that decision by purchasing the right property, is not only important, it’s crucial! Pay too much in the first place and you’ll get no short-term capital growth. Choose a ‘lemon’ and if you need to sell in a soft market reducing the price will be the only way to do so.
So how do you know you’re paying the right price? Just because the papers are screaming ‘buyers’ market’ and the agent is giving you a ‘discount’ on the asking price, it doesn’t equate to a ‘bargain’. Drawing comparables against the weekend results in the paper won’t always help as they only list exact addresses for auction sales and many of those are now ‘undisclosed’. In fact, sales results won’t help you much at all unless you’ve been monitoring the market closely and assessing the individual properties listed – and furthermore, how do you know someone else didn’t over pay on the property you’re comparing against? I was recently asked to help with a report into vendor discounting, which is the amount the vendor discounts throughout the sales campaign in order to sell. It wasn’t hard to find examples, however it was much easier to find examples of advertised prices (private sale) which had been exceeded!
There are three numbers in real estate – what the vendor wants, what the market (you) is willing to pay and what a property’s reasonable market value is against comparable sales. Unless you’ve got a handle on all three you can’t negotiate effectively. If you’re a current buyer who has little experience negotiating and find yourself judging a property’s value based on the quoted range, or ‘reserve’ price, rather than a solid base of knowledge, beware! Selling agents know all the tricks to con a buyer into paying more, from touting they have other offers on the table, to convincing them the ‘distressed’ vendor has ‘a very reasonable’ reserve.
And what about choosing the right property? Well, even in flat markets with well-publicised drops over any one year, there are those properties which buck the trend – the roses amongst the thorns – in locations with unique aspects that drive owner occupiers to stretch budgets. And these are the very properties investors need to target if they’re going to prosper during boom and bust cycles.
A suburb-by-suburb look through Melbourne highlights a few of these areas which are withstanding current conditions. Take, for example, Kew, located southeast of Melbourne’s CBD. Made up of roughly 70 per cent owner occupier, it’s already seen a 29 per cent jump during the first quarter in median value and a steady 74 per cent year to date clearance rate, according to the Real Estate Institute of Victoria. While this doesn’t guarantee every home in Kew will buck the downturn, you can be pretty sure that if you own a good well-positioned property that suits the buyer demographic of the area, it’s going to attract attention.
I would never advise someone to purchase a property unless they’re fully committed to a long term game plan, however what I would strongly advise is the essential need. C. Cashmore
According to RP Data the average time Australians stay in their homes is 7.5 years, although in the established suburbs of Melbourne – close to the water and city – it’s 9.1 years. However there seem to be increasing numbers of vendors selling prime real estate after only one or two years of residence (something I’m seeing more and more often when I research the sales history of homes). In many cases these homes are struggling to sell, with days on market stretching into months as vendors try to achieve their ‘wish price’ (a return on investment) in flat conditions. These are often people who purchased when interest rates were low and now rates have climbed they find themselves labouring to make the repayments.
Investment in real estate is a long-term game plan, so trying to get a return on price one or two years down the line is a gamble no one should take, or be forced to take. Therefore in a flat market, with the possibility of interest rate rises rising on the horizon, paying the right price and insuring that decision by purchasing the right property, is not only important, it’s crucial! Pay too much in the first place and you’ll get no short-term capital growth. Choose a ‘lemon’ and if you need to sell in a soft market reducing the price will be the only way to do so.
So how do you know you’re paying the right price? Just because the papers are screaming ‘buyers’ market’ and the agent is giving you a ‘discount’ on the asking price, it doesn’t equate to a ‘bargain’. Drawing comparables against the weekend results in the paper won’t always help as they only list exact addresses for auction sales and many of those are now ‘undisclosed’. In fact, sales results won’t help you much at all unless you’ve been monitoring the market closely and assessing the individual properties listed – and furthermore, how do you know someone else didn’t over pay on the property you’re comparing against? I was recently asked to help with a report into vendor discounting, which is the amount the vendor discounts throughout the sales campaign in order to sell. It wasn’t hard to find examples, however it was much easier to find examples of advertised prices (private sale) which had been exceeded!
There are three numbers in real estate – what the vendor wants, what the market (you) is willing to pay and what a property’s reasonable market value is against comparable sales. Unless you’ve got a handle on all three you can’t negotiate effectively. If you’re a current buyer who has little experience negotiating and find yourself judging a property’s value based on the quoted range, or ‘reserve’ price, rather than a solid base of knowledge, beware! Selling agents know all the tricks to con a buyer into paying more, from touting they have other offers on the table, to convincing them the ‘distressed’ vendor has ‘a very reasonable’ reserve.
And what about choosing the right property? Well, even in flat markets with well-publicised drops over any one year, there are those properties which buck the trend – the roses amongst the thorns – in locations with unique aspects that drive owner occupiers to stretch budgets. And these are the very properties investors need to target if they’re going to prosper during boom and bust cycles.
A suburb-by-suburb look through Melbourne highlights a few of these areas which are withstanding current conditions. Take, for example, Kew, located southeast of Melbourne’s CBD. Made up of roughly 70 per cent owner occupier, it’s already seen a 29 per cent jump during the first quarter in median value and a steady 74 per cent year to date clearance rate, according to the Real Estate Institute of Victoria. While this doesn’t guarantee every home in Kew will buck the downturn, you can be pretty sure that if you own a good well-positioned property that suits the buyer demographic of the area, it’s going to attract attention.
I would never advise someone to purchase a property unless they’re fully committed to a long term game plan, however what I would strongly advise is the essential need. C. Cashmore
Wednesday, May 18, 2011
Steady as she goes
According to ANZ Bank’s latest Pan-Regional Housing Outlook Australia’s home prices may well hover for the rest of this year without a “wholesale downward shift” in values.
The report argues Australia’s buoyant economy and tight housing market will continue to keep house prices steady.
The strong labour market and skills shortage will put upward pressure on wages and, as a result, “forced” selling of homes will remain at low levels, the report said.
“Nonetheless, rising interest rates and deteriorating affordability will cap price gains and we expect little movement in house prices over the year ahead,” the report said.
Paul Braddick ANZ head of property research said the local housing market was “delicately poised” but would avoid further price drops so long as there was not a rapid rise in interest rates or unemployment levels.
The on-going housing shortage would result in lower rental vacancy rates and higher rent, providing a “clear signal” to investors that the housing market was improving, Mr Braddick said.
In fact the latest results from the RP Data – Rismark Home Value Indices RP Data show that over the 12 months to March 2011 capital city rental rates have increased by 2.9% which is well below average. However, over the last quarter, capital city rents have increased by a much larger 4.8%.
The view that rents are starting to increase is supported by the most recent CPI data from the ABS which suggests that rents have increased by 1.3% during the first quarter of 2011.
The report argues Australia’s buoyant economy and tight housing market will continue to keep house prices steady.
The strong labour market and skills shortage will put upward pressure on wages and, as a result, “forced” selling of homes will remain at low levels, the report said.
“Nonetheless, rising interest rates and deteriorating affordability will cap price gains and we expect little movement in house prices over the year ahead,” the report said.
Paul Braddick ANZ head of property research said the local housing market was “delicately poised” but would avoid further price drops so long as there was not a rapid rise in interest rates or unemployment levels.
The on-going housing shortage would result in lower rental vacancy rates and higher rent, providing a “clear signal” to investors that the housing market was improving, Mr Braddick said.
In fact the latest results from the RP Data – Rismark Home Value Indices RP Data show that over the 12 months to March 2011 capital city rental rates have increased by 2.9% which is well below average. However, over the last quarter, capital city rents have increased by a much larger 4.8%.
The view that rents are starting to increase is supported by the most recent CPI data from the ABS which suggests that rents have increased by 1.3% during the first quarter of 2011.
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