Finance News in Australia

An Important Lesson for Homebuyers

2009-04-20T05:42:00.000-07:00

I'm often asked what are the important things buyers should know when they purchase a home. Many commentators talk about research, know the area, know the market, get a building inspectors report, etc etc etc.

All of those things are important of course, but above all the most important buying strategy is "knowing when to walk away" That's right, it is as easy as that. When negotiations are not going according to plan simply turn around and walk away. All too often egos and emotions become the driving factor in negotiations instead of rationale and reason. You don't have to have that house, you only think that you do. There will be thousands of others out there and many may be better than the house that you have just fallen in love with.

Just tell the agent "sorry I've lost interest" and walk away. It will either get you that house at the right price, or you will find a better one.

Ask any questions about buying your house on this blog, or email me at www.rescueme.com.au (peter@rescueme.com.au)

April 2009 - Where are we going?

2009-04-20T05:41:00.000-07:00

House prices continue to hold and even gain some modest ground in many areas across Australia, but by no means will property prices surge under the current economic conditions. In fact many higher priced house have either fallen or will fall in the next 12 months.

Is property going to become a losing investment? No way, in the long term it will always be a superior investment that will offer both modest rental returns and sound capital gains, but as always it is important to buy well, and be able to hold in uncertain times. If anyone overborrows they will be quickly exposed financially and may need to sell property at the worst possible time.

Bear that in mind whenever you buy. Be positive, but be cautious.

2009-02-19T05:12:00.000-08:00

Where is the housing market now - 19/02/09 - The economists and commentators were surprised at the increase in new home buyers recorded in December. Loan approvals were up by 6.4% over November. We were not at all surprised, in fact we predict that the January stats when they are released in a few weeks will be an even bigger surprise, with large numbers of new home buyers coming into the market. February so far is also very buoyant, and may be our best month for some years. Clients across Victoria, NSW, ACT, and QLD are reporting strong buying competition for housing in the below $400,000 price range. This will shore up the bottom of the market, and although we expect to see some price easing in the medium price range, and even greater easing in the high end. we don't expect median prices to fall in blue collar/middle class suburbs close to transport, jobs, and amenities. We do expect to see a soft market on the Gold Coast and significant falls in areas that experienced illogical gains such as WA and small mining towns in Qld.

With the resources boom coming to an end the demand for housing in mining towns will fall away and many previously lucrative housing investments will become liabilities.

Where should we buy houses? - Stay away from small low population country areas, holiday home areas, and other "discretionary real estate" spending for now as further falls are expected, but capital and major regionals should fair quite well. Also be careful in centres such as Townsville and to some degree Cairns as ex Storm Financial clients drop houses to repay margin calls. If you are interested in these more negative areas, the bonus is that at some point in 2009 very good buys will be available for anyone needing housing in those areas, or for anyone willing and able to sit out the downturn. Otherwise we are slightly bullish on housing, but don't expect a boom, just a firm market in the right areas. With a generous First Homebuyers Grant, low interest rates, and in some states low or nil$ stamp duty rates up to $500,000 the home loan affordability equation has tipped in favour of the first home buyer.

What is in Store for 2009

2009-01-27T00:10:00.000-08:00

I am reading wide ranging view points on what will happen in 2009 to our economy. All agree that employment will suffer, but after that is really is pure conjecture. Ask me when it is over and I will be able to give you a very accurate account of 2009.

However it is safe to assume that when job losses gather pace, then naturally personal spending will decrease (unemployed people don't spend as much) Others around them will see what is happening and get nervous, and thus also cut back in expenditure.

Talk of home prices falling out of the sky may have some truth in the high end of the market, but the low to medium end should be held up by the First Home Buyers Grant and lower interest rates, which will put extra money into the pockets of all mortgage borrowers. Those lucky people who don't have any debts and have surplus cash to invest, will not get much of a return on their savings for some time.

Interest rates will drop again in February (next week) and they will fall further before this is over. Rents may come under pressure to pass on a reduction, but at the moment there isn't enough accommodation to go around so it is likely that pressure won't amount to much.

Make sure that you look after your job. If you can do that you should be able to save money as the price of goods will fall, property prices won't increase much if at all, petrol prices will stay low, and as already mentioned the cost of borrowing will be low. Put that extra cash away for a rainy day. Pay it off the mortgage so that you can redraw it later (first check to ensure that you have a redraw facility) but just don't waste it.

Be cautious if investing, and generally be careful with money, but above all don't panic as opportunities will appear over the next year or so. Newspapers and the rest of the media always exaggerate the situation. So take little notice of current affairs programs such as "This Day Tonight" or "Extra" as they will try to increase ratings by bending the truth (well alright they lie). Don't rush your strategies as conditions will stay depressed for 18 months to 2 years.

Happy 2009

The Australian property Market - Chris Joye

2009-01-13T18:13:00.000-08:00

The Australian 3 December 2008 Article by Christopher Joye (chief executive of the research group Rismark International.)

THE economics of Australia's $3.3 trillion housing market are widely misunderstood, with sensationalist claims that a housing bubble caused the global credit crisis and that Australian house prices will fall by 30 per cent to 50 per cent. In fact, the latest RP Data-Rismark Index results show that Australian house prices declined by just 0.8 per cent in the 12 months to October this year, and increased during the most recent three months.

The primary cause of the global credit crisis was a prolonged period of relaxed lending standards across asset markets, which led to excessively high levels of debt. This was further propelled by the US Federal Reserve's maintenance of unreasonably low interest rates in response to the 2001 tech wreck.

In the US, the crisis was exacerbated by poor regulatory practices in which lenders had no recourse to borrowers if they defaulted (which is not the case in Australia) and the presence of two quasi-government agencies that crowded the private sector out of the prime lending market.

Subsequent damage has been wrought by the tendency of today's highly interconnected financial markets to wildly overreact to positive and negative events.

As the inevitable unwinding of debt takes place, almost all asset prices have declined, especially in the US and British housing markets, where the coincidence of very high default rates, bank failures and severe credit rationing has precipitated price falls.
According to the Case-Shiller Index, US house prices are off 21 per cent. (This data is arguably biased downwards given that distressed sellers account for 40 per cent of all sales even though they represent only 3 per cent of homes.) In comparison, the S&P 500 has fallen by 43 per cent since its apogee in October 2007.

The contrast is more striking in Britain, which does not suffer from the US problem of overbuilding. According to the FT Index, which importantly captures all British sales, house prices have fallen by just 6 per cent from their peak.

Yet the FTSE All Share Index has contracted 39 per cent. Indeed, the FTSE has fallen more on individual days than the British housing market has from peak to trough. If one wants to talk about bubbles, the most credible conclusion is that the biggest bubbles were in shares.

In Australia, the hyperbolic predictions of economists Steve Keen and Gerard Minack that house prices will fall by 30 per cent to 50 per cent have been relentlessly recycled in newspapers and purportedly credible programs such as 60 Minutes and The 7.30 Report.

The doomsayers' claims are based on the assumption that housing affordability is at an all-time low.

They dismiss the fact house prices are determined by supply as well as demand (affordability is a demand-side factor) and conclude that prices must fall by some arbitrarily large margin. Keen likes to shock by quoting statistics about the rise in household debt without acknowledging that debt-servicing ratios have remained unchanged thanks to vastly lower real interest rates, the emergence of two-income households and higher real incomes.

Recent analysis by the Reserve Bank of Australia has comprehensively demonstrated that housing affordability is not at an all-time low. According to one of the Reserve Bank's benchmarks, the representative household in June 2007 had more real disposable income left over after purchasing a home and servicing a 90 per cent mortgage than at any other time since June 1982.

The bank also found that the representative household could afford to buy 33 per cent of all homes in June 2007, which, although less than the historical average of 45 per cent, was markedly better than the 13 per cent of homes available to it in June 1990.
Importantly, the Reserve Bank's present 4.25 per cent cash rate is considerably lower than the 6.25 per cent rate that existed in June 2007. Since mortgage rates peaked at 9.6 per cent in August, the Reserve Bank has pushed them down to about 6.7 per cent, with markets predicting that they will be less than five per cent by mid-2009. At the same time, house prices have not appreciated.

These improvements in affordability have been augmented by the Government's $10.4 billion spending package, which has focused on supporting incomes and boosting the first home owners grant.

Thus, despite assumptions of rising unemployment and slowing wages growth, ANZ and Westpac believe that Australian disposable incomes will grow solidly by eight per cent or more during the next year.

Perhaps the best insight into mortgage stress is default rates. Only 0.4 per cent of all home loans on Australian bank balance-sheets were delinquent in August 2008, a fraction of equivalent rates in the US (more than 2.5 per cent) and Britain (1.3 per cent). The Reserve Bank has noted that although August was the peak of its recent monetary policy cycle, Australian delinquency rates were still materially lower than levels experienced in the mid-1990s.

Australia also benefits from the fact we don't really have a sub-prime market, which accounts for 15 per cent of US loans. And in contrast to the US and Britain, where most loans are fixed for years, about 85 per cent of all Australian mortgages are variable so Reserve Bank rate cuts immediately benefit borrowers.

The biggest risk to Australian house prices is a credit squeeze. Yet, unlike the US and Britain, which have suffered multiple bank failures, there is no evidence of Australian banks systematically denying residential credit. Since the crisis began the big banks have profited immensely from a decline in competition and tremendous deposit inflows.

While the banks are restricting credit to businesses, they are happily investing in the home loan market, which attracts a much lower risk-weighting from the regulator. Today, high-quality borrowers have no difficulties getting 95 per cent loans. Indeed, Australia's largest mortgage broker, AFG, reported that approvals in October were the strongest since November 2007.

The main reason most forecasters believe Australian house prices will rise in the medium term is because of enormous excess demand. Treasury projects that housing demand is growing at more than 190,000 properties a year compared with housing starts of 145,000 homes each year. Building approvals in NSW, our largest state, are at a 23-year low. This had led to a severe housing shortage, which Westpac and ANZ estimate at more than 120,000 homes and growing. ANZ forecasts that Australia's housing supply deficit will rise to 200,000 by 2010.

When the demand for an asset exceeds supply, prices rise as the market seeks to stimulate new production. This is why, despite the prophets of doom, and the five rate hikes borrowers endured between late 2007 and mid-2008, house prices have remained largely unchanged.

The Reserve Bank believes Australia's housing market is leading the US by three years, having entered into its downturn in 2004. There is also a consensus between the Reserve Bank and most economists that the doomsayers' predictions will be proven wrong. A striking counterfactual is the 1990-92 recession, when unemployment hit 10.9 per cent yet house prices rose by two per cent a year according to the Australian Bureau of Statistics.

The media would do well to interrogate sensationalism.

Christopher Joye was the principal author of the 2003 Prime Minister's Home Ownership Taskforce report and is chief executive of research group Rismark International.

Footnote - It is nice to find a voice of reason in the media who is prepared to supply hard facts and intelligent predictions and not just sensational headlines that shock people into an incorrect feeling of doom in regard to the housing market. The media such TV and newspapers are giving you data that relates to the market 2 or 3 months ago. Here at www.rescueme.com.au we are seeing strong demand for first homes, and we know that other brokers are as well. In a few months that will mean many ex-first home buyers will sell and look to upgrade. Translate that to late in 2009 and it seems difficult to escape a resurgent home/property market. Don't get carried away, it won't be a boom, but it will be a normal stable market with rises of around 4% to 6% annually which is where we want the market to be. The days of easy money are over for now, but good secure capital gains are still possible.

2009-01-11T19:18:00.000-08:00

BUY PROPERTY NOW - 12/01/2009 - If you are a first home buyer, you will not have a better opportunity than right now to get into your own place courtesy of the Federal Governments generous grant, and low interest rates, with the prospect of more rate cuts in February and March. Most experts are predicting borrowing rates to reduce to about 4.5% variable and in the low fives for fixed rates of 2 to 3 years. I am now seeing strong demand for low priced homes, and many are selling within a few days. Result - prices will increase although probably by only $20,000 or so. But still by buying now that is an extra $20,000 that you won't have to pay for your house, and with lower repayments for the next 30 years.
Calculate what repayments would be, and compare that to your rental now, and then add an extra 10% to your rent to allow for increases over the next two years. How does it compare? If your rent is more or much the same as the repayments, then what are you waiting for, grab a house now. If renting is still much cheaper than perhaps you should wait for now, but these market conditions won't last forever. The good times don't last forever, and neither do the bad times. Plan ahead for the next 10 years now. Use our free calculator at http://www.rescueme.com.au/calculators.html to see whether renting is cheaper than buying for you. If you do decide to buy then try to get an experienced negotiater to advise you with your contract offer and negotiations.

MAKING MONEY OUT OF THE FINANCIAL CRISIS

2009-01-04T22:08:00.000-08:00

What's that you say? How can anyone make money at the moment?

Easy really, the two best drivers of wealth are still property and the sharemarket. Both of these are down at the moment, although property is not down very much apart from property owned by financially distressed vendors.

Let's look at PROPERTY first - There is good buying pressure on lower priced homes in the first home buyers are of the market, so let's avoid that area. If you look around carefully and talk to as many real estate agents as possible, then you will find homes in the bracket just above that level. (Agents will chase deals for cashed up buyers at present) For example if the entry level in your area is $350,000 then look at homes in the $500,000 bracket. You should be able to pick up one of these for around $430,000 if you are prepared to wait and negotiate hard. That will give you a much better buy in the long run for that extra $80,000.

You must buy with your head using all of the logical measures rather that just picking a home with colours that you like. A house needs to be a sound building displaying some worthwhile architectural features that make it stand out, and importantly it must be well located. Paint colour, age, and other superficial characteristics will in the long run have little bearing on what you can achieve with a house. In fact I always consider a house or property that is a bit run down as an advantage as less people will be interested thus offering a better buy. Really paint is cheap. This market has brought prices back to a realistic level and ensured that they don't race off leaving everyone behind. You do need to take a long term view, and with the current interest rates you can afford to hold a property that brings in reasonable rent. Yields should be in the vicinity of 5% or more. If I buy for $520,000 then I look for $520 per week or close to that. Interest rates will shortly be around 5% so a positively geared property is not out of the question if you have a small deposit.

PROFITS - give yourself at least 5 years, but I suspect that you may earn an easy $100,000 out of a $500,000 house over that time as well as taking some tax benefits along the way, and you will only be taxed on half of the capital gain as long as you hold for more than 12 months.

Now lets look at the SHAREMARKET - This market has taken an absolute hammering over the last 18 months, in particular the latter half of 2008 when many were predicting the end of the world as we know it. and truly it was the end of the world for many banks and related financial concerns. We now have some stability in this market, banks are again lending, Obama is promising to fix the ills of the system and has brought on many good people who appear capable of doing that given time, and the more normal market conditions means that investors will again look at the fundamentals of the companies rather that just looking for the nearest exit to run through. Many of these companies will receive solid upgrades once we realise that they still have good earning capacity. Look for CASH earnings, and not just revaluations of assets to drive income. Values of warehouses, breweries, retail property etc. can go up or down, but a company with sound cash earnings can ride out storms and fluctuations in the economy. I can't and won't tell you what companies to invest in, but ask yourself if people will still need to eat, have a beer, drive a car (and what sort of a car) go to the movies etc. Regardless of the situation people will still need necessities, but perhaps champagne and caviar will be off the menu for a while.

Think carefully about the industry that you are putting money into, the company, the people running the company, and the strength of the company. If you are unsure ask your stockbroker for advice, but always be involved in the decision yourself. Never invest in any company that you don't understand.

Invest with intelligence and win in this credit crisis.....

www.rescueme.com.au

AND NOW THE SCAMS APPEAR

2008-12-15T18:07:00.000-08:00

One good thing this credit crisis has done is flush out many of the scams as investors try to move funds out of these schemes only to be told that really there is no money there at all. Often investors are long term and have received excellent returns for many years, all funded by new investors who also want higher than normal returns. Whilst they will be horrified about their money, at least by finding out the truth earlier the damage will be limited. With the Madoff "Ponzi style scheme" in New York to cost investors in excess of $50 Billion, and many other scams and frauds in the UK, Australia and elsewhere, the overall figure will be much higher that people realise.
What can we learn from this experience? How many times have you heard the saying "If it sounds too good to be true, then it is too good to be true" There is no way that you can earn more than other investors without taking a higher risk, or worse still investing in something that later turns out to be illegal or a scam.

Scammers rely on one ingredient, and that is the greed of the investor will override his or her common sense. That coupled with some charm and an air of "trust me" and your hooked. Always remember that the return of your money is more important than the return on your money.

Sure everyone knows that these confidence fraudsters are bad people who should be jailed for their sins, but if I can just say something controversial here and suggest that most of those people who got hooked are victims of their own greed and stupidity, and in all probability they would have lost that money anyway because they were governed by the worst of all human investment traits, and that is greed. It is a characteristic that we all have, but we need to suppress it if we want to survive in a tough world. Greed pushes us to take risks which eventually start to resemble gambling more than rational investment strategies. If stupid greedy investors did not exist then nor would scammers profit from them.

Sit down now and look at your investments, savings, superannuation, properties owned, and any other form of investment that you may be involved in. Ask yourself why have I invested money in this, what are the risks, and what are the benefits. What would happen to me if this investment failed and I lost it all. Examine everything and if necessary make gradual changes to your investment strategy.

I hope this advice hasn't come too late.

CREDIT CRISIS

2008-12-09T16:28:00.000-08:00

Yes we are in the throws of a credit crisis, but could this be the start of your wealth building in 2009.

All change brings opportunity, so if you have the determination and endeavour, you will place yourself in a position to take advantage of that opportunity and profit from it. Anyone who has secure employment or income will be in a position to buy at bargain prices whether that is a new plasma TV or a $1M commercial property, there will be bargains appearing over the course of 2009. You may not get a steal, but if you search hard enough for the right bargains then exceptional investments at the right price will appear in 2009.

Read our discussion on the "credit crisis" on www.rescueme.com.au/creditcrisis.html and then leave a comment on this blog. We want your feed back. If you are angry then tell us, if you have plans then tell us. Whatever you have to say then please say it so that all can share in your thoughts.

Spend, Spend, Spend

2008-12-07T14:33:00.000-08:00

The words of advice from K.Rudd for pensioners and for anyone with children is spend, spend, spend. But before you do that, look at your credit card debt. You may be a lot better off paying it off your credit cards, and then burying the card in the backyard so that you leave it alone.

Australians have a lot of credit card debt, and it won't go away by itself. If you don't have any debt, and are in a great position financially then take the PM's advice, but for the rest of us perhaps we should be a little more prudent.

Merry Xmas.

Christmas Gift of 1% Interest Rate Reduction

2008-12-01T20:32:00.000-08:00

INTEREST RATE REDUCTION OF 1% - 02/12/2008 - The RBA has today given the economy a full 1.00% reduction in the official interest rates. This will save a borrower with a $250,000 home loan $2500 per annum in interest which is over $200 per month extra cash they will have in their pocket. We are now getting to a point where potential new home buyers really should look at their options to purchase instead of renting. We have been predicting a surge in new home buyers coming onto the market ever since the two pronged stimulus of interest rate reductions and very generous first home buyers grant of up to $21,000

With variable rates at 6.00% and the likelihood of more rate reductions in February and March 2009 then I can't remember a better time to buy that first home. Don't forget that the First Home Buyers Grant will reduce back to $7000 on 30/06/09 and if it the government choose to maintain that grant, then it will give a stimulus to the market and increase home values across the board. Either way you really can't afford to miss out on that grant if you are eligible for it.

THE START OF A REAL RALLY???

2008-11-26T15:56:00.000-08:00

DOW UP FOUR DAYS IN A ROW - IS THIS THE START OF A TURNAROUND? - 27/11/2008 - What a difference four days can make. Since Obama announced his team of economic advisors and administrators, and with the Citigroup bailout, the market has responded positively. Such is the perceived quality of the team that Obama has put in place. Unlike Paulson who has yoyo'd on key measures to the point that the market had all but lost faith in the Bush administrations ability to control the future of the US economy, the market can now see that a team with the right experience and skills has been assembled by Obama, and that team will take over the economy in January 2009. As long as the now discredited Bush team don't fumble too much between now and 20th January next year, things may just hold up ok.

We now need a reasonable Christmas sales period in the US especially for this Friday (called Black Friday because that is the day when most stores actually start making a profit and move from the red into the black). That will set the trend for the next 12 months, and will either signal a prolonged deep recession, or if sales are seen as good in this climate, then the stock market will move higher. You may ask what does this mean to an average Aussie paying off a home and working 40 hours a week. Well the stock market predicts the future, and will rise or fall on what is about to happen. So even if things are a bit tough on the ground, if the market is rising then better times are ahead. Conversely if the market is falling as it has for the last 14 months, then bad times are ahead. Our stock market runs parallel to Wall Street because we are just a minnow in the real world, and whatever happens in the US will happen to our market as well. Interest rates are predicted to decrease again in December, perhaps by 1% again, and further decreases will probably happen next year after January.
This will be a good time to either re-visit your home loan to see if a better deal can be arranged, and/or aggressively look to see what bargains are out there in both real estate and shares.

Those with courage and intelligence will make money in these situations.

If you would like advice on a refinance of your home loan visit www.rescueme.com.au/refinance.html You may be able to save a huge amount on your monthly repayments by an intelligent re-finance.

Financial Crisis Update

2008-11-24T18:04:00.000-08:00

Overnight the US government has delivered a $20 Billion US dollar rescue package to keep Citigroup solvent. They have also guaranteed another $306 Billion in Collateralised Debt Obligations held on their books to keep this once mighty titan of the finance world solvent. Don't think that the US Government has paid $326 Billion to Citigroup, far from it, but without government support it may well have become insolvent.

This action coupled with the Obama rescue package expected in January 2009 has given much needed confidence to the global share market. It is confidence that the markets lack, without that no-one will buy shares or property, and in fact they will sell at any price to "cash up" for the possible bad times that may be upon us. However no-one really knows, and that is the real problem. The sooner that a market is created for the toxic CDO's the sooner we will have some idea of what the extent of the damage to the system really is.

This period is bringing serious change to the markets, and with change comes opportunity. For those with courage and a well thought out plan will prosper where others without either will run aground. That bargains abound on the share market is a given, although there will be a lot more pain for many companies that won't be able to weather the storm.

Many will see a safer option in property, especially commercial property, over the next 12 to 24 months as investors look to sell unwanted property. Take care with tenants though, as some tenants will collapse financially, and others will give up expensive leased premises that they can no longer afford. Imagine if you owned a childcare centre leased to ABC Learning. Only one year ago you would have considered that a safe tenant, but now you would be worried. Look for tenants who are recession proof. For example a food wholesaler selling to the lower end of the market has a better chance of hanging on than a wholesaler who sells Champagne and Caviar in a recession. Your tenants are your customers, and you always need to know your customers. Make sure that you hold a bond for up to 3 months to help if a tenant leaves you in the lurch. At least that gives you some time to find a new tenant without suffering financially.

Any questions, email me peter@rescueme.com.au or call at our website www.rescueme.com.au to see more helpful information

2008-11-19T17:28:00.000-08:00

Don't Waste the Interest Rate Reductions

2008-11-18T17:47:00.000-08:00

INTEREST RATES TO REDUCE AGAIN IN DECEMBER - 19/11/2008 Interest rates are expected to fall another 0.75% in early December . If you are a home loan borrower you need to make a strategy right now regarding the savings that are now coming by way of reduced homeloan payments and fuel costs. Don't foolishly spend this extra money, use this opportunity to make extra payments on your loan and get ahead. Remember both good and bad times don't last forever, and you need to provide for all occasions before they arise. Download our free calculator http://www.rescueme.com.au/calculators.html and see what a difference small extra payments will make over the term of your loan. You now have the ability to make quite large extra payments and save a huge amount of money, don't waste this opportunity.

Saved by the Financial Crisis

2008-11-18T17:30:00.000-08:00

SAVED BY THE FINANCIAL CRISIS - 12/11/08 - One lesser talked about result of the financial crisis is that many home loan borrowers who until recently have been facing ever increasing mortgage payments, are now looking at substantially reduced home mortgage payments because of the lower interest rates that are now in effect. Those who have been struggling to hold onto their homes, may contact their lender to see if they can convert home loans to interest only for a year or two to reduce total commitments. Debt consolidation is increasing as borrowers look to place expensive credit card debts against their homes at much lower interest rates. We are getting reports of many borrowers looking to fix rates for terms from 1 year to 5 years at the lower rates now on offer. We suggest that borrowers take care as rates are expected to reduce further. Consult a quality broker to get some guidance on future rate movements. We can be reached on 1300 309 656 or enquiries@rescueme.com.au if you would like to discuss this in detail.
www.rescueme.com.au

Buy a House Now - Tomorrow could be too late

2008-10-21T16:30:00.000-07:00

If you are a potential new home buyer who hasn't owned a home before in Australia, the you will be eligible for the $14,000 First Home Buyers Grant until 30/06/09. On new homes that increases to $21,000.

We are predicting a noticeable increase in real estate sales in the sub $400,000 range between now and Xmas, with sales levels building over time and reaching a peak in June 2009. Our rational for that is that many home buyers have been sitting on the fence until now wondering whether to buy or wait. The increased grant reduces to former levels on 30/06/019 so those who have procrastinated will surge into the market in June 2009 to make sure that they get the grant.

Now we have a situation where interest rate are coming down fast, supply is good so prices are not galloping upward, the government is giving you all the deposit that you need, and state governments have recently reduced their stamp duty costs in some cases to zero up to $500,000. All of that spells a powerful incentive to buy within the next 8 months. However those buyers who wait until 2009 will face a reduced supply, and you know what happens when supply is reduced whilst demand has increased. You guessed it, prices in the lower end will jump about $20,000 or more wiping out the value of the home buyers grant if you move too late.

But of course life is like that, those who act quickly prosper, and those who dither will pay for their indecision. Others who don't move at all will get left behind again.

Interest Rates

2008-10-19T05:07:00.000-07:00

I write articles on Interest Rates futures, and how this will affect housing in Australia. This is a hot topic at the moment with such turbulence in the world equity markets, and major problems in housing in the USA and UK.

My articles are on web page www.rescueme.com.au/financenews.html

I would be interested in constructive comments from others who are interested in thsi subject either professionally or from an investors standpoint. Any comments or ideas that would make my work more suited to what the public are looking for would be of interest to me.

Peter Fraser