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1 November 2011 – First Interest Rate Cut in 2½ Years

The Reserve Bank of Australia cut official interest rates today by 0.25% to 4.5% in response to low inflation figures reported last month and a weaker global economy. This is the first time official interest rates have fallen in over two and a half years. » read more

PD Comments:

• Although the Reserve Bank did not indicate further reductions, the financial markets are expecting three further cuts of 0.25% over the next 12 months.

9 August 2011 – CBA Cuts Fixed Home Loan Rates

Commonwealth Bank of Australia has cut interest rates on its fixed rate home loans by up to 0.6%, in anticipation of an official cut in interest rates by the Reserve Bank following heavy falls in global share prices over the last few days, which might send the global economy into recession again. Later in the day, Westpac followed suit and cut its fixed rates. » read more

PD Comments:

• There is no need to rush to lock in these fixed rates, which aren't much lower than prevailing variable rates. Wait for the other lenders to make their move first to see if you can get a better deal with their fixed rates or for the next few months to see how much the Reserve Bank will cut official interest rates and where variable interest rates land in response.

3 May 2011 – Stamp Duty Cuts for First-Home Buyers in Victoria

The Victorian Government has decided to cut stamp duty for first-home buyers by 20 per cent from July 1, increasing up to 50 per cent in 2014. » read more

PD Comments:

• While this increases the spending power of a first-home buyer, unfortunately it increases the spending power of all first-home buyers. This drives up prices, and might result in the cuts ending up in the seller's pocket.

12 December 2010 – Mortgage Exit Fees Abolished from 1 July

The Government has introduced a banking package that includes the removal of mortgage exit fees, also known as deferred establishment fees, from 1 July. These changes are designed to make it easier for borrowers to switch lenders, which will in increase the competition between the banks and keep interest rates low.

PD Comments:

• Many of the banks have already reduced their mortgage exit fees to zero in anticipation of these reforms.

12 November 2010 – Wide Range in Big 4 Standard Variable Rates

After the Reserve Bank lifted interest rates by 0.25% to 4.75% on Melbourne Cup Day, the Big 4 Banks have now all raised their standard variable rates.

• WBC up by 0.35% to 7.86%

• CBA up by 0.45% to 7.81%

• ANZ up by 0.39% to 7.80%

• NAB up by 0.43% to 7.67%.

PD Comments:

• Note that no one pays the standard variable rate any more. The typical discount is around 0.7% or more off the standard variable rate, so you should be using this benchmark instead.

8 September 2010 – Increased Competition in the Mortgage Market 

Signs of increased competition in the mortgage market are emerging as banks and other lenders:

• lift their loan to valuation ratio (that is, they are prepared to lend more for the same value of property securing the mortgage)

• increase the interest discount from the standard variable rate, especially for large loans. » read more

PD Comments:

• You should check that your mortgage interest rate is still competitive at least every year because minimising your holding costs is one of the main ways to make money in real estate.

9 June 2010 – Stamp Duty Cuts on Off-the-Plan Home Purchases in NSW 

The NSW Government has announced cuts to stamp duty on off-the-plan home purchases (from apartments to blocks of land) to assist the construction industry secure presales and hence financing, increase the supply of homes and assist home buyers.

The Home Builder’s Bonus program starts from 1 July 2010 and will run for two years. The concessions are as follows:

The 100% stamp study cuts are also extended to empty nesters aged over 65 selling their primary residence and downsizing to a newly-constructed home worth up to $600,000. » read more

PD comments: 

• For recent off-the-plan purchases where some dwellings have been sold without the benefit of the stamp duty cuts, buyers will benefit from the stamp duty cuts. Make sure you check that prices haven’t been artificially inflated by the developer, so that they in effect they are paid the Home Builder’s Bonus.

• However, most Government subsidies to buyers generally accrue to sellers. For later developments, the most likely beneficiaries from this program with be developers, who will probably increase prices by at least the amount of the stamp duty cuts. In a similar way, the beneficiaries of the First Home Onwers’ Boost scheme were sellers, as prices generally increased across the board due to the increased budget of buyers.

12 April 2010 – Slump in Home Loans Signal Weaker Property Prices 

The number of home loan approvals slumped for the fifth straight month in February, following the Reserve Bank's decision to raise interest rates over the last few months. » read more

PD Comments:

• While house prices are still strong on the back of increased confidence, the drop in home loan approvals signal weaker prices over the next few months.

1 February 2010 – Reduction in Public Transport Fares to Boost Property Prices in NSW's Outer Suburbs 

The cost of long-distance train fares were halved as part of the NSW Government's streamlining of public transport fares into zones, resulting in savings of up to $2,500 a year. » read more

PD Comments:

• This will make the outer suburbs more popular and will boost property prices in the medium term.

1 December 2009 – Banks Lift Interest Rates Above 0.25% Increase by Reserve Bank

For the third time in three months, the Reserve Bank increased official interest rates by another 0.25% (to 3.75%), citing the mild economic downturn in Australia, and confidence and business conditions suggesting the gradual recovery of the Australian economy. » read more

Unlike before, except for NAB, the major banks increased their standard variable rates by more than 0.25%:

• WBC - 0.45%

• CBA - 0.37%

• ANZ - 0.35%

• NAB - 0.25%.

PD Comments:

• The Reserve Bank's third increase in three months is a vote of confidence in the strength of the recovery of the Australian economy.

• Although most of the banks increased their standard variable rates above the increase in the Reserve Bank's cash rate, this augurs well for property buyers because it signals the start of increased competition between the big 4 banks.

3 November 2009 – Interest Rates Rise by Another 0.25%

The Reserve Bank increased official interest rates by another 0.25% to 3.5% due to stronger than expected economic conditions and the recovery in confidence in Australia and resumption of growth in the global economy. » read more

31 October 2009 – Sydney Median House Prices Pass $600,000

According to RP Data, Sydney Median House Prices recently exceeded $600,000. » read more

PD Comments:

• Sydney median house prices rose past $500,000 in 2003 and reached around $570,000 a year later (» read more). However, they have moved sideways since, and only resumed their upward climb at the start of this year.

6 October 2009 – Interest Rates Rise by 0.25%

The Reserve Bank increased official interest rates by 0.25% to 3.25% as it indicated that the risk of a contraction in the economy had passed. Australia is the second country in the world (the first of the Group-of-20 countries) to raise interest rates following the global financial crisis. » read more

PD Comments:

• The increase in interest rates today is a testament to the strength of the Australian economy due to our ties to China, and the prudential regulation of the banking system.

• Interest rates will probably rise by at least another one percent by the end of next year.

30 September 2009 – Retail Sales Strong

Retail sales increased by strongly by 0.9% in August, compared to expectations of 0.5%. » read more

PD Comments:

• The household sector is showing signs of strength with strong retail sales and increasing housing credit. Unfortunately this means that interest rates might rise in the next quarter.

2 September 2009 – Australian Economy Growing Strongly

The Australian economy grew strongly in the June quarter, with GDP growing by 0.6%, following the 0.4% increase in the previous quarter. » read more

PD Comments:

• The Government spending in the budget and the two mini budgets in December and February and the Reserve Bank's cutting of cash rates to 3% has been effective in avoiding the economic contractions of other developed countries over the last three quarters.

• The risk is that if the Government doesn't reduce spending, the Reserve Bank could raise interest much sooner than expected to cool down the economy.

14 August 2009 – Reserve Bank Governor: Normal Interest Rates 3% Higher

In his testimony before the parliamentary economics committee, the Reserve Bank Governor, Glenn Stevens, suggested that "normal" cash rates over the last 17-18 years of low inflation were in the "fives", which is 2-3% higher than the current 3%. Mortgage rates are typically 2% above cash rates, which means that they are normally around 7-8%. » read more

PD Comments:

• With mortgage rates at their lowest in forty years, you can expect them to rise 2-3% over the next few years to their normal levels. So make sure you can service yours at normal rates of 7-8% for the long term.

7 August 2009 – RBA Forecasts Stronger Growth

In its August Statement of Monetary Policy, the Reserve Bank of Australia noted that economic conditions had been stronger than it had expected in the last quarter, and as a result, upgraded its growth forecasts for 2009 and 2010. It found that there was a general improvement in sentiment both in Australia and overseas, which reduces the need to reduce interest rates further. Another positive is that price pressures are gradually abating and inflation is expected to remain low over the next few years. » read more

PD Comments:

• The Reserve Bank's findings are consistent with the pickup in business confidence and strong employment levels reported in last month's NAB Business Survey.

14 July 2009 – Business Confidence Picks Up

The NAB Monthly Business Survey showed business confidence picked up sharply in June to levels last seen in September 2008. There was also a sharp improvement in employment levels. » read more

PD Comments:

• The pickup in business confidence and strong employment levels suggests that the downturn in the Australian economy is not as severe as most people had expected.

16 June 2009 – Stamp Duty Halved on New Dwelling Purchases in NSW

The NSW Government is offering stamp duty cuts worth up to $11,245 per dwelling to stimulate the housing construction sector. The discount, which starts on 1 July and will run for at least six months, will be available only for newly-constructed houses and units, house and land packages and off-the-plan purchases worth up to $600,000. » read more

PD Comments:

• These new incentives do not affect first home buyers who receive larger grants from the Federal and NSW Governments. They are targeted at investors and people looking to upsize (growing families) or downsize (retirees) their homes.

12 June 2009 – CBA Increases Interest Rates by 0.1%

The Commonwealth Bank will increase interest rates on home and business loans by 0.1% from June 15 to offset higher funding costs. In particular, the bank's standard variable rate will rise from 5.64% to 5.74%. » read more

PD Comments:

• Despite criticism of the Commonwealth Bank's decision by Prime Minister and Treasurer as being "selfish" because it threatens Australia's economic recovery, the increase only brings the Commonwealth's mortgage rate into line with NAB's, but still lower than ANZ's and Westpac's.

• The Australian economy is still weak, and official interest rates will remain low for the foreseeable future. The Commonwealth Bank's decision to lift interest rates is not a harbinger of rising interest rates; rather, it is a result of the bank's decision to raise its interest rates in line with its funding cost and the other bank's interest rates.

12 May 2009 – Federal Budget 2009-10

With the Australian economy in recession, the focus of the Budget is to provide long term stimulus to the economy through a $22 billion infrastructure program. It compliments the mini budgets in December 2008 and February 2009 that focused on the short term stimulus to the economy by providing cash to households to boost consumer spending. In addition to the Government spending, there will be small tax savings to honour election promises. To keep the budget deficit in check, the Government will cut "middle class welfare" by restricting access to superannuation and health benefits.

GDP is forecasted to decline by 0.5%, while the unemployment rate is expected to rise to 8.25% by June 2010, from the current 5.4%.

The First Home Owner Boost Scheme is being extended for six months, with the original payments ($7,000 for established homes and $14,000 for new homes) continuing to be made for contracts entered into on or before 30 September 2009. The grant will then halve and cease on 31 December 2009. The $7,000 First Home Owners Scheme still applies after this date. » read more

PD Comments:

• While the Government is forecasting the unemployment rate to rise sharply to 8.25% next year, the Australian economy is still in much better shape than most of the other developed economies, which are now all in recession due to the global financial crisis. Moreover, the Australian economy will probably be one of the first to recover due to the health of its financial system and the pick up in demand for commodities as the Chinese and the rest of the world economies recover.

7 May 2009 – Unemployment Rate Surprisingly Strong

The (seasonally adjusted) unemployment rate dropped unexpectedly from 5.7% in March to 5.4% in April. Most economists expected it to rise with further job losses as the economy slowed. The The largest fall in unemployment was in NSW, where the rate dropped from 6.8% in March to 6.0% in April. » read more

PD Comments:

• While April's result could be an aberration, it is consistent with other economic indicators such as retail sales, and suggests that the outlook for the Australian economy is not as weak as many people had expected.

4 May 2009 – House Prices Fall 6.7% Over Year to March 2009

House prices across Australia's capital cities fell 6.7% over the year ending March 2009, driven by the sharp rise in interest rates over 2008. Perth had the largest fall of 10.1%, followed by Sydney with 7.3%.  » read more

PD comments:

• When markets are depressed, sales volumes contract (owner occupiers just sit on their properties, for example) and most of the sales occur from the lower value properties, which artificially drags down median prices. If you compare resale values, the fall in prices would probably be much less.

• The even sharper fall in interest rates at the end of 2008 and in early 2009 should prop up prices over the next year and counteract the rising unemployment rate.

23 April 2009 – First Home Owner Boost Scheme Not Extended

The Government has decided not to extend the First Home Owner Boost Scheme beyond 30 June 2009. [For contracts made between 14 October 2008 and 30 June 2009, first home buyers receive an extra $7,000 for buying an established home or $14,000 for buying or building a new home under the First Home Owner Boost Scheme, in addition to the $7,000 First Home Owner Grant. There are also stamp duty concessions for first home buyers.] The subsidy has been responsible for a record surge in first home buyers. » read more

PD Comments:

• If you are not a first home buyer then you are probably better off staying out of the market for first home owner properties unless you expect prices to keep on rising strongly.

• Even first home buyers should proceed carefully. The surge in first home buyers could have pushed the prices of first home owner properties up by more than the value of the grant. You might be better off waiting until after 30 June 2009 to buy when prices might pull back a bit.

21 April 2009 – Some Light at the End of the Tunnel

Despite talks of a prolonged recession and another cut in the cash rate to 3% by the Reserve Bank on 8 April 2009, the banks have recently been increasing their fixed rates in response to the increase in their cost of wholesale funding for fixed-term loans. » read more

PD Comments:

• This means that the market is starting to expect higher interest rates in the future as the economy recovers.

16 March 2009 – Chairman of Federal Reserve: Recession Could End This Year

Ben Bernanke, the chairman of the Federal Reserve, said on 60 Minutes (US) that the financial system could be stabilized by the end of the year, which will see the recession coming to an end and recovery begin next year. » read more

PD Comments:

• The stock market, which is a leading indicator of the health of the economy, has risen from its lows, which supports Bernanke's outlook.

11 February 2009 – Home Loan Approvals on the Rise

The number of home loan approvals rose 6.4% in December as a result of the recent interest rate cuts and tripling of the first home buyers' grant in October to $21,000 for the purchase of newly constructed homes. This marks the start of the reversal of the 20% fall in home loan approvals in the first half of 2008 when the Reserve Bank raised interest rates sharply. » read more

PD Comments:

• This could be a leading indicator of the resurgence in the property market.

4 February 2009 – Banks Pass on Full 1% Cut in Interest Rates

The Reserve Bank reduced cash rates by another 1% to 3.25% on 4 February 2009 (» read more). In addition, the major banks have all agreed to pass on the full cut in interest rates. The standard variable rate is now at the lowest level since the 1960s.

PD Comments:

• Interest rates will not stay at this level for long so make sure you do not overextend yourself and can service your mortgage at much higher interest rates (7-8%).

Source: Reserve Bank of Australia

24 January 2009 – New Homes Get Smaller

Despite shrinking household sizes, the average new house build in the US over the last thirty years has increased in floor size by over 40%. However, the trend is now starting to reverse due to affordability problems. » read more

6 January 2009 – Higher Density Living Coming to Sydney

The state and federal government are planning to increase the density of the inner city of Sydney around Parramatta Road with apartment towers as high as fifteen storeys that will be serviced by mass-transit subways. You can get a better idea of what it will look like at the end by looking at Chatswood and Hurstville. » read more

PD Comments:

• So why do I buy houses? Because catering for the higher density living requires land, and that is where my houses with their high land content come in.

11 December 2008 – Unemployment Rate Steady

The unemployment rate remained steady at 4.3% in November. Seasonally adjusted, it increased slightly to 4.4% (» read more). Most economists expect the unemployment rate to rise to only 7-8% this time round, which is around the 2000 peak. During the last two recession in the early 1980s and 1990s, the unemployment rate rose above 10%.

PD Comments:

• Despite concerns of rising unemployment, when you look at the big picture you can see that the unemployment rate has been at its lowest over the last thirty years, and even if it rose to 7-8%, it would still be near the lows of the last thirty years.

Source: Australian Bureau of Statistics, Reserve Bank of Australia

7 December 2008 – Chinese Tour Groups Go House Hunting in the US

Cash-rich Chinese investors have been touring the US looking for bargain properties. What started out as holiday tours where the tourists happened to enquire about the many properties for sale, has now turned into specific property-buying trips. » read more

PD Comments:

• The Chinese investors are adopting Warren Buffet's value approach to investing: "The time to get interested is when no one else is. You can't buy what is popular and do well."

3 December 2008 – Cash Rates Fall Again

The Reserve Bank reduced cash rates by 1% to 4.25% effective 3 December 2008. Cash rates are now the lowest they've been over the last twenty years. » read more

PD Comments:

• Interest rates will not stay at this level for long so make sure you do not overextend yourself and can service your mortgage at much higher interest rates (7-8%).

Source: Reserve Bank of Australia

3 March 2008 – House Prices Cheap in Sydney's West and South West

House prices in Sydney's West and South West are now much cheaper than the median house price in all the other capital cities. This is due to the sharp fall in prices from their peak in 2003-04. On average, houses bought over the last five years have been resold for a loss of over $20,000. In contrast, houses in the inner suburbs have fared much better over this period. » read more

PD Comments:

• Houses in Sydney's West and South West offered a very good buying opportunity compared to the other capital cities in 2008. The time to buy is when there is very little buying competition, not when confidence recovers.

• Since then (14 October 2008), demand from first home buyers has risen strongly due to the First Home Owner Boost Scheme.