Ending speculation, the mortgage industry has been buoyed by the news last night (May 12^th) that an extension of the increased first home owner grant was included in the federal budget.

The increased grant will continue until September 30, after which it will be phased down to $14,000 for new homes and $10,500 for existing homes until the end of the year.

This is good news for brokers for whom first home buyers have provided a strong business flow in the past six months.

ABS housing finance figures showed housing finance rose a further 5% in February, representing a 24 per cent increase in finance approvals in just six months.

First home buyers as a proportion of all buyers also rose to a new high of 27.3%, compared to 26.5% in February and 16.4% in March 2008.

Shane Oliver, AMP chief economist confirmed the extension of the grant was good news for the property market.

“Overall it’s a very pro-housing budget,” he said.

The extension of the grant into the second half of the year should maintain activity but the postponement of the deadline could slow things down he said.

“Some of the first home buyer business may now have been brought forward,” he said.

Lending experts all confirm first home buyers were assisting in propping up the market. One stated:

“If you look at the long term average of first home buyers in the market it’s around 15 to 17 per cent. So we’re running around 10 per cent above system – that would be accounting for a fair bit of the increase in activity,” he said.

Observers confirm the extension of the grant is good news for the market but raises concern over the impact tighter lending policies are having. Minimum personal savings of 5% own funds for example.

The new policies have really only just started to take full effect. These March figures covers loans applied for in January and February when policies were much less stringent. We will see just how these lending policies are impacting the market in a few months.

Should you require guidance about applying for your First Home Loan or the First Home Owners Grant contact William at MacLean Finance 03 9802 0211, who is happy to answer all your questions.

With Interest Rates as low as 4.82%pa as an ongoing variable rate buying your first home now is an excellent idea.

First home buyers have revived the Australian property market.

The danger is that many may soon find the excitement of owning their own place short lived as job losses rise, house prices fall and instances of negative equity grow.

Of course such a view is not shared by many; however there is need for caution.

Australian Finance Group (AFG) the aggregation group for MacLean Finance Pty Ltd settled 7,673 mortgage loans in February 2009, of which 26.1% or 2003 were for first home buyers. (The Australian Bureau of Statistics housing finance data which lags behind by a month, indicates that AFG accounts for a tenth of all mortgages lent in Australia)

Naturally the increased government grants for first home buyers has without doubt provided a stimulus, evidenced in AFG figures with 4,786 first home buyers in the three months to February 2009 –which is more than double the 2,316 for the corresponding period a year before.

Loan to value ratios – LVR, which is the loan expressed as a proportion of the value of a property, were 76.6 per cent and 75.0 per cent for New South Wales and Victoria respectfully, which AFG said were higher than normal due to the impact of first home buyers, who usually have smaller deposits.

AFG’s February average for all mortgages was $349,000, with borrowers selecting the low variable rates, with only 2.5 per cent of new mortgages being fixed, even though Australian banks have already indicated passing on any more Reserve Bank of Australia official rate cuts will be difficult due to currently high funding costs.

The facts show that first home buyers are borrowing more than ever before, spurred on by government grants and falling interest rates, at a time when the global financial system is imploding, which may have further negative impacts on the Australian economy, is another sign to proceed with caution.

The Australian Bureau of Statistics indicates job security continues to slide, with Australian unemployment in January 2009 increasing to 4.6 per cent, up from 4.1 per cent a year earlier.

Reserve Bank governor Glenn Stevens provided some positives in his monetary policy speech last week, saying, ‘The Australian financial system remains strong and the monetary policy transmission process is working to deliver large reductions in interest rates to end borrowers’. This is reinforced with the Australian big 4 Banks now being listed amongst the top 14 Banks in the world.

Stevens also pointed out that, ‘Nonetheless, economic conditions are clearly weak, and given the speed and scale of the global economic deterioration and its effect on confidence, weak conditions are likely to continue in the near term’.

With unemployment rising, weak global economic conditions, and unsustainably low interest rates, Australia suffers the potential problem of enticing the financially inexperienced to load up with future levels of unserviceable debt, which is what landed America and the world’s financial system in this financial mess in the first place.

The answer for Australians is that the Banks continue with their conservative lending policies, – there is only one lender still lending 100% loans and doing so under very strict conditions – others have dropped their LVRs to 90% and 95%.

Credit impaired borrowers have greater difficulty in getting their loans approved compared to 18 months ago, which is a further evidence of the tighter and more conservative lending market currently operating in Australia, and most of the world.

The interest rate used to qualify borrowers is always loaded by the banks at 1.0% or 1.5% above current rates to ensure they can service their debts once rates move back up. A sound move by the Banks!

If you planning on becoming a First Home Buyer and your employment is secure, press ahead with your plans and take advantage of the opportunity to get into your own home. Being King of your own Castle is still a realistic goal for young Australians.

Building approvals throughout Australia

were again weak in October and are

expected to remain so for much of 2009.

Yesterday’s data released by the ABS showed

total building approvals fell 5.4% in October,

and when seasonally adjusted, 26.1% down

on the previous year.

Multi-units fell a sharp 11.1% and  

are now down by 37% on October 2007.

Master Builder’s chief economist Peter Jones

predicted such weak building activity would

follow through into much of the new year.

“Stimulatory effects of the dramatic

loosening of fiscal and monetary policy

will take time to come through and

soft conditions in the housing market

can be expected over much of calendar 2009,”

Peter Jones said.

Melbourne House Prices Still Rise

In An Otherwise Falling Market

Melbourne Home prices increased by 1.07%

in the 3 months to October to a new

$451,661 average price, according to

RP Data-Rismark International.

Tim Lawless, their National Research Director,

said “The facts are that over the past 12 months

Australian property values have declined by

just 0.8%, which is a phenomenal result

when compared to the S&P/ASX 200 Index,

which has reported a decline of 40.5%”

Additionally, the supply of residential housing

is at an all time low, down from 17000 dwellings

a month to 13000 dwellings per month and

continuing to fall, with no foreseeable over supply,

according to the HIA (Housing Industry Association)

for up to 5 years.

These facts predict a strong future for Victorian housing.

Macquarie Bank Rejects NSW Academic’s dire predictions!

University

Some Academics just don’t seem to get it!

Convinced home prices are going to get worse

A NSW University academic’s prediction insists

his research indicates house prices will

collapse by up to 40 percent in addition

to the economy going into depression.

But the sensational headlines it created

have been rebuffed by most commentators

including the Macquarie Bank which insists

such a fall has only a 1% chance of happening.

The Reserve Bank of Australia, (RBA)

Cuts Rates by 1.00%

In line with market expectations,

the property market welcomed the Board’s

announcement today to drop the

basic cash rate from 5.25% to 4.25%.

This drop of 1% had the analysts saying

it is indicative of the way the RBA is

determined to keep Australia out of recession.

More land at lower cost essential

for residential recovery

Meanwhile Developers are having a hard time!

Spiralling land costs and the inadequate

release of new land could inhibit a recovery

in residential dwelling construction,

according to a report from the

Housing Industry Association and RP Data.

Median land prices have increased by

106 per cent in the last six years,

posing a considerable barrier to new home

construction which is desperately needed

to improve dwelling supply according

to the combined groups’ Residential Land

Report released yesterday.

HIA chief economist Harley Dale said

soaring land prices combined with poor

release levels and planning delays

threatened the prospects of a

substantial recovery in home building

activity as well as the anticipated boost

to the wider economy.

“We now have falling interest rates and

a tripling of the First Home Owners Grant

which should provide a boost to new home

building and the wider economy in 2009.

“There is however a real risk that the

perennial problems of inadequate land release

and excessive planning delays prevent

the industry from boosting supply to the

extent required over the next 18 months.

That would come at a cost to the entire

Australian economy,” he said.