Prime Minister John Howard says he is concerned about anybody losing their home because they cannot pay their mortgage, but the percentage of repossessions is still very low.
Sydney's Daily Telegraph is reporting that repossession writs issued by the Supreme Court for Sydney and the New South Wales central coast have more than doubled over the past three years.
Mr Howard says he is following the issue carefully.
"I am sensitive to some of the difficulties and challenges - that is why we provided tax relief, which helps people deal with increased interest rates," he said.
"It's why people have to ask themselves against the background of the recent interest rate rise, 'Will it be better or worse under a Labor government?
"Now my argument is it will be much worse under a Labor government."
Marginal seats
Mr Howard and Opposition Leader Kevin Rudd have both both been campaigning in marginal seats today.
For the second day in a row, Mr Howard headed to Sydney's western suburbs, promising funding for a sports centre in the key marginal seat of Lindsay.
Mr Rudd has arrived in Perth this evening, starting his campaign visit with yet another walk through a shopping centre.
He is visiting the marginal Labor seat of Cowan, held by Graham Edwards, who is retiring at this month's election.
Labor holds the seat by just 0.8 per cent.
Earlier today, Mr Rudd brought his campaign back to South Australia.
"What I sense across Adelaide is a mood for change," he said.
WorkChoices in focus
Mr Rudd was focusing on economic issues.
"Working families face the double whammy of rising interest rates and WorkChoices," he said.
Industrial relations was in the campaign spotlight today, after new figures were released showing half of the Australian Workplace Agreements (AWAs) checked against the Government's fairness test were sent back to employers for re-writes.
Mr Rudd says it is proof that the WorkChoices laws are a red tape burden for businesses.
"Bad for working families and bureaucratic nightmare for business," he said.
Mr Howard says only 5 percent of the wage deals that have been fully processed have been rejected.
"The evidence clearly is that more jobs have been created and businesses are doing very well - it's a double benefit," he said.
He says the figures show the fairness test is working.
Source: ABC
Saturday, November 10, 2007
Saturday, October 27, 2007
Mortgage rates; NAB and ANZ Bank tell Costello to mind is own business
On the subject of mortgage rates, two of Australia's biggest banks, ANZ and NAB, have politely told Treasurer Peter Costello to butt out of their business, saying decisions on how to set mortgage rates are theirs alone.
Mr Costello has again warned the banks not to use the subprime meltdown in the United States as an excuse to push up home loan rates.
In response both the chairman of the National Australia Bank, Michael Chaney, and the chief executive of the ANZ, Michael Smith, have firmly indicated that they will respond to commercial not political pressure.
Speaking after a Business Council of Australia dinner in Sydney last night marking the end of his presidency, Mr Chaney said the Treasurer's comments needed to be viewed in the context of the election campaign.
"One can understand the Treasurer during an election campaign providing that sort of advice but at the end of the day the banks will do what they have to do to protect their company and their depositors," Mr Chaney said.
Unveiling the ANZ's annual profit this morning - a record $4.18 billion - chief executive Michael Smith warned that Australian banks could not avoid the current global uncertainty.
And he refused to rule out passing on the additional cost of money to consumers.
"The Australian banking system is more dependent on wholesale funding that probably any other OECD market as a system. Therefore the repricing of risk and the increase in funding costs is obviously going to have an impact," Mr Smith said.
Earlier this week, National Australia Bank boss John Stewart told a newspaper that the higher price of credit would need to passed on at some point.
Mr Costello has again warned the banks not to use the subprime meltdown in the United States as an excuse to push up home loan rates.
In response both the chairman of the National Australia Bank, Michael Chaney, and the chief executive of the ANZ, Michael Smith, have firmly indicated that they will respond to commercial not political pressure.
Speaking after a Business Council of Australia dinner in Sydney last night marking the end of his presidency, Mr Chaney said the Treasurer's comments needed to be viewed in the context of the election campaign.
"One can understand the Treasurer during an election campaign providing that sort of advice but at the end of the day the banks will do what they have to do to protect their company and their depositors," Mr Chaney said.
Unveiling the ANZ's annual profit this morning - a record $4.18 billion - chief executive Michael Smith warned that Australian banks could not avoid the current global uncertainty.
And he refused to rule out passing on the additional cost of money to consumers.
"The Australian banking system is more dependent on wholesale funding that probably any other OECD market as a system. Therefore the repricing of risk and the increase in funding costs is obviously going to have an impact," Mr Smith said.
Earlier this week, National Australia Bank boss John Stewart told a newspaper that the higher price of credit would need to passed on at some point.
Monday, October 22, 2007
Pleadged tax cuts will be sallowed up by rent rises
John Howard and Kevin Rudd's bursts of campaign trail largesse in the form of promised tax cuts will no doubt help those who have large mortgages.
But for many families, the extra money looks likely to be eaten up quickly if the rental outlook is any indication.
According to industry commentator Michael Matusik rents will rise rapidly over the next three years to 2010.
Some households spend 26 per cent of their income on rent, not substantially more than the 25 per cent they spent in 2004, he says.
Rent hike coming
But with fewer housing starts over the next 12 months, and with low vacancy rates already well documented, Matusik anticipates an average increase of 35 per cent in rents between now and 2010.
“The largest increases are expected to be in Melbourne (50 per cent), Sydney (40 per cent), Brisbane (30 per cent) and Canberra (25 per cent),'' Mr Matusik says.
”The current weekly median rent of $275 for a three-bedroom house could be as high as $365 by June 2010.''
Mr Matusik thinks rental growth will be sluggish during the 2008 financial year. But as tenants move less frequently and renters absorb spare bedrooms, the rises will really kick in. Will this create another surge of investors, which in turn will push property prices even higher.
Most capital cities have very low vacancy rates and increasing rentals, but higher purchase prices across Australia now mean buying an investment property is a much larger commitment.
Yields not giving
For many would-be investors, spending money on their own house without the worry of an additional large mortgage seems more appealing. In many areas yields still haven't reached a level that will attract investors en masse.
Take, for example, Canberra, which has a rental figure of $350 a week for a three-bedroom house.
On a median house price of $428,000, the gross return is only 4.25 per cent.
In Sydney the average weekly rent for a three-bedroom house is now $280. The median house price is $525,500, giving a gross return of 3.26 per cent. The gross return obviously doesn't include the benefit of negative gearing, nor does it account for outgoings, all the costs and charges associated with owning a property.
The exception is probably Melbourne, where CBD yields are reportedly now about 7 per cent, and in the inner city 5 per cent.
Demand from both young owner occupiers and investors has already led to substantial median price jumps for apartments in suburbs such as South Yarra, West Melbourne and Richmond. There is limited supply and pre-sales are strong.
Around the country, apartment prices are recovering after years in the doldrums, particularly in Sydney.
Recent figures from researcher RP Data show that the pace of growth in apartment prices is pulling ahead of house price growth.
It's impossible to tell where interest rates, prices and yields will be in 2010.
But it's likely any extra money will be small change to anyone -- renter or buyer, over the next three years. Source: The Australian
But for many families, the extra money looks likely to be eaten up quickly if the rental outlook is any indication.
According to industry commentator Michael Matusik rents will rise rapidly over the next three years to 2010.
Some households spend 26 per cent of their income on rent, not substantially more than the 25 per cent they spent in 2004, he says.
Rent hike coming
But with fewer housing starts over the next 12 months, and with low vacancy rates already well documented, Matusik anticipates an average increase of 35 per cent in rents between now and 2010.
“The largest increases are expected to be in Melbourne (50 per cent), Sydney (40 per cent), Brisbane (30 per cent) and Canberra (25 per cent),'' Mr Matusik says.
”The current weekly median rent of $275 for a three-bedroom house could be as high as $365 by June 2010.''
Mr Matusik thinks rental growth will be sluggish during the 2008 financial year. But as tenants move less frequently and renters absorb spare bedrooms, the rises will really kick in. Will this create another surge of investors, which in turn will push property prices even higher.
Most capital cities have very low vacancy rates and increasing rentals, but higher purchase prices across Australia now mean buying an investment property is a much larger commitment.
Yields not giving
For many would-be investors, spending money on their own house without the worry of an additional large mortgage seems more appealing. In many areas yields still haven't reached a level that will attract investors en masse.
Take, for example, Canberra, which has a rental figure of $350 a week for a three-bedroom house.
On a median house price of $428,000, the gross return is only 4.25 per cent.
In Sydney the average weekly rent for a three-bedroom house is now $280. The median house price is $525,500, giving a gross return of 3.26 per cent. The gross return obviously doesn't include the benefit of negative gearing, nor does it account for outgoings, all the costs and charges associated with owning a property.
The exception is probably Melbourne, where CBD yields are reportedly now about 7 per cent, and in the inner city 5 per cent.
Demand from both young owner occupiers and investors has already led to substantial median price jumps for apartments in suburbs such as South Yarra, West Melbourne and Richmond. There is limited supply and pre-sales are strong.
Around the country, apartment prices are recovering after years in the doldrums, particularly in Sydney.
Recent figures from researcher RP Data show that the pace of growth in apartment prices is pulling ahead of house price growth.
It's impossible to tell where interest rates, prices and yields will be in 2010.
But it's likely any extra money will be small change to anyone -- renter or buyer, over the next three years. Source: The Australian
Thursday, October 18, 2007
Housing bargains in suburban Brisbane getting harder to find.
Cheap housing is getting harder to find, with only 13 suburbs now left within a 20km radius of Brisbane's central business district with a median house price under $300,000.
The cheapest suburb is Carole Park in Ipswich, according to Colliers PRD research. It offers bargains for home hunters, with the median house price only $183,000.
Researcher Jonathan Rivera, from Colliers PRD, said 73 suburbs within a 20km radius of the centre of Brisbane had a median house price of less than $400,000.
Regions south of Brisbane are classed as the most affordable.
At Gailes in Ipswich, the median house price is $205,000, while at Inala, in southwest Brisbane, buyers can find a property for $215,000.
"Prices within a 5-10km radius of Brisbane are becoming out of reach for many," Mr Rivera said.
The affordable areas identified were also achieving a good yield (annual rent as a proportion of selling price), he said.
"Investors are basically in competition with first-home buyers in those areas," he said. "A lot of these areas, like Carole Park, have a strong employment node nearby. Again that's attracting renters, which creates strong demand.
"The number of (affordable) suburbs is going to continue to shrink."
Centenary First National agent Tony Bishop said Carole Park was experiencing unprecedented interest from first-home buyers.
He recently sold a four-bedroom house in Skepper St in just two days for $265,000.
"Houses in places like Carole Park are selling in the mid-$200,000s and they are affordable," he said.
"We've got stacks of buyers around looking for properties under $300,000 and as soon as you get them, they're gone."
Richardson & Wrench Real Estate agent Shelly Smith said houses in Strathpine, just north of Brisbane, were selling rapidly.
"Usually within 24 hours to a week they're under contract," she said.
"We don't have enough houses to sell for the list of buyers we have."Source: Sunday Mail
The cheapest suburb is Carole Park in Ipswich, according to Colliers PRD research. It offers bargains for home hunters, with the median house price only $183,000.
Researcher Jonathan Rivera, from Colliers PRD, said 73 suburbs within a 20km radius of the centre of Brisbane had a median house price of less than $400,000.
Regions south of Brisbane are classed as the most affordable.
At Gailes in Ipswich, the median house price is $205,000, while at Inala, in southwest Brisbane, buyers can find a property for $215,000.
"Prices within a 5-10km radius of Brisbane are becoming out of reach for many," Mr Rivera said.
The affordable areas identified were also achieving a good yield (annual rent as a proportion of selling price), he said.
"Investors are basically in competition with first-home buyers in those areas," he said. "A lot of these areas, like Carole Park, have a strong employment node nearby. Again that's attracting renters, which creates strong demand.
"The number of (affordable) suburbs is going to continue to shrink."
Centenary First National agent Tony Bishop said Carole Park was experiencing unprecedented interest from first-home buyers.
He recently sold a four-bedroom house in Skepper St in just two days for $265,000.
"Houses in places like Carole Park are selling in the mid-$200,000s and they are affordable," he said.
"We've got stacks of buyers around looking for properties under $300,000 and as soon as you get them, they're gone."
Richardson & Wrench Real Estate agent Shelly Smith said houses in Strathpine, just north of Brisbane, were selling rapidly.
"Usually within 24 hours to a week they're under contract," she said.
"We don't have enough houses to sell for the list of buyers we have."Source: Sunday Mail
Wednesday, October 10, 2007
Expect to be whacked by more mortgage rate rises
Higher petrol prices, another mortgage interest rate rise and global credit market volatility have dented consumer sentiment, with more rate pain predicted, a survey shows.
The Westpac-Melbourne Institute consumer sentiment index, based on a survey of 1200 people, fell 0.3 per cent in October to 115.3 points.
Westpac chief economist Bill Evans said index reading was still 4.5 per cent below where it was before the Reserve Bank of Australia (RBA) raised interest rates by half a percentage point to 6.5 per cent in August.
Survey: Have you been stung by bank fees?
Mr Evans said a December interest rate rise was likely, in the event of high September quarter inflation data, to be released on October 24.
"We are expecting a read that will establish a strong case for another rate hike," he said.
"A December rate hike seems the most likely prospect although a delay to February next year cannot be ruled out."
Mr Evans said higher petrol prices, up by 2.4 per cent since the September survey, had also dented consumer confidence.
"Households will also have been affected by the persistent reports of turmoil in the global credit markets," Mr Evans said.
"Some non bank lenders have actually passed on some of their higher funding costs to borrowers."
The index is still similar to the average level of 2007 despite an 8.1 per cent fall after the August rate increase.
Source: AAP
The Westpac-Melbourne Institute consumer sentiment index, based on a survey of 1200 people, fell 0.3 per cent in October to 115.3 points.
Westpac chief economist Bill Evans said index reading was still 4.5 per cent below where it was before the Reserve Bank of Australia (RBA) raised interest rates by half a percentage point to 6.5 per cent in August.
Survey: Have you been stung by bank fees?
Mr Evans said a December interest rate rise was likely, in the event of high September quarter inflation data, to be released on October 24.
"We are expecting a read that will establish a strong case for another rate hike," he said.
"A December rate hike seems the most likely prospect although a delay to February next year cannot be ruled out."
Mr Evans said higher petrol prices, up by 2.4 per cent since the September survey, had also dented consumer confidence.
"Households will also have been affected by the persistent reports of turmoil in the global credit markets," Mr Evans said.
"Some non bank lenders have actually passed on some of their higher funding costs to borrowers."
The index is still similar to the average level of 2007 despite an 8.1 per cent fall after the August rate increase.
Source: AAP
Monday, October 08, 2007
Strong growth for construction industry and pick up in housing building means mortgage growth
The Australian Industry Group-Housing Industry Association Performance of Construction Index increased by 6.85 points to 55.2 last month, the strongest rate of growth since June last year.
HIA chief economist Harley Dale says the higher levels of activity reflect an increase in work on both new and existing projects.
"It shows that we're seeing continued solid growth for the non-residential building sector, which is something that's been apparent for quite some time now," he said.
"But we did also see a little bit of a pick-up in the demand for new houses, so a little bit of a better result for the residential side of the building market."
But the HIA also says another interest rate rise before the end of the year could reverse the steady gains in the sector over the last month.
Mr Dale says residential construction is yet to make a significant recovery and higher interest rates will further slow that process.
"There is some growing talk around again about an increased risk of another interest rate rise over the next three to six months," he said.
"Should we get another interest rate rise, that would of course have a dampening effect on the chances of the residential sector recovering into early 2008."Source: ABC
HIA chief economist Harley Dale says the higher levels of activity reflect an increase in work on both new and existing projects.
"It shows that we're seeing continued solid growth for the non-residential building sector, which is something that's been apparent for quite some time now," he said.
"But we did also see a little bit of a pick-up in the demand for new houses, so a little bit of a better result for the residential side of the building market."
But the HIA also says another interest rate rise before the end of the year could reverse the steady gains in the sector over the last month.
Mr Dale says residential construction is yet to make a significant recovery and higher interest rates will further slow that process.
"There is some growing talk around again about an increased risk of another interest rate rise over the next three to six months," he said.
"Should we get another interest rate rise, that would of course have a dampening effect on the chances of the residential sector recovering into early 2008."Source: ABC
Sunday, August 26, 2007
Home buyers vote with their auction tickets
Homebuyers have shrugged off concerns about global financial markets to push weekend clearance rates close to levels not seen since the housing boom of 2003.
And this month's interest rate rise appears to have had little impact on the auction market, according to Michael McNamara, general manager of researcher Australian Property Monitors.
Nationwide
On Saturday, 69 per cent of Sydney homes offered at auction were sold, while in Adelaide the clearance rate was 80.4 per cent.
In Melbourne, agents reported a clearance rate of 84 per cent. One inner city Melbourne agency, Kay & Burton, notched up the best one-day result in its history, achieving almost $29 million from seven properties. The top sale was one of Toorak's oldest homes at 14 Maple Grove that went under the hammer for $9.11 million.
In Brisbane, agents said the market was hot, with one property in riverside Woolloongabba selling for more than $1 million.
But Mr McNamara sounded a note of caution, saying there may be a delayed reaction to the interest rate rise with some pain felt down the track in lower to middle income families.
"Some decision making may be delayed on speculation of another rate rise", he said.
Property market 'safe'
Frank Gelber, chief economist for BIS Shrapnel, predicted property would ride out the current stock market turmoil.
He said investors, and even home owners, had little to worry about because property wouldn't suffer.
"Don't panic is my advice," Mr Gelber told The Australian. "It's going to mean very little for property."
In fact, Mr Gelber said property might benefit from the stock market chaos because money that would otherwise go into shares would be invested in property. At a residential level, that would help to boost sluggish housing markets in parts of Australia.Source: The Australian
And this month's interest rate rise appears to have had little impact on the auction market, according to Michael McNamara, general manager of researcher Australian Property Monitors.
Nationwide
On Saturday, 69 per cent of Sydney homes offered at auction were sold, while in Adelaide the clearance rate was 80.4 per cent.
In Melbourne, agents reported a clearance rate of 84 per cent. One inner city Melbourne agency, Kay & Burton, notched up the best one-day result in its history, achieving almost $29 million from seven properties. The top sale was one of Toorak's oldest homes at 14 Maple Grove that went under the hammer for $9.11 million.
In Brisbane, agents said the market was hot, with one property in riverside Woolloongabba selling for more than $1 million.
But Mr McNamara sounded a note of caution, saying there may be a delayed reaction to the interest rate rise with some pain felt down the track in lower to middle income families.
"Some decision making may be delayed on speculation of another rate rise", he said.
Property market 'safe'
Frank Gelber, chief economist for BIS Shrapnel, predicted property would ride out the current stock market turmoil.
He said investors, and even home owners, had little to worry about because property wouldn't suffer.
"Don't panic is my advice," Mr Gelber told The Australian. "It's going to mean very little for property."
In fact, Mr Gelber said property might benefit from the stock market chaos because money that would otherwise go into shares would be invested in property. At a residential level, that would help to boost sluggish housing markets in parts of Australia.Source: The Australian
Sunday, August 12, 2007
Wespac mortgage rates increase
Wespac bank, one of Australia's major banks has announced changes to its mortgage home loan interest rates in response to this week's rise in official rates.
Westpac says it will raise variable home loan rates and business lending rates by 0.25 of a percentage point.
Its standard variable home loan rate is being set at 8.32 per cent.
The bank is also putting up some of its deposit rates by 0.3 per cent.
The changes are effective from Friday, August 10th 2007.
Source: ABC
Westpac says it will raise variable home loan rates and business lending rates by 0.25 of a percentage point.
Its standard variable home loan rate is being set at 8.32 per cent.
The bank is also putting up some of its deposit rates by 0.3 per cent.
The changes are effective from Friday, August 10th 2007.
Source: ABC
Monday, August 06, 2007
Howard Federal Government credibility crisis on mortgage interest rates
South Australia's Premier says the Federal Government is not believed by voters when it blames the states for mortgage interest rate rises.
South Australia's Premier Mike Rann says the electorate will not accept the Federal Government's claim that the states are to blame for interest rate rises.
The Commonwealth is running an advertising campaign claiming that debt taken on by the states is putting upward pressure on rates.
Mr Rann says the public has stopped believing the Federal Government a long time ago.
"Apparently the new formula is that when interest rates go down that's John Howard's responsibility and when they go up it's the states," he said.
"The fact is is that states' borrowings are the lowest they've been for 50 years so this one won't wear. I mean it's a sign of desperation."
South Australia's Premier Mike Rann says the electorate will not accept the Federal Government's claim that the states are to blame for interest rate rises.
The Commonwealth is running an advertising campaign claiming that debt taken on by the states is putting upward pressure on rates.
Mr Rann says the public has stopped believing the Federal Government a long time ago.
"Apparently the new formula is that when interest rates go down that's John Howard's responsibility and when they go up it's the states," he said.
"The fact is is that states' borrowings are the lowest they've been for 50 years so this one won't wear. I mean it's a sign of desperation."
Friday, August 03, 2007
Mortgage shopper beware as ASIC to crackdown on advertised property investment schemes
Television advertisements promoting property schemes may need to come with a warning and the schemes' prospectuses assessed by ratings agencies.
University of Melbourne professor Ian Ramsay, a corporate law and securities regulation specialist, says an independent agency could be brought in to conduct a risk evaluation of property scheme prospectuses.
These agencies would also track related-party transactions and assess how secure the investment would be.
Risk assessments could then be incorporated into the television advertisements.
"People are investing on the basis of a 30-second advertisement," Professor Ramsay says. "The risk evaluation might be part of the advertisement."
The Australian Securities and Investments Commission will this month release an update on its plans to investigate companies deemed to be offering high-risk financial products.
ASIC has identified 83 unlisted and unrated debenture issuers, with about $8 billion of investors' funds, that it considers to be high risk. But it has refused to name them, claiming this would be "prejudicial".
An ASIC spokeswoman said ASIC chairman Tony D'Aloisio would probably be releasing his update around the middle of the month.
But the update will be just that — it will not contain a water-tight model to stop more business failures. Instead, a special team has been set up to develop the plan, which will take 12 months to finalise.
About 20,000 investors around Australia have fallen victim to property-related companies Westpoint, Bridgecorp, ACR and Fincorp, which imploded owing more than $800 million. Yesterday, South Australian mortgage business John West was placed in liquidation.
While the products were a lot riskier than some investors realised, some of the other big problems might include lack of development expertise and the dearth of disclosure on related-party transactions, a critical gap because many of the companies were part of a web of related companies. Often investors' funds were lent at higher rates to related companies.
Stuart Wilson, chief executive of the Australian Shareholders Association, said ASIC needed to focus more on the advertisements.
"We have a strong suspicion retail investors are investing because of the advertisements being pitched, rather than the details of the prospectuses," Mr Wilson said.
He said the evidence of that lay in the way investors were shocked when they discovered their funds were not guaranteed and that the investments were riskier than they had believed. "There was also a lack of understanding of the business models behind the schemes."
He said ASIC could have been more proactive but there were limits to how far it could protect investors. "While ASIC could have done more around the monitoring of the advertisements, they shouldn't be held responsible when investors lose money."
Source: The Age
University of Melbourne professor Ian Ramsay, a corporate law and securities regulation specialist, says an independent agency could be brought in to conduct a risk evaluation of property scheme prospectuses.
These agencies would also track related-party transactions and assess how secure the investment would be.
Risk assessments could then be incorporated into the television advertisements.
"People are investing on the basis of a 30-second advertisement," Professor Ramsay says. "The risk evaluation might be part of the advertisement."
The Australian Securities and Investments Commission will this month release an update on its plans to investigate companies deemed to be offering high-risk financial products.
ASIC has identified 83 unlisted and unrated debenture issuers, with about $8 billion of investors' funds, that it considers to be high risk. But it has refused to name them, claiming this would be "prejudicial".
An ASIC spokeswoman said ASIC chairman Tony D'Aloisio would probably be releasing his update around the middle of the month.
But the update will be just that — it will not contain a water-tight model to stop more business failures. Instead, a special team has been set up to develop the plan, which will take 12 months to finalise.
About 20,000 investors around Australia have fallen victim to property-related companies Westpoint, Bridgecorp, ACR and Fincorp, which imploded owing more than $800 million. Yesterday, South Australian mortgage business John West was placed in liquidation.
While the products were a lot riskier than some investors realised, some of the other big problems might include lack of development expertise and the dearth of disclosure on related-party transactions, a critical gap because many of the companies were part of a web of related companies. Often investors' funds were lent at higher rates to related companies.
Stuart Wilson, chief executive of the Australian Shareholders Association, said ASIC needed to focus more on the advertisements.
"We have a strong suspicion retail investors are investing because of the advertisements being pitched, rather than the details of the prospectuses," Mr Wilson said.
He said the evidence of that lay in the way investors were shocked when they discovered their funds were not guaranteed and that the investments were riskier than they had believed. "There was also a lack of understanding of the business models behind the schemes."
He said ASIC could have been more proactive but there were limits to how far it could protect investors. "While ASIC could have done more around the monitoring of the advertisements, they shouldn't be held responsible when investors lose money."
Source: The Age
Wednesday, August 01, 2007
Growth targest needed as suburbs sprawl causing infrasrtucture strain
Suburban sprawl and urban regeneration are changing the face of our cities as we strive to meet the demands of population increases and lifestyle.
But is all growth necessarily good growth? And who's looking after the interests of future generations as we meet the challenge of change? This week, The Courier-Mail revisits its Our Future, Your Say series, aimed at targeting issues such as growth, transport, city living and climate change.
It will be run with Channel Nine, Griffith University's Urban Research Program and The Brisbane Institute.
Our panels of high-profile speakers include Treasurer and Minister for Infrastructure Anna Bligh, Lord Mayor Campbell Newman and Deputy Mayor David Hinchliffe.
The series kicks off on August 8 with a forum entitled What Price Growth? which questions growth targets in the south-east.
Other forums include The Great Climate Change Debate, about climate change and sustainability, and The Sardine City, where we will discuss density in the inner suburbs.
The Future of the Car will be discussed at the fourth forum on September 26, followed by Generation Y - a look at the next generation of leaders in the city - and What's So Special About Brisbane - preserving the essence of the city, despite the growth.
Have your say in the special Courier Mail series by emailing ourfuture@thecouriermail.com.au
Forum 1: What Price Growth?
August 8, 6.30pm, Customs House
Speakers include:
Treasurer and Minister for Infrastructure Anna Bligh Guy Gibson, general manager - affordable housing and sustainability - Lend Lease Communities writer-actor William McInnes Griffith University associate lecturer Cheryl Paten Forum 2: The Sardine City - Living Closer Together
August 29, 5.30pm, Irish Club, City
Speakers include:
Deputy Mayor David Hinchliffe Conics chairman Jim McKnoulty Forum 3: The Future of the Car - Transport, Tolls and Tired Commuters
September 26, 5.30pm, Customs House
Speakers include:
Lord Mayor Campbell Newman RACQ CEO Ian Gillespie Griffith University Urban Policy Program research fellow Jago Dodson.
Source: Courier Mail
But is all growth necessarily good growth? And who's looking after the interests of future generations as we meet the challenge of change? This week, The Courier-Mail revisits its Our Future, Your Say series, aimed at targeting issues such as growth, transport, city living and climate change.
It will be run with Channel Nine, Griffith University's Urban Research Program and The Brisbane Institute.
Our panels of high-profile speakers include Treasurer and Minister for Infrastructure Anna Bligh, Lord Mayor Campbell Newman and Deputy Mayor David Hinchliffe.
The series kicks off on August 8 with a forum entitled What Price Growth? which questions growth targets in the south-east.
Other forums include The Great Climate Change Debate, about climate change and sustainability, and The Sardine City, where we will discuss density in the inner suburbs.
The Future of the Car will be discussed at the fourth forum on September 26, followed by Generation Y - a look at the next generation of leaders in the city - and What's So Special About Brisbane - preserving the essence of the city, despite the growth.
Have your say in the special Courier Mail series by emailing ourfuture@thecouriermail.com.au
Forum 1: What Price Growth?
August 8, 6.30pm, Customs House
Speakers include:
Treasurer and Minister for Infrastructure Anna Bligh Guy Gibson, general manager - affordable housing and sustainability - Lend Lease Communities writer-actor William McInnes Griffith University associate lecturer Cheryl Paten Forum 2: The Sardine City - Living Closer Together
August 29, 5.30pm, Irish Club, City
Speakers include:
Deputy Mayor David Hinchliffe Conics chairman Jim McKnoulty Forum 3: The Future of the Car - Transport, Tolls and Tired Commuters
September 26, 5.30pm, Customs House
Speakers include:
Lord Mayor Campbell Newman RACQ CEO Ian Gillespie Griffith University Urban Policy Program research fellow Jago Dodson.
Source: Courier Mail
Mortgage interest rate rise more likely as private debt spirals
Private debt is growing faster than at any time since the last days of the 1980s property boom, increasing the likelihood of another rate rise next week.
The $27.4 billion lift in debt in June was shared among businesses, homebuyers and high earners pumping the maximum $1 million into superannuation ahead of the June 30 deadline.
The increase in debt last month, reported yesterday by the Reserve Bank, was the fastest since November 1989, when home loan interest rates hit 17 per cent under the Hawke Labor government.
The Reserve Bank board is meeting next Tuesday and is expected by financial markets to raise its benchmark cash rate by a quarter of a point to 6.5 per cent.
"If there was not much doubt about a tightening next week, there is less after these numbers," HSBC chief economist John Edwards said yesterday.
The expected rise would push a standard mortgage rate to 8.3 per cent, the highest level since November 1996.
The Reserve Bank has used the rapid growth in borrowing as part of its justification for each of the past three interest rate increases.
Raising interest rates only lowers inflation by reducing the appetite of both business and households for debt-funded spending.
Some of the leap in borrowing in June will be reversed next month. Personal debt soared $5.5 billion in June, the biggest increase on record, as high-income earners borrowed to buy shares and managed fund units to put into their superannuation.
Personal borrowing normally rises by about $2 billion a month, and probably returned to this level in July.
However, the Reserve Bank will be concerned that home buyers are also taking on new debt at a rapid rate, borrowing $12.1 billion in June. This was the biggest monthly increase in mortgage debt since March 2004.
Business took on another $9.9 billion in debt, with the 18.7 per cent growth in borrowing over the past year the fastest since June 1989. "It's the business lending increase which will attract RBA governor Glenn Stevens's eye," Mr Edwards said.
Deutsche Bank chief economist Tony Meer said that although tax planning for the end of the financial year by high-income individuals had added to the surge of borrowing in June, there has been a steady increase in the growth of borrowing since the end of last year.
"Interest rates are not seriously dampening the appetite for borrowing," he said.
Mr Meer said the Reserve Bank was likely to raise rates at least twice over the next 12 months.
The Australian Bureau of Statistics released new home approvals figures yesterday, showing a slow recovery in building levels from the dip caused by the rate rises last year.
"The new housing sector is still struggling to gain traction under the weight of record low housing affordability," Housing Industry Association chief economist Harley Dale said.
The total number of new dwellings approved jumped by 7.5per cent in June, but this was influenced by the level of approvals for new apartments, which vary widely every month.
Trend figures calculated by the ABS show that the number of approvals for private houses has been creeping higher at a rate of just 0.2 per cent a month, while the number of approvals for apartment blocks rose by 0.8 per cent last month.
Source: The Australian
The $27.4 billion lift in debt in June was shared among businesses, homebuyers and high earners pumping the maximum $1 million into superannuation ahead of the June 30 deadline.
The increase in debt last month, reported yesterday by the Reserve Bank, was the fastest since November 1989, when home loan interest rates hit 17 per cent under the Hawke Labor government.
The Reserve Bank board is meeting next Tuesday and is expected by financial markets to raise its benchmark cash rate by a quarter of a point to 6.5 per cent.
"If there was not much doubt about a tightening next week, there is less after these numbers," HSBC chief economist John Edwards said yesterday.
The expected rise would push a standard mortgage rate to 8.3 per cent, the highest level since November 1996.
The Reserve Bank has used the rapid growth in borrowing as part of its justification for each of the past three interest rate increases.
Raising interest rates only lowers inflation by reducing the appetite of both business and households for debt-funded spending.
Some of the leap in borrowing in June will be reversed next month. Personal debt soared $5.5 billion in June, the biggest increase on record, as high-income earners borrowed to buy shares and managed fund units to put into their superannuation.
Personal borrowing normally rises by about $2 billion a month, and probably returned to this level in July.
However, the Reserve Bank will be concerned that home buyers are also taking on new debt at a rapid rate, borrowing $12.1 billion in June. This was the biggest monthly increase in mortgage debt since March 2004.
Business took on another $9.9 billion in debt, with the 18.7 per cent growth in borrowing over the past year the fastest since June 1989. "It's the business lending increase which will attract RBA governor Glenn Stevens's eye," Mr Edwards said.
Deutsche Bank chief economist Tony Meer said that although tax planning for the end of the financial year by high-income individuals had added to the surge of borrowing in June, there has been a steady increase in the growth of borrowing since the end of last year.
"Interest rates are not seriously dampening the appetite for borrowing," he said.
Mr Meer said the Reserve Bank was likely to raise rates at least twice over the next 12 months.
The Australian Bureau of Statistics released new home approvals figures yesterday, showing a slow recovery in building levels from the dip caused by the rate rises last year.
"The new housing sector is still struggling to gain traction under the weight of record low housing affordability," Housing Industry Association chief economist Harley Dale said.
The total number of new dwellings approved jumped by 7.5per cent in June, but this was influenced by the level of approvals for new apartments, which vary widely every month.
Trend figures calculated by the ABS show that the number of approvals for private houses has been creeping higher at a rate of just 0.2 per cent a month, while the number of approvals for apartment blocks rose by 0.8 per cent last month.
Source: The Australian
Monday, July 30, 2007
Nab poll shows homeownership continues to be the great Aussie dream
For most Australians, buying a home is their biggest goal in life, a survey shows.
According to the NAB survey, buying a home is better than world travel, having a family or volunteering - in that order.
Almost 80 per cent of 25- to 34-year-olds also put bricks and mortar near the top of their list, just behind seeing more of the world.
The research also showed that younger generations tended to have more goals and aspirations than their parents and grandparents.
While many young people list owning their own home as their number one goal it is still just one of many that they want to achieve during their lifetime.
People aged 16 to 24 tend to have about five big life goals while those in other age groups averaged two goals.
Other insights from the NAB Big Life Survey include Queenslanders listing overseas travel and owning their own home among their biggest goals in life.
Compared to other states Queenslanders were also most likely to list buying the car of their dreams.
Compared to other states, South Australians were the least likely to list a huge adventure, such as climbing Mt Everest, as one of their big goals in life.
The top three goals for South Australians included seeing more of the world, volunteering and owning their own home.
West Australians were among those most likely to list having a family among their big life goals but still listed overseas travel, volunteering and owning their own home before having children.
Victorians and Tasmanians were most likely to want to travel when compared against other states.
People in NSW tended to share the nation's top goals with travel, volunteering and home ownership heading the list.
Source: AAP
According to the NAB survey, buying a home is better than world travel, having a family or volunteering - in that order.
Almost 80 per cent of 25- to 34-year-olds also put bricks and mortar near the top of their list, just behind seeing more of the world.
The research also showed that younger generations tended to have more goals and aspirations than their parents and grandparents.
While many young people list owning their own home as their number one goal it is still just one of many that they want to achieve during their lifetime.
People aged 16 to 24 tend to have about five big life goals while those in other age groups averaged two goals.
Other insights from the NAB Big Life Survey include Queenslanders listing overseas travel and owning their own home among their biggest goals in life.
Compared to other states Queenslanders were also most likely to list buying the car of their dreams.
Compared to other states, South Australians were the least likely to list a huge adventure, such as climbing Mt Everest, as one of their big goals in life.
The top three goals for South Australians included seeing more of the world, volunteering and owning their own home.
West Australians were among those most likely to list having a family among their big life goals but still listed overseas travel, volunteering and owning their own home before having children.
Victorians and Tasmanians were most likely to want to travel when compared against other states.
People in NSW tended to share the nation's top goals with travel, volunteering and home ownership heading the list.
Source: AAP
Sunday, July 29, 2007
No secret sauce on mortgage interest rates from Labor
Opposition Leader Kevin Rudd says he cannot guarantee interest rates will not rise under a Labor Government.
But he has promised to maintain budget surpluses and tackle capacity constraints in the economy to help the central bank keep rates down.
His comments came as Mr Rudd prepared to host a summit on housing affordability in Canberra today, amid predictions interest rates could rise following yesterday's inflation data.
Economists said the Reserve Bank of Australia is now highly likely to lift rates by a quarter percentage point as early as next month, after inflation rose to 1.2 per cent for the June quarter, well above expectations.
It would be the fifth increase since Prime Minister John Howard was re-elected, although the Government said rates are still at historically low levels.
"No government can make any promise in relation to interest rates, what you can do is make sure ... the budget policy takes as much pressure off the Reserve Bank as possible," Mr Rudd told Channel 9.
"The Reserve Bank sets rates. Governments don't set rates.
"My job is to make sure, as the alternative prime minister, that through the budget policy we pursue - which is to produce budget surpluses over the economic cycle - that we take as much pressure off the Reserve Bank as possible in order to keep interest rates as low as possible."
He said people were disappointed in Mr Howard because the prime minister had pledged before the last election to keep interest rates low, yet they had risen four times since.
Mr Rudd said he had no silver bullet solutions to the housing affordability crisis, but would consider tax breaks for first-home buyers to help them get into the market.
He warned political leaders had "a real challenge on our hands" to ensure Australians had access to affordable housing.
"If you go back 10 years, the average cost of a house was something like four times that of the average annual wage; today, 10 years later, it is seven times the value of an average annual wage," Mr Rudd said.
"People are particularly concerned about first home buyers.
"One of the proposals we've got on the table today is 'how do we help first-home buyers get into the market' in terms of encouraging them with first-home buyer deposit schemes which could be treated in a concessional way by the taxation system."
State housing ministers will join Mr Rudd and housing industry stakeholders today in nutting out the issues.
Opposition treasury spokesman Wayne Swan said the Federal Government's failure to invest in education and tackle skills shortages in the economy were partly to blame for the rise in inflation.
"This government has been complacent when it comes to the main drivers of productivity in the economy, and there's no doubt in the longer term that's put upward pressure on inflation and upward pressure on interest rates," said ABC Radio.
"We should have invested more in the training and the education of our people - that is one significant factor here."
Mr Swan said the housing affordability crisis was rapidly becoming an economic problem as some workers could not afford to live near job opportunities.
But he rejected suggestions buyers were being too picky.
"Some people may have unrealistic expectations or be aiming too high, but I think the great bulk of people are now struggling just to put a very basic roof over their heads," he said.
Source: AAP
But he has promised to maintain budget surpluses and tackle capacity constraints in the economy to help the central bank keep rates down.
His comments came as Mr Rudd prepared to host a summit on housing affordability in Canberra today, amid predictions interest rates could rise following yesterday's inflation data.
Economists said the Reserve Bank of Australia is now highly likely to lift rates by a quarter percentage point as early as next month, after inflation rose to 1.2 per cent for the June quarter, well above expectations.
It would be the fifth increase since Prime Minister John Howard was re-elected, although the Government said rates are still at historically low levels.
"No government can make any promise in relation to interest rates, what you can do is make sure ... the budget policy takes as much pressure off the Reserve Bank as possible," Mr Rudd told Channel 9.
"The Reserve Bank sets rates. Governments don't set rates.
"My job is to make sure, as the alternative prime minister, that through the budget policy we pursue - which is to produce budget surpluses over the economic cycle - that we take as much pressure off the Reserve Bank as possible in order to keep interest rates as low as possible."
He said people were disappointed in Mr Howard because the prime minister had pledged before the last election to keep interest rates low, yet they had risen four times since.
Mr Rudd said he had no silver bullet solutions to the housing affordability crisis, but would consider tax breaks for first-home buyers to help them get into the market.
He warned political leaders had "a real challenge on our hands" to ensure Australians had access to affordable housing.
"If you go back 10 years, the average cost of a house was something like four times that of the average annual wage; today, 10 years later, it is seven times the value of an average annual wage," Mr Rudd said.
"People are particularly concerned about first home buyers.
"One of the proposals we've got on the table today is 'how do we help first-home buyers get into the market' in terms of encouraging them with first-home buyer deposit schemes which could be treated in a concessional way by the taxation system."
State housing ministers will join Mr Rudd and housing industry stakeholders today in nutting out the issues.
Opposition treasury spokesman Wayne Swan said the Federal Government's failure to invest in education and tackle skills shortages in the economy were partly to blame for the rise in inflation.
"This government has been complacent when it comes to the main drivers of productivity in the economy, and there's no doubt in the longer term that's put upward pressure on inflation and upward pressure on interest rates," said ABC Radio.
"We should have invested more in the training and the education of our people - that is one significant factor here."
Mr Swan said the housing affordability crisis was rapidly becoming an economic problem as some workers could not afford to live near job opportunities.
But he rejected suggestions buyers were being too picky.
"Some people may have unrealistic expectations or be aiming too high, but I think the great bulk of people are now struggling just to put a very basic roof over their heads," he said.
Source: AAP
Wednesday, July 25, 2007
Mortgage rate rise to happen on the back of big spending election promises
There is still a risk of another interest rate rise as both sides of politics are likely to promise too much in this year's federal election, independent forecaster Access Economics says.
"That extra money will come atop the kerosene of the $70 billion of policy costs splashed onto a raging economy by the federal budget," Access director Chris Richardson said.
While country-wide inflation risks were probably worsening from a falling unemployment rate, a turn in the productivity cycle was expected, he said in Access Economics' June 2007 business outlook released today.
"There has been considerable pent up savings in labour costs from the surge in business investment in recent years," he says.
"Although wage gains are still picking up their pace, a lift in productivity is now underway. That is easing consumer pricing pressures by reducing the cost of doing business."
And business investment has been extraordinarily strong.
"Economists are naturally unflappable. We don't marvel at much. But it is not hard to marvel at the stunning cycle in business investment that has been running since early 2002," he said.
"After stripping out inflation effects, the lift in (capital expenditure) over the past five years is 85 per cent."
China's economic boom continues to drive a clear divide between Australia's "sunbelt" states of Western Australia, Queensland and the Northern Territory and the rest.
But there are signs that the country's most populous state, NSW, may soon be making an economic recovery.
Dr Richardson said the key preconditions for a NSW recovery were increasingly being met with the end of the drought and pent up demand for housing, and state output growth could outpace official forecasts as a cocktail of good news replaces the more "toxic mix" of recent years.
In the meantime, the "sunbelt state" beneficiaries of global growth have resource strengths and fast growing populations.
"Even the ACT is getting a cut of the boom, courtesy of surging federal tax revenues," Dr Richardson said.
"The federal Budget announced the creation of yet another 5,244 public servants, many of which will be in Canberra. That means the ACT's boom will continue for longer.
He said Queensland continued to look a picture of near perfect health.
"Capacity is tight - both unemployment and rental vacancies are very low, business investment spending is very high, and the state government is pouring money into water, hospitals, roads, rail and schools."
Elsewhere, in the west, the equation was simple.
"A stronger-for-longer China is a stronger-for-longer Western Australia,"
"This resource boom can't last forever, but it is not ending any time soon. And that is helping to ensure a relatively soft landing for WA's overly pumped up housing prices."
But he said while NT economic growth was sprinting as it played to its resource strength, the huge engineering spend up of recent years was tailing off, so a tapering off in demand and output was likely.
Victorian economic growth remained surprisingly close to the surging growth of its resource-based neighbours, helped by an increasing population and gaining from the struggles of NSW.
"But can Victoria rely on NSW to continue to fumble the ball? Relying on the competition to remain hapless is not a successful strategy for the longer term," Dr Richardson said.
On South Australia, he said the next few years would be crucial for the state's future as the risk of boomer retirement looms early and large for the "dodgy demographics" of Australia's oldest state.
"SA's job growth has to be strong enough to convince the boomers to stay in their jobs for longer,' he said.
Finally, the business investment boom in Tasmania that stalled in early 2006 may have further to fall, making for a more modest economic outlook.
Source: AAP
"That extra money will come atop the kerosene of the $70 billion of policy costs splashed onto a raging economy by the federal budget," Access director Chris Richardson said.
While country-wide inflation risks were probably worsening from a falling unemployment rate, a turn in the productivity cycle was expected, he said in Access Economics' June 2007 business outlook released today.
"There has been considerable pent up savings in labour costs from the surge in business investment in recent years," he says.
"Although wage gains are still picking up their pace, a lift in productivity is now underway. That is easing consumer pricing pressures by reducing the cost of doing business."
And business investment has been extraordinarily strong.
"Economists are naturally unflappable. We don't marvel at much. But it is not hard to marvel at the stunning cycle in business investment that has been running since early 2002," he said.
"After stripping out inflation effects, the lift in (capital expenditure) over the past five years is 85 per cent."
China's economic boom continues to drive a clear divide between Australia's "sunbelt" states of Western Australia, Queensland and the Northern Territory and the rest.
But there are signs that the country's most populous state, NSW, may soon be making an economic recovery.
Dr Richardson said the key preconditions for a NSW recovery were increasingly being met with the end of the drought and pent up demand for housing, and state output growth could outpace official forecasts as a cocktail of good news replaces the more "toxic mix" of recent years.
In the meantime, the "sunbelt state" beneficiaries of global growth have resource strengths and fast growing populations.
"Even the ACT is getting a cut of the boom, courtesy of surging federal tax revenues," Dr Richardson said.
"The federal Budget announced the creation of yet another 5,244 public servants, many of which will be in Canberra. That means the ACT's boom will continue for longer.
He said Queensland continued to look a picture of near perfect health.
"Capacity is tight - both unemployment and rental vacancies are very low, business investment spending is very high, and the state government is pouring money into water, hospitals, roads, rail and schools."
Elsewhere, in the west, the equation was simple.
"A stronger-for-longer China is a stronger-for-longer Western Australia,"
"This resource boom can't last forever, but it is not ending any time soon. And that is helping to ensure a relatively soft landing for WA's overly pumped up housing prices."
But he said while NT economic growth was sprinting as it played to its resource strength, the huge engineering spend up of recent years was tailing off, so a tapering off in demand and output was likely.
Victorian economic growth remained surprisingly close to the surging growth of its resource-based neighbours, helped by an increasing population and gaining from the struggles of NSW.
"But can Victoria rely on NSW to continue to fumble the ball? Relying on the competition to remain hapless is not a successful strategy for the longer term," Dr Richardson said.
On South Australia, he said the next few years would be crucial for the state's future as the risk of boomer retirement looms early and large for the "dodgy demographics" of Australia's oldest state.
"SA's job growth has to be strong enough to convince the boomers to stay in their jobs for longer,' he said.
Finally, the business investment boom in Tasmania that stalled in early 2006 may have further to fall, making for a more modest economic outlook.
Source: AAP
Monday, July 23, 2007
'Super-size my home" urge is driving the housing crisis
Liberal backbencher Bruce Baird, chairman of a parliamentary inquiry into home lending practices, told The Australian yesterday he would investigate the phenomenon of people unwilling to live in suburbs in their price bracket.
"I've heard others say ... there's a wish to go for the McMansion and they want to be in nice suburbs, with ducted cleaning systems, airconditioning and plasma screens," he said.
But Queensland Liberal backbencher Steve Ciobo - who has been urging John Howard to consider doubling the first-home buyers' grant to $14,000 - strongly rejected the idea.
He said people were "self-regulating" but they also had a right to be "aspirational".
"I find it hard to believe that someone would say: 'No, I will not purchase a home because I want four bedrooms and four bathrooms but it's well out of my price bracket' when there's an opportunity to purchase something smaller, further away, within their price bracket," he said yesterday.
The Opposition is due to hold a national housing summit in Canberra on Thursday.
Several Coalition backbenchers have told The Australian they are concerned that Labor is "owning" the issue of housing affordability.
They said it was made worse by the fact the Coalition did not have a dedicated housing minister to develop ideas and take on the ALP.
Mr Baird said he had noticed resistance among home buyers to moving "out to other suburbs which are cheaper, where expectations are not quite as high".
However, Mr Ciobo said families did not need lectures: "From my perspective, it's like saying to people, well you shouldn't be aspirational.
"I don't think there's anything wrong with being aspirational."
Mr Baird said housing affordability would be a key issue in this year's federal election.
"The Government has done quite a bit in terms of the first-home owners' scheme, but it remains an issue."
He said his inquiry would investigate whether banks were to blame for lending people too much money.Source: The Australian
"I've heard others say ... there's a wish to go for the McMansion and they want to be in nice suburbs, with ducted cleaning systems, airconditioning and plasma screens," he said.
But Queensland Liberal backbencher Steve Ciobo - who has been urging John Howard to consider doubling the first-home buyers' grant to $14,000 - strongly rejected the idea.
He said people were "self-regulating" but they also had a right to be "aspirational".
"I find it hard to believe that someone would say: 'No, I will not purchase a home because I want four bedrooms and four bathrooms but it's well out of my price bracket' when there's an opportunity to purchase something smaller, further away, within their price bracket," he said yesterday.
The Opposition is due to hold a national housing summit in Canberra on Thursday.
Several Coalition backbenchers have told The Australian they are concerned that Labor is "owning" the issue of housing affordability.
They said it was made worse by the fact the Coalition did not have a dedicated housing minister to develop ideas and take on the ALP.
Mr Baird said he had noticed resistance among home buyers to moving "out to other suburbs which are cheaper, where expectations are not quite as high".
However, Mr Ciobo said families did not need lectures: "From my perspective, it's like saying to people, well you shouldn't be aspirational.
"I don't think there's anything wrong with being aspirational."
Mr Baird said housing affordability would be a key issue in this year's federal election.
"The Government has done quite a bit in terms of the first-home owners' scheme, but it remains an issue."
He said his inquiry would investigate whether banks were to blame for lending people too much money.Source: The Australian
Labour to retain negative gearing for property investors and the first home home buyer grant
Home rental affordability is a key election issue and so Opposition Labor would retainnegative gearing as a way to make housing more affordable, according housing spokeswoman Tanya Plibersek said.
Ahead of the party's national housing summit in Canberra this week, the Opposition was looking at several strategies but, Ms Plibersek said, negative gearing would not be among them.
"We're not touching negative gearing," she told the Ten Network yesterday. "We are interested in . . . ways of attracting investment into the lower end of the market and there might be things you can do with the tax system to improve that, including a national affordable rental incentive scheme."
"Negative gearing" means that the outflow of cash to keep an investment, such as a rental property is greater than the the inflows of rent and taxation reduction. This means that the investor is effectively subsidising the housing of the tenant. The payoff for the investor is capital growth, which needs a long term view.
In these cases, the Australian Taxation Office allows investors to offset the loss against their income tax assessment.
Ms Plibersek said negative gearing was not the way to make housing more affordable. Labor would look at other solutions.
She said Labor also retain the first home buyers grant.
Ahead of the party's national housing summit in Canberra this week, the Opposition was looking at several strategies but, Ms Plibersek said, negative gearing would not be among them.
"We're not touching negative gearing," she told the Ten Network yesterday. "We are interested in . . . ways of attracting investment into the lower end of the market and there might be things you can do with the tax system to improve that, including a national affordable rental incentive scheme."
"Negative gearing" means that the outflow of cash to keep an investment, such as a rental property is greater than the the inflows of rent and taxation reduction. This means that the investor is effectively subsidising the housing of the tenant. The payoff for the investor is capital growth, which needs a long term view.
In these cases, the Australian Taxation Office allows investors to offset the loss against their income tax assessment.
Ms Plibersek said negative gearing was not the way to make housing more affordable. Labor would look at other solutions.
She said Labor also retain the first home buyers grant.
Thursday, July 19, 2007
Mortgage reduction on Steroids can get you owning your home sooner
Mortgage interest rates are sitting at a six-year higher and could rise even more. If you're a borrower, there are some basic steps you can take to reduce interest costs.
Step 1: Shop around for your mortgage
It's never been a better time to negotiate with lenders as the big banks are undercutting each other on interest rates to win your business.
A slowing property market in 2006 scared many of the big lenders and competition shot up in the home loan market.
So if you're after a home loan, go to ALL of the big banks and other lenders and ask them for a discounted interest rate.
At the moment, the big banks advertise standard discount of 70 basis points to 7.37 per cent if you borrow larger amounts, usually more than $250,000, but banks are giving bigger discounts to people who ask and shop around.
The more you borrow, the more likely they are to chop 80 or even 85 basis points of the standard variable rate (SVR) of 8.07 per cent.
If you haggle hard enough and trade lenders off against each other, you'll probably get a better deal than if you simply went to one lender and asked for the best deal.
Step 2: Fix your mortgageloan
Fixed rates on home loans currently sit well below the standard variable rate (SVR) of 8.07 per cent.
Three-year and five-year fixed rate home loans are priced below the 8.07 per cent standard variable rate.
Locking in your home loan could provide also good security against a rate rise. With today's strong economy, there's a chance we'll get another rate rise this year or next after three in 2006.
But the risk of fixing is that if interest rates fall, you might miss out on a cut in official interest rates. You're stuck with the rate you locked in at for the duration of your fixed loan. And the loan might limit extra repayments so check this.
Step 3: Make more mortgage repayments
One of the easiest ways to cut your interest costs is to repay in fortnightly instalments rather than monthly.
You'll save thousands of dollars each year on your loan repayments and you'll be surprised by the numbers.
There are 26 fortnights in one year but only 12 months. If you split your monthly repayment into two, paying fortnightly means you would effectively be making 13 monthly repayments each year.
If your loan is worth $200,000 and you repaid in fortnightly instalments at an interest rate of 8.07 per cent rather than monthly, you'd save almost $100,000 in interest costs over 30 years (or $99,647 to be exact).
If you borrowed $400,000, you'd save almost $200,000 in interest costs over the life of your loan, or $193,295 to be exact.
Step 4: Go for a basic home loan
Most lenders offer basic loans with few frills. Interest rates start from about 7 per cent and for that, you might get a simple principal and interest loan on which you make monthly repayments.
Some lenders offer loans online without the personal support and some just offer cheaper no-frills loans, especially the non-bank lenders. These loans may suit you if you've got a tight budget and can't afford to make extra repayments and simply want the lowest cost home loan.
But there might be traps here so watch out. Some basic home loans limit extra repayments and redrawing, which allow you to save interest.
Some simple loans don't allow fortnightly repayments, only monthly, so what you save in up-front interest costs you may lose in flexibility which allows you to limit interest costs over the longer run.
Step 5: Repay extra on your mortgage
If you've got extra money and you don't need it, put it straight onto the home loan and save money. The more of the principal you repay, the more you'll save, especially if you repay extra earlier on in your home loan when interests costs suck up most of your mortgage repayments.
Take an example. If you've got a home loan of $200,000 taken over 30 years at a rate of 8.07 per cent, you can save almost $50,000 in interest costs simply by putting an extra $50 on your loan each month, or $47,965 to be exact. You'll also reduce your loan term by 3 years and 5 months. So you'll also be free of debt sooner.
Step 6: Use an offset account with your mortgage
Offset accounts are great strategies to reduce your. Offset accounts into which you put your salary and surplus cash link your home loan to a savings or transaction account.
The balance in the savings account is then used to offset the home loan balance, thus reducing interest costs. As interest is calculated daily on a home loan, the benefit to borrowers accrues as soon as there is cash in the transaction account.
Using a credit card to pay for expenses allows you to keep your money in the offset account for any interest-free period given by the card.
There are tax benefits to an offset account. Tax is not paid on interest credited to your savings account because the interest is not actually being earned, but it instead offsets the home loan interest.
These accounts are ideal for people who don't want to pay off their home loan so they can use the money, but who want to reduce their interest bill.
Step 7: Check with non-bank lenders mortgages
Non-bank lenders have lower overheads and their main aim is to grab market share from the big banks.
Lately, many lenders have been missing out to banks. So if you're in the market for a cheaper interest rate, check with the non-bank lenders, including building societies and credit unions.
These lenders price their variable loans to undercut the banks and they may even negotiate their advertised rates lower to win your business.
Bank lending now accounts for about 70 per cent of home loans taken by borrowers. In June 2002 the banks only held around 60 per cent of new home loan approvals. So the banks are moving onto the turf held by non-bank lenders and they aren't happy about this. So check what they can do for you.
Step 8: Reduce your mortgage loan term
When you've got a home loan, time means money. So the quicker off you pay your loan, the less interest you'll pay off.
Take two scenarios. You take a $200,000 loan over 30 years. At an interest rate of 8.07 per cent, you'll pay $331,828 in interest costs over the life of the loan if you repaid in monthly instalments. But if you repaid the loan over 20 years, you'd pay $203,585 in interest.
So that is a saving of $128,243 if you repaid your loan 10 years earlier. So if you have the funds, it's a great option and effective in reducing your borrowing costs by getting rid of it earlier.
Step 9: Know your loan costs
In today's competitive market, many lenders are waiving establishment fees on loans and other start-up fees such as valuation costs and legal fees. So ask them to waive your up-front fees and you could save hundreds of dollars.
Don't forget to ask about any ongoing fees on the loan such as monthly account keeping fees or transaction fees. Check whether early-repayment and other common fees apply such as redraw costs and break fees associated with ending the loans.
These fees aren't picked up by the loan's comparison interest rate on the loan so ask about them. And it's how the banks make money. So don't hand over your cash too freely.
Step 10: Save a bigger mortgage home loan deposit
The fact is, time is money. The more you borrow, the more you will repay in interest. So, if you are saving for your first home, save as much as you can before you buy.
Start making the sacrifices before you buy your home and get the mortgage and life will be a little easier. Make sure you claim the first home owner's grant and any other subsidies your state government offers.
Source: NewsCorp
Step 1: Shop around for your mortgage
It's never been a better time to negotiate with lenders as the big banks are undercutting each other on interest rates to win your business.
A slowing property market in 2006 scared many of the big lenders and competition shot up in the home loan market.
So if you're after a home loan, go to ALL of the big banks and other lenders and ask them for a discounted interest rate.
At the moment, the big banks advertise standard discount of 70 basis points to 7.37 per cent if you borrow larger amounts, usually more than $250,000, but banks are giving bigger discounts to people who ask and shop around.
The more you borrow, the more likely they are to chop 80 or even 85 basis points of the standard variable rate (SVR) of 8.07 per cent.
If you haggle hard enough and trade lenders off against each other, you'll probably get a better deal than if you simply went to one lender and asked for the best deal.
Step 2: Fix your mortgageloan
Fixed rates on home loans currently sit well below the standard variable rate (SVR) of 8.07 per cent.
Three-year and five-year fixed rate home loans are priced below the 8.07 per cent standard variable rate.
Locking in your home loan could provide also good security against a rate rise. With today's strong economy, there's a chance we'll get another rate rise this year or next after three in 2006.
But the risk of fixing is that if interest rates fall, you might miss out on a cut in official interest rates. You're stuck with the rate you locked in at for the duration of your fixed loan. And the loan might limit extra repayments so check this.
Step 3: Make more mortgage repayments
One of the easiest ways to cut your interest costs is to repay in fortnightly instalments rather than monthly.
You'll save thousands of dollars each year on your loan repayments and you'll be surprised by the numbers.
There are 26 fortnights in one year but only 12 months. If you split your monthly repayment into two, paying fortnightly means you would effectively be making 13 monthly repayments each year.
If your loan is worth $200,000 and you repaid in fortnightly instalments at an interest rate of 8.07 per cent rather than monthly, you'd save almost $100,000 in interest costs over 30 years (or $99,647 to be exact).
If you borrowed $400,000, you'd save almost $200,000 in interest costs over the life of your loan, or $193,295 to be exact.
Step 4: Go for a basic home loan
Most lenders offer basic loans with few frills. Interest rates start from about 7 per cent and for that, you might get a simple principal and interest loan on which you make monthly repayments.
Some lenders offer loans online without the personal support and some just offer cheaper no-frills loans, especially the non-bank lenders. These loans may suit you if you've got a tight budget and can't afford to make extra repayments and simply want the lowest cost home loan.
But there might be traps here so watch out. Some basic home loans limit extra repayments and redrawing, which allow you to save interest.
Some simple loans don't allow fortnightly repayments, only monthly, so what you save in up-front interest costs you may lose in flexibility which allows you to limit interest costs over the longer run.
Step 5: Repay extra on your mortgage
If you've got extra money and you don't need it, put it straight onto the home loan and save money. The more of the principal you repay, the more you'll save, especially if you repay extra earlier on in your home loan when interests costs suck up most of your mortgage repayments.
Take an example. If you've got a home loan of $200,000 taken over 30 years at a rate of 8.07 per cent, you can save almost $50,000 in interest costs simply by putting an extra $50 on your loan each month, or $47,965 to be exact. You'll also reduce your loan term by 3 years and 5 months. So you'll also be free of debt sooner.
Step 6: Use an offset account with your mortgage
Offset accounts are great strategies to reduce your. Offset accounts into which you put your salary and surplus cash link your home loan to a savings or transaction account.
The balance in the savings account is then used to offset the home loan balance, thus reducing interest costs. As interest is calculated daily on a home loan, the benefit to borrowers accrues as soon as there is cash in the transaction account.
Using a credit card to pay for expenses allows you to keep your money in the offset account for any interest-free period given by the card.
There are tax benefits to an offset account. Tax is not paid on interest credited to your savings account because the interest is not actually being earned, but it instead offsets the home loan interest.
These accounts are ideal for people who don't want to pay off their home loan so they can use the money, but who want to reduce their interest bill.
Step 7: Check with non-bank lenders mortgages
Non-bank lenders have lower overheads and their main aim is to grab market share from the big banks.
Lately, many lenders have been missing out to banks. So if you're in the market for a cheaper interest rate, check with the non-bank lenders, including building societies and credit unions.
These lenders price their variable loans to undercut the banks and they may even negotiate their advertised rates lower to win your business.
Bank lending now accounts for about 70 per cent of home loans taken by borrowers. In June 2002 the banks only held around 60 per cent of new home loan approvals. So the banks are moving onto the turf held by non-bank lenders and they aren't happy about this. So check what they can do for you.
Step 8: Reduce your mortgage loan term
When you've got a home loan, time means money. So the quicker off you pay your loan, the less interest you'll pay off.
Take two scenarios. You take a $200,000 loan over 30 years. At an interest rate of 8.07 per cent, you'll pay $331,828 in interest costs over the life of the loan if you repaid in monthly instalments. But if you repaid the loan over 20 years, you'd pay $203,585 in interest.
So that is a saving of $128,243 if you repaid your loan 10 years earlier. So if you have the funds, it's a great option and effective in reducing your borrowing costs by getting rid of it earlier.
Step 9: Know your loan costs
In today's competitive market, many lenders are waiving establishment fees on loans and other start-up fees such as valuation costs and legal fees. So ask them to waive your up-front fees and you could save hundreds of dollars.
Don't forget to ask about any ongoing fees on the loan such as monthly account keeping fees or transaction fees. Check whether early-repayment and other common fees apply such as redraw costs and break fees associated with ending the loans.
These fees aren't picked up by the loan's comparison interest rate on the loan so ask about them. And it's how the banks make money. So don't hand over your cash too freely.
Step 10: Save a bigger mortgage home loan deposit
The fact is, time is money. The more you borrow, the more you will repay in interest. So, if you are saving for your first home, save as much as you can before you buy.
Start making the sacrifices before you buy your home and get the mortgage and life will be a little easier. Make sure you claim the first home owner's grant and any other subsidies your state government offers.
Source: NewsCorp
Sunday, July 15, 2007
Homeowners stuck with higher mortgage repayments according to Labor treasury.
Mortgage repayments have soared in New South Wales since 2001 thanks to eight interest rate rises under the Coalition Government, Federal Opposition treasury spokesman Wayne Swan said.
Census data released today shows the number of households paying more than 30 per cent of their income to mortgage repayments has nearly doubled across the state in the five years to 2006, Mr Swan said.
In 2001, 106,044 households had mortgages over the 30 per cent repayment mark.
That number increased to 203,569 in 2006, which equals a 92 per cent increase.
In metropolitan Sydney, the increase over the same period went from 64,510 to 127,384 households - a jump of 97 per cent, Mr Swan said.
Outside the metropolitan areas of NSW the five year increase to 2006 of homeowners paying over 30 per cent of their income to mortgage repayments rose by 83 per cent.
Mortgage holders in Prime Minister John Howard's electorate of Bennelong have seen the figure jump 101 per cent, Mr Swan said.
The Opposition treasury spokesman said the census data shows neither Mr Howard nor Federal Treasurer Peter Costello can be trusted to look after the interests of Australian mortgage holders. Source: AAP
Census data released today shows the number of households paying more than 30 per cent of their income to mortgage repayments has nearly doubled across the state in the five years to 2006, Mr Swan said.
In 2001, 106,044 households had mortgages over the 30 per cent repayment mark.
That number increased to 203,569 in 2006, which equals a 92 per cent increase.
In metropolitan Sydney, the increase over the same period went from 64,510 to 127,384 households - a jump of 97 per cent, Mr Swan said.
Outside the metropolitan areas of NSW the five year increase to 2006 of homeowners paying over 30 per cent of their income to mortgage repayments rose by 83 per cent.
Mortgage holders in Prime Minister John Howard's electorate of Bennelong have seen the figure jump 101 per cent, Mr Swan said.
The Opposition treasury spokesman said the census data shows neither Mr Howard nor Federal Treasurer Peter Costello can be trusted to look after the interests of Australian mortgage holders. Source: AAP
Friday, July 13, 2007
Easy home mortgage finance with no physical home appraisals
Mortgage lenders are approving home loans without inspecting properties, forking out to applicants without a deposit and encouraging clients to shoulder debts far beyond their means.
More than half of all standard mortgage applications are now done without an onsite inspection and lending competition is encouraging banks and other institutions to extend loans quickly and cheaply, Fairfax reports today.
Banks are also urging people to take on debts which swallow up to half their income.
One-quarter of loans to people with bad or incomplete credit histories had been approved without on-site inspections, relying instead on a drive-by or statistical analysis of local sales data.
The average loan-to-value ratio of new loans in NSW has risen from 51 per cent in 2003 to 75 per cent this year.
Australian Property Institute president Gregory Preston said borrowers were at risk.
"If they get caught out and are forced to sell the borrower is sort of out on a limb," Mr Preston said.
Source: AAP
More than half of all standard mortgage applications are now done without an onsite inspection and lending competition is encouraging banks and other institutions to extend loans quickly and cheaply, Fairfax reports today.
Banks are also urging people to take on debts which swallow up to half their income.
One-quarter of loans to people with bad or incomplete credit histories had been approved without on-site inspections, relying instead on a drive-by or statistical analysis of local sales data.
The average loan-to-value ratio of new loans in NSW has risen from 51 per cent in 2003 to 75 per cent this year.
Australian Property Institute president Gregory Preston said borrowers were at risk.
"If they get caught out and are forced to sell the borrower is sort of out on a limb," Mr Preston said.
Source: AAP
Monday, July 09, 2007
Housing crisis concerns as Treasurer Costello orders Commonwealth audit to find housing development land
Peter Costello will "audit" all commonwealth-owned land to identify areas that should be released for new housing as he tries to blunt Labor's winning housing affordability campaign.
The Treasurer has called on the states to work with him to identify all land that could be released for development to address the housing affordability crisis.
But Labor claims that Mr Costello's effort will not work, arguing that high interest rates are the main cause of housing unaffordability.
Mr Costello said high property prices were affecting first homebuyers and one way to balance prices was to release more land for development.
"It's not a demand problem, it's a supply problem - you've got to boost the supply of housing," Mr Costello said. [It is a demand problem, that needs to be solved by increasing supply of housing stock.]
"We should do an audit of all land, particularly in outer suburban areas, that should be released for new housing."
Mr Costello called on the states to work in conjunction with the commonwealth on the audit. "We will ask the states to look at any land that they have that could be released for housing," he told the ABC's Insiders program.
Queensland Premier Peter Beattie welcomed the move, but NSW Acting Premier John Watkins said his Government's land release program was sufficient to meet demand.
"We've got a plan to release properties throughout southwest and northwest and western Sydney because of the needs of this city," Mr Watkins said.
"We're releasing that land as appropriately and as quickly as we can to cater for the needs of this growing city.
"I think anyone that is critical of that actually doesn't know the level of detail or the level of land release that is occurring."
Documents obtained under Freedom of Information last week embarrassed the federal Government when they revealed that the impact of land release on housing affordability had been overstated.
"While better land release and land-use policies by the states and territories are likely to improve affordability to some extent, the various reports probably overstate this effect," the document read.
Kevin Rudd said a national audit ignored the fact that high interest rates were making mortgage repayments unaffordable. "Mr Costello's response today was simply to talk around the edges of this debate," the Opposition Leader said.
"What this shows is that after 11 years, Mr Howard's Government has gone stale and has lost touch with working families across Australia who are doing it tough meeting their mortgage repayments."
Labor Treasury spokesman Wayne Swan said the typical first homebuyer was paying the highest percentage of their disposal income in mortgage repayments in history.
Source: The Australian
The Treasurer has called on the states to work with him to identify all land that could be released for development to address the housing affordability crisis.
But Labor claims that Mr Costello's effort will not work, arguing that high interest rates are the main cause of housing unaffordability.
Mr Costello said high property prices were affecting first homebuyers and one way to balance prices was to release more land for development.
"It's not a demand problem, it's a supply problem - you've got to boost the supply of housing," Mr Costello said. [It is a demand problem, that needs to be solved by increasing supply of housing stock.]
"We should do an audit of all land, particularly in outer suburban areas, that should be released for new housing."
Mr Costello called on the states to work in conjunction with the commonwealth on the audit. "We will ask the states to look at any land that they have that could be released for housing," he told the ABC's Insiders program.
Queensland Premier Peter Beattie welcomed the move, but NSW Acting Premier John Watkins said his Government's land release program was sufficient to meet demand.
"We've got a plan to release properties throughout southwest and northwest and western Sydney because of the needs of this city," Mr Watkins said.
"We're releasing that land as appropriately and as quickly as we can to cater for the needs of this growing city.
"I think anyone that is critical of that actually doesn't know the level of detail or the level of land release that is occurring."
Documents obtained under Freedom of Information last week embarrassed the federal Government when they revealed that the impact of land release on housing affordability had been overstated.
"While better land release and land-use policies by the states and territories are likely to improve affordability to some extent, the various reports probably overstate this effect," the document read.
Kevin Rudd said a national audit ignored the fact that high interest rates were making mortgage repayments unaffordable. "Mr Costello's response today was simply to talk around the edges of this debate," the Opposition Leader said.
"What this shows is that after 11 years, Mr Howard's Government has gone stale and has lost touch with working families across Australia who are doing it tough meeting their mortgage repayments."
Labor Treasury spokesman Wayne Swan said the typical first homebuyer was paying the highest percentage of their disposal income in mortgage repayments in history.
Source: The Australian
Saturday, July 07, 2007
Savings plan for first time home buyers
In a new savings plan from the Labor Party, families would be able to divert some of their pre-tax earnings into special accounts to save for a home deposit in a similar fashion to top-up superannuation, under a plan being considered by Kevin Rudd.
Signalling housing affordability as a major election issue, Labor says it is examining a range of options to help first-home buyers.
John Howard remains under pressure from backbench MPs to offer solutions to the housing affordability crisis but has ruled out doubling the $7000 first-home buyers' grant on the grounds it would only increase prices.
The Opposition Leader will today unveil a plan under consideration by Labor to allow new home deposit savings vehicles, with the potential higher returns than an ordinary deposit account and tax advantages that could help young families to save the deposit required to buy their first home.
"Government policies could create the financial framework for such accounts, running it in the same way superannuation works – as a low-tax, low-overheads savings vehicle," Mr Rudd said yesterday.
The accounts are intended to have a concessional rate of tax like super accounts.
But decisions about when tax would be applied still have to be determined. Exit taxes on superannuation payment for people over 60 were abolished by the Howard Government yesterday.
Mr Rudd said the accounts would help young Australians see the benefits of their financial sacrifices and would help create a new culture of saving.
"Savings accrued in these accounts could only be withdrawn to purchase a first home," he said.
"Federal Labor is considering innovative policies to help young Australians save for a home and reduce the mortgage burden – as part of a debate on declining housing affordability."
Labor says that first and foremost it is committed to using macroeconomic management principles to keep downward pressure on interest rates, but there other ways of helping Australians realise the "dream of home ownership".
"The decline in affordability and shortage of homes is the result of a lack of leadership and innovation over the last 11 years at the federal level by the Howard Government," Mr Rudd said.
"One of the greatest challenges facing first-home buyers in Australia now and into the future is saving a deposit – particularly for those caught in the rental trap."
Those saving for a home now use accounts that pay low interest taxed at the account holder's marginal tax rate. For most, this results in 31.5 to 41.5 per cent of interest being lost in tax.
Source: The Australian
Signalling housing affordability as a major election issue, Labor says it is examining a range of options to help first-home buyers.
John Howard remains under pressure from backbench MPs to offer solutions to the housing affordability crisis but has ruled out doubling the $7000 first-home buyers' grant on the grounds it would only increase prices.
The Opposition Leader will today unveil a plan under consideration by Labor to allow new home deposit savings vehicles, with the potential higher returns than an ordinary deposit account and tax advantages that could help young families to save the deposit required to buy their first home.
"Government policies could create the financial framework for such accounts, running it in the same way superannuation works – as a low-tax, low-overheads savings vehicle," Mr Rudd said yesterday.
The accounts are intended to have a concessional rate of tax like super accounts.
But decisions about when tax would be applied still have to be determined. Exit taxes on superannuation payment for people over 60 were abolished by the Howard Government yesterday.
Mr Rudd said the accounts would help young Australians see the benefits of their financial sacrifices and would help create a new culture of saving.
"Savings accrued in these accounts could only be withdrawn to purchase a first home," he said.
"Federal Labor is considering innovative policies to help young Australians save for a home and reduce the mortgage burden – as part of a debate on declining housing affordability."
Labor says that first and foremost it is committed to using macroeconomic management principles to keep downward pressure on interest rates, but there other ways of helping Australians realise the "dream of home ownership".
"The decline in affordability and shortage of homes is the result of a lack of leadership and innovation over the last 11 years at the federal level by the Howard Government," Mr Rudd said.
"One of the greatest challenges facing first-home buyers in Australia now and into the future is saving a deposit – particularly for those caught in the rental trap."
Those saving for a home now use accounts that pay low interest taxed at the account holder's marginal tax rate. For most, this results in 31.5 to 41.5 per cent of interest being lost in tax.
Source: The Australian
Tuesday, June 05, 2007
Housing sector rebound with a stronger rise that predicted
A stronger than expected rise in building approvals could be the foundation of a housing sector recovery, economists say.
Signs are emerging that the effect of last year's three interest rate rises is starting to fade.
The more stable private sector housing component posted strong gains, while building construction activity is starting to pick up.
Australian building approvals rose 8.1 per cent to 12,858 units in April, seasonally adjusted, from an upwardly revised 11,898 units in March, the Australian Bureau of Statistics (ABS) said today.
Economists had expected approvals to rise by 2.5 per cent in April.
In the year to April, building approvals went up by 4.5 per cent.
Reactions
Grange Securities chief economist Stephen Roberts said the housing sector would continue to grow strongly in the second quarter of 2007.
"All told, the April home building approvals figures are consistent with signs of recovery in housing activity and add to the run of economic readings that point to accelerating economic growth continuing into the early part of the second quarter," he said.
Most of the rise in building approvals during April came from a 19 per cent jump, seasonally adjusted, in the "other sector" for private sector dwellings, which includes volatile apartment projects.
Rental shortage
The more stable private sector houses tally rose by a seasonally adjusted 3.3 per cent to 8734 new dwellings, which HSBC chief economist John Edwards said was an indication of a recovery in the housing sector.
"Sharp increases in rents, low vacancy rates and recent anecdotal reports of increased house prices would be consistent with this," Dr Edwards said.
Nonetheless, most of the increase in new building approvals was in Queensland, which experienced a 31.6 per cent seasonally-adjusted rise in total new dwellings and a 24.9 per cent gain in private sector houses.
QLD leading the way
"The approvals gains were almost entirely in Queensland, however, with New South Wales and Victoria seeing further decline.
"If there is indeed recovery, it is still very patchy."
Commonwealth Bank of Australia senior economist Michael Workman said it was difficult to be negative about the housing construction outlook.
Forecast
"The strong underlying fundamentals of firm jobs, population and income growth, and low vacancy rates are expected to drive the gradual rise in national dwelling construction over 2007 and 2008," he said.
Mr Workman said construction companies still had healthy order books, with activity likely to flow at high levels into next year for the non-residential sector.
But JPMorgan economist Helen Kevans said the Reserve Bank of Australia's (RBA) decision to raise rates last year was still slowing residential construction activity.
"Indeed, the building approvals series is volatile, failing to indicate any clear trend emerging in the property market," she said.
"Still, the impact of the RBA's three quarter point rate hikes last year are likely still feeding through the residential construction sector, which continues to battle with rising material costs; this suggests there may be further correction in the sector to come."
Most economists expect interest rates to remain on hold for the rest of 2007.
Source: AAP
Signs are emerging that the effect of last year's three interest rate rises is starting to fade.
The more stable private sector housing component posted strong gains, while building construction activity is starting to pick up.
Australian building approvals rose 8.1 per cent to 12,858 units in April, seasonally adjusted, from an upwardly revised 11,898 units in March, the Australian Bureau of Statistics (ABS) said today.
Economists had expected approvals to rise by 2.5 per cent in April.
In the year to April, building approvals went up by 4.5 per cent.
Reactions
Grange Securities chief economist Stephen Roberts said the housing sector would continue to grow strongly in the second quarter of 2007.
"All told, the April home building approvals figures are consistent with signs of recovery in housing activity and add to the run of economic readings that point to accelerating economic growth continuing into the early part of the second quarter," he said.
Most of the rise in building approvals during April came from a 19 per cent jump, seasonally adjusted, in the "other sector" for private sector dwellings, which includes volatile apartment projects.
Rental shortage
The more stable private sector houses tally rose by a seasonally adjusted 3.3 per cent to 8734 new dwellings, which HSBC chief economist John Edwards said was an indication of a recovery in the housing sector.
"Sharp increases in rents, low vacancy rates and recent anecdotal reports of increased house prices would be consistent with this," Dr Edwards said.
Nonetheless, most of the increase in new building approvals was in Queensland, which experienced a 31.6 per cent seasonally-adjusted rise in total new dwellings and a 24.9 per cent gain in private sector houses.
QLD leading the way
"The approvals gains were almost entirely in Queensland, however, with New South Wales and Victoria seeing further decline.
"If there is indeed recovery, it is still very patchy."
Commonwealth Bank of Australia senior economist Michael Workman said it was difficult to be negative about the housing construction outlook.
Forecast
"The strong underlying fundamentals of firm jobs, population and income growth, and low vacancy rates are expected to drive the gradual rise in national dwelling construction over 2007 and 2008," he said.
Mr Workman said construction companies still had healthy order books, with activity likely to flow at high levels into next year for the non-residential sector.
But JPMorgan economist Helen Kevans said the Reserve Bank of Australia's (RBA) decision to raise rates last year was still slowing residential construction activity.
"Indeed, the building approvals series is volatile, failing to indicate any clear trend emerging in the property market," she said.
"Still, the impact of the RBA's three quarter point rate hikes last year are likely still feeding through the residential construction sector, which continues to battle with rising material costs; this suggests there may be further correction in the sector to come."
Most economists expect interest rates to remain on hold for the rest of 2007.
Source: AAP
Sunday, May 27, 2007
Banks fee grab slows due to competition as it hits $10bn
Australia's banks milked $9.8 billion in fees in the 2005-06 year from account holders, with households accounting for $4 billion with many more Australians paying penalty fees on credit cards.
Total domestic fee income earned by banks grew by 6 per cent in 2006, to a whopping $9.8 billion.
While businesses paid $5.7 billion in fees, banks’ fee income from households jumped 10 per cent to $4.0 billion in 2006.
“The growth in fee income appears to have been mainly the result of an increase in the use of banking services rather than higher unit charges,” the RBA said today.
Credit card fees jumpTotal fees paid by households on credit cards jumped 13 per cent in 2006 to $1.02 billion.
Account-servicing and transaction fees on credit cards increased by 9 per cent, which was roughly in line with the growth in the number of credit card accounts and the value of cash advances.
Other credit card fees – which are mainly penalty fees, over-limit fees and foreign currency conversion fees – rose by 21 per cent.
Strong home loan competition
Fee income from housing loans grew by 6 per cent to $800 million, slower than the growth in the number of housing loan approvals.
“This development reflects strong competition among banks for new housing lending in recent years, which has seen banks discounting or waiving loan establishment fees,” the RBA said.
Fee income from personal loans rose by 15 per cent to $500 million, consistent with the strong growth of personal credit in 2006.
The largest component of banks’ fee income from households was fees on deposit accounts, accounting for more than 40 per cent of the total at $1.62 billion.
"Fee income from this segment grew by 9 per cent in 2006, mainly reflecting the growth in the number of accounts and transactions," the RBA said.
The latest survey by the Reserve Bank of Australia (RBA), relating to banks’ 2006 financial year, covered 18 banks which accounted for more than 90 per cent of the total assets of the banking sector in Australia.
A banker's viewThe Australian Bankers Association said today rising transaction numbers was driving bank fee growth.
It own analysis shows that actual unit costs - that is, the cost of each transaction to consumers - was declining.
ABA chief executive David Bel said the RBA figures told a "double good story'' for consumers.
The results showed fees were coming down and interest margins - the difference between the interest rates on bank loans and deposits - were also being squeezed.
In a report commissioned by the ABA, Macquarie University academic Kim Hawtrey found the average unit cost of banking to consumers fell in 2006 and over the past five years had dropped by 5 per cent.
Source: AAP
Total domestic fee income earned by banks grew by 6 per cent in 2006, to a whopping $9.8 billion.
While businesses paid $5.7 billion in fees, banks’ fee income from households jumped 10 per cent to $4.0 billion in 2006.
“The growth in fee income appears to have been mainly the result of an increase in the use of banking services rather than higher unit charges,” the RBA said today.
Credit card fees jumpTotal fees paid by households on credit cards jumped 13 per cent in 2006 to $1.02 billion.
Account-servicing and transaction fees on credit cards increased by 9 per cent, which was roughly in line with the growth in the number of credit card accounts and the value of cash advances.
Other credit card fees – which are mainly penalty fees, over-limit fees and foreign currency conversion fees – rose by 21 per cent.
Strong home loan competition
Fee income from housing loans grew by 6 per cent to $800 million, slower than the growth in the number of housing loan approvals.
“This development reflects strong competition among banks for new housing lending in recent years, which has seen banks discounting or waiving loan establishment fees,” the RBA said.
Fee income from personal loans rose by 15 per cent to $500 million, consistent with the strong growth of personal credit in 2006.
The largest component of banks’ fee income from households was fees on deposit accounts, accounting for more than 40 per cent of the total at $1.62 billion.
"Fee income from this segment grew by 9 per cent in 2006, mainly reflecting the growth in the number of accounts and transactions," the RBA said.
The latest survey by the Reserve Bank of Australia (RBA), relating to banks’ 2006 financial year, covered 18 banks which accounted for more than 90 per cent of the total assets of the banking sector in Australia.
A banker's viewThe Australian Bankers Association said today rising transaction numbers was driving bank fee growth.
It own analysis shows that actual unit costs - that is, the cost of each transaction to consumers - was declining.
ABA chief executive David Bel said the RBA figures told a "double good story'' for consumers.
The results showed fees were coming down and interest margins - the difference between the interest rates on bank loans and deposits - were also being squeezed.
In a report commissioned by the ABA, Macquarie University academic Kim Hawtrey found the average unit cost of banking to consumers fell in 2006 and over the past five years had dropped by 5 per cent.
Source: AAP
Monday, May 21, 2007
Strong economy holds up property values and keeping a lid on mortgage rates
As US mortgage default rates hit an all-time high, the Australian situation is 'different' - Costello
Australians should not be concerned about rising interest rates fuelled by a surge in mortgage defaults in the US, Treasurer Peter Costello has said.
US mortgage default rates hit an all-time high in the first quarter of 2007.
Mr Costello said he would continue to closely monitor developments in the US, but the Australian situation was different.
"There's been a large default (rate) in the United States and it's of concern to the Americans,'' Mr Costello told Macquarie Regional Radio today.
"The default rate in Australia is much, much lower than it is in the United States ... In fact, we have one of the lowest default rates in the world. But we do watch what happens in the American economy.
"It's the world's biggest economy and it can have effects here.''
Mr Costello said his primary concern in Australia was keeping unemployment and inflation down.
"We do like to keep an eye on the international developments but the important thing for us, really, is to keep inflation low, keep the prices down, make sure that we run strong economic management ... consistent with keeping people in jobs and people in homes and businesses successful,'' he said. "That's what we like to see.'' AAP
Australians should not be concerned about rising interest rates fuelled by a surge in mortgage defaults in the US, Treasurer Peter Costello has said.
US mortgage default rates hit an all-time high in the first quarter of 2007.
Mr Costello said he would continue to closely monitor developments in the US, but the Australian situation was different.
"There's been a large default (rate) in the United States and it's of concern to the Americans,'' Mr Costello told Macquarie Regional Radio today.
"The default rate in Australia is much, much lower than it is in the United States ... In fact, we have one of the lowest default rates in the world. But we do watch what happens in the American economy.
"It's the world's biggest economy and it can have effects here.''
Mr Costello said his primary concern in Australia was keeping unemployment and inflation down.
"We do like to keep an eye on the international developments but the important thing for us, really, is to keep inflation low, keep the prices down, make sure that we run strong economic management ... consistent with keeping people in jobs and people in homes and businesses successful,'' he said. "That's what we like to see.'' AAP
Friday, May 04, 2007
Sheikh rules in $1.2 trillion Muslim mortgage and money market
SHEIKH Nizam Yaquby is the gatekeeper to the $US1 trillion ($1.2 trillion) market for managing Muslim wealth. Yaquby, who lives in Bahrain, says he's on advisory boards of 40 finance companies, and tells Citigroup, American International Group and HSBC Holdings which insurance policies, accounts and bonds they can sell to devout Muslims. Just as Wall Street turned to Nobel Prize winner Myron Scholes in the 1980s to help make derivatives the fastest growing financial market, banks can't find enough scholars steeped in the teachings of Muhammad to accommodate the demand for new bonds that conform to Shariah law.
Without men like Yaquby to bless the borrowings, none of the $US70 billion of Islamic debt outstanding can be traded and companies would have been unable to sell any of the $US17 billion in new offerings last year, according to Standard & Poor's and Bloomberg.
"The credibility of institutions comes from the stature of the Shariah boards they have," said Afaq Khan, head of Islamic banking at Standard Chartered in Dubai, the world's second biggest underwriter of Islamic bonds. "Transactions can get shot down at the structuring stage if scholars don't allow them."
Yaquby sits on more company advisory boards than any of the 20 top scholars who tell banks which bonds meet the requirements of Shariah law, according to London-based Euromoney Institutional Investor's Internet Securities.
The advisers say they can earn as much as $US1 million a year for providing their expertise.
Shariah requires that investors profit only from transactions based on the exchange of assets, not money alone, so interest is banned. Bankers sell Islamic bonds, or sukuk, by using property and other assets to generate income equivalent to interest they would pay on conventional debt. The money can't be used to finance gambling, guns or alcohol.
The world's top five banks by assets - Zurich-based UBS, HSBC and Barclays in London, Paris-based BNP Paribas and Citigroup in New York - have Islamic units. CIMB Group in Kuala Lumpur is the biggest underwriter of sukuk this year followed by Standard Chartered in London, Barclays and Citigroup.
Sales of sukuk grew nine times faster than international corporate bonds last year and twice as fast as the US market for debt with ratings below investment grade, according to Bloomberg data. The assets managed under Islamic rules will almost triple by 2015 to $US2.8 trillion, according to the Islamic Financial Services Board, an association of central banks based in Kuala Lumpur.
International banks, mostly in London, use the same scholars for religious rulings, or fatwas, says Rushdi Siddiqui, who runs Islamic indexes for Dow Jones in New York.
"Unfortunately people think we are overpaid but this isn't true," Yaquby, dressed in a traditional white ghutra headcloth and ankle-length dishdasha robe, said in an interview in Dubai last month. "They don't look at what bankers and lawyers are being paid. Yet the CEO of an Islamic bank can't take a decision without the scholar."
Yaquby says the biggest international banks pay scholars annual retainers of $US20,000 to $US50,000. Mohamed Ma'sum Billah, a scholar in Selangor, Malaysia, sits on about 20 boards. Fees are as high as $US100,000, up sevenfold from 2002, he says.
Advisers also receive $US1000 to $US3000 each time they meet a client, says Mohammed Daud Bakar in Kuala Lumpur, who works for HSBC, BNP Paribas and Frankfurt-based Deutsche Bank. Monzer Kahf, a scholar based in Westminster, California, says the total works out at $US200 to $US500 an hour, or as much as $US1 million a year for a 45-hour working week.
While there are more than 20 Islamic scholars, the international banks want the top names, says Majid Dawood, chief executive officer of Yasaar Ltd, a Dubai-based consultant that advises Paris-based Societe Generale, Royal Bank of Scotland in Edinburgh and Dublin-based Bank of Ireland. "Everyone wants the star scholars but you can't have Brad Pitt in every film," Dawood says. "Scholars are overstretched," says Abdallah Kubursi, regional vice-president in Dubai for AIG, the world's biggest insurance company. New York-based AIG started a Bahrain-based Islamic insurance unit in October to target 300 million customers.
Getting approval from scholars takes a minimum of two weeks, says Hissam Kamal, head of Islamic finance for HSBC Saudi Arabia in Riyadh.
"For an established issuer that could tap the conventional bond market in just a few days, there's a significant extra lead time for Shariah compliance," Kamal says. "You can't complete documentation and a fatwa in a week. It will be two or three weeks at best."
The process can take six months, says Ruggiero Omar Lomonaco, head of Islamic investor products in Dubai for ABN Amro.
"Every day, at all times, I have to receive calls and emails and deal with them," says Muhammad Imran Usmani, a 37-year-old Pakistani who advises Amsterdam-based ABN and Credit Suisse Group in Zurich. "The problem is we have a limited number of scholars who are working internationally," he said in an interview in Dubai, while keeping one eye on his BlackBerry.
Credit Suisse and New York-based Merrill Lynch are among 29 firms that seek advice from Mohammed Elgari in Saudi Arabia, according to Euromoney. Thirty-five firms share Saudi scholar Abdul Sattar Abu Ghuddah.
The Shariah finance industry, born in the 1970s after a 12-fold jump in oil prices, is expanding with crude prices near record highs enriching Islamic nations.
Billionaire Maan al-Sanea, the second biggest shareholder in HSBC, plans to use property in eastern Saudi Arabia to raise as much as $US5 billion for his Saad Trading, Contracting & Financial Services Co. He will create a trust company called Golden Belt 1 Sukuk Co, which will lease the land to Saad Trading. Golden Belt will pass on the rent paid by Saad Trading to bond holders, thus avoiding interest.
"The land's value or what's built on it isn't hugely relevant to the sukuk," says Philip Lotter, a corporate finance analyst at Moody's Investors Service in Dubai.
"Its purpose is to provide an asset that Saad Trading can pay rent on," he says.
UK Treasury Minister Ed Balls last month said the Government might sell Islamic bonds, following the German state of Saxony-Anhalt and Texas-based East Cameron Gas Co.
The Japan Bank for International Co-operation plans to sell as much as $US300 million of sukuk in Malaysia. Tokyo-based Aeon Credit Service Co in January became the first Japanese company to sell Islamic bonds.
Nakheel PJSC, the Dubai developer building islands in the shape of palm trees for luxury homes in the Persian Gulf, raised $US3.52 billion in November in the biggest sukuk sale. Nakheel increased the amount from an initial $US2.5 billion target after the underwriters received orders for $US6.25billion.
Shariah scholars need to be experts on the Koran, commercial law and finance. Yaquby has a degree in comparative religion and economics from McGill University in Montreal, according to his profile on HSBC's website. He learned Shariah in Bahrain, Saudi Arabia, Egypt, India and Morocco, according to Calyx Financial, a New York-based asset management firm that includes Yaquby among its advisers.
Scholars find it hard to make a living when they start, says Yaquby. Fees for advisers to local Islamic banks begin at about $US3000 a year, according to Billah in Malaysia.
"Most scholars are paid about the amount an investment banker would leave as a tip after dinner," says Siddiqui at Dow Jones Indexes. The high earners are like "rock 'n' roll superstars".
Professors Fischer Black and Scholes in 1973 created the mathematical model to value options that is now the cornerstone of a market with an underlying value of $US115 trillion. They led a stream of PhDs dubbed "quants" to Wall Street to work on derivatives, contracts whose value is derived from underlying assets, including stocks, bonds, currencies and commodities, and events such as changes in interest rates and the weather.
Bloomberg
Without men like Yaquby to bless the borrowings, none of the $US70 billion of Islamic debt outstanding can be traded and companies would have been unable to sell any of the $US17 billion in new offerings last year, according to Standard & Poor's and Bloomberg.
"The credibility of institutions comes from the stature of the Shariah boards they have," said Afaq Khan, head of Islamic banking at Standard Chartered in Dubai, the world's second biggest underwriter of Islamic bonds. "Transactions can get shot down at the structuring stage if scholars don't allow them."
Yaquby sits on more company advisory boards than any of the 20 top scholars who tell banks which bonds meet the requirements of Shariah law, according to London-based Euromoney Institutional Investor's Internet Securities.
The advisers say they can earn as much as $US1 million a year for providing their expertise.
Shariah requires that investors profit only from transactions based on the exchange of assets, not money alone, so interest is banned. Bankers sell Islamic bonds, or sukuk, by using property and other assets to generate income equivalent to interest they would pay on conventional debt. The money can't be used to finance gambling, guns or alcohol.
The world's top five banks by assets - Zurich-based UBS, HSBC and Barclays in London, Paris-based BNP Paribas and Citigroup in New York - have Islamic units. CIMB Group in Kuala Lumpur is the biggest underwriter of sukuk this year followed by Standard Chartered in London, Barclays and Citigroup.
Sales of sukuk grew nine times faster than international corporate bonds last year and twice as fast as the US market for debt with ratings below investment grade, according to Bloomberg data. The assets managed under Islamic rules will almost triple by 2015 to $US2.8 trillion, according to the Islamic Financial Services Board, an association of central banks based in Kuala Lumpur.
International banks, mostly in London, use the same scholars for religious rulings, or fatwas, says Rushdi Siddiqui, who runs Islamic indexes for Dow Jones in New York.
"Unfortunately people think we are overpaid but this isn't true," Yaquby, dressed in a traditional white ghutra headcloth and ankle-length dishdasha robe, said in an interview in Dubai last month. "They don't look at what bankers and lawyers are being paid. Yet the CEO of an Islamic bank can't take a decision without the scholar."
Yaquby says the biggest international banks pay scholars annual retainers of $US20,000 to $US50,000. Mohamed Ma'sum Billah, a scholar in Selangor, Malaysia, sits on about 20 boards. Fees are as high as $US100,000, up sevenfold from 2002, he says.
Advisers also receive $US1000 to $US3000 each time they meet a client, says Mohammed Daud Bakar in Kuala Lumpur, who works for HSBC, BNP Paribas and Frankfurt-based Deutsche Bank. Monzer Kahf, a scholar based in Westminster, California, says the total works out at $US200 to $US500 an hour, or as much as $US1 million a year for a 45-hour working week.
While there are more than 20 Islamic scholars, the international banks want the top names, says Majid Dawood, chief executive officer of Yasaar Ltd, a Dubai-based consultant that advises Paris-based Societe Generale, Royal Bank of Scotland in Edinburgh and Dublin-based Bank of Ireland. "Everyone wants the star scholars but you can't have Brad Pitt in every film," Dawood says. "Scholars are overstretched," says Abdallah Kubursi, regional vice-president in Dubai for AIG, the world's biggest insurance company. New York-based AIG started a Bahrain-based Islamic insurance unit in October to target 300 million customers.
Getting approval from scholars takes a minimum of two weeks, says Hissam Kamal, head of Islamic finance for HSBC Saudi Arabia in Riyadh.
"For an established issuer that could tap the conventional bond market in just a few days, there's a significant extra lead time for Shariah compliance," Kamal says. "You can't complete documentation and a fatwa in a week. It will be two or three weeks at best."
The process can take six months, says Ruggiero Omar Lomonaco, head of Islamic investor products in Dubai for ABN Amro.
"Every day, at all times, I have to receive calls and emails and deal with them," says Muhammad Imran Usmani, a 37-year-old Pakistani who advises Amsterdam-based ABN and Credit Suisse Group in Zurich. "The problem is we have a limited number of scholars who are working internationally," he said in an interview in Dubai, while keeping one eye on his BlackBerry.
Credit Suisse and New York-based Merrill Lynch are among 29 firms that seek advice from Mohammed Elgari in Saudi Arabia, according to Euromoney. Thirty-five firms share Saudi scholar Abdul Sattar Abu Ghuddah.
The Shariah finance industry, born in the 1970s after a 12-fold jump in oil prices, is expanding with crude prices near record highs enriching Islamic nations.
Billionaire Maan al-Sanea, the second biggest shareholder in HSBC, plans to use property in eastern Saudi Arabia to raise as much as $US5 billion for his Saad Trading, Contracting & Financial Services Co. He will create a trust company called Golden Belt 1 Sukuk Co, which will lease the land to Saad Trading. Golden Belt will pass on the rent paid by Saad Trading to bond holders, thus avoiding interest.
"The land's value or what's built on it isn't hugely relevant to the sukuk," says Philip Lotter, a corporate finance analyst at Moody's Investors Service in Dubai.
"Its purpose is to provide an asset that Saad Trading can pay rent on," he says.
UK Treasury Minister Ed Balls last month said the Government might sell Islamic bonds, following the German state of Saxony-Anhalt and Texas-based East Cameron Gas Co.
The Japan Bank for International Co-operation plans to sell as much as $US300 million of sukuk in Malaysia. Tokyo-based Aeon Credit Service Co in January became the first Japanese company to sell Islamic bonds.
Nakheel PJSC, the Dubai developer building islands in the shape of palm trees for luxury homes in the Persian Gulf, raised $US3.52 billion in November in the biggest sukuk sale. Nakheel increased the amount from an initial $US2.5 billion target after the underwriters received orders for $US6.25billion.
Shariah scholars need to be experts on the Koran, commercial law and finance. Yaquby has a degree in comparative religion and economics from McGill University in Montreal, according to his profile on HSBC's website. He learned Shariah in Bahrain, Saudi Arabia, Egypt, India and Morocco, according to Calyx Financial, a New York-based asset management firm that includes Yaquby among its advisers.
Scholars find it hard to make a living when they start, says Yaquby. Fees for advisers to local Islamic banks begin at about $US3000 a year, according to Billah in Malaysia.
"Most scholars are paid about the amount an investment banker would leave as a tip after dinner," says Siddiqui at Dow Jones Indexes. The high earners are like "rock 'n' roll superstars".
Professors Fischer Black and Scholes in 1973 created the mathematical model to value options that is now the cornerstone of a market with an underlying value of $US115 trillion. They led a stream of PhDs dubbed "quants" to Wall Street to work on derivatives, contracts whose value is derived from underlying assets, including stocks, bonds, currencies and commodities, and events such as changes in interest rates and the weather.
Bloomberg
Friday, April 27, 2007
Mortgage interest rates should remain stable after suprisingly low inflation figures delight the finance markets
The Australian Industry Group (AiG) says official interest rates can remain on hold for an extended period after yesterday's better-than-expected inflation figures.
The Reserve Bank's decision at the beginning of this month not to raise interest rates surprised some analysts.
But after yesterday's inflation numbers, the outcome from next week's central bank board meeting is viewed as a foregone conclusion.
At 2.4 per cent, annual inflation is at a two-year low, while underlying measures are also back comfortably within the officially-targeted range.
The AiG says the Reserve Bank will be able to take an extended "wait and see" approach.
It also hopes reduced interest rate speculation will take some of the heat out of the Australian dollar.
But after dropping almost one cent on the figures yesterday, the dollar has climbed 0.4 cents overnight to 82.76 US cents.
Print Email
The Reserve Bank's decision at the beginning of this month not to raise interest rates surprised some analysts.
But after yesterday's inflation numbers, the outcome from next week's central bank board meeting is viewed as a foregone conclusion.
At 2.4 per cent, annual inflation is at a two-year low, while underlying measures are also back comfortably within the officially-targeted range.
The AiG says the Reserve Bank will be able to take an extended "wait and see" approach.
It also hopes reduced interest rate speculation will take some of the heat out of the Australian dollar.
But after dropping almost one cent on the figures yesterday, the dollar has climbed 0.4 cents overnight to 82.76 US cents.
Print Email
Mortgage interest rates should remain stable after suprisingly low inflation figures delight the finance markets
The Australian Industry Group (AiG) says official interest rates can remain on hold for an extended period after yesterday's better-than-expected inflation figures.
The Reserve Bank's decision at the beginning of this month not to raise interest rates surprised some analysts.
But after yesterday's inflation numbers, the outcome from next week's central bank board meeting is viewed as a foregone conclusion.
At 2.4 per cent, annual inflation is at a two-year low, while underlying measures are also back comfortably within the officially-targeted range.
The AiG says the Reserve Bank will be able to take an extended "wait and see" approach.
It also hopes reduced interest rate speculation will take some of the heat out of the Australian dollar.
But after dropping almost one cent on the figures yesterday, the dollar has climbed 0.4 cents overnight to 82.76 US cents.
Print Email
The Reserve Bank's decision at the beginning of this month not to raise interest rates surprised some analysts.
But after yesterday's inflation numbers, the outcome from next week's central bank board meeting is viewed as a foregone conclusion.
At 2.4 per cent, annual inflation is at a two-year low, while underlying measures are also back comfortably within the officially-targeted range.
The AiG says the Reserve Bank will be able to take an extended "wait and see" approach.
It also hopes reduced interest rate speculation will take some of the heat out of the Australian dollar.
But after dropping almost one cent on the figures yesterday, the dollar has climbed 0.4 cents overnight to 82.76 US cents.
Print Email
Wednesday, April 25, 2007
How to spot an honest mortgage broker to source your home loan
Specialist mortgage sellers still have a lot of work to do to rehabilitate their image.
Seeking to change perceptions that some mortgage brokers are nothing more than commission-driven salespeople, the Mortgage and Finance Association of Australia has released the results of a shadow shop that shows its members in a more positive light.
Market researcher brandmanagement conducted the secret survey where real shoppers made 104 visits to brokers throughout Australia. The shadow shop was restricted to MFAA members, which paid for the study.
"Brokers were rated above average across all areas of the services they provide, performing particularly highly when it came to customer focus, knowledge of products and honesty and integrity," says MFAA chief executive Phil Naylor.
"The mystery shop also confirmed brokers are living up to their reputation for providing a friendly and personable service, with consumers giving high performance ratings to these soft skills."
He says perceptions of brokers not disclosing commissions are challenged by the shadow shop. Under the MFAA's code of practice, members must disclose their commissions to the borrower.
None of the shadow shoppers entered into a contract with the broker to act on their behalf and so, under the association's rules, the brokers were not required to disclose commissions but 62 per cent did so anyway.
However, brandmanagment managing director Andrew Inwood says the study shows there is plenty of room for improvement.
He says brokers who disclosed commissions tended to minimise their impact. "They talk it down; they still feel uncomfortable talking about how they are paid," Inwood says.
He also says that where shoppers were expecting the broker to present them with a choice of suitable mortgages, in 24 per cent of shadow shops, they were recommended only one mortgage.
When the shoppers discussed interest rates and repayment amounts, two-thirds of shoppers said there was no discussion using comparison rates. These are calculated after adding fees and charges to the lender's advertised rate so that the true cost of loans can be compared.
Consumers often approach mortgage brokers because of the complexity of products and anxiety about debt, in the hope they will find the best loans.
In only 5 per cent of face-to-face meetings were the shoppers given details of the Credit Ombudsman, which is where the shoppers go if they have a complaint against a broker.
Inwood says in about one third of the shadow shops, the shoppers felt that the broker was recommending they take out larger loans than they needed.
Brandmanagement has conducted numerous shadow shops of the financial services industry. Inwood says brokers are rated more highly by consumers than bank staff or financial planners. He suspects that one of the reasons for that is mortgage brokers are giving advice that is more straightforward and limited than financial planners. He says when consumers go to a bank they may be offered only the mortgage package the bank is promoting at the time and follow-ups on consumer enquiries can be slow. Brokers, however, have very good response times.
Nick Coates, finance spokesman at consumers' association Choice, says the brandmanagement study does not evaluate the appropriateness of the mortgages recommended to the shoppers.
Choice released the results of its own shadow shop of mortgage brokers in February. The findings showed the advice brokers gave on reverse mortgages was riddled with "glaring deficiencies".
Choice found most brokers, who garner commissions based on the size of the loan, provided a poor standard of advice.
Concerns have also been growing over brokers marketing "mortgage reduction" services, which are pitched at those consumers who are finding it hard to make ends meet. While the brokers say they have strategies to eliminate mortgage debt quickly, consumers often end up with larger debts because of the fees and higher-cost loans.
Coates says a further area of concern is the sale of "no doc, low doc" loans sold by some brokers. Low documentation loans are taken out by people who have a chequered credit history or the self-employed who fail to meet the usual lending criteria.
All these dangers areas for consumers were outside of the scope of the brandmanagement study.
It was mostly about the shadow shoppers' perception of the brokers' "soft" skills such as friendliness, and service aspects such as the time it took for the broker to respond to an enquiry and some compliance issues.
The results of a shadow shop of financial planners and the advice they gave on switching superannuation funds, conducted by the Australian Securities & Investments Commission and released in 2005, showed consumers are poor judges of the quality of the financial advice they receive.
Coates suspects consumers are also likely to be poor judges of the recommendations they receive from mortgage brokers.
He says no amount of codes of practices obviates the need for a national regulatory framework through which brokers have to be licensed and where the licences can be taken away from brokers not acting in consumers' interests.
The MFAA supports and continues to lobby for a national regulatory regime. Brokers are covered under the credit laws of each state and territory. In 2003, the federal, state and territory governments agreed to produce uniform regulation.
The NSW Government has released details of pending reforms which are regarded as the best template for national regulation.
They require mortgage brokers to be licensed or registered, to undergo probity checks, be members of an approved dispute resolution scheme and have compensation arrangements. But a national approach to effective consumer-friendly regulation is still a long way off.
Source: The Age
Seeking to change perceptions that some mortgage brokers are nothing more than commission-driven salespeople, the Mortgage and Finance Association of Australia has released the results of a shadow shop that shows its members in a more positive light.
Market researcher brandmanagement conducted the secret survey where real shoppers made 104 visits to brokers throughout Australia. The shadow shop was restricted to MFAA members, which paid for the study.
"Brokers were rated above average across all areas of the services they provide, performing particularly highly when it came to customer focus, knowledge of products and honesty and integrity," says MFAA chief executive Phil Naylor.
"The mystery shop also confirmed brokers are living up to their reputation for providing a friendly and personable service, with consumers giving high performance ratings to these soft skills."
He says perceptions of brokers not disclosing commissions are challenged by the shadow shop. Under the MFAA's code of practice, members must disclose their commissions to the borrower.
None of the shadow shoppers entered into a contract with the broker to act on their behalf and so, under the association's rules, the brokers were not required to disclose commissions but 62 per cent did so anyway.
However, brandmanagment managing director Andrew Inwood says the study shows there is plenty of room for improvement.
He says brokers who disclosed commissions tended to minimise their impact. "They talk it down; they still feel uncomfortable talking about how they are paid," Inwood says.
He also says that where shoppers were expecting the broker to present them with a choice of suitable mortgages, in 24 per cent of shadow shops, they were recommended only one mortgage.
When the shoppers discussed interest rates and repayment amounts, two-thirds of shoppers said there was no discussion using comparison rates. These are calculated after adding fees and charges to the lender's advertised rate so that the true cost of loans can be compared.
Consumers often approach mortgage brokers because of the complexity of products and anxiety about debt, in the hope they will find the best loans.
In only 5 per cent of face-to-face meetings were the shoppers given details of the Credit Ombudsman, which is where the shoppers go if they have a complaint against a broker.
Inwood says in about one third of the shadow shops, the shoppers felt that the broker was recommending they take out larger loans than they needed.
Brandmanagement has conducted numerous shadow shops of the financial services industry. Inwood says brokers are rated more highly by consumers than bank staff or financial planners. He suspects that one of the reasons for that is mortgage brokers are giving advice that is more straightforward and limited than financial planners. He says when consumers go to a bank they may be offered only the mortgage package the bank is promoting at the time and follow-ups on consumer enquiries can be slow. Brokers, however, have very good response times.
Nick Coates, finance spokesman at consumers' association Choice, says the brandmanagement study does not evaluate the appropriateness of the mortgages recommended to the shoppers.
Choice released the results of its own shadow shop of mortgage brokers in February. The findings showed the advice brokers gave on reverse mortgages was riddled with "glaring deficiencies".
Choice found most brokers, who garner commissions based on the size of the loan, provided a poor standard of advice.
Concerns have also been growing over brokers marketing "mortgage reduction" services, which are pitched at those consumers who are finding it hard to make ends meet. While the brokers say they have strategies to eliminate mortgage debt quickly, consumers often end up with larger debts because of the fees and higher-cost loans.
Coates says a further area of concern is the sale of "no doc, low doc" loans sold by some brokers. Low documentation loans are taken out by people who have a chequered credit history or the self-employed who fail to meet the usual lending criteria.
All these dangers areas for consumers were outside of the scope of the brandmanagement study.
It was mostly about the shadow shoppers' perception of the brokers' "soft" skills such as friendliness, and service aspects such as the time it took for the broker to respond to an enquiry and some compliance issues.
The results of a shadow shop of financial planners and the advice they gave on switching superannuation funds, conducted by the Australian Securities & Investments Commission and released in 2005, showed consumers are poor judges of the quality of the financial advice they receive.
Coates suspects consumers are also likely to be poor judges of the recommendations they receive from mortgage brokers.
He says no amount of codes of practices obviates the need for a national regulatory framework through which brokers have to be licensed and where the licences can be taken away from brokers not acting in consumers' interests.
The MFAA supports and continues to lobby for a national regulatory regime. Brokers are covered under the credit laws of each state and territory. In 2003, the federal, state and territory governments agreed to produce uniform regulation.
The NSW Government has released details of pending reforms which are regarded as the best template for national regulation.
They require mortgage brokers to be licensed or registered, to undergo probity checks, be members of an approved dispute resolution scheme and have compensation arrangements. But a national approach to effective consumer-friendly regulation is still a long way off.
Source: The Age
Saturday, April 21, 2007
Housing prices tipped to rise
The rich will get even richer this year as the nation approaches another massive property boom, a property expert has tipped.
Michael Yardney - who runs buyers' advocacy service Metropole Property Investment Strategists - says that despite the record low in affordability, there was no doubt the great divide would keep growing, with the more affluent suburbs set to be the strongest performers in 2007.
"I think, looking at the stage of the cycle we are in in SA, this is a year where the rich are going to get richer," Mr Yardney said.
He said Australia was on the cusp of one last momentous real estate boom caused by strong immigration, a lack of land and an increasing proportion of single-person households. As the price climb continued, home ownership levels would also continue to fall, he said.
The Australian Housing and Urban Research Institute has predicted that by 2011, the number of renters across the country will have risen 12 per cent, to 40 per cent of the population.
"Now that is just an amazing figure," Mr Yardney said. The property commentator predicts Adelaide's median house price will be $13.5 million in less than 40 years.
Recent State Government figures peg Adelaide's median house price at $300,000, up from $110,000 in 1996.
He said while such a rise seemed unimaginable, he pointed to countries like the United Kingdom, where house prices were beyond the reach of average people.
Source: The Advertiser
Michael Yardney - who runs buyers' advocacy service Metropole Property Investment Strategists - says that despite the record low in affordability, there was no doubt the great divide would keep growing, with the more affluent suburbs set to be the strongest performers in 2007.
"I think, looking at the stage of the cycle we are in in SA, this is a year where the rich are going to get richer," Mr Yardney said.
He said Australia was on the cusp of one last momentous real estate boom caused by strong immigration, a lack of land and an increasing proportion of single-person households. As the price climb continued, home ownership levels would also continue to fall, he said.
The Australian Housing and Urban Research Institute has predicted that by 2011, the number of renters across the country will have risen 12 per cent, to 40 per cent of the population.
"Now that is just an amazing figure," Mr Yardney said. The property commentator predicts Adelaide's median house price will be $13.5 million in less than 40 years.
Recent State Government figures peg Adelaide's median house price at $300,000, up from $110,000 in 1996.
He said while such a rise seemed unimaginable, he pointed to countries like the United Kingdom, where house prices were beyond the reach of average people.
Source: The Advertiser
Monday, April 16, 2007
Calls to scrap mortgage comparison rates as they are not understood and open to lender abuse
A lack of awareness of comparison rates and how they work has prompted calls for them to be scrapped. A finance industry group has described them as costly, complex and open to abuse.
And a recent study found that since 2003, when mandatory comparison rates were introduced, only about a third of people have found out what they are and only about one in 10 could define them accurately.
Most people said they found the wide range of choice in the consumer credit market confusing, a situation that was not helped much by comparison rates.
The Mortgage & Finance Association of Australia, which represents mortgage brokers, says state governments are maintaining a costly system that has not served consumers well. Its attack on comparison rates comes in response to the Queensland Government's introduction of a bill to extend the life of the mandatory comparison rate regime, scheduled to lapse in July this year, to 2009.
Comparison rates are loan interest rates calculated after adding fees and charges to the lender's advertised rate. The idea is to express the full cost of the loan in the rate and also provide a basis for comparing one loan with another.
The mandatory comparison rate rules are part of the Uniform Consumer Credit Code, which governs consumer lending. This is uniform state legislation first passed in Queensland and then taken up by the other states.
The code was introduced in 1994, with the mandatory comparison rate following in 2003. The comparison rate scheme has a sunset clause, put in place to allow the states to review the effectiveness of the comparison rates before making them a permanent part of the code.
Calvert Duffy, head of legal and compliance with the brokers' association, says: "Having the ability to compare like with like is a brilliant idea. But the execution is difficult and consumers struggle with the concept."
There has been a proliferation of "off-book" fees and charges since 2003. Items such as third party valuations and legal fees do not go into the comparison rate, nor do the increasingly common and expensive deferred establishment fees.
Lenders say these fees cannot form part of the comparison rate because they do not apply to all borrowers equally and may not apply at all. Duffy says to leave them out means understating the real cost of the loan but putting them in creates inaccuracies. Either way, the comparison rate is unhelpful.
The system, though widely held to be flawed, still has its fans. Mara Bun, a senior executive of the banking industry research group Cannex, says the idea of comparison rates is a good one and the problems in the current arrangement can be fixed. "Deferred establishment fees and other exit charges are the big problem," Bun says. "The states need to look at how the [credit code] can capture those costs."
Duffy says such a project is not worth doing, even if it means better comparison rates, because consumers are not using them.
In a study published last year, researchers from the Institute for Social Research at Swinburne University of Technology found a low level of awareness in the focus groups they ran. Only 37 per cent recognised the term "comparison rate" and only 12.5 per cent could define it correctly. Among those who knew about comparison rates, the majority found them helpful but the message did not appear to be getting out widely.
Respondents said the most important factor in choosing a credit product was the interest rate, followed by fees and charges - a finding that makes the lack of awareness of comparison rates surprising.
The Swinburne report says: "The majority of people interviewed did not feel educated about the credit market. Confusing, complex and mind-boggling were words frequently used to describe credit searches."
The researchers said that similar studies in New Zealand, Britain and US also found low levels of awareness of comparison rates.
Source. The Age
And a recent study found that since 2003, when mandatory comparison rates were introduced, only about a third of people have found out what they are and only about one in 10 could define them accurately.
Most people said they found the wide range of choice in the consumer credit market confusing, a situation that was not helped much by comparison rates.
The Mortgage & Finance Association of Australia, which represents mortgage brokers, says state governments are maintaining a costly system that has not served consumers well. Its attack on comparison rates comes in response to the Queensland Government's introduction of a bill to extend the life of the mandatory comparison rate regime, scheduled to lapse in July this year, to 2009.
Comparison rates are loan interest rates calculated after adding fees and charges to the lender's advertised rate. The idea is to express the full cost of the loan in the rate and also provide a basis for comparing one loan with another.
The mandatory comparison rate rules are part of the Uniform Consumer Credit Code, which governs consumer lending. This is uniform state legislation first passed in Queensland and then taken up by the other states.
The code was introduced in 1994, with the mandatory comparison rate following in 2003. The comparison rate scheme has a sunset clause, put in place to allow the states to review the effectiveness of the comparison rates before making them a permanent part of the code.
Calvert Duffy, head of legal and compliance with the brokers' association, says: "Having the ability to compare like with like is a brilliant idea. But the execution is difficult and consumers struggle with the concept."
There has been a proliferation of "off-book" fees and charges since 2003. Items such as third party valuations and legal fees do not go into the comparison rate, nor do the increasingly common and expensive deferred establishment fees.
Lenders say these fees cannot form part of the comparison rate because they do not apply to all borrowers equally and may not apply at all. Duffy says to leave them out means understating the real cost of the loan but putting them in creates inaccuracies. Either way, the comparison rate is unhelpful.
The system, though widely held to be flawed, still has its fans. Mara Bun, a senior executive of the banking industry research group Cannex, says the idea of comparison rates is a good one and the problems in the current arrangement can be fixed. "Deferred establishment fees and other exit charges are the big problem," Bun says. "The states need to look at how the [credit code] can capture those costs."
Duffy says such a project is not worth doing, even if it means better comparison rates, because consumers are not using them.
In a study published last year, researchers from the Institute for Social Research at Swinburne University of Technology found a low level of awareness in the focus groups they ran. Only 37 per cent recognised the term "comparison rate" and only 12.5 per cent could define it correctly. Among those who knew about comparison rates, the majority found them helpful but the message did not appear to be getting out widely.
Respondents said the most important factor in choosing a credit product was the interest rate, followed by fees and charges - a finding that makes the lack of awareness of comparison rates surprising.
The Swinburne report says: "The majority of people interviewed did not feel educated about the credit market. Confusing, complex and mind-boggling were words frequently used to describe credit searches."
The researchers said that similar studies in New Zealand, Britain and US also found low levels of awareness of comparison rates.
Source. The Age
Saturday, March 31, 2007
Mortgage interest rate speculation is forcing up the Aussie dollar
Speculation of the chance of an interest rate rise as early as next month has now strengthened to at least 40 per cent, as futures market momentum propels the dollar.
The dollar is expected to trade above the US80c barrier for at least a week, driven by aggressive new short positions, but a fresh bout of "risk aversion" has now emerged in some forecasts.
And the greenback was markedly weaker in most of the big swaps yesterday, as fears grew over the future of the world's largest economy.
Economists are now speculating that the Reserve Bank of Australia will raise rates to 25 basis points to 6.5 per cent when it meets in April.
Financial markets were taken aback last week by the RBA's surprise move to effectively warn that interest rate pricing was too low.
The 40 per cent likelihood is a substantial increase on last week's pricing, which had it set at less than 3 per cent.
Investment bank JP Morgan has put it at almost 50 per cent that the cash rate will be shifted to 6.5 per cent in April.
"The most likely triggers are the May budget, which almost certainly will include sweeteners, given that the Government trails the Opposition in opinion polls and is desperate to catch up, another rise in credit growth, and more evidence that wage pressure is building," chief economist Stephen Walters said.
The dollar shot as high as US80.33c in international trade yesterday morning, before the start of local equities trading.
The domestic currency then retreated, but the marginal softening allowed active traders to take on new positions.
Last night the dollar was hovering at US79.96c as most analysts predicted the currency would push back through the next benchmark.
It has touched US80c twice in the past 18 months, but its peak yesterday was the highest in more than 10 years.
The currency, according to the Reserve Bank, has spent just 5 per cent of its trading time above US80c in the past 22 years.
The number of long-term contracts being taken out on the dollar is starting to be rebuilt after a marked reduction as a result of the stock market jitters.
Westpac currency strategist Jonathan Cavenagh said the dollar momentum was being provided by short traders chasing the yields.
Hedge funds are understood to have been active buyers yesterday on the interest rate speculation while the carry trading has been reset.
The dollar, along with the New Zealand dollar, has been the target of active buying as investors borrow in the low-rate Japanese yen and buy into the high-yield currencies.
"The people who are in the short-term plays are potentially speculating that the RBA may hike rates," Mr Cavenagh said.
"There's still upside risk in the dollar from here.
The effect of the dollar movement was seen in the market yesterday, especially as building company stocks were punished.
Economists said retailers stood to benefit from the currency, as imports were made cheaper and profit margins could be inflated.
The US Federal Reserve is expected to announce that it will leave rates on hold at 5.25 per cent following its meeting overnight.
Source: The Australian
The dollar is expected to trade above the US80c barrier for at least a week, driven by aggressive new short positions, but a fresh bout of "risk aversion" has now emerged in some forecasts.
And the greenback was markedly weaker in most of the big swaps yesterday, as fears grew over the future of the world's largest economy.
Economists are now speculating that the Reserve Bank of Australia will raise rates to 25 basis points to 6.5 per cent when it meets in April.
Financial markets were taken aback last week by the RBA's surprise move to effectively warn that interest rate pricing was too low.
The 40 per cent likelihood is a substantial increase on last week's pricing, which had it set at less than 3 per cent.
Investment bank JP Morgan has put it at almost 50 per cent that the cash rate will be shifted to 6.5 per cent in April.
"The most likely triggers are the May budget, which almost certainly will include sweeteners, given that the Government trails the Opposition in opinion polls and is desperate to catch up, another rise in credit growth, and more evidence that wage pressure is building," chief economist Stephen Walters said.
The dollar shot as high as US80.33c in international trade yesterday morning, before the start of local equities trading.
The domestic currency then retreated, but the marginal softening allowed active traders to take on new positions.
Last night the dollar was hovering at US79.96c as most analysts predicted the currency would push back through the next benchmark.
It has touched US80c twice in the past 18 months, but its peak yesterday was the highest in more than 10 years.
The currency, according to the Reserve Bank, has spent just 5 per cent of its trading time above US80c in the past 22 years.
The number of long-term contracts being taken out on the dollar is starting to be rebuilt after a marked reduction as a result of the stock market jitters.
Westpac currency strategist Jonathan Cavenagh said the dollar momentum was being provided by short traders chasing the yields.
Hedge funds are understood to have been active buyers yesterday on the interest rate speculation while the carry trading has been reset.
The dollar, along with the New Zealand dollar, has been the target of active buying as investors borrow in the low-rate Japanese yen and buy into the high-yield currencies.
"The people who are in the short-term plays are potentially speculating that the RBA may hike rates," Mr Cavenagh said.
"There's still upside risk in the dollar from here.
The effect of the dollar movement was seen in the market yesterday, especially as building company stocks were punished.
Economists said retailers stood to benefit from the currency, as imports were made cheaper and profit margins could be inflated.
The US Federal Reserve is expected to announce that it will leave rates on hold at 5.25 per cent following its meeting overnight.
Source: The Australian
Thursday, March 29, 2007
Mortgage interest rates and not stamp duty deter home buyers say Labor
First time home buyers are more concerned about the risk of another interest rate rise than whether the states should end stamp duty on house purchases the Federal Opposition said today.
Financial markets are betting on another interest rate rise this year following comments by a central bank official last Friday suggesting that the four interest rate rises since 2004 have yet to kill-off inflation pressures completely.
"If you look at the impact of those interest rate rises, they've added $88,000 to the cost of a home in Sydney of $450,000, and of course that's a home in Sydney where a first home owner wouldn't be paying any stamp duty at all," Labor treasury spokesman Wayne Swan said.
Treasurer Peter Costello is putting pressure on states to get rid of stamp duty, a tax that should have been removed with the introduction of GST in 2000.
"So what we've got out there this morning is the same old Peter Costello playing the same old blame game because he won't put up his hand and accept responsibility for the fact that inflation is driving up interest rates over time," Mr Swan said.
"The impact of four interest rate rises since the last election when he promised to keep them at record lows is causing housing stress, particularly in western Sydney."
Mr Swan said housing affordability is a complex problem.
"The first problem is the level of interest rates at the moment and certainly many home owners out there would not be welcoming another interest rate rise. That's number one," he said.
"There's a whole host of factors, at the state level, local government level, a whole host of factors that if we had some political leadership from the Federal Treasurer, who accepted some responsibility for just once in his life, then we could consider all of those things together."
Source: AAP
Financial markets are betting on another interest rate rise this year following comments by a central bank official last Friday suggesting that the four interest rate rises since 2004 have yet to kill-off inflation pressures completely.
"If you look at the impact of those interest rate rises, they've added $88,000 to the cost of a home in Sydney of $450,000, and of course that's a home in Sydney where a first home owner wouldn't be paying any stamp duty at all," Labor treasury spokesman Wayne Swan said.
Treasurer Peter Costello is putting pressure on states to get rid of stamp duty, a tax that should have been removed with the introduction of GST in 2000.
"So what we've got out there this morning is the same old Peter Costello playing the same old blame game because he won't put up his hand and accept responsibility for the fact that inflation is driving up interest rates over time," Mr Swan said.
"The impact of four interest rate rises since the last election when he promised to keep them at record lows is causing housing stress, particularly in western Sydney."
Mr Swan said housing affordability is a complex problem.
"The first problem is the level of interest rates at the moment and certainly many home owners out there would not be welcoming another interest rate rise. That's number one," he said.
"There's a whole host of factors, at the state level, local government level, a whole host of factors that if we had some political leadership from the Federal Treasurer, who accepted some responsibility for just once in his life, then we could consider all of those things together."
Source: AAP
Wednesday, March 28, 2007
Falling house prices are a natural correction according to Prime Minister John Howard
Prime Minister John Howard says a fall in house prices was a natural correction to an overheated market.
House prices have fallen in Sydney with higher interest rates but risen dramatically in Perth as the West Australian economy powers along on a resources boom.
"The housing market in sections of the country did get overheated and there did need to be some correction," Mr Howard told CNBC television.
"I think that's occurred without big damage being done to borrowers and big damage being done to the industry and that's beginning to come back."
Mr Howard refused to comment on speculation the Reserve Bank will lift interest rates next month.
"As for speculation about interest rates, I won't engage in that. That's a matter for the central bank [Reserve Bank of Australia] to determine," he said.
Source: AAP
House prices have fallen in Sydney with higher interest rates but risen dramatically in Perth as the West Australian economy powers along on a resources boom.
"The housing market in sections of the country did get overheated and there did need to be some correction," Mr Howard told CNBC television.
"I think that's occurred without big damage being done to borrowers and big damage being done to the industry and that's beginning to come back."
Mr Howard refused to comment on speculation the Reserve Bank will lift interest rates next month.
"As for speculation about interest rates, I won't engage in that. That's a matter for the central bank [Reserve Bank of Australia] to determine," he said.
Source: AAP
Friday, February 23, 2007
Gold Coast betters Brisbane as the hottest Property Market in Australia
Gold Coasters can take some comfort from estimates showing this city has the hottest property market in Australia.
Queensland property prices rose fastest at 3 per cent in the December quarter and it is believed the Gold Coast is doing even better than Brisbane.
The surge of the value of Gold Coast housing is not unexpected, given that it flat-lined for almost 10 years before the turn of the century and was constantly in the shadow of Sydney and Brisbane markets.
But then it found a life of its own and in recent years prospered while Sydney's market actually shrank.
So for investors and first-time buyers who were lucky enough to hitch a ride on the Gold Coast market, it's been a great journey.
Not so lucky are thousands of young people who could only watch as the possibility of home ownership slipped from their grasp and drifted well out of reach.
They may be the first generation that will not be able to afford the Great Australian Dream of a family house on a suburban block.
There are plenty of banks willing to lend them money, but the burden of a mortgage loan is just too heavy for many of them.
Their wages simply won't sustain repayments of between $600 and $800 -- or more -- each week
Their confidence is further weakened by high accounting fees for small savers and by the HECS fees many of them have to repay when they are starting out.
And, it must be said, the stability that young people need to build a solid financial base is not what it used to be.
They enter adult life with the brutal truths that one in three marriages or partnerships is destined to fail and that severe financial hardship often accompanies the fracturing of marriage bonds.
For men there is the perception that an anti-male bias in the Family Court system will cause them to be financially burned in the event of a marriage breakdown.
No wonder many people are timid about the 'c' word -- commitment -- when the time comes to buy a house.
So with a bag of disincentives swung their way when the possibility of a housing loan arises, many members of the X and Y generation simply opt out. They either go overseas working casual jobs, submit themselves to the rental market for life or even go back to live with their parents.
The only way many of them will know what home ownership is all about is when their parents die and they are left an estate.
Politicians, lending institutions and developers should be considering ways to solve the housing affordability for the rising generation. There has to be a way -- through a combination of stamp duty relaxation, new styles of housing estates, larger home loan grants, tax breaks and partially deferred repayments -- to get these young people into their dream houses.
Source: Gold Coast Bulletin
Queensland property prices rose fastest at 3 per cent in the December quarter and it is believed the Gold Coast is doing even better than Brisbane.
The surge of the value of Gold Coast housing is not unexpected, given that it flat-lined for almost 10 years before the turn of the century and was constantly in the shadow of Sydney and Brisbane markets.
But then it found a life of its own and in recent years prospered while Sydney's market actually shrank.
So for investors and first-time buyers who were lucky enough to hitch a ride on the Gold Coast market, it's been a great journey.
Not so lucky are thousands of young people who could only watch as the possibility of home ownership slipped from their grasp and drifted well out of reach.
They may be the first generation that will not be able to afford the Great Australian Dream of a family house on a suburban block.
There are plenty of banks willing to lend them money, but the burden of a mortgage loan is just too heavy for many of them.
Their wages simply won't sustain repayments of between $600 and $800 -- or more -- each week
Their confidence is further weakened by high accounting fees for small savers and by the HECS fees many of them have to repay when they are starting out.
And, it must be said, the stability that young people need to build a solid financial base is not what it used to be.
They enter adult life with the brutal truths that one in three marriages or partnerships is destined to fail and that severe financial hardship often accompanies the fracturing of marriage bonds.
For men there is the perception that an anti-male bias in the Family Court system will cause them to be financially burned in the event of a marriage breakdown.
No wonder many people are timid about the 'c' word -- commitment -- when the time comes to buy a house.
So with a bag of disincentives swung their way when the possibility of a housing loan arises, many members of the X and Y generation simply opt out. They either go overseas working casual jobs, submit themselves to the rental market for life or even go back to live with their parents.
The only way many of them will know what home ownership is all about is when their parents die and they are left an estate.
Politicians, lending institutions and developers should be considering ways to solve the housing affordability for the rising generation. There has to be a way -- through a combination of stamp duty relaxation, new styles of housing estates, larger home loan grants, tax breaks and partially deferred repayments -- to get these young people into their dream houses.
Source: Gold Coast Bulletin
Thursday, February 22, 2007
Rent relief for tenants, pressure to release more building land and property investment support possible as Australia caught in a housing shortgage
The Federal Government is considering assistance for people struggling with the rising cost of renting homes.
Prime Minister John Howard said today that he was "conscious that rents have got up in different parts of the country ".
"I am aware of that, and I know there is some additional pressure because of the very strong economic conditions," Mr Howard said.
"Other people have put views to me about rental assistance ... we are considering those things."
Some observers have blamed changes to superannuation for turning investors away from property, causing a rental shortage.
But Mr Howard said the slow release of land around the country had contributed to the housing shortage that was pushing up rents.
"In some parts of the country, state governments have been far too slow at releasing land and that has contributed to the shortages.
"The other thing that governments generally around Australia have got to do is to make sure the level of land releases is adequate."
Mr Howard said rising rental prices underlined the "folly" of people who advocated the abolition of negative gearing for housing investors.
Source: AAP
Prime Minister John Howard said today that he was "conscious that rents have got up in different parts of the country ".
"I am aware of that, and I know there is some additional pressure because of the very strong economic conditions," Mr Howard said.
"Other people have put views to me about rental assistance ... we are considering those things."
Some observers have blamed changes to superannuation for turning investors away from property, causing a rental shortage.
But Mr Howard said the slow release of land around the country had contributed to the housing shortage that was pushing up rents.
"In some parts of the country, state governments have been far too slow at releasing land and that has contributed to the shortages.
"The other thing that governments generally around Australia have got to do is to make sure the level of land releases is adequate."
Mr Howard said rising rental prices underlined the "folly" of people who advocated the abolition of negative gearing for housing investors.
Source: AAP
Wednesday, February 21, 2007
Property vultures critised for going for easy pickings in the property investment market
The Nsw Department of Fair Trading will investigate a controversial property scheme that capitalises on the misery struggling homeowners in Sydney's mortgage belt in the property downturn.
Property Secrets buys "bargain" properties in Sydney's struggling outer-west suburbs that have been repossessed by banks during the property slump, and former housing commission properties, on behalf of investor clients.
The group then undertakes renovations on the properties and obtains rproperty valuations that come in well above the investor's outlay, encouraging clients to reinvest the difference in more depressed properties.
"Fair Trading Minister Diane Beamer has looked into the scheme to see if there are any breaches of the Fair Trading Act or any acts relating to property purchases," said a spokesman yesterday. "On the surface it seems that while it may not be illegal, there are moral questions you have to ask about this."
Property Secrets operates twice-weekly property investment tours of depressed suburbs such as Mount Druitt in Sydney's struggling western growth corridor, where home owners have been squeezed by the double-whammy of rising interest rates and plummeting house prices.
Property Secrets founder Paul Giezekamp would not respond to questions from The Australian yesterday. In a written statement the group said the company's conduct was in "strict compliance" with the Fair Trading Act.
"It is true that Property Secrets intends to purchase cheap properties in a depressed market from motivated sellers, but there is no public utility served by Property Secrets and investor clients staying away," the group said.
"The result is a rejuvenation of some of Sydney's poorest and most disadvantaged suburbs."
During a Property Secrets tour on Tuesday, attended by The Australian, Property Secrets consultant Jennifer Reeves told potential investors: "Nobody works out here so there's nothing else to do except breed and rent houses."
After Ms Reeves made the remark, The Australian was approached by a fellow Property Secrets consultant and told not to publish the statement.
Ms Reeves's comments, published yesterday, sparked debate on talkback radio, with Ms Beamer also weighing in on the controversy.
"As minister for Western Sydney I was extremely offended by the quotes attributed to this gentleman's property consultant," Ms Beamer said yesterday.
In a written statement from Property Secrets, Ms Reeves denied making those statements.
Later during Tuesday's Property Secrets tour - as printed in The Australian - Ms Reeves also said to investors: "Okay, so out here we put our blinkers on - we might not like what we see but it's okay, we're not living here and we get a nice tenant to move in."
Real estate consumer advocate Neil Jenman said buying properties for less than they had sold for was simply "opportunistic" and wise investing.
Source: The Australian
Property Secrets buys "bargain" properties in Sydney's struggling outer-west suburbs that have been repossessed by banks during the property slump, and former housing commission properties, on behalf of investor clients.
The group then undertakes renovations on the properties and obtains rproperty valuations that come in well above the investor's outlay, encouraging clients to reinvest the difference in more depressed properties.
"Fair Trading Minister Diane Beamer has looked into the scheme to see if there are any breaches of the Fair Trading Act or any acts relating to property purchases," said a spokesman yesterday. "On the surface it seems that while it may not be illegal, there are moral questions you have to ask about this."
Property Secrets operates twice-weekly property investment tours of depressed suburbs such as Mount Druitt in Sydney's struggling western growth corridor, where home owners have been squeezed by the double-whammy of rising interest rates and plummeting house prices.
Property Secrets founder Paul Giezekamp would not respond to questions from The Australian yesterday. In a written statement the group said the company's conduct was in "strict compliance" with the Fair Trading Act.
"It is true that Property Secrets intends to purchase cheap properties in a depressed market from motivated sellers, but there is no public utility served by Property Secrets and investor clients staying away," the group said.
"The result is a rejuvenation of some of Sydney's poorest and most disadvantaged suburbs."
During a Property Secrets tour on Tuesday, attended by The Australian, Property Secrets consultant Jennifer Reeves told potential investors: "Nobody works out here so there's nothing else to do except breed and rent houses."
After Ms Reeves made the remark, The Australian was approached by a fellow Property Secrets consultant and told not to publish the statement.
Ms Reeves's comments, published yesterday, sparked debate on talkback radio, with Ms Beamer also weighing in on the controversy.
"As minister for Western Sydney I was extremely offended by the quotes attributed to this gentleman's property consultant," Ms Beamer said yesterday.
In a written statement from Property Secrets, Ms Reeves denied making those statements.
Later during Tuesday's Property Secrets tour - as printed in The Australian - Ms Reeves also said to investors: "Okay, so out here we put our blinkers on - we might not like what we see but it's okay, we're not living here and we get a nice tenant to move in."
Real estate consumer advocate Neil Jenman said buying properties for less than they had sold for was simply "opportunistic" and wise investing.
Source: The Australian
Wednesday, February 07, 2007
Housing Construction activity slows for the fourth month straight
Building activity in Australia's construction sector deteriorated last month, underpinned by a reduction in new business, but stable interest rates this year should provide some support to the housing sector.
The Australian Industry Group/Housing Industry Association (HIA) performance of construction index (PCI) fell 3.7 points to a reading of 48.4 in January, below the 50.0 points level separating expansion from contraction.
Ai Group economic and research associate director Tony Pensabene said the reduction in new business is consistent with reports by companies of a decline in customer enquiries and fewer invitations to tender.
"With new orders having now fallen for four straight months, weakness in the industry is set to continue, pushing any recovery out to at least the second half of 2007," he said.
"On top of this, interest rate uncertainty, low housing affordability and land supply shortages are among the factors having negative influences on demand.
"Under these conditions, industry needs stability in the interest rate environment."
Of the sectors surveyed, only commercial construction expanded in January, having risen seven consecutive months.
The house building and apartment sectors remained in decline, while work on engineering construction projects fell for the first time since April 2006.
The result follows the moderate growth in total construction activity recorded in December 2006.
HIA housing and economics executive director Simon Tennent said the combined effect of the three interest rate rises of 2006 had taken the wind out of the sails for Australia's builders.
"It is hoped, however, that with the inflation cycle now easing, and with house prices still edging up and rental markets tightening, housing demand will return in 2007," Mr Tennent said.
AAP
The Australian Industry Group/Housing Industry Association (HIA) performance of construction index (PCI) fell 3.7 points to a reading of 48.4 in January, below the 50.0 points level separating expansion from contraction.
Ai Group economic and research associate director Tony Pensabene said the reduction in new business is consistent with reports by companies of a decline in customer enquiries and fewer invitations to tender.
"With new orders having now fallen for four straight months, weakness in the industry is set to continue, pushing any recovery out to at least the second half of 2007," he said.
"On top of this, interest rate uncertainty, low housing affordability and land supply shortages are among the factors having negative influences on demand.
"Under these conditions, industry needs stability in the interest rate environment."
Of the sectors surveyed, only commercial construction expanded in January, having risen seven consecutive months.
The house building and apartment sectors remained in decline, while work on engineering construction projects fell for the first time since April 2006.
The result follows the moderate growth in total construction activity recorded in December 2006.
HIA housing and economics executive director Simon Tennent said the combined effect of the three interest rate rises of 2006 had taken the wind out of the sails for Australia's builders.
"It is hoped, however, that with the inflation cycle now easing, and with house prices still edging up and rental markets tightening, housing demand will return in 2007," Mr Tennent said.
AAP
Tuesday, February 06, 2007
War babies fade into history as the bay boomers bloom
In many respects they are the forgotten generation. They were born in the years between Wall Street's implosion and Hiroshima's explosion. Some know them as Depression kids; to others they are war babies; to others again they are the silent generation.Their birthplace is the rarely explored windward side of the baby boomer mountain. This generation claims, and is afforded, no defining letter of the alphabet. They are most popularly known as the diminutive pre-boomer generation, where "diminutive" refers to their number rather than to the scale of their cultural contribution. And yet, of all God's generations it is the pre-boomers who have perhaps most profoundly shaped today's Australia, especially at the political level.
Much of this generation was too young to participate in World War II and the Korean War; by Vietnam they were too old.
Either through skilful navigation or by damn good luck these kids, born after and before calamitous events, morphed in the 1950s into the world's first teenagers.
The first incarnation of this bold new life form is thought to have been the "bobby-soxer" - girl fans of Frank Sinatra who in the late 40s boogied and bebopped dressed in full skirts and short white socks and with hair in ponytails.
Richie Cunningham was a teenager from the pre-boomer generation. But then so too were James Dean, Elvis Presley and Prime Minister John Howard. (Although - and there is no firm evidence to support this theory - I suspect John Howard as a teenager was much closer to Richie Cunningham than to James Dean.)
Not that pre-boomers were white-bread teenagers.
Perhaps in anticipation of the youth revolution that would follow in the 1960s, pre-boomers invented primitive forms of teenage counter-culture. There were beatniks and bodgies; the latter manifested in a uniquely female form known, delightfully, as widgies. (The 1950s widgie should not be confused with the contemporary wedgie, which you may be assured is a different concept altogether.)
Maynard G.Krebs, subject of the popular television series The Many Loves of Dobie Gillis (1959-1963), was a self-styled beatnik who, interestingly enough, would later inspire the Gen-Y cartoon character Shaggy in Scooby Doo.
Yoko Ono was arguably the first global beatnik; even today at the age of 74 she remains proudly and defiantly beatnikesque in her fashion and demeanour. (I am sure I have seen recent pictures of Yoko in a black beret.)
Unlike modern genres of urban sub-culture, such as "Goths", the highest and purest form of beatnikism was never defined by youth. While young Goths look cool, Goths who are middle-aged, let alone geriatric, are frankly a bit of a worry.
The pre-boomer generation delivered this nation two prime ministers: John Howard and Paul Keating. The brash baby-boomer generation, for all the big talk of changing the world, has yet to catapult anyone beyond leader of the opposition. (Baby boomers are such political teasers.)
But the fertile generational brine that delivered our most recent prime ministers also yielded colourful mutations: teddy boys, mods and rockers were, with perfect 20-20 hindsight, the necessary building blocks upon which stronger, sharper and edgier sub-groups would be later based.
Academics enjoy musing deferentially about "standing on the shoulders of giants", but then so too must London's late-1970s punks, who could not have manufactured their in-your-face subculture without a rebel heritage stretching back to the bobby-soxers. After all, the punk Mohican hairstyle is surely nothing more than an erect pony tail.
Beyond their teenage years the pre-boomers tackled the 1960s with a style and panache that was, well, decidedly 1960s. Those pesky baby boomers were culturally impotent; they were epitomised at this time by the hapless Theodore (Beaver) Cleaver in Leave it to Beaver (1964).
Fashion and form quickly evolved around pre-boomer tastes. This was the era forensically spoofed by Mike Myers as Austin Powers. Austin's shagadelic world delivered slim ties, popularised the Watusi and the now-famous faux sophistication of "Bond, James Bond".
But the pre-boomer's grip on youth culture came crashing down in the northern summer of 1967. The boomers would wait not a moment longer for their summer of love. Pre-boomers, perhaps content with their lusty fling with cultural power, retreated to the background, happy to watch on as long-haired hippies slogged it out with the frugal establishment over the following decade.
From there the pre-boomers morphed into middle age, where they once again blossomed. By the mid-1980s pre-boomers were at the peak of their corporate power and once again they set the cultural agenda.
The messianic Gordon Gekko delivered what would turn out to be the pre-boomer's parting shot: "greed is good". And at that time greed did indeed seem good. The shoulder pads were big and the hair was even bigger. Conspicuous consumption by middle-aged pre-boomers delivered the perfect antidote to a Depression-ravaged and war-rationed childhood.
Actors Joan Collins and Larry Hagman in Dynasty and Dallas served up, and spiced up, a heady mix of materialism and Machiavellian manipulation to a pre-crash world awash with pre-boomer ideals.
But the pre-boomer's shooting star fizzled out in the late 1980s. It was at this time that circling, cawing, carnivorous boomers swooped and seized control, just as they did with youth culture in that single northern summer more than two decades earlier.
From that point onwards the pre-boomers hunkered down into retirement, where they remain today passively observing and quietly remembering a time when the Watusi ruled the world.
Now aged between 61 and 76 this generation has either actually or virtually seachanged; many are, in either case, wistfully musing on the merits of a wanderlust life as a grey nomad.
Author Bernard Salt, a KPMG Partner in Australia
bsalt@kpmg.com.au
Much of this generation was too young to participate in World War II and the Korean War; by Vietnam they were too old.
Either through skilful navigation or by damn good luck these kids, born after and before calamitous events, morphed in the 1950s into the world's first teenagers.
The first incarnation of this bold new life form is thought to have been the "bobby-soxer" - girl fans of Frank Sinatra who in the late 40s boogied and bebopped dressed in full skirts and short white socks and with hair in ponytails.
Richie Cunningham was a teenager from the pre-boomer generation. But then so too were James Dean, Elvis Presley and Prime Minister John Howard. (Although - and there is no firm evidence to support this theory - I suspect John Howard as a teenager was much closer to Richie Cunningham than to James Dean.)
Not that pre-boomers were white-bread teenagers.
Perhaps in anticipation of the youth revolution that would follow in the 1960s, pre-boomers invented primitive forms of teenage counter-culture. There were beatniks and bodgies; the latter manifested in a uniquely female form known, delightfully, as widgies. (The 1950s widgie should not be confused with the contemporary wedgie, which you may be assured is a different concept altogether.)
Maynard G.Krebs, subject of the popular television series The Many Loves of Dobie Gillis (1959-1963), was a self-styled beatnik who, interestingly enough, would later inspire the Gen-Y cartoon character Shaggy in Scooby Doo.
Yoko Ono was arguably the first global beatnik; even today at the age of 74 she remains proudly and defiantly beatnikesque in her fashion and demeanour. (I am sure I have seen recent pictures of Yoko in a black beret.)
Unlike modern genres of urban sub-culture, such as "Goths", the highest and purest form of beatnikism was never defined by youth. While young Goths look cool, Goths who are middle-aged, let alone geriatric, are frankly a bit of a worry.
The pre-boomer generation delivered this nation two prime ministers: John Howard and Paul Keating. The brash baby-boomer generation, for all the big talk of changing the world, has yet to catapult anyone beyond leader of the opposition. (Baby boomers are such political teasers.)
But the fertile generational brine that delivered our most recent prime ministers also yielded colourful mutations: teddy boys, mods and rockers were, with perfect 20-20 hindsight, the necessary building blocks upon which stronger, sharper and edgier sub-groups would be later based.
Academics enjoy musing deferentially about "standing on the shoulders of giants", but then so too must London's late-1970s punks, who could not have manufactured their in-your-face subculture without a rebel heritage stretching back to the bobby-soxers. After all, the punk Mohican hairstyle is surely nothing more than an erect pony tail.
Beyond their teenage years the pre-boomers tackled the 1960s with a style and panache that was, well, decidedly 1960s. Those pesky baby boomers were culturally impotent; they were epitomised at this time by the hapless Theodore (Beaver) Cleaver in Leave it to Beaver (1964).
Fashion and form quickly evolved around pre-boomer tastes. This was the era forensically spoofed by Mike Myers as Austin Powers. Austin's shagadelic world delivered slim ties, popularised the Watusi and the now-famous faux sophistication of "Bond, James Bond".
But the pre-boomer's grip on youth culture came crashing down in the northern summer of 1967. The boomers would wait not a moment longer for their summer of love. Pre-boomers, perhaps content with their lusty fling with cultural power, retreated to the background, happy to watch on as long-haired hippies slogged it out with the frugal establishment over the following decade.
From there the pre-boomers morphed into middle age, where they once again blossomed. By the mid-1980s pre-boomers were at the peak of their corporate power and once again they set the cultural agenda.
The messianic Gordon Gekko delivered what would turn out to be the pre-boomer's parting shot: "greed is good". And at that time greed did indeed seem good. The shoulder pads were big and the hair was even bigger. Conspicuous consumption by middle-aged pre-boomers delivered the perfect antidote to a Depression-ravaged and war-rationed childhood.
Actors Joan Collins and Larry Hagman in Dynasty and Dallas served up, and spiced up, a heady mix of materialism and Machiavellian manipulation to a pre-crash world awash with pre-boomer ideals.
But the pre-boomer's shooting star fizzled out in the late 1980s. It was at this time that circling, cawing, carnivorous boomers swooped and seized control, just as they did with youth culture in that single northern summer more than two decades earlier.
From that point onwards the pre-boomers hunkered down into retirement, where they remain today passively observing and quietly remembering a time when the Watusi ruled the world.
Now aged between 61 and 76 this generation has either actually or virtually seachanged; many are, in either case, wistfully musing on the merits of a wanderlust life as a grey nomad.
Author Bernard Salt, a KPMG Partner in Australia
bsalt@kpmg.com.au
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