I can't remember a time when "opinions" are more divided, and for Aust Residential action, everyone has an opinion
from Michael Pascoe
http://www.smh.com.au/business/rba-on-h ... -n7x7.html" ....... I can’t recall any previous instance of our central bank giving so blunt a warning about the dangers of an asset bubble as served up ........ pilots last year. “Build more housing and build it fast,” the RBA more-or-less ordered. “Otherwise housing prices will take off and we’ll make you very sorry.”
It will end in tears as global central bank theology no longer states that asset bubbles should be left alone – they are to be pricked.
The three main housing price surveys – the ABS, RP Data-Rismark and Australian Property Monitors – differ in their methodology and can vary a bit in their findings, but it’s now three out of three that the bubble is inflating.
Today’s ABS score of the average established house in the state capitals jumping 5.2 per cent in the December quarter and 13.6 per cent over 2009 will do as an illustration. And remember that the best of the first-home buyer incentives were already washing out of the market in the December period. Annualise that December quarter figure if you dare.
Perversely, it’s the promise of a housing bubble that is sucking investors back into the market as well as panicking would-be owner-occupiers into taking the plunge. And it’s the reality of a housing bubble that will help force up interest rates.
Throw in today’s TD Securities-Melbourne Institute monthly inflation survey and the idea that the current cash rate is at the bottom end of the RBA’s “neutral” range means nothing. Any doves on the RBA board will be fighting to hold “neutral” as the desired target.
(The TD-MI headline inflation rise of 0.8 per cent and trimmed mean of 0.5 per cent for January contain a seasonal whack – education costs, for example – but still print ugly compared with previous Januaries. And there’s no comfort in the “year-to” figure still being in the RBA’s desired range. As a very rough but much better guide to the current state of play, try annualising the TD-MI results for the last three months and you get a bit over 5.6 per cent. Scary. )
The RBA’s warnings to all levels of government seem to have achieved nothing. Oh, there’s been plenty of talk, there always is, and Kevin even chimed in with some lofty ideas of enforcing national sustainability standards that probably will increase housing costs, not to mention the Feds’ effort in raiding their social housing budget to top up the primary school shed spree.
State governments are incapable of moving on population planning fast enough to make a difference at this stage. Some state governments are simply incapable. And most local governments are hamstrung by their state masters forcing them to extract ever greater charges from developers, never mind ever-growing meddling in private property rights. And the banks still don’t want to lend ot developers. It’s a bleak outlook.
On a purely anecdotal level, I suffered a wonder through a few open-for-inspections around the median Sydney home price on Saturday and found a certain sad air of desperation about them from the buyers’ perspective, not the vendors’.
As one agent remarked, the current market is such that a vendor who agrees to place a property on the market for $600,000 and gets an offer in the first week immediately thinks it must be worth $650,000. A buyer told me of the frustration of agreeing a price, pending a building report only to find the price jacked up by $50,000 while the report was being prepared.
Those of us with grey hair have seen it before. Share prices rising are reported on the business pages but house prices jumping cop front page headlines. Today it’s the ABS figures that will be supported by bullish statements from any and all property “experts”. Tomorrow it will be tabloid TV shows about the money to be made quickly renovating and flicking properties at the rising bottom of the market. And sometime after that, victims will awake to the RBA Governor coming at them with his big blunt instrument.
The could be a partial and temporary alternative. With many small-to-medium enterprises still to feel the recovery as interest rates rise, there’s an argument the RBA should be looking for a sharper weapon – targeting banks’ home mortgage lending capacity rather than bludgeoning all borrowers.
Making mortgages harder to get would do nothing to alleviate the underlying problem of supply and demand, just keeping Gen Xs and Ys at home with their parents even longer, but it could provide breathing space for governments to get off their collective backside.
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and then at the other end of the scale there was this bit of self-interested lachrymony:
Monday - February 1: Harley Cremer CEO, Darius Finance tells RWE Aust Business News what's happening behind the scenes.
" We have avoided the worst of the financial crisis being suffered by the rest of the world. How lucky we are in Oz! "
Even our Reserve bank keeps lifting interest rates to slow down an economy that they believe will otherwise go gang busters. We apparently have been saved by China's unquenchable appetite for our minerals, along of course with our shopper-holics, who will never give up spending if it means keeping our economy steaming ahead.
But am I living in a parallel universe?
As a working finance broker I get to meet a lot of small to medium sized businesses. They are quick to tell me that they are still waiting to experience the joy of our robust market. They get cold comfort in having to pay continuously increasing mortgage payments, in order to keep this buoyant market under control. Try financing a home from one of the only four pillar lenders that has not been devoured.
For a start you had better have exemplary credit, and proof you can still make the payments based on an estimated future elevated interest rate. By the way, be ready to thump up 20% cash deposit, plus fees often running into 5 figures, for stamp duty, legal fees et al. Now if you think that is hard, how about if you are a business wanting to buy a commercial property?
Hold on to your hat.
Our four pillars have all (coincidentally and simultaneously)decided that they would rather give the residentially secured finance their full support. This means that expect them to be real tough on every aspect of a commercial loan, and then some. For instance any so called specialised property, such as hotels, service stations etc are off the table completely. For the rest they have lowered the loan to value ratios to a preferred 65% from up to 80% previously, based on their conservative valuation. Investment properties will need pre-sales, or proof positive that the loan can be serviced from other sources.
If all this seems too hard then it has worked!
But hang in there, nature abhors a vacuum and some time, I hope soon, new lenders who are seriously looking to assist businesses will pop up again" Harley Cremer believes.
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Ultimately, RBA is a blunt instrument, but its the ONLY blunt instrument we have
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edit 02 Feb after RBA announcement
looks like the banks being 'bastards' did the work for the market. Text of RBA Announcement with rates on hold included "..........Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point. Since information about the early impact of those changes is still limited, the Board judged it appropriate to hold a steady setting of monetary policy for the time being...."
