Paul Castran - CEO - Castran Gilbert

With affordability at its lowest level on record, first-home buyers are thinking outside the square.  And by outside the square, we’re talking inside the family!

The home-ownership dream rarely used to feature a sibling in your bathtub and a parent on your certificate of title. These days though, first-home buyers are becoming more flexible.

Housing affordability fell to record lows in the March quarter this year according to the latest Housing Industry Association-Commonwealth Bank report.                Mortgage payments accounting for 30.7 per cent of total first-home buyer income these days!

Generations X and Y are also settling down later meaning for many home ownership is a solo battle.

It’s not surprising then that increasing numbers of first-home buyers are teaming up with siblings, parents or friends in a bid to break into the property market.

“There’s been a noticeable trend towards family members buying property together, as property prices are still very high, particularly for first-home buyers,” says Aussie Home Loans boss John Symond.

The number of family members taking out mortgages together has jumped from about 1% of all loans originated by ‘Aussie’ to 5 per cent over the past two years!   Mortgage Choice has reported a similar trend. A survey carried out by the company last year revealed more than 6 per cent of people who bought property within the past two years had done so with family or friends. And of those who intended to buy property within the next two years, over 8 per cent intended to do so with family or friends!

Home buyers are flocking back to variable rate mortgages which now account for 91% of the residential lending market, their highest proportion in four months.

Mortgage broker Mortgage Choice reported in April basic variable mortgages accounted for 48.15 per cent of all home loans approved - up nearly one per cent from March, while standard variable mortgages comprised 42.77 per cent of the market, down 1.47 per cent from March.

Basic variable loans generally have less loan features than a standard variable loan.

Fixed rate loans accounted for four per cent of all approvals.

Basic variable loans have been the most popular loan type though for the last four months after overtaking standard variable for the first time in January 2009!

Rates charged on variable home loans move in line with interest rates set by the Reserve Bank of Australia which successively cut its overnight cash rate since September last year to a 49-year low!

And despite interest rates being at their lowest in decades, the sensitive global and domestic economic climate is having a strong influence over loan product preferences.

Consumer conservatism with rates and fees continues to win out against loan flexibility and extra features.

Line of credit loans in April, popular with property investors, posted a fall, five per cent down from the previous month.

Commitments for owner-occupied housing rose 4.9 per cent in March, seasonally adjusted, to 59,793, Australian Bureau of Statistics data showed this month.

Total housing finance by value rose 6.7 per cent in March, seasonally adjusted, to $20.688 billion, based on the latest data available.

Melbourne’s outer suburb vacancy rates have improved from 0.7 per cent to 1.8 per cent in the past six months, according to the Real Estate Institute of Victoria’s April vacancy rates.

Rental vacancy rates across Melbourne are reasonably steady having been between one and 1.4% for          12 months.  However it‘s significant that there’s a noted improvement in the outer suburbs.

The improvement most likely due to the number of first homebuyers moving from rented accommodation into their own homes with the assistance of the grants, bonus and boosts.

The March quarter median prices show that most of the marketplace activity has been in the outer suburbs; for instance Craigieburn, Melton South, Hillside, Epping, Caroline Springs, Werribee and Meadow Heights – all outer suburbs of Melbourne very popular with first homebuyers.

It‘s great news for renters if a by-product of the grants, bonus and boosts is an improvement in availability of rental accommodation, however monitoring of the situation over the next few months will tell of any continual improvement..

The last month’s REIV members figures show a very minor change in the inner suburbs where the vacancy rate moved from 1.5 to 1.3 per cent and in the middle suburbs where it moved from 1.4 to 1.3 per cent.

551 Punt Road SOUTH YARRA

Renovated from the ground up, no expense spared, this gorgeous home has been re-stumped and rewired with new double glazing.  It features a stunning gourmet kitchen opening on to a large family room at the rear overlooking a picturesque back garden with entertaining area …accommodation includes three huge double bedrooms plus study (master with ensuite) formal sitting room, all with 12 ft plus ornate Victorian ceilings!

There’s 4 open fire places perfect to share a glass of red, cosy up and fall asleep in front of this winter, stunning new timber floors with brass inlay and ducted heating! 

There’s off street parking for  a number of cars including a car port, as well as a double storey cottage / studio. 

This beautiful home is a truly beautiful example of a timeless triple brick “Victorian” superbly decorated with feature gold leaf!  

You’d think the stars would be aligned wouldn’t you: low rates, a steady population growth, low vacancy rates, strong rental market and a shortage of housing in the majority of capital cities.

Since the latter 2008, the number of loans to first home buyers has outweighed substantially those to existing owner-occupiers and investors as first-time buyers rush to take advantage of the increased government grant. These numbers are set to surge in the next two months after the Prime Minister indicated that the increased grant will end June 30. In previous interest-rate cycles, lending to investors and existing home buyers increased alongside that to first-home buyers.

Partly, the reason is that investors aren’t getting the first-home-owner grant, and when laying your own money down instead of the governments’, you think more carefully before deciding to take the plunge. Unemployment concerns and fears about how the economy will evolve this year are also reasons why investors aren’t yet entering the market.

Consumer sentiment figures released earlier this month by the Westpac-Melbourne Institute Survey found pessimists still outnumbered optimists and, with the prospect of more unemployment, that’s unlikely to change anytime soon.

Interest rates are one of the crucial aspects investors consider. During the past month or so, several of the big banks have increased their fixed mortgage rates, even though variable rates are expected to go even lower!

Banks say it’s due to an increase in the rates in the wholesale market where they access funds. Not everyone accepts that that is the reason, but most acknowledge it’s a signal borrowing costs are near their lowest levels ever!!

Some economists believe fixed rates will continue to rise as banks manage their risk, and it is just a matter of the speed at which it happens. Fixed rates are not popular at the moment even with investors who traditionally used this option.

It shouldn’t be a surprise, given the cash rate is expected to fall to 2 per cent by the end of the year.

But fixed rates are a bit of a barometer of the longer term trend in interest rates, so they’re worth watching. It also pays to remember that just because the Reserve Bank of Australia cuts rates’, that doesn’t mean banks have to follow suit.

Only time can tell, whether or not property buying will be better next year!

The value of our Aussie homes increased in the first quarter of the year, bucking a global trend downwards believe it or not!

House and flat prices in Australia increased in value by 1.6% in the first three months of the year, helped by a scarcity of supply, lower interest rates and incentives to first-home buyers.

The slight recovery in Australia “has primarily been driven by the 40% fall in home loan rates down to 5.7%, which are now at their lowest since July 1968!”

March’s three-month gain follows a 0.1% rise in the three months to February in the              RP Data-Rismark’s national dwelling value index, and a 3% fall in the value of “cap” city homes in 2008.

The strength of Australian housing prices is a world away – well so far - from the 2.7% drop in British home prices over the first quarter, capping a year to March a whopping 17.5% plunge!

US housing didn’t fare too much better, with prices in the top 20 cities sinking 1.9% in February, which brought the 12-month fall to 18.6%, according to the most recent     S&P/Case-Shiller index, a widely followed measure.

RP Data-Rismark said the first-home buyer’s grant, ending on June 30, has acted like a catalyst for new home buying in Australia, but lower interest rates are sustaining the market’s growth.

Increasing rents boosted the housing component of the Consumer Price Index (CPI) by   0.9 per cent for the quarter and the overall annual increase to 5.5 per cent, that’s according to  Australian Bureau of Statistics figures released this week.

The CEO of Real Estate Institute of Australia has said, “The majority of this increase in the housing component was driven by rents, which increased nationally by 1.7 per cent over the quarter and 8.4 per cent over the year. The cities where rents increased the most were Perth and Darwin with annual increases of 10.9 per cent and 13.5 per cent respectively!”

This rent increase in the recent quarter reflects low vacancy rates and the scarcity of rental properties across capital cities, combined with the decrease in building approvals and housing finance for investment.

The National Rental Affordability Scheme should hopefully relieve this figure, however the impact won’t be felt for quite some time.

“With an underlying demand for additional housing at around 200,000 dwellings per year and commencement of new dwellings of 147,000 in 2008, Australia will need to build significantly more homes than what has occurred to meet the rental demand.”

Housing affordability improved since the Reserve Bank rate cuts, although there’s been very little     flow-on benefit to those in the rental market.

“With lower interest rates and greater affordability, now’s the time for those within the rental market to seriously consider purchasing their own home.”

Presentation is the key to achieve the highest possible sale price.

Nothing is clearer than when you look at how Australia’s great retailers present and merchandise their products. For example; Sportsgirl illuminate, air-condition, merchandise in size and colour and display in the highest retail fit out possible. This enables a substantial margin.

Presentation of your most valuable asset is paramount. We would suggest that one of Castran Gilberts representatives advise you on a case by case basis before you sell.

Paul Castran