There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.
Each Saturday morning I like to share some of the ones I’ve read during the week.
The weekend will be over before you know it, so enjoy some weekend reading.
What a difference a year makes in the property market
It has certainly been an interesting year for the property market.
So what has happened in 2018?
An article on Realestate.com.au takes a look at the year that was, and what we can take away from it.
This time last year, the market was beginning to change.
The Royal Commission was just about to be announced and the Sydney market was just starting to show some signs of weakness.
Developer activity was moderating and investors were pulling back.
It’s been no surprise then that in 2018, many of Australia’s property markets experienced some significant shifts.
The Royal Commission has made borrowing difficult
The Financial Services Royal Commission was announced on 30 November 2017 and banks began adjusting their lending practices almost immediately.
In 2018, anyone looking to get a loan has found it increasingly difficult and we saw a marked reduction in lending to all buyers.
But, it was investors that staged the biggest pull back.
By the end of 2018, lending to investors has dropped by almost 30% from the peak.
We’ll know the final outcome of the Royal Commission in early 2019, at which stage we’ll get a better idea as to what the likely implications are to property.
Prices fell in Sydney and Melbourne
Sydney prices peaked in July 2017 while Melbourne’s pricing reached a high at the end of 2017.
Both cities experienced price declines in 2018.
While we started to see buyer activity pull back on realestate.com.au at the end of 2017, this accelerated far quicker than expected – likely due to extensive reporting of the potential of a price crash.
At this stage, it looks like prices will continue to drop next year until there is greater certainty as to the impact of the Royal Commission, and when the 2019 Federal election has been decided.
We saw the end of high auction numbers and clearance rates
The biggest Super Saturday ever recorded was in Melbourne at the end of October 2017, when almost 2,000 properties went to auction.
This coincided almost exactly with prices peaking in the city.
Clearance rates in 2018 were a lot lower than they were the previous year.
At the same time fewer people are now going to auction and more people are moving to private sale.
Will clearance rates get to below 40%?
There has been only one weekend where clearance rates got that low and that was in Sydney at the peak of the Global Financial Crisis.
With very few places going to auction, agents adapted quickly and the next weekend, the clearance rate jumped back up to 50% as fewer properties were sold by the auction method.
First home buyers are back
Pretty much everywhere, first home buyers staged a recovery, with Sydney showing the biggest resurgence.
Part of this was to do with improved first home buyer incentives in many states.
However, the other driver was that there were fewer investors.
Investors and first home buyers frequently target similar properties in similar locations, so more limited competition was good news for this buyer group.
First home buyers were also encouraged by the slower market in many cities, giving them time to make decisions without the pressure of fast rising prices.
Hobart just kept growing
Hobart has been seeing rising buyer activity on realestate.com.au since 2015 and in 2018 this continued.
With a lot of buyer activity comes price growth, and Hobart was the strongest capital city in 2018.
The strength of Hobart also spread to other parts of Tasmania with Launceston seeing double-digit price growth over the year.
With more stringent lending conditions, and a pull back of rental activity, it is unlikely that we will continue to see very strong price growth in Hobart next year.
Developer activity continued to moderate
Developers in Australia have been buoyed by lots of local and offshore investors over the past few years.
However, both groups have steadily declined, which led to fewer buyers and therefore less development.
The pact also flowed through to development site sales, which also reduced in volume.
Read the full article here
Melbourne listings surge out of the blocks
There’s been an increasingly high stock rise in Melbourne.
It’s an easier buying environment for property seekers in one sense right now, but it’s also become considerably harder to get a mortgage.
It may be a buyer’s market, but many can’t afford to buy what they thought they might be able to.
Stock listings rose in November, as they are wont to do, but the increase in listings in Melbourne has been by far the most substantial, with total stock listings running all the way up to 43,727 from 33,070 a year earlier.
The latest figures from SQM Research are charted below, and showed that the usual November increase was noticeably more marked in Melbourne (as always, you can click on the graphics to expand them):
In Sydney there has also been a marked increase in listings in certain regions.
Read the full article here
‘Risks are on the downside’: Why Australia’s housing downturn could see the RBA cut rates again
The reserve bank finished 2018 with, as predicted, no change in interest rates.
But is this set to change?
In this article on Business Insider Economist Dr Shane Oliver looks at why we could be seeing another interest rate cut.
AMP Capital Chief Economist Shane Oliver is one of the more pessimistic forecasters when it comes to the outlook for Sydney and Melbourne home prices.
Following the release of CoreLogic’s Home Value Index earlier this week, revealing that Sydney and Melbourne home prices fell by 1.4% and 1% respectively from October, Oliver says the risks to his forecasts are now to the downside.
He says there are a number of factors working in tandem to push prices lower in these cities, describing it as the “perfect storm”.
“The decline in property prices is being driven by a perfect storm of tighter credit conditions, poor affordability, rising unit supply, reduced foreign demand, the switch from interest only to principle and interest mortgages for a significant number of borrowers, fears that negative gearing and capital gains tax concessions will be made less favourable if there is a change of government, falling price growth expectations and FOMO (fear of missing out) risking turning into FONGO (fear of not getting out) for investors,” Oliver says.
“These drags are most evident in Sydney and Melbourne because they saw the strongest gains into last year and had become more speculative with a greater involvement by investors.”
As seen in this simple-yet-effective chart from Oliver, the recent downturn in CoreLogic’s national price measure only really reflects the movements in Sydney and Melbourne, the two markets where prices boomed in recent years.
In average weighted terms, Australia’s smaller capital city markets — which didn’t participate in the prior price boom — are now failing to participate in the current price downturn.AMP Capital
Oliver expects those trends in his chart will continue in the period ahead, suggesting that downside risks are emerging to valuations in Sydney and Melbourne, but not in the other capitals.
Read the full article here
‘It’s completely unfair’: Mortgage insurance double dipping prevents home owners with low equity from refinancing
Results indicate mortgage insurance is hindering borrowing capacity for investors.
According to an article on Domain.com.au , mortgage insurers are double dipping and the affect on further borrowing is severe.
Insurers are double dipping on one of the big hidden costs of buying a home, with some home owners slugged twice for lender’s mortgage insurance on the one property.
Borrowers with deposits of less than 20 per cent are forced to take out LMI at the time of purchase, and again if they choose to refinance with less than 20 per cent equity, prompting calls to reform the practice.
LMI is usually compulsory for buyers with a small deposit and protects the lender if the borrower defaults.
It has cost home owners $6 billion over the past four years, according to financial comparison site Mozo.
Mortgage insurance is not refunded or transferred when borrowers refinance, which is particularly problematic for borrowers whose homes have declined in value, according to Mozo property expert Steve Jovcevski.
“If you started with a 10 per cent deposit in 2016 and have been working hard to pay down your loan to get to at least 20 per cent equity to allow you to refinance to get a cheaper rate, the 4.5 per cent fall property prices could be your worst nightmare,” he said.
According to Mozo, 23 per cent of owner-occupiers paid mortgage insurance, and a borrower with a 10 per cent deposit on a $500,000 home pays about $10,000 in LMI, either upfront or as part of the loan.
The fact that mortgage insurance is not transferable, in effect, locks home owners with low equity into sticking with their lender, or face being charged LMI twice if they refinance. It’s something Jovcevski says needs to change.
“It’s time lenders and mortgage insurers allowed these borrowers to move their loan without incurring a penalty,” he said.
“It’s just completely unfair and trapping borrowers to one lender.”
A Productivity Commission report in June recommended lenders refund the cost of LMI when borrowers refinance.
The report called on the Australian Securities and Investments Commission to require lenders to provide borrowers with the option to get some of their “unused” LMI back if they switched lender.
Commissioner Dr Stephen King said Australia did not have a healthy LMI market, with little competition.
Mortgage insurance is dominated by two major players: QBE and Genworth.
“If you’re an insurer you’d like the current system, but if you’re a borrower you don’t like the current system,” King said.
Making LMI refundable rather than transferable would make changing lenders simpler, according to King.
“There may be considerable differences between your new loan and your old loan,” he said.
“Simply transferring across will often mean there are going to be windfall gains or losses on both sides.”
The report also suggested allowing LMI to be paid in instalments, which Mortgage Choice chief executive Susan Mitchell said was “worthy of consideration”.
She said LMI should be treated the same way as other insurance products.
“If you purchase car insurance and decide to sell your car within the year, your insurer will refund the difference to you,” she said.
“The same logic should be applied to lender’s mortgage insurance in order to give borrowers the freedom and choice to switch loan providers if their needs change.”
Read the full article here
TOP 10 HOLIDAY HOMES IN AUSTRALIA IN 2018
Summer means holidays – and for many families the best holidays are spent at the beach staying in a holiday home.
So where are some of the most beautiful holiday homes in Australia?
This article from Viewretreats.com gives a sneak peak at some of the most stunning holiday properties around.
More often than not, your choice of accommodation can make or break your holiday.
If you are looking to have a luxurious self-contained home away from home, our exclusive collection of the Top 10 Holiday Homes in Australia in 2018 is guaranteed to add a touch of style and indulgence to your next getaway.
We have compiled some of Australia’s finest homes and private luxury villas that are architectural masterpieces, lavishly appointed, and located in some of the most desirable holiday locations.
1. PICADILLY HOUSE, BYRON BAY HINTERLAND, NSW
If you’re searching for a luxurious getaway on a grand scale, then Picadilly House is the holiday home for you.
2. SOUTH HAMPTON LUXURY RETREAT, MORNINGTON PENINSULA, VIC
Situated on the scenic Mornington Peninsula, South Hampton consists of the main residence, a cottage and a loft – each with views of the pristine surrounds of Red Hill all the way to the bay.
3. RACQUET RETREAT, SUNSHINE COAST, QLD
Nothing says luxury and indulgence quite like Racquet Retreat in Noosa Heads on Queensland’s Sunshine Coast.
4. WOLSELEY HOUSE, SOUTH COAST, NSW
Set upon 50 secluded acres in one of the South Coast’s most desirable locations, Wolseley House is a grand luxury manor with four elegantly appointed bedrooms, ideal for families or groups who are looking for a relaxed countryside getaway or weekend escape.
5. SOPHIE’S VINEYARD, MARGARET RIVER, WA
Enjoy a stress-free and tranquil escape with a stay at Sophie’s Vineyard, a luxuriously chic 5-bedroom retreat located on the doorstep of some of the Margaret River region’s best sights, towns and beaches.
6. SEIDLER HOUSE, SOUTHERN HIGHLANDS, NSW
Designed by Australia’s architectural master, the late Harry Seidler, this stunning contemporary 4-bedroom masterpiece with views over the New South Wales Southern Highlands is the perfect luxury accommodation for sophisticated holidaymakers and wine buffs.
7. WILBURRA, KANGAROO VALLEY, NSW
Stylish, exquisite and sumptuous are just some of the words that best describe Wilburra Executive Retreat.
8. CETACEAN, WHALE BEACH, NSW
Situated within easy reach of one of Sydney’s most popular shores, Cetacean promises a unique experience for families or groups seeking a breezy and tranquil holiday.
9. NARRINGA RIDGEVIEW, BYRON BAY HINTERLAND, NSW
Located just a stone’s throw away from Byron Bay, Narringa Ridgeview is an architecturally designed luxury retreat perfect for families or group of up to 12 people.
10. ALINGHI BEACH HOUSE, CENTRAL QUEENSLAND, QLD
Alinghi Beach House is an architect-designed five-bedroom grand residence located within an exclusive estate on a pristine stretch of coast, 6 km’s south of Agnes Water in Queensland.
Read the full article here
Weekend video: Can you solve the time travel riddle? – Dan Finkel
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