Does this mean another year of the same – or are their green shoots so to speak of a property market revival ?

Well I am predicting normal market conditions – those which we have have seen in Townsville between 1994 – 2001 – and stabilising of prices now that we see buyers entering the market – and most importantly first home buyers out shopping for homes again.

Why did they leave – prices interest rates and bank policies – and with the Bank’s slowly easing policy (although certainly not to 2005 – 2007 policies where moony was easy to obtain), but common sense approaches where Bank’s again are lending 95% of the purchase price of home where  borrowers have established a savings pattern, have clean credit history and stable employment.

The mortgage insurers are also loosening up according to brokers in line with a little more confidence from the lenders.

The buyers coming through houses savaging the market outlook are still their, but many in the last six months got left with egg on there face.

And off course the outlook for interest rates is stable to declining.  The one economist who dared to come out and call the RBA drops, Westpac’s Bill Evan’s, got it mostly right although if you put it in context with the Business Spectator’s article published in the last few days, most economists still think the RBA will not be as aggressive as Evan’s predicited.

“Of course Westpac’s Bill Evans, who pulled off the forecasting coup of the year. On the July 15, Evans turned 180 degrees from projecting further RBA rate hikes to a total of four cuts, commencing in December. It is one indication of how difficult forecasting really is that while Evan’s switch is universally hailed as highly prescient, the timing and magnitude of the forecast itself were wide of the mark. (In the article Fighting a false forecasting war, published November 17, I explained the poorly understood differences between forecasting and investing.) Immediately after Evans’ radical change of tune, which was triggered by an overseas trip, the second quarter inflation numbers printed at a stonkingly high 0.9 per cent (after a similarly high first quarter result). Were it not for the US debt ceiling crisis, the RBA would have hiked rates in August. Instead, the RBA ended up lowering rates in November and December. The first cut was rationalised by the RBA’s willingness to shift monetary policy back to ‘neutral’ on the basis of the one (anomalously low) third-quarter CPI print. The December cut, which tipped policy into stimulatory territory, was justified not by a weak domestic economy, which the RBA repeatedly claimed was tracking ‘at trend’, but rather by the desire to give financial markets some insurance against a deterioration in the European situation”.

Europe is still not out of doll drums and although the US economy is showing some positive signs (finally) it’s like we will see a interest rate range in the broader 6% area for some time – fixed rates on home loans certainly confirm this.

High set three bedroom homes in Vincent and Heatley still represent great rental properties – they are selling as low as $240000 (I have seen one go for $220000 in Heatley) and return  $320 per week – so not quite positive geared – but well under house and land value and certainly worth entertaining as part of a diversified investment portfolio.

Rental demand is still strong in the seasonal periods.

The Townsville economy still echoes some sector distress ( let’s see if the Labour government turn off the building boost).

All in all there are still challenges out there, but nothing like the perfect storm we had in 2008.

And this is how I remember it through 1994 – 2001 – steady as she goes, some ice bergs are out but we can manoeuvre around them – yes some excess stock (units) clearing – but at the same time savvy buyers out their mopping up – normal healthy market conditions returning with a an uplift around 2015.

My tip – Raise your glass 2012 – it will be a little better than 2011, confidence will grow, prices will stabilise in line with interest rates, and property will a solid long term investment as it always has been. Graham Lynham

With interest strong over the past few months, all be at subdued prices, it’s can only be seen as a positive move for property buyers.

Real Estate business filed the following article on line today :

For the second consecutive year, the Reserve Bank of Australia has managed to upstage the race that stops a nation – Melbourne Cup.

At its November Board meeting this afternoon, the Reserve bank decided to cut 25 basis points from the official cash rate, taking the new rate to just 4.5 per cent.

The announcement failed to shock industry pundits, with many economists predicting a November rate cut.

Last week’s benign inflationary growth provided the RBA with the right impetus to cut rates, according to RP Data’s national research director Tim Lawless.

“The rate cut should not come as a surprise from a housing market perspective, considering the soft market conditions that have been evident since June last year have created no inflationary pressures,” he said.

“In fact, capital city home values are down 3.6 per cent from their December 2010 peak and rental rates have increased by just 4.5 per cent over the 12 months to September.

“The improved debt servicing position will be a welcome improvement to anyone with a mortgage, however the primary benefit from the rate cut is likely to be seen in an improvement in consumer sentiment which should lead to an uplift in housing transaction volumes which are currently tracking about 13 per cent below the five year average nationally.”

We recently had the scenario where a house went under contract for $260000. The buyer was happy, until the original Bank he applied to finance could not give him and his partner approval without them putting more equity than they would prefer.

She loved the home – she could work to walk – it was basic but in a quiet street – but with about $15000 to be spent could be made into something special ……

What was interesting was comments the buyer made in informing us of the decision to terminate the contract – he  included a line about not be worried because he had seen an article on “Kochi” (Seven’s morning program) where an analyst said the property market will fall – and he said he will by the house for half the price in 12 months.

These comments where repeated day after day by buyers – and being a reasonably educated person – and having sat on the other side as a Home Lender writing far above average number of home loans – I felt if I have to buyers points of views day and night – I should have my say. Some days  I think I am in Hyde Park Sydney watching someone on soap box, not the front yard of quaint cottage on Palmerston Street – and some buyers follow my around wanting their negative opinion heard.

So how bad is it – terrible !

It is that bad we had five 5 contracts in one week – 2 fail (building and pest and finance) – it’s the end of the world for the Townsville Property Market.

One straight under contract again the next week – making 2 under contract for the week – we are damned !

As of tonight 1 under contract – two being negotiated.

Hang on – there are buyers out there ? Fooorrrrr Reeeeaaaalllll !!!!!!!

So the Townsville Property Market is doomed ?

Unlikely – more we have had a price correction. And houses like very other commodity – they get purchased and sold – there just closer to the heart – so we are sensitive to dropping prices – it’s usually a couples major asset.

What the current trend reveals is that the market is both healthy and has cycled as all economic models should do – it’s an ecosystem.

So what went wrong – between 2001 and 2007  house prices soared – then things went a little skeewiff – prices went that high that average Townsville people (workers) on median wages ($40000 to $50000 per annum) – could not afford to pay $310000 for an average home when interest rates hit  8.63% on the Commonwealth Bank’s Wealth Package variable home loan rate (the rate average buyers enjoyed in 2007).

So the market stalls – the house prices start to adjust  - median wages stay where they are  - and before the Reserve Bank acts with a rate cut the Bank’s start the job – “We will not be undercut”- particularly if you are new client – ahh but Mr Michael Cant says our existing clients enjoy competitive rates – (I would like to see the statistics) – come on Michael your cutting costs at the CBA because you need to compete with erosion of margin – why do high valued clients need to ask for a discount ?  that’s why I tell clients to haggle – and they get up 1.15% of their variable rate (there is  secret – it’s cheaper to give you discount than buy new business ! – the CAB no it)  if you do not ask your plain lazy or got too much money ! Use the force of competition !!!!

The RBA sits and sits (Mrs Steven is immune to what average regional Queenslanders see in median Australia – and we know Canberra politicians in the capital city did not see a hint of recession in the A.C.T.  in the last four years – nor did their house prices – government wages are an economic stimulus package on a on-going basis.

All the good judges now come to the platform – even the local lenders tell their clients not buy the market will fall – (Some do not even own a home – but they all become experts overnight – and start telling there clients that the market will fall – make stupid offers – and they quote there lenders in front of us (one CBA  lender confided to another agent with whom she used to work in the CBA exactly this – confirming again what our buyers where telling us). The brokers are smarter – they are scrapping to make living – and know if they damn the market they will not eat – they do not enjoy the guaranteed salary the local lenders earn in the Banking Industry.

Did they forget that they work for the largest home lender in the land  (which means in turn they forget that the CBA holds 30% plus of the Australian Housing Market – so these same lenders telling their new clients to make stupid offers to owners of which 1 in three have a Commonwealth Bank Home Loan ?????? – great attitude – I  am sure Sir Ralph would not have approved of this. How about Mr Cant struggling to keep his home look – an incerase of 20000 applications in the last few months in Australia because we are offering not to be beaten on a  deal – bet it’s not in Townsville !

And it goes on.

Then the Banks – who are suddenly flush with cash – with there staff bashing the crap out of the market – herding with the sheep bleating “things are bad things are bad” – and the journalists jump on the band wagon – their the Chicken Little’s – “The sky is falling in the sky is falling in “.

The borrowing levels plumment to lowest level in a decade – surprise we have too much money in deposits – we have to drop term deposit rates – which means cost of funds drop – which means more money to fund Australian homes now comes from within Australia -and we become a little immune to higher costs for offshore money.

Investors desert housing as an option (but with their compass resembling that of Captain’s Cook of Magnetic Island – all over the shop (we can keep heading north into the unchartered waters of the share market) – where do they put there money – in the safe harbour of the Bank’s – cash is king they cry !  So more money in the Bank’s.

So no investors buying – so where will people live if the population increases – next – the rents start to creep up as it gets harder to find a rental home ?

So cheaper money – cheaper rates for borrowers !  The fixed rates drop – 6.30% for three years – nearly 1.5% below the standard variable rate (what I now call irrelevant – as it’s designed to milk extra interest off those unfortunately not have someone one guiding them and trust their bankers – or too lazy to care – then suddenly the nibbles start – affordability suddenly gets better – a $260000 home – which can’t be built  for under $290000 looks attractive. Interest only on the loan, plus rates and insurance is $375 per week for a home you would pay $320 per week for – so for $50 per week – we choose where we live- where we send our children to school we choose (we are now in the catchment area) – we choose who our children have as peers and our little piece of Australia to call home where we may just grow old. And we create our own Australian story to look back on.

Yes the dream is achievable again – and that dream many Australian’s are still happy to pay a little more for.

So the market starts to stabilise – but wasn’t the bottom supposed to fall out of it ?

Yes the market has corrected – and yes a $420000 home in Kirwan is now only worth $360000 – but I remember when they where purchased for much less. It’s off in some suburbs 15% off the high’s of 2007.

I am not denying that. IS there a boom coming – I think not – this is normal – this is what we seen from 1994 – 2001 – but houses are still priced higher than then – much higher.

And those who are not moving and do not have to sell are still living there dream – they don’t care what there house is worth – it’s home – that’s why we purchased it in the first place !

So whilst everybody damns the housing market – it is market – an ecosystem – and what the Chicken Little’s and Sheep do not factor in is that we are people – and people live lives – which revolve around communities – which revolve around suburbs – which revolve around people – living in houses.

It’s a fact lost in the articles.

And any lenders out there – fight for outcomes for your clients – believe you make a difference in peoples lives – future generations of children will cherish a the home they get to grow up as much as any lifetime memory – like their family – like I remember 321 Ingham Road Garbutt growing up.

And in the end buyer of the $260000 home came back in on the Saturday – signed a fresh contract  -and had his uncondtional finace approevd today. The dream is still alive ………………….

Graham Lynham

(A resident of 321 Ingham Road Garbutt Townsville  from 1961 to 1986 – 25 years – from which he attended Garbutt State School and Pimlico High School Townsville  -and still sees the children he went to school with ! (Damn I am getting old).)

P.S. Thanks Mum and Dad

It was easy to get up in the hype – increased fees bring buyers forward – but as mentioned recently it only effects a small number of buyers who KNOW they were going to be effected.

There is no doubt some people will have recriminations – take the buyer who made an offer on a house which was on the market for mid $800′s. Believing the hype of “it’s a buyers market they make an offer well under asking price (the home started at $920000 and eventually (after months of marketed sold for $855000). It went to auction (surpirse – did not sell) and after months more of marketing (and drawing good interest -sells at $75000 above there offer.

They were not wrong to think they could steal it so to speak - believe what you read – “the sky is falling in”. But one factor missing amongst buyers is that quality stock still brings a premium, and whilst owner was asking above replacement cost initially (they may debate this as land costs are what are under pressure and sometimes that is hard to determine in a select area where you can’t buy similar land), once the house got in “the zone” interest remained strong.

So the house sells – one happy buyer one happy seller and one who missed out. And the consequence is that the cost of buying the same home now $16000 more expensive, and the costs of others in that range also more expensive. But they are still looking – they have not left the market and they will buy – higher stamp duty or not.

And that’s the point in all this – first home buyers -no worse off – investors no worse off – people buying land no worse off – if they build in the short term $10000 better off .

I am not predicting a boom – but when  someone is ailing a little – a shot of steroids (interest rate cut) will bring a sense of well being to the market. And of course when prices hit a low point (one house in Rasmussen marketed at $220000 buy another agency received multiple offers above the asking price – the pain and negativity suddenly disappear and the buyers attack knowing well priced (under priced stock).

Townsville property has reached a price where people are saying it’s time to buy – and that means the shoots of confidence are back.

Graham Lynham

This is not say that out of fear buyers did not bring their plans forward and with August traditionally a quiet month in Townsville Real Estate their could be a slight hiccup. But I am willing to predict that if interest rates fall by Christmas the market will show it has stabilised and we close to the bottom of the market.

Despite agents talking doom and gloom about the increase in costs the arguments are totally irrational !

Why -= because it will only effect a small number of buyers.

Let’s look at it rationally – the stamp duty increases do not effect first home buyers, land buyers or investors. They only effect second home and beyond buyers – who know what they paid before and who do not come from interstate.

Ask yourself the question – how mush ctamp duty did I pay when I purchased my home – most people could not remember !

The interstate buyer is is the big point – if you move from NSW QLD or Victoria you still pay less in most cases than if you purchased in your home state !

So if you know no difference (look how people quickly adapted to the GST) then it will quickly become the norm.

Here is an excerpt from an email sent to me Gary Thompson of Definitive Finance on the Sunshone Coast. Gary is an ex Commonwealth Bank Mobile Lender in the ealry days with me and has been in finance brokerage for many years.

This is couurtesy of  ”Which Property”.

In the 2011-2012 budget announcement, the Queensland government has revealed its plans for revenue reforms when purchasing property, which will commence 1st August 2011. The legislation is currently being drafted and this is a summary of the proposed changes.

TRANSFER (STAMP) DUTIES

Stamp duty is fundamentally a tax for the transfer of a property which you pay to the state government when you buy your property. The revenue reforms will mean that transfer duties will change in Queensland.

Owner Occupiers
The changes to stamp duty through the reforms will mostly affect owner occupiers looking to upgrade their principal place of residence. If you are in this category, the Home Concession, a discount in Queensland on stamp duty for owner occupiers will end on 31st July 2011.

What does this all really mean?

Let’s say you are buying a property after 1st August 2011, and you intend to use it as your principal place of residence:

Property Value $450,000: Stamp Duty*

Under the new rules, stamp duty for owner occupiers will increase substantially in Queensland. However, it can be seen that the rate is still competitive with counterparts such as New South Wales and Victoria. In saying this though, it is definitely a most unwelcome move which will deter Queensland residents from changing their principal place of residence as frequently.

GRANTS

$10,000 Building Boost!
On a brighter note, in an effort to stimulate the housing construction sector, the Queensland Building Boost Grant will be available for the next six months, commencing 1st August 2011. This will entitle both owner occupiers and investors to a $10,000 grant upon building or buying a brand new residence (house, townhouse or unit) under the value of $600,000.

First Home Owner
First home buyers will still be eligible for a concession on stamp duty, the $7,000 first home owner’s grant plus the new $10,000 Building Boost (subject to the purchase price of the property). This means, if you are a first home buyer you could be eligible for a total of $17,000 in grants and a concession on stamp duty!

More information about the Queensland stamp duty changes and grants is available on the Queensland budget website.

To take advantage of these upcoming changes visit our website where we have a variety of brand new properties available under $600,000 in Queensland: www.whichproperty.com.au.

Regards

Mark Borrill
Managing Director
Which Property

*This guide is an estimate from data available from the relevant State Revenue Offices and does not take into account any available bonuses, grants or concessions. This is subject to change pending the written legislation for Queensland.

Food for thought ?

More to come on my tip for interest rate movements going forward in my next blog.

Graham Lynham

The move comes on the back of recent figures showing Australia’s housing market remains soft, and the number of jobs advertised has fallen.

“This is great news for mortgage holders,” says Domain.com.au property expert Carolyn Boyd. “With the new financial year rolling around, many householders are facing increases in other expenses such as power and gas, and the last thing they need at the moment is to have to pay more interest.”

Those who can afford to do so though, should always pay more off their mortgage, Boyd says, as it provides a buffer against further rate rises, and can help to free households of mortgage debt sooner.

Each 0.25 per cent interest rate rise adds another $60 to the monthly cost of an average Australian mortgage.

The official interest rate is now 4.75 per cent. Mortgage holders on variable interest rates are being charged a standard variable rate of about 7.83 per cent by their lenders.

The above report courtesy of Domain.com.au.

Graham Lynham

It’s no secret that REA is the number 1 portal in Australia, and in Queensland it’s clear from enquiry levels in our office that they dominate the market. In fact we subscribe to the number 2 portal Domain, and it’s clear from enquiry levels that they hold little sway with home shoppers in the Townsville Area.

It’s certainly not surprising that they are to be challenged – if you want to buy a home in the ACT , the leading portal appears to be alllhomes.com.au, and independent. It’s all about how we are conditioned and we see as the point of reference in the particular market.

No the less, challenge they may , nut it will still take time and enormous financial input to change “belief systems”, and I suspect REA will dominate the market for some time to come..

Australia’s largest real estate companies are preparing to fight online marketing giant REA Group Ltd over the rising costs of Internet advertising and real estate data access rights, according to the Australian Financial Review.

Companies which include LJ Hooker, Ray White, Raine & Horne and Century 21 are considering banding together to create rival advertising spaces and information sources, the AFRsaid.

“It’s called Project Rebellion,” Real Estate Institute of Australia president David Airey told the AFR.

“For too long agents have simply allowed their information too be used by commercial operators at no charge and been put in the stupid position of having to buy it back.”

REA operates the country’s most popular real estate website, realestate.com.au.

The Cowboy’s performances do well for Townsville and help cement it as Australia’s regional powerhouse, and we are certainly priviledged to have the high calibre NRL team absed in our great city.

Angelo worked for the Townsville City Council before leaving for Delfin Lend Lease and being based at Douglas (Riverside Gardens). Once that projected wound up he moved back to a Senior Role with the Council.

With rumours oif the Rocky Springs Development imminent, the move seems timely.

The Rocky Springs Project, a proposed satellite city, will be located 15 km south east of the city centre, will occupy 1594 hectares and cater for 15,000 to 18,000 dwellings housing up to 38,000 people.

The Townsville Bulletin today published this (story and link follow) :

http://www.townsvillebulletin.com.au/article/2011/06/18/240671_news.html

Planning Boss Gone

TOWNSVILLE City Council’s director of planning and development, Angelo Licciardello, has resigned after almost three years in the top town planning job.

The council’s CEO Ray Burton is understood to have informed staff of the resignation yesterday.

A council spokesman could not be contacted last night to comment on the resignation which comes as the council is still working on a new town plan to replace the town plans of the former Townsville and Thuringowa councils, which were amalgamated in 2008.

It is understood Mr Licciardello will serve out a three-month notice period before moving on to a new role with a local development company.

Mr Licciardello was appointed to the position – a role understood to command a salary of up to $290,000 – in October 2008.

In June of that year, he had been appointed chairman of the council’s CBD Taskforce, however, in the previous Labor-controlled Townsville council he also served as director of planning from 1995 to 2001 before taking a role in the private sector.

In his most recent stint, Mr Licciardello was director of planning and development at a difficult time with the council championing contentious new infrastructure charges on development.

Developers labelled the charges ridiculous and unviable.

After State Government reforms, announced in May this year, the charges are to be reduced State-wide from July in an effort to stimulate construction activity.

Mr Licciardello was known to be forthright in his advocacy for following the city’s planning scheme – a trait which sometimes did not sit well with councillors.

He also won few friends in the development sector after telling a meeting of the urban development institute in 2009 that the previous council approach to accommodate development would be replaced by adherence to processes and procedures.

However he also appears to have attracted little support from the council’s executive structure.

Of the 18 executive managers across the council structure as at January this year, just two were in planning and development compared with six in corporate services, five in community and environment and four in infrastructure services.

Only the commercial businesses department has fewer executive managers, having one executive manager.
If Angelo’s move to Delfin Lend LEase is confirmed  – and thus Rocky Spring’s start

Graham

And of course if you have lived in Townsville you will remember a lot of Flinder’s Street prior to the Mall being constructed. I can remember driving down Flinder’s Street as a child (I am know 50) and particularly at Christmas seeing the lights in the shop window’s.  I will not reflect on that know – but here’s a piece from the Townsville Bulletin today  with the link :

http://www.townsvillebulletin.com.au/article/2011/06/18/240641_news.html

Drive-through milestone

The official reopening won’t be for another month but today will be a landmark for shoppers and store owners who had been crying out for a rejuvenated CBD.

The day will be marked with a parade of historic cars.

Flinders St traders, who have been in the main street for the duration of the journey – the heydays when it was a thriving mall and the downturn when it was a virtual ghost town, forcing owners to shut up shop – are the ones rejoicing the most.

Lorna Mead of Bert Brown and Co said her family’s business has been trading in the CBD for 112 years.

“I personally have been involved since the late-1950s,” she said. “I remember as a child my father was here and it was a very busy traffic street. It was the place to be and that continued up until the mall development came in, which made it bigger and better. In the late-70s through to the 90s, it was really the place to be.

“I think many people will be relieved to have access to the shops made easier.”

Townsville Hatters’ Lyn Towers has been set up on Flinders St for more than 20 years.

“We’ve had a lot of ups and downs but everything is very positive at the moment,” she said.

“It was good at the start and then David Jones pulled out of the mall and there was a slump but now the mall is looking lovely.

“I think it will help people to see what shops are here. It’s not the same old shops like in the shopping centres, which people don’t realise.

“I’m sure it’ll bring people back in.”

Lawrie Kemp has been in the city centre since he was a kid working at his family’s business Doug Kemp’s Camera House.

He said the mall redevelopment was the biggest improvement to come to the CBD.

“I think it will have a very positive impact on trading,” he said.

“The street development will generate the Palmer St-type atmosphere and it will become a much livelier place.”

Mayor Les Tyrell said the parade at 10am would mark the awakening of Flinders St.

“The ability to drive cars once again through here and to come in and park and shop will be great,” he said.

“I encourage everyone to come in and see what we’ve got to offer.

“This was the biggest part of the project and there’s an opportunity for people to see what the street has opened up to.”