The Board thought it was prudent to cut the official cash rate 50 basis points to 3.75 per cent, after headline inflation turned out to be significantly lower than the RBA’s target range of two to three per cent.

The rate cut failed to surprise industry pundits, with RP Data’s Cameron Kusher stating that the economy was in serious need of a “boost”.

“We have seen a lot of softness in the economy of late. House prices are down on where they were, retail activity has slumped and headline inflation was just 1.6 per cent for the year,” he said.

“There is no doubt the economy is doing it tough at the moment and hopefully this rate cut will help ignite consumer spending once again.”

Managing Director of 1300HomeLoan John Kolenda said the 50 basis point cut was the minimum required to boost consumer and business confidence, especially as the banks were unlikely to pass on the whole cut.

“The RBA’s decision to swallow its pride today and cut the cash rate by 50 basis points will finally make people sit up and take notice that the central bank is serious about the non-mining sectors of the economy,” Mr Kolenda said.

“This is a good start but the RBA will likely need to cut rates again by 25 basis points over the coming months to really deliver the economic shock treatment the economy has been crying out for.”

Mr Kolenda said that the 50 basis point cut would deliver meaningful relief to borrowers even if banks only passed on part of the reduction due to increases in their cost of funds.

“When even former Reserve Bank governor Bernie Fraser was calling for a 50 basis point cut you know that some action was needed to get things moving again in the economy,” Mr Kolenda said.

“The retail sector is stagnant, the construction sector is stalled, and there is weaker than expected inflation so this cut was absolutely necessary but we mustn’t forget it is only the first step.”

With the RBA trimming rates, all eyes will now be on Australia’s lenders to see if they pass on the full rate cut to borrowers.

The above article has been sourced from real estate business.

TOWNSVILLE’S property market has begun the slow upward march out of the price ditch with suburbs such as Hyde Park leading the charge.

The inner city spot scored the highest quarterly median price boost of 17.9 per cent, according to RP Data, which brought the median house price up to $395,000.

It’s a heartening fact that Graham Lynham, of Graham Lynham Real Estate, said was evidence of overall market improvement that was largely thanks to well performing patches such as Hyde Park, Hermit Park and Mysterton.

“I think overall the market has been picking up for the past few months,” he said.

“When a market flattens it picks up from the city out.

“Hyde Park has been generating strong sales … and it really only takes a few strong sales to change a market,” he said.

Mr Lynham put down Hyde Park’s popularity to its reputable schools, proximity to the city and Castletown Shopping Centre which he said was one of the most profitable shopping centres.

He said the suburb also featured a large number of the always-popular Queenslander homes, while offering some top blue ribbon streets.

Mr Lynham believed the quarterly boost in median sale prices came off the back of some higher end sales earlier in the year (they sold a $700,000 property in Princess Rd) and said the quality and striking classic homes on large blocks had proven a big drawcard.

“The appeal of the area is similar to that of North Ward and Belgian Gardens,” he said.

“Plus Hyde Park is a real niche suburb and there’s often not as much product on the market.

“It really pulls above its weight.

“It will be suburbs like Hyde Park that lead the property market back up.

Hyde Park home owner Glenda Wanless moved to the suburb about eight years ago and said in that time the lure of patch had not abated.

“Houses aren’t excessively priced here … and I believe it’s those suburbs with houses priced in the middle of the mark (between $400,000 and $600,000) that survive the slumps better,” she said.

“And people seem to really like living here. It’s a great location that’s close to everything … and there’s a lot of Queenslanders which really seem to hold their value.”

Since October last year Mr Lynham had recorded an increase in house sales, and said one factor also impacting that rise was the struggling unit market, which was under pressure due to high body corporate fees.

Evidence of this particularly struck home in Railway Estate, where quarterly unit prices dropped 16.3 per cent, according to RP Data.

In the last year, up to January 2012, median unit prices plunged 24.1 per cent in the inner-city suburb, with house prices dropping 2.5 per cent in that time.

Mr Lyneham attributed this to the style of homes in the suburb, and said many were run down and in need of a renovation.

He said many buyers didn’t want to buy a house or unit and have to spend further money unless they could get the home for an absolute steal.

And with many properties in Railway Estate needing a makeover, he said it wasn’t working in the suburb’s favour.

But as those renovations slowly happened and newer and more impressive houses popped up, he expected the suburb’s market to improve.

“You do see nice product in Railway Estate but it’s spread thinly,” he said.

Local land developers I spoke with in January said that whilst the boost was welcome. sales had been slower than expected, and this is not doubt due to general malaise in the housing market.

Land sales have definitely improved, but this is a far cry from 2006 when I remember clients lining up at the Kalinda Chase Sales Office to secure a block ahead of others due the demand.

It’s a simple fact, that whilst BAnk’s credit policies are tighter, and interest rates still above cyclic lows of the last 10 years, that boosts. grants or any other incentives play an active but only small part in driving a market.

And with established houses retailing at well below 90% of replacement costs, the incentives simply give buyers choice which they must evaluate carefully before committing – there is in many cases better value int he established market at times – and again this a part of the property cycle.

The fact remains - rental demands remain good,  interest rates will probably drop again and we do not have an oversupply of land, and with a likelihood of change in the federal government at the next election confidence will slowly return.

And I would imagine the Can Do team in Brisbane may still vote to extend the boost – let’s hope so.

A copy of the article follows :

An influx of last-minute buyers has given Townsville’s building industry a lift as the hours count down to the end of the $10,000 Queensland Government Building Boost.

But while the surge was a welcome relief for many builders, the number of homes being built remains lower than previous years, with some fearing it was a Band-aid solution that failed to get business back on track.

Housing Industry Association regional president and owner of Finlay Constructions Darren Finlay said he noticed a 10 per cent increase in homes being built for the duration of the building boost.

But this figure was still down on previous years, proving more needed to be done, he said.

Mr Finlay feared simply not enough houses were being built, which could cause a shortage in years to come, especially with increased rent prices already causing a financial strain on many households.

The Queensland Building Boost was initially set up in answer to the struggling state of the industry and was set to end on January 31.

It was then extended to April 30 in a bid to lure more buyers.

Mr Finlay said the scheme was initially tipped to attract 14,000 in people in Queensland when it was launched last August, but just 3206 people had taken advantage of the offer by January 1.

“With a new State Government in power it doesn’t look likely that the scheme will be extended beyond this month,” he said.

While the boost did not bring local business back to its former glory, Stockland North Shore project manager Andrew Astorquia said it had sparked a busy start to 2012.

“Because the boost was initially supposed to end in January, we had a very busy month then,” he said.

“We did five times as many sales in that month as we did at the same time last year.”

All in all, Mr Astorquia said, the boost had a positive effect on business, and as a result he expected a bit of a slump to follow this year.

“Interest rates will have an effect, too … if they drop there will be a bit more confidence,” he said.

“But with the building boost ending there will be a bit of a lull.”

Mr Astorquia said last-minute buyers keen to snap up the building boost also needed to remember they couldn’t just waltz in two days before it finished and be eligible for the grant.

He said paperwork and building contracts took about two weeks, so anyone keen to buy should not leave it later than this weekend.

It was for that reason that Stockland launched a double building boost offer – matching the grant dollar for dollar – with an end date of tomorrow.

Graham Lynham

Residents say that the bulk of the damage appeared to be between Palmerston street and Mooney street and continued through to Ross River Road, Aiktenvale with some houses loosing roofs and others reporting significant number of trees and debris being left in the lake.

We can confirm that police and emergency service workers were readily on the street and a clean up is currently underway. We have contacted all our tenants in the areas affected and are currently assessing the damage and notifying owners where their property have been damaged.

Whilst driving the streets checking our properties for any damage some residents told Graham Lynham that they were abosolutley terrified.

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