The dream is still alive ………….. owning a home in Townsville

With recent articles predicting the Australian property market will crash resonating into buyers comments, it’s enlightening that others recognise the fundamentals as we do.

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 feel I have to share this article on VA home loans with you – 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

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