Broker News has reported that yesterday’s ABS Housing Finance statistics confirm what many industry commentators have hinted at recently - the demand for mortgages has reached a turning point.

The figures revealed that, overall, the value of housing finance commitments in December 2008 increased by 5.9%.

Managing director at Mortgage Choice, Paul Lahiff, described the results as heartening.

He said the third consecutive month of improved housing finance demand across major categories, left him confident the industry had passed a crossroads.

“Despite much doom and gloom about the economy and consumer sentiment, Australian property buyers appear to be concentrating more on their personal circumstances rather than that of the country, or the globe,” he said.

Lahiff felt that property buyers were taking up opportunities presented by many factors, including ‘historically’ low interest rates, higher rents, low vacancy rates, slowed housing price growth, high migration and rising rental yields for investors.

And managing director at Opportune Home Loans, Paul Ryan, has reason to believe additional interest rates cuts will see these figures improving even further.

“Interest rates are low and likely to come down further,” he said.

RP Data national research director Tim Lawless attributed the ’sudden rise’ to the first home buyer’s incentive.

“The trend in the data is clear; the proportion of first home buyers in the market hasn’t been this high since December 2001,” he said.

These positive results followed similar ones for October and November.

The statistics showed the number of owner occupied dwellings financed rose by 6.4%, and its value rose 7.1%.

First homebuyers approvals moved to 14,154, from 11,665 and 9,901 in November and October.

First homebuyers as a percentage of all housing finance commitments increased to 25.4% in December, from 23.6% in November.

Fixed loans jumped 2.9% for December, from a 6.1% fall in November.

The number of loans for the purchase of new and established dwellings, and the construction of dwellings all rose significantly, to 15.2%, 5.6% and 9.9% respectively.

Broker News today reported fewer households are currently experiencing mortgage stress compared to December 2008, according to Fujitsu Consulting’s latest Stress-o-meter.

It reported that 635,000 households were experiencing some degree of pain in the first month of 2009, 6% lower than December 2008 and well off the peak of 900,000 in August last year.

There was also a 15% fall in those facing a potential sale or foreclosure, “thanks to the significant drop in interest rates, and the government payments in December”.

This is great news!
Lee Sutherland

Andrew Inwood, Founder and CEO of CoreData Research, today announced that high net worth investors are returning to the property market. High net worth investors are defined as having more than three million dollars to invest. The latest survey showed that this group of investors are not happy with leaving their funds sitting in cash. The returns now achieveable from real estate is attractive and relatively secure he said. Theses investors are searching for and buying the bargains that are now available in the market.

This is great news for the real estate sector as it shows the faith that this group of investors have in real estate as an investment.

Happy investing!
Lee Sutherland.

The official cash rate could drop as low as 3.75 per cent by early next year, according to forecasts by NAB.

NAB said yesterday its October Business Survey and Economic Outlook had revealed record low business confidence and a sharp deterioration in business conditions.

With downside risks to growth strong, NAB adjusted its forecast for the official cash rate to 3.75 per cent for early 2009 – previously 4.5 per cent for mid-2009.

“We expect another 75 point rate cut in December and then another 75 basis points in early 2009,” NAB said.

This would certainly be welcome news for all property investors.

Until next time, happy investing.

Below is the RBA announcement:

At its meeting today, the Board decided to reduce the cash rate by 75 basis points to 5.25 per cent, effective 5 November 2008.

World financial markets have remained turbulent over the past month. Global equity prices have been volatile and fell further in net terms, and there have been significant exchange rate movements, including a sharp depreciation of the Australian dollar. A number of governments have announced measures to strengthen their financial systems, which should help to stabilise conditions over time.

International economic data have continued to point to significant weakness in the major industrial economies, and there have been further signs that China and other parts of the developing world are slowing as well. These conditions have contributed to further falls in world commodity prices.

In Australia, the overall path of economic activity appears until recently to have been close to what the Board had expected, with a needed moderation in demand occurring after a period of earlier strength. Recent reductions in borrowing rates, the depreciation of the exchange rate and the fiscal stimulus announced in October will work to assist growth in the period ahead, but deteriorating international conditions and falling commodity prices will have a dampening influence. On balance, it appears likely that spending and activity will be weaker than earlier expected.

Consumer price inflation in Australia remained high in the September quarter. As expected, CPI inflation in year ended terms picked up to 5 per cent, while underlying measures were just over 4½ per cent. Nonetheless, capacity pressures are now easing and, given the outlook for more moderate growth in demand and activity, it is reasonable to expect that inflation in Australia will soon start to fall. Global disinflationary forces will assist in this regard, though the depreciation of the exchange rate means that the decline of inflation to the target could take longer than would otherwise be the case.

Weighing up these international and domestic developments, the Board judged that a further significant reduction in the cash rate was warranted. The Board will continue to monitor developments and make adjustments as needed to promote sustainable growth consistent with achieving the 2-3 per cent inflation target over time.

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This is certainly good news for all borrowers with the cut being larger than the 50 basis points cut the market had anticipated. That now makes a total of 175 basis point cut in interest rates in just two months. It will be interesting to see if this has any effect on property prices given the lack of confidence that is dominating the market at present.

Till next time….happy investing.