Weekend reads – Must read articles from the last week

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.

Property market showing signs of recovery with surge in owner-occupier and investor lending

Things are looking up for the property market.

According to an article on ABC News there are clear signs of recovery with more people borrowing.

Australia’s housing market is showing further signs of recovery, thanks to a surge in the number of people who are borrowing — and taking out bigger mortgages.

Key points:

• Value of new loans to owner-occupiers lifted 5.3pc in July, but fell 8.3pc in the past year
• Loans to property investors rose 8.3pc during the month, but experienced an annual drop of 20.4pc
• Rise in borrowing activity coincides with rebound in property prices and auction clearance rates

The value of new loans issued to households jumped 3.9 per cent to $32 billion in July, its sharpest increase in four-and-a-half years, according to the latest data from the Australian Bureau of Statistics (ABS).

It was driven, in particular, by owner-occupiers (excluding those who are refinancing).

The amount of money they borrowed rose 5.3 per cent to $13.3 billion since the previous month, seasonally adjusted — the strongest result since August 2015.

Furthermore, the number of people taking out a mortgage to buy their next home lifted 4.2 per cent to 32,427 in July — much higher than the 1.5 per cent increase that the market had expected.

The figures showed there was strong demand from people applying for mortgages to buy their first home.

“First home buyers have continued their slow but steady return to the market, increasing their share of new owner-occupier lending to 29.4 per cent in July,” said Sally Tindall, research director of online comparison website RateCity.

She also noted it was the highest proportion of first home buyers since January 2012.

In addition, the July figures showed a strong increase in lending for those refinancing their owner-occupied homes (+6.3pc) and investment properties (+3.5pc) and personal loans (+4.3pc).

Surge in investor lending

There was also a significant bump in lending to investors, up 4.7 per cent to $4.6 billion, its sharpest rise since September 2016.

However, the value of new personal loans and commercial lending fell 2.6 and 1.1 per cent respectively.

“Property market conditions have improved, particularly in Melbourne and Sydney, since June,” CommSec chief economist Craig James said.

“Demand for home loans have jumped, auction clearance rates are up, home sales have lifted and both markets have recorded decent price gains, supported by the lowest mortgage rates since the 1950s.”

The recent boost in household lending comes after the Reserve Bank (RBA) cut interest rates to a record low, and the Government passed its personal income tax cuts for lower to middle income earners.

Despite the solid monthly increase, it was still a massive drop over the past year.

In the 12 months since July 2018, the value of owner-occupier lending dropped 8.3 per, while the amount loaned to investors has plunged by an even steeper 20.4 per cent.

“The RBA is unlikely to be impressed by these numbers,” ANZ economists Adelaide Timbrell and Felicity Emmett wrote in a note.

Read the full article here

Not different this time

It would seem that lending has taken a positive turn.

This Blog by Pete Wargen analyzes the statistics.

Lending rebounds

Congratulations Australia on a well-deserved Ashes victory.

Onwards to less depressing news.

I’ve found it’s by and large less hassle to keep my own counsel these days, but the latest lending figures suggest consumers needs to be wary of the headline-grabbers continuing to tout the housing crunch agenda, at least in the short term.

Remember, though, that there are markets within markets and some sectors will perform better/(worse) than others.

The AFR reported today that Westpac has slashed loan rates on its mortgage products by up to 130 basis points, taking mortgage rates down to half-century lows.

History suggests that this will encourage homebuyers, and in fact – as previously discussed here – home lending did indeed jump by well over 5 per cent in July, for the fastest monthly increase in four years.

In only two months the value of home lending to owner-occupiers has jumped by almost 10 per cent, suggesting that the prospect of a Labor government was weighing heavily on market sentiment.

Investors are coming back too, with the value of lending to investors up by nearly 5 per cent in July, after a protracted squeeze.

And first homebuyers are also coming to the party, even ahead of the First Homebuyer Deposit Scheme from 1 January.

Source: Justin Fabo, MacquarieMortgage Choice separately reported that first homebuyers made up 30 per cent of owner-occupier commitments, recording a 20 per cent jump in values month-on-month.

Read the full article here

Sales prior to auction rise as Sydney and Melbourne buyers look to avoid the competition

Pre-auction sales are on the rise in Sydney and Melbourne.

An article on Domain.com.au looks what’s going on.

More people are selling their homes before their scheduled auction with the number of these sales now similar to those seen during the property market boom.

Just over a quarter of Sydney sellers – 28 per cent – sold their home before auction in August, while 14.5 per cent sold their property prior to it going under the hammer in Melbourne, Domain data shows.

The figures have risen since August last year, when sales prior to auction sat at 21 per cent in Sydney and 12 per cent in Melbourne, as the market cooled.

Domain economist Trent Wiltshire said the data showed sales prior to auction were historically higher when market conditions were strong.

“These pre-auction sales were particularly low at the end of last year and at the start of this year when the Sydney and Melbourne markets were softest,” Mr Wilshire said.

“The share of pre-auction sales is back close to where it was during the 2012-17 boom.”

Brad Teal of Brad Teal Real Estate in Melbourne said sales prior to auction were being determined by the level of interest in a property.

If there was only one strong buyer interested in a home or apartment, and the buyer was offering a good price, then the preference was to sell before it went under the hammer, he said.

“When the market goes into growth mode you can identify buyers [who are keen to buy] but when the market goes the other way, as it did last year, you find you have no certain buyers and only maybes and that’s the difference,” Mr Teal said.

As the market has improved in recent months, more sales prior to auction has revealed a number of serious buyers re-entering the market.

Mr Teal said this was partly due to people getting finance quicker through the banks.

He said people were able to secure a mortgage within two weeks, rather than the four weeks it took to finalise a loan last year.

LJ Hooker Sydney auctioneer Ben Mitchell said he had noticed a significant bump in the number of sales prior to auction in July.

Part of the reason for the rise in the numbers was due to buyers’ fear of missing out, he said, with fewer homes for sale and more buyers at auctions.

Some buyers had attended multiple auctions with no success, and wanted to secure a property without the competition.

“I’ve seen some people at their fifth, sixth or even seventh attempt to buy and it’s heartbreaking from a buyer’s point of view,” Mr Mitchell said.

“So they put everything in prior to try and buy.”

Chief auctioneer with Ray White Matt Condon agreed.

Buyers were now coming to auctions with a plan in place to try and either avoid competition by making an offer prior, or opening bidding with a higher-than-normal amount to knock out competitors, he said.

“In general, buyers are trying to implement strategies rather than just arriving at the auction and sitting back and seeing what unfolds,” Mr Condon said.

Read the full article here

Why fear is leaving the property market this Spring

With spring in the air, the property market seems to be blooming.

In this article for Switzer, John McGrath looks at the state of play in our property markets.

It’s pretty clear now that Sydney, Melbourne and Brisbane are in recovery mode and things are looking up nationally as well.

CoreLogic’s latest report, released last week, showed Sydney dwelling values went up by 1.6% – the highest monthly gain since June 2017.

Melbourne bounced 1.4% – the highest gain since July 2017.

Brisbane also had a small bounce of 0.2%.

These are surprisingly strong monthly results this early into the recovery. It’s the third consecutive month of price growth for Sydney and Melbourne and the second for Brisbane.

On a national basis, August produced the first home price rise since October 2017 at 0.8%.

Regional markets are mixed, but we have seen some price gains over the past three months in the Capital Region (areas surrounding ACT), Newcastle and Lake Macquarie and Richmond-Tweed (NSW), Wide Bay and Townsville (QLD) and Geelong (VIC).

The election result, two interest rate cuts and APRA’s easing of credit criteria (which has increased the lending criteria for many) are having a cumulative impact across Australia.

The effect is greater in Sydney and Melbourne because these markets are on the rebound from an 18-month downturn and a greater decline in values – they’re not just recovering from tough credit restrictions which have pulled every market down a bit in recent times.

The things we are seeing in the big recovery markets of Sydney and Melbourne right now mirror the trends of past recoveries, providing further evidence that the bottom has arrived or to some extent even passed by now.

The typical scenario in a recovery is a stabilisation in prices, higher auction clearance rates and a lower volume of homes for sale.

According to CoreLogic, auction clearances have bounced back into the 70% brackets for Sydney and Melbourne – the highest levels since early 2017; and they’re above 70% for the combined capital cities, too.

New listings (defined as properties not previously advertised for sale over the past six months) are down -23% in Sydney, -20% in Melbourne and -17% nationally.

What typically happens next is we start to see increasing values, which leads to a higher volume of homes for sale as vendors gain new confidence to sell.

This doesn’t necessarily happen quickly, as demonstrated by sales data in the most recent recovery periods of 2009 and 2011.

We also saw a low volume of auctions in the recovery of early 2012 and things remained this way until early 2013.

We know now that the boom period for Sydney and Melbourne began in mid-2012 but the very start of major growth periods is never obvious at the time.

This time around, auction clearance rates have been improving since the middle of May this year but the volume of homes for sale and the number going to auction remains low.

This is because home owners are waiting for more consistency before selling.

They want to see similar properties down the road selling for a price that would be acceptable to them.

Looking at the history of market booms and downturns, on a national basis this current downturn was the biggest in terms of reduced home values since at least the 1980s.

That sounds scary but the reality is our national median only dropped by less than -10%.

Research analyst, Cameron Kusher from CoreLogic puts it well when he says this “speaks to the ongoing strength of the housing market over the past 40 years, which has culminated in Australia being one of the most expensive places in the world in which to buy property”.

Focusing on the big East Coast cities for a moment, let’s take a look at the largest downturns in terms of home value declines in Sydney, Melbourne and Brisbane since the 1980s.

This data from CoreLogic shows peak to trough percentage falls and proves that even in the worst three downturns, the falls were relatively small and certainly nothing dramatic.

Sydney – Top 3 Downturns

2017-19           -14.9%

1988-91           -11.6%

1984-85           -9.5%

Melbourne – Top 3 Downturns

2017-19-10.9%

2008-09           -9.4%

2010-12           -8.4%

Brisbane – Top 3 Downturns

2010-12           -10.6%

2008-09           -8.4%

1994-95           -5.0%

Source: CoreLogic

All of this explains why fear is, and should, be leaving the East Coast markets this Spring.

Read the full article here

4 things people who are good with money do every day

Have you ever wondered how some have more money than others?

Often it comes down to their money habits.

This article from Business Insider explains 4 things to learn from those who are good with money.

People who are good with money have to work at it every day.

Like exercise or eating healthy, managing your money is never finished.

You can reach your goal weight or ideal net worth, but there are daily behaviours required to maintain that status.

Here are a few things people who are good with money do every day:

1. They balance their wants and needs

A TD Ameritrade survey of supersavers – those who save or invest an average of 29% of their income – found that 60% of them adhere to a budget, while 49% of others do the same.

To these people, saving isn’t an afterthought – it’s a necessary expense that’s baked into their budget.

Believe it or not, they still have money leftover to spend how they like. According to the survey, supersavers and average savers spend the same amount of their budget, about 7%, on travel.

In other words, they have figured out how to balance spending for the present and saving for the future.

2. They make decisions that put them closer to their goals 

People who are good with money understand there’s no time to waste.

They start saving as early as they can, stay away from high-interest debt, and commit to growing their money through investing.

Most importantly, they establish both short-term and long-term goals and revisit them regularly.

And the decisions they make every day – from positioning themselves for a raise at work to tracking their spending – bring them one step closer to achieving their financial goals.

“The No. 1 reason most people don’t get what they want is that they don’t know what they want,” said T. Harv Eker, a self-made millionaire.

“Rich people are totally clear that they want wealth.”

3. They limit their exposure to temptation

When you’re trying to spend less and save more, temptation may be the greatest enemy.

People who are good with money aren’t necessarily born with a higher dose of discipline, but they know how to create it.

As James Clear, a productivity and habits expert, writes in his bestselling book “Atomic Habits,”: “‘Disciplined’ people are better at structuring their lives in a way that does not require heroic willpower and self-control. In other words, they spend less time in tempting situations.”

That is to say, people who are good with money are thoughtful about where they spend their time.

They aim to limit their exposure to situations where they are tempted to overspend on things that don’t align with their goals, such visiting the mall during a blowout sale or a rooftop bar during happy hour.

4. They practice patience

“This seems obvious, but there are plenty of people who only focus on two things when it comes to money: making it and spending it,” Katie Brewer, a certified financial planner and the founder of financial-planning firm Your Richest Life, wrote in a blog post. “But that is a short-term view of money that does not lead to wealth.”

One of the most common paths to wealth is consistent saving and investing, according to research by Tom Corley, a CFP and CPA who studied wealthy people for five years.

Read the full article here

Weekend video: Can you solve the prisoner hat riddle?

from Property UpdateProperty Update https://propertyupdate.com.au/weekend-reads-must-read-articles-from-the-last-week-103/