Hi all
Welcome to the last Byron Property Search newsletter for the year - and what a year its been.
Thanks for all the positive feedback for these newsletters. I don't make myself out to be an expert on anything but try to make sense of these complex matters in simple terms.
And on that note, here is a fun way to make sense of all this.
Financial Meltdown Funnies
Q: What is the capital of Iceland?
A: About $3.40
Q: What does an Icelandic Bank and an Icelandic streaker have in common?
A: Both have frozen assets.
Overheard in City bar: "This credit crunch is worse than a divorce. I've lost half my assets and I still have a wife."
"The credit crunch has put me back on my feet - the car has been repossessed."
Q: What's the difference between a stock broker and a pigeon?
A: A pigeon can still make a deposit on a Ferrari.
PLUUUnnnngging Interest Rates
Well they have done it again. A full 100 basis points or 1% drop in rates as of today. The official bank rate is now just 4.25% and has dropped 3% in 4 months. CBA and NAB were the first to announce passing on the full 1% to consumers. This means that we can now offer interest rates of 6.04 percent and in some cases - under 6%. Beware of those offering rates like 4.99% as they are honeymoon rates and need to be avoided like the plague. Who would have though this time last year when many people were paying around 10% for a standard variable. If you are stuck in a rate that is not close to this or your fund provider is not passing on the cut - let me know. We'll fix em!
Same goes for my Buyers Agent services. I have been snooping around I am starting to see some good buys around. In the new year I will attempt to list some in the newsletters so stay tuned.
Stats for Byron:
Here are the median house price fluctuations for Byron Bay, post code 2481. There may be slight variations for other post codes in the shire and if you want to look for yourself - click here.
The graph tells us that median house prices have been rising in Byron since 2005. The other interesting thing to note is that prices in Byron are rising for the last 18 months or so while those in the region have been dropping. Then look at the difference; median price in Byron for a house: $771,000 while the region is $279,000. Yes - that is almost 3 times the value for a house with a 2481 postcode compared to one, in say, Lismore. Makes commuting look attractive!
More stats:
The September quarter housing figures are also mildly interesting for the capital cities. Sydney has dropped 3.1% over the year. Brisbane has seen a 5.2% fall in median house prices and a 1.6% fall in the unit market. To the west, Perth median house prices fell 3.4% and units just a bit higher and Hobart has dropped over 4%. Canberra has only fallen slightly - under 1% for houses. Melbourne, Adelaide and Darwin have recorded positive growth in median house prices over the year but this is expected to slow. Unfortunately, I have not been able to access Byron Shires stats for this quarter but stay tuned.
Will property values fall # 2
Last month I questioned the widely held opinion that house prices are going to fall by up to 30 or 40%. I am happy to see that I am in the company of respected SMH finance journo, Ross Gittens who disagrees like I do. He wrote recently in the SMH that we are going to have a soft landing. Yes, USA has fallen 20% and the UK has fallen 15%, we have only fallen 3% and should remain within the manageable 5%. Reasons for this are that we still have a high demand for homes. Immigration remains strong, rental returns remain high and demand still outstrips supply. USA overbuilt new homes and immigration in the UK is in reverse. The only spanner in the works here is if unemployment gets out of hand and too many people cannot afford their mortgage and there are many forced sales. Lets hope that doesn't happen and it looks like the gov is managing things well.
Another major reason why the USA is slumping so much is that most of the dodgy sub prime loans sold there were "non recourse" loans. This means that the debt was secured against the property not the burrower. So if a property drops below its mortgage debt, the owner can just walk away from the property without being chased for the shortfall. There has been so much of this in the states its called "Jingle Mail" where the owner drops the keys in an envelope, sends it to the bank and walks away.
There are however three areas where we can expect more substantial price falls:
1. Western Sydney and other strip mall areas where there were many low deposit, non bank loans.
2. Top end, expensive locations where many of our high flyers are experiencing unfamiliar stress.
3. Areas with lots of investor or rental properties as investors assume the capital gain is negligable and wish to invest in other sectors.
Byron Shire does not a fit any of these factors - except Top End (lets shed a little tear!).
Changes to home loan options
We all knew it was on the way but lets look at some of the ways that the banks are tightening access to finance.
1. The No Doc Loan is almost non existent. This was a facility where you could take up to 70% of your equity with signing an income declaration but now is not available.
2. CBA tightens Lo Doc as of December 1. CBA requires BAS statements before approving a lo doc higher than 60%. Also any loan between 60% and the maximum 80% will have to pay the off the shelf rate and not be discounted which means a rate of at least .7% higher.
3. No deposit loans eliminated. All loans now require at least a 10% deposit. Good riddance as I don't know anyone who took on this one anyway but was one of the weird ones that came out of the states in the sub prime fiasco.
If you have any questions at all about your loan and how you can improve it, don't hesitate to call me.
If you have any questions about the last paragraph and how bank changes may affect your future finance options, please contact me now.
Have a good 2009!
Michael