Welcome to BPS Newsletter # 12 - September 2007
OVERVIEW
It looks like the property market is still firm but the recent rate hike did take a little of the wind out of the sales. It is anybodies guess what the wash up will be with the US sub prime mortgage loan market. It is obvious that is going to be more pain and foreclosures in that part of the world. I don't think the Australian market has much to worry about in this area. Our house prices have already had a correction and generally values are starting to firm. The sub prime market (loans with minimal security or bad credit lenders) is around 20% over there while here it is less than 2%.
The big picture is equally hard to read. I am of mixed opinion as on the one hand I gained a renewed respect for the USA and believe it is getting a lot of negative press at present. My experience of it was of a vibrant robust ffpeople and economy. On the other hand the sub prime debacle is just one of a few things that could drive this super power into recession. The cost of the disastrous war and effect on morale, the deficit, oil prices and looming peak oil, a run on treasury bonds from Asian nations - all or any of these things could be looming to dint the luster of the world's only super power. If the American empire wanes, then someone else will fill the void. If not Europe then China - or as some economists are predicting, the BRIC countries - Brazil, Russia, India and China. Don't you love those acronyms?
Is this the time to run for the hills and batten down the hatches? Not really - there is always some looming disaster around the corner. The attitude should be confidence with caution. I believe we are going to see some property price rises especially in our special part of the world. Also I think the share market is going to be choppy and unpredictable for a while so the property market may be the best haven for investment at this time in the cycle. However I am very suspicious of some wealth creation advocates who encourage punters to bet the house into a highly leverage situation to capitalize on a short term gain. I don't think this is the time to put all the chips on the table, be in a stressful, loss of sleep situation - life is too short!.
LOANS, RATES AND THE WHOLE DAMN THING!
Most of you would have had a recent hike of .25%. That may hurt, especially as I know some people are now paying high 8's or even 9% plus. I get to see some clients who cannot get out of these high rates because of excessive DEF (Deferred Establishment Fees or exit fees). I can no longer sell people a loan which locks them into high DEFs. Either the loan is a good one and the customer decides to stay with the product with a good rate and a broker who gives good service. Otherwise they should be able to walk at will.
If any of you are in this position - paying too much but cannot exit - then lets get together and we can crunch the numbers and see whether it is worth while for you to make the break and move. Our best rate at the moment is lo doc 3 year fixed at 7.64%. In some situations it may be best just to bite the bullet and and pay onerous exit fees to get a better deal.
PROPERTY
Just thought I would highlight a couple of investment ideas - from the lower end of the market first:
- Unit in Rajah Road Ocean Shores - 3 bedrooms and rented for $350 PW with stable tenant will sell for $370K.
- Probably the cheapest unit in Ocean Shores is now on the market at $320K. 3 beds and wooden floor - not a bad position.
For anybody looking at a small development investment - duplex blocks in Ocean Shores are selling like the regular hot potatoes at present. I know of a few still available.
As for more up market buying - look out for anything with an ocean view. Places worth looking are hills in Ocean Shores, Coolomon Scenic Drive (still good value), Coopers Shoot (expensive), Old Byron Bay Road or the hills above Lennox Head.
Happy hunting! Let me know if I can be of help.
Take care
Michael M Murray
Buyers Agent/Mortgage Broker