The Reserve Bank has signalled its recent aggressive approach to interest rates may be nearing an end, saying official interest rates are not too far away from what policy-makers consider to be “normal” levels.

RBA assistant governor Guy Debelle has told a Senate inquiry into finance for small business, the economy has been recovering well and the Reserve Bank is trying to ensure the current pace of growth can be sustained.

Last week, the Reserve Bank raised the official cash rate to 4.25 per cent, marking its fifth rate rise since last October.

Dr Debelle says at that current setting, the cash rate is closer to average levels.

“We are deciding that the situation where we needed historically low interest rates is no longer necessary, so we’re moving back to something around about average levels, which is not far away from where we are at the moment,” he said.

When asked by the South Australian Senator Annette Hurley whether the Reserve Bank was trying to rein in demand by raising interest rates, Dr Debelle said that was not the case.

“We’re not trying to depress demand, we’re trying to make it grow at a sustainable pace,” he said.

The central bank has previously said that normal or average rates would be somewhere in the vicinity of 4.25 to 4.75 per cent.

Source: ABC Online

The Age reports: DESPITE another interest rate rise, Melbourne’s property market is back in action after Easter, having recorded its strongest opening quarter on record.

The weekend’s clearance rate reached 85 per cent, from the 488 auctions reported.

JPP Buyer Advocates’s Catherine Cashmore went to five auctions at the weekend and said all the properties at the top end of the price range sold.

A one-bedroom South Yarra apartment at 4/34 Tivoli Road was on the market at $450,000, before six bidders pushed the selling price to $675,000, more than $200,000 past the reserve.

Ms Cashmore said the buyer was the next-door neighbour who intended to knock down the walls between the two apartments. ”But then there was the other bidder also bidding at that level and that’s what you’ve got to be worried about - people will dig in their pockets deeper when they want to win the game.”

A renovated property at 1/15 Ashby Grove in Eaglemont was quoted in the low $500,000s and sold for $645,000.

The two-bedroom residence at 149 Lennox Street, Richmond, went on the market at $760,000, and sold for $876,000, while 5/199 Lennox Street went for $510,000.

Ms Cashmore said interest rate rises were going to have little effect on a housing market where the real problem was a lack of stock for the booming population.

Noel Jones group chairman Adrian Jones believed the market was as strong as ever, even after the latest interest rate increase.

He said about six bidders competed for 54 Albion Road, Box Hill, which was on the market at $705,000, and sold for $849,000. ”For a two-bedroom weatherboard home in Box Hill, that’s just massive.”

Mr Jones said a Camberwell home backing a railway line, at 1 Westbourne Grove, sold for $1.1 million. ”Camberwell is just so popular, people will pay almost any price to get into the market.”

But buyers’ advocate Peter Rogozik said: ”I think the rapid price increase we’ve seen since mid-2009 has come to an end and what we’ll see in the future is more gradual price increases.”

He said bidding for the deceased estate at 36 Empress Avenue, Kingsville, opened at $300,000 and with three bidders and a reserve of $550,000. The property was passed in for $497,500.

”It was quite an interesting result … there’s a fair gap between what it was passed in on and the reserve,” he said.

REIV chief executive Enzo Raimondo said compared with the past few years, listings for the next few weeks were very strong, almost double what they were this time last year. ”Buyers have choice but will face competition,” he said.

*Melbourne records strongest opening quarter on record.

* The weekend’s clearance rate reached 85 per cent.

* REIV chief executive Enzo Raimondo says listings for the next few weeks are almost double what they were this time last year.

Source: The Age, 12/04/2010

“The pass in rate is up…..the pass in rate is down”. So what does that really mean? The weekly announcement from the newspapers is useful but often can send negative or positive messages to the public.However there is no method to disseminate the results. For example when the rate moves one week to the next it does not necessarily mean that prices have gone up or down nor does  it say that the pass in rate in the outer suburbs [where Auction is not as common as in the inner suburbs] is higher or lower and vice versa.                                              
 
Therefore do not think that auction results are in any way a reflection of the state of the market and remember that not all auction or private sales are reported to the media.                         
 
This weekend past 63% of properties auctioned sold .Last year the rate was 85%.                                             
 
Call Brian if you feel you need more explanation.0439004889

SYDNEY: With Australia expected to cut interest rates, beleaguered property trusts could see their rental yields become more attractive, but the bad news that has battered the sector may rumble on.

Australia’s highly leveraged real estate investment trusts, or REITs, have suffered as the global credit crunch lifted borrowing rates and raised questions about a practice of using nonrental income to increase dividend payments.

GPT Group, Mirvac Group and Babcock & Brown - which have listed REITs - have issued profit warnings and seen their share prices dive.

Centro Properties Group set off the bearish mood when concerns about debt refinancing emerged early this year.

The S&P/ASX 200 REIT index has lost 42 percent since a peak last October, but has picked up more than 20 percent since mid-July.

Today in Business with Reuters
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 Some analysts say the sector is still 20 percent undervalued, and rate cuts would ease pressure on the securities, which pay most of their rent to investors as dividends.

After more than a decade of expansion backed by a commodities boom as the nation sold iron ore and copper to China, the Australian economy is now seeing signs of weakness, with consumer spending sapped by rising fuel and mortgage costs.

The Reserve Bank of Australia said that it would not wait for inflation to fall before lowering interest rates, giving the clearest indication that it would ease monetary policy next month.

“As the RBA begins the easing cycle, this will make REITs more attractive from a yield perspective,” said a Merrill Lynch analyst, John  Kim.

The weighted average dividend yield for Australian REITs is 7.8 percent, slightly above the central bank’s cash target rate of 7.25 percent and compared with a 10-year government bond yield of 5.8 percent.

“The large cap A-REITs will benefit the most, as equity and global property investors revisit the sector, now that one of the major headwinds against the industry appears to be headed for a reversal,” Kim added.

During the last two periods of falling interest rates, in 1996 to 1998 and in 2001, REIT prices rose 6.7 percent in the following 12 months, according to UBS.

UBS said that groups active in residential development, or which have large domestic floating debt exposure, should benefit most, pointing to Stockland Group and Mirvac as examples.

Affordability has become an issue for Australia’s residential market of nearly 3 trillion Australian dollars. Home prices have jumped fivefold in 20 years, while household income has only doubled, so lower borrowing costs should offer homebuyers some relief.

But even if the central bank cuts its policy rate, lenders could still be reluctant to adjust their views of risk for property trusts, said Clement Chong, vice president and senior analyst for Moody’s Investors Service.

In May, Moody’s said it maintained a stable outlook on the ratings of Australian REITs over the next 12 months, but warned that a challenging credit environment and softening property fundamentals in some overseas markets were risks.

Dugald Higgins, associate director for Property Investment Research, said that a deteriorating global economy could hurt REIT earnings, as commercial property values and rents suffered in Australia and the United States, where many Australian trusts own shopping malls, offices and warehouses.

“It will only take a piece of bad news to hit the market, and I imagine we will see a lot of people jump ship again,” Higgins said. “Valuations, fundamentals are still pretty much out the window and have been in the last six months and I don’t see that changing a lot throughout the rest of this year.”

Babcock & Brown, which has listed real estate vehicles, has seen its share prices tumble after a profit warning due partly to revaluation of real estate assets. Babcock & Brown shares have sunk to below 4 Australian dollars, or $3.47, from almost 35 dollars in June 2007.

Office vacancy rates in Australia crept higher in July, prompting property executives to predict the global credit crunch would take its toll on rents and the value of buildings.

As the market braces for earnings announcements from REITs, investors will watch property valuations to see whether the trusts apply mark-to-market accounting.

The practice, which has gained ground in Britain, relies on indexes rather than appraisals of individual buildings, and allows companies to adjust their asset valuations faster.

“Typically in Australia, we’ve still got six monthly valuations,” said Tim Nation, director of international investment at DTZ. “It just inherently slows down the ability for asset values to reflect where the market thinks the pricing should be.”

Source:International Herald Tribune by Reuters,  By Eriko Amaha ReutersPublished: August 20, 2008

Analysis of the REIV June quarterly median prices shows that the Melbourne property market is strongest in the inner and middle suburbs.

The REIV classifies the inner city as those suburbs within 10km of the CBD and the middle those between 10km and 20km from the CBD.

Comparing the number of sales in the inner, middle and outer suburbs between the March and June quarters shows that the largest increase in homes sold was in the inner suburbs. In the June quarter there were 5,374 homes sold, a 21 per cent increase on the 4,456 sold in the March quarter.

The middle suburbs recorded a more moderate increase in sales with an increase of 11 per cent from 4,481 to 4,989.

A clear sign of the impact of interest rates, broader economic uncertainty, increases in the price of petrol and groceries can be seen in the fact that the number of sales dropped in the outer suburbs, by 9 per cent between the March and June quarters from 3,617 to 3,288.

Over the June quarter there was a subtle change in sales method being used to take property to market. The number of properties sold at auction during the June quarter increased by 17 per cent from the March quarter whilst the number of properties sold via private sale has increased 4 per cent, however this likely to be a statistical anomaly as there are almost no auctions conducted in the metropolitan areas during January. However if the comparison is made with the June quarter of 2007 it shows that the number of homes sold by private sales and auctions dropped by an equal amount of 22 per cent.

This shows that whilst the more moderate market conditions have not changed the method of sale, there has clearly been a substantial dampening of demand in the outer suburb and consolidation of demand for homes in the inner and middle suburbs.

Source: REIV

Source: www.ameinfo.com

Danial Schon, Vice President of Schon Properties, talks to AME Info about the Dubai real estate market, which sectors investors should be looking into for the biggest returns and why he thinks that prices across the city can only keep increasing.

Schon Properties is well established in Dubai’s property market.

The company already has four projects under development.

Its flagship residential projects are the Dubai Lagoon development and Schon Suites and the latest launch, the Signet project in Jebel Ali.

The Signet is a mixed-use development that will allow people to make use of one space for their business and residential needs.

This, Schon believes, will prove popular in the face of ever-increasing commercial rental costs.

‘This project was made keeping small businesses in mind.

‘The biggest problem for these people when they move to Dubai is that, because of the rising costs of rent they can never find a place.’

Recent reports that home owners would not be automatically eligible for residency visas have added further questions for investors from outside the GCC.

‘I think that everybody is still seeking clarification on that,’ says Schon.

‘But I know that the government of Dubai is so pro-business, and the policies are for the benefit of the economy, buyers, end users and so on, that the final decision will work in everybody’s favour. I don’t think that it will be a case of ‘we were promised this but didn’t get it’.

‘But we do tell our buyers that the residency visas will be subject to approvals at that time. We don’t know what they might be, laws change all over the world, so we don’t say that you’re guaranteed a visa.’

Most profitable branch of Dubai’s real estate market

Of the various projects springing up across the city, all are designed to attract investors.

But though prices are spiralling in the residential, commercial and hospitality sectors, Schon believes that, for individuals, the latter will bring the best returns.

‘Serviced hotel apartments are definitely the most profitable, because Dubai is built on tourism. You see the campaigns all around the world.

‘We launched a project called Schon Suites about three months ago. The concept is that all the rent goes into a pool, then an independent auditor distributes the rent equally according to your percentage ownership of the building.

‘It’s for people who can’t build hotels themselves. And it’s a very good return, the projected yields come up to 20% per year - that’s on 10 year historical information from the Department of tourism and Commerce Marketing, the inflation rate and so on. We’ve done extensive research on this and the numbers are phenomenal.’

Dubai property prices to increase

Almost all developments have shown these increases.

Most of the projects in Dubai have posited double-digit growth over a 12-month period.

This growth, driven in part by speculation and supply shortages, will not slow down as more properties come online, Schon believes. The root cause of the price escalation is down to the construction component.

‘I think prices have a long way to go yet,’ he says. ‘Mainly due to the rising cost of construction, which is detrimental to the industry as a whole.’

Global factors, such as China’s decision to increase payments for steel imports by 40% above market rate, are continuing to have a local consequence.

‘Things like that have a huge effect. The minute you’ve purchased your steel it’s already going up 1.5% per month, that’s the rate that we calculate construction inflation at for our contingencies.

‘What this does is that it drives prices up, because it controls supply but the demand is still high. So, prices have a long way to go. People ask me why property is so expensive - the most important thing in development is not hype, it’s not marketing or sales, it’s delivery. If developers don’t price at the risk of tomorrow’s costs, then they will lose money. And, if that happens, the quality suffers.’

Increased regulation helps property market

‘The creation of Rera [Real Estate Regulatory Authority] will ensure that it never gets to the point where the credibility of Dubai is affected, because they will step in,’ Schon notes.

Rera is a prime example of how Dubai’s property landscape has changed, partly in response to concerns over the lack of transparency in the market. Government legislation has enforced a set standard of regulation among the city’s developers and agents.

‘Every transaction is regulated, everything is transparent. You have to set up an escrow account before anything is sold now,’ he agrees. ‘We also have green building guidelines to follow.’

Thanks to initiatives like these, Schon is convinced that the upward trend is certain to continue, and that investors should take advantage of the opportunities on offer.

‘We were offered plots in 2002 that we didn’t go for, because analysts were saying ‘the bubble’s about to burst’. These are the same reports that are still going around now. Anyone who says that is not looking at the whole picture.

‘Dubai is the centre of the region for property, there are also investors from Iran, Pakistan, India. Even Chinese groups have started investing here. Everybody wants to be involved.’

12-Jul-2008
Every week many families try to realise the dream of owning their first home and there are a number of suggestions from REIV that may help.

Firstly, familiarise yourself with the two main methods of selling a property, auction and private sale. A major difference is that in private sale you can make the sale conditional on obtaining finance and there is a three day cooling off period.

Decide on what you want in terms of size, location and price range. Register your name and requirements with agents who service the area you are interested in and ask them to let you know when suitable properties become available. Regularly check the newspapers and set up alerts on real estate internet sites such as realestateview.com.au.

If you are not buying a brand new home it is also a sensible idea to obtain a building inspection report before you make an offer or bid at auction, this will provide guidance on what needs to be repaired on the property and how much it may cost.

Organise your finances before making an offer or bidding at an auction. If you are bidding at auction you need to be able to provide a 10 per cent deposit, immediately following the auction, should your bid be successful.

When you organise your finances make sure that you take into account stamp duty, cost of conveyancing, possible moving expenses and the repayments allowing a bit of room for the fact that variable home loan interest rates can move up.

Finally, research the different levels of State Government financial assistance that may be available to you. Assistance is available for first home buyers and different stamp duty rates are applied differently for newly built homes in the city and in regional Victoria than established homes in the city.

Source: REIV

This weekends auction results did not produce any surprises except perhaps the Albert Park Victorian featured in The Sunday Age which was passed in near a million on a Vendors bid. The opening [genuine] bid was $700,000 and that was the only interest.Unusual for the area.and maybe, just maybe ,the “Quote” was too high.
 
Once again expectations were exceeded in Camberwell.Not surprising because of the suburbs proximity to the City and probably more importantly, the access to private schools.                                       
 
It will be interesting to read the release of median prices next week.These figures give a false impression of market conditions because “Median”means the difference between the hightest and the lowest sale prices in any given suburb for the quarter.It is not an average.                 
 
The commercial market.                                 
Listed Property Trusts[LPT’s] are taking beating and for a very good reason.Investors money is used as “equity” in the purchase of large commercial,industrial and retail assets and then,based on a valuation at the time of purchase, significantly geared.They then rely on regular re-valuations to pay dividends. As soon as there is a downturn in the market, valuations do not come up to expectations,dividends are not maintained at initial levels, unitholders get anxious and sell just to get out which has a serious impact on the value of holdings and unit prices.
 
The pattern will continue because yields are diminishing across all sectors of the non residential market.

By Brian  from Buyer’s Advocates Melbourne

 A fairly ordinary weekend for auctions although the dailies reported some extraordinary prices for properties in the inner suburbs,namely Camberwell and Richmond where expectations were exceeded.                                      
 
Of course this time of year is not the best gauge of the market or auction results.I’ts cold,the snow season is on,school holidays are near their end and most Vendors will be holding back for better weather. However the paucity of stock can be beneficial to Vendors.                                          
 
General sentiment re interest rates,share prices and market conditions is not good and it is being reflected in the property market.
 
Demand will build and put pressure on so we expect an improvement in results at auction and other means of sale.
 
An interesting and usually overlooked stat. is that auctions only make up aproximately 30% of all sales. However most commentators use auction results as their barometer of market conditions.
 
In a forthcoming article we will talk about sales reporting.