Q How much can I borrow?

This depends on a range of factors including your personal circumstances, the price of the property and any valuation that may be required (a bank valuation may not be the same as the purchase price). Depending on the lender, they may be prepared to lend up to 95% of valuation, depending on your ability to repay. It’s worth noting that loans of more than 80% valuation often require mortgage insurance, which the borrower pays for.

Q What is the difference between fixed and variable rates?

Fixed interest rates are locked in for a period of time and don’t fluctuate, so payments remain constant for that period whereas variable interest rates vary according to market conditions. Variable loans will increase or decrease over time which will directly affect your payments.

Q What is a split loan account?

Split loans give you the flexibility to structure a home loan in a way that best suits your situation. You can fix a portion of your home loan so that you have certainty with your repayments and have the other portion on a variable rate.

Q What is an offset account and how does it work?

It’s an everyday account connected to your home loan that lets you get money out of an ATM, pay bills or write cheques. Being linked to your home loan it assists in getting the Principal down and ultimately saving you interest. With interest calculated daily, every cent you have in an offset account works to pay off your home loan faster.

Q What’s a redraw facility?

This is when you withdraw extra money that you’ve paid into your variable rate home loan. The amount simply gets added to the amount you owe. You can redraw as you need, as long as you have available funds in the loan.

Q Can I make extra payments or pay a lump sum?

Yes, most loans have this facility allowing you to reduce the original amount borrowed so you pay less interest over the long haul.

Q Can I Switch Loans?

Making the decision to change loans or refinance, is difficult as there are hundreds of loans available from hundreds of lenders. On top of that, there are other factors to consider such as how long do you want your loan period to be or how much you can afford each month? Some loans have early pay out penalties and other costs you will need to consider. Sometimes re- financing is not the answer and not the right option for you.

Q Am I eligible for the First Home Owner’s Grant Scheme of $7000?

You will be eligible to apply if you:
are buying your first home
are an Australian citizen or permanent resident
intend to make the home your principal residence, and
start living in the home within a reasonable time. The payment will be the same regardless of your income.

Q What is Lenders Mortgage insurance (LMI)?

LMI protects lenders against loss should a borrower default on their loan.

Q What is the difference between a Principal and Interest Home Loan and an Interest-only Home Loan?

A Principal and Interest Home Loan is where the principal and the interest are repaid together for the term of the loan. An Interest-Only Loan allows you to pay only the interest on the loan. Property investors are suited to Interest-Only because it maximises the investor’s tax deductions.

Q How can I reduce my mortgage?

The secret to financial security is making your money work for you.
Here are some tips to obtain financial security:
Evaluate – review your current financial position comparing your total income against all outgoings.
Budget – recording your day to day expenses is the key to financial control. By using your cash flow more effectively you can reduce your current commitments.
Plan – set your future personal and financial goals. This will give you an incentive to succeed.
Select – choose a loan that offers features and benefits that match your individual lending needs, not just now but into the future. This will assist you to repay your loan sooner.

Q Should I refinance?

Decide whether your existing financial arrangements still suit your current circumstances. If your current loans or credit card debts are not providing you with the desired results and you are paying too much, consider refinancing or consolidating your debts to achieve a financial benefit. These days, there are a wide range of finance products from many different lenders available. Finding the right loan may greatly reduce your loan term, interest payments or repayments enabling you to obtain greater financial security.

Q What tools can I use to help me select the right loan?

This can often be a daunting task. For those that like to do research before meeting with a broker or lender, there are many websites that have very basic information such as interest rates. Unfortunately there are many variables that come into play when selecting a home loan. Ratesonline provides very comprehensive information on over 700 home loan products that is updated daily.
You are able to research many loans and submit an enquiry or application and will be contacted by either a broker or lender.

Source: www.ratesonline.com.au

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.

APARTMENTS
 

The developer of the old CUB site at the top of Swanston Street recently announced that he would build a high-rise tower that would offer, amongst other things, “affordable housing”.

The building would have accommodation ranging from one bedroom to two and three bedroom apartments.

Hardly “affordable”.  Consider some prices for the basic one bedroom apartment being offered elsewhere in the city.  Prices range from $265,000 to $400,000.  Hardly affordable housing for families.  However very affordable for wealthy overseas students and property investors.

High-rise residential towers however do provide quality living usually in a city or near city location and offer “lifestyle”.  However beware of management fees, which are very high and are an additional cost to rates, taxes and utility charges.

LAND
 

Recently Tony De Dominco from the Urban Development Institute stated the Federal Budget would be helpful to first homebuyers, but would not solve housing problems.

He said the way to solve housing problems was to release more land???

Sounds great but to whom is it released – land developers, who land bank and then release it to suit their schedule, which relates to demand for their particular product and their ability to develop the infrastructure to service the land?

Usually new releases are out in the “boondocks”, far from public transport, schools and other services.  Not exactly where families will buy.

Land developers control land, not the government.

By Karina Barrymore July 07, 2008 08:30am

BORROWERS should brace for more interest rate rises despite the Reserve Bank of Australia indicating rates are on hold.

Since late last year individual lenders have pushed up their interest rates on top of the “official” increases by the Reserve and there seems no sign of this letting up.

St George Bank put its mortgage rates up again on Friday and there is likely to be more to come, regardless of the Reserve Bank’s decisions.

This is because the finance and banking industry ultimately has the last say on interest rates.

Although the Reserve Bank sets an official rate, it is up to each lender to decide what it will charge.
And despite the Reserve Bank indicating last week it thinks consumer demand is coming under control, the banks and lenders have other issues to factor in which could still see rates go up again.

As with any business or service, the biggest influence on how much a customer gets charged is usually market forces.

Supply and demand for money, or credit, dictates the rate a lender will charge its customers.

If lots of people want to borrow money and there is a shortage, lenders can push up the interest rate they charge. If nobody wants to borrow money, lenders can lower the rate.

At the moment there is still a global credit shortage and that is why some Australian lenders are warning people to prepare for more rate rises.

So far this year the major banks have topped up the official Reserve Bank interest rate rises by up to an extra 0.4 per cent on mortgages.

Second tier and non-major banks, however, have also been actively pushing up their rates, in some cases by even more.

However, the situation is worse for people with money owed on credit cards and commercial loans which have seen interest rate increases outpace even the unofficial rate rises.

“Without a doubt commercial loans have gone up substantially, in fact much more than personal lending,” Infochoice head of research Steven Anderson said.

“Small business lending has gone up a lot further, I’d say for every 25 basis points for personal lending, small business loans have gone up 40 points,” Mr Anderson said.

And although the RBA thinks the economy may be stabilising, there are other factors that are influencing the lenders to raise rates again.

“The RBA increases don’t reflect the current market conditions for lenders,” Mr Anderson said.

“The cost of money has just gone too high and profit margins aren’t there. Compared with last year the cost of money has just gone through the roof.

“These costs have to be passed on to customers,” he said.

The main cost issue at the moment is the 90 day cash rate. Ever since the credit crisis started to hit Australia back in September 2007, this cost component has been much higher.

St George group executive of retail banking Les Matheson said on Friday that even with its latest rate hike, the bank was still not “fully recovering” all its higher funding costs.

Australian deposits only account for just over half the amount of money needed to meet borrowing demand. That means the other half has to be sourced from overseas.

The flow-on effects from the world wide credit shortage are expected to take another 12 to 24 months to work through the financial system and get back to normal.

So the higher cost of money could be here for a while but that’s not necessarily bad news for everyone.

For people with money on deposit in Australia the current situation has provided a windfall, with deposit rates rocketing up this year.

In many cases investors can earn higher returns for having their money in the bank on short term deposits than they can from the share market, property or even in their superannuation fund.

Deposit rates have jumped up to 8 per cent and that’s without having to lock your money in for long periods.

(Source: news.com.au, 10/07/2008)

By Parag Deulgaonkar  on Thursday, July 10, 2008

Dubai will face an oversupply of property if current projects are delivered on time, according to an international ratings firm.

There is also a risk of the emirate being unable to stimulate demand in view of the massive developments in the pipeline, said Fitch Ratings, in a report on the state of Dubai’s property market.

“Many challenges have begun to surface, mainly the prospect of oversupply – if current delivery plans are met – and the risk of being unable to stimulate demand in view of the massive development projects in the pipeline,” it said.

“Nevertheless, there is a high probability of late delivery (and even project cancellation) due to logistical constraints that could ultimately result in a better match between supply and demand.”

Another dimension was the risk of oversupply in each segment due to the choice of targeting top-tier customers.

Moreover, the relationship among regional real estate markets and Dubai’s ability to maintain its leading position will come under the scanner in the long term, with the emergence of new centres in the region such as Abu Dhabi and Doha.

Strong gains in property prices in recent years have prompted concern that speculative real estate investment was increasing, which clearly adds to the risk profile of the sector. “The magnitude of price corrections, should they occur, could be substantial given the emerging nature of the market – and depending on the magnitude of inexperienced speculators, and/or short-term holders, in the property market,” the report said.

Compared to Western markets there is little transparency or reliable data in Dubai’s real estate sector. A key tool that should act as a mitigating factor is the improving regulations of the local market, together with transparency, and the production of dependable comprehensive real estate market data.

On the back of an anticipated slowdown in the world’s advanced economies, the impact of the credit crunch and sub-prime lending crisis on the Dubai real estate market is also another concern, which is magnified due to the fact that the demand is driven by expatriates and foreign investment.

The Dubai real estate market remained strong in 2007 and in the first quarter of 2008, performing well in each of the residential, office and commercial sectors. The driving factors included strong regional economies, inflow of foreign investment, low interest rates, and limited supply in all real estate segments.

During the first quarter of 2008, the main developers continued to report strong gains in revenues, margins and profitability, while their credit ratios showed more reliance on external debt. The outlook for construction in general in the Gulf Co-operation Council (GCC) is more positive than in western Europe. Supportive factors – such as strong GDP growth, rising income levels, healthy liquidity, rapid population expansion and increasing mortgage availability – continue to underpin robust growth in Abu Dhabi, Dubai and Doha.

These positive fundamentals, together with increasing corporate sophistication, should support companies’ credit profiles over the medium term. Foreign demand is the main driver, and Dubai’s ability to continue attracting investment is the fundamental success factor. Moreover, the relationship between regional real estate markets and the ability of Dubai to maintain its leading position is to be tested in the long term with the emergence of new centres in the region such as Abu Dhabi and Doha.

However, depending on the future supply-demand balance, the impact of any potential decline on a developer’s credit profile will vary on the basis of the proportion of off-plan sales (pre-sales) in its portfolio, phasing, size, and time of project delivery. Also key are risk management practices and management reaction – especially in a softening market scenario. On the regional and global front, the impact of rising inflation and input costs on developers is a growing concern.

On the supply side, the government is the key market player – through large developers, either fully or partially owned. Indeed, given that an estimated 50 per cent of supply over the next few years is under such central control, Fitch believes it is difficult to envisage the authorities will deliberately flood the market with supply and erode market fundamentals and their own projects’ profitability.

Fitch believes foreign demand is the prime driver of Dubai’s property market for reasons such as expatriates living and working in Dubai, institutional investors, the rise in Dubai’s status as a financial centre, location for “parked money” (Iranian residents) and overseas investors (from India, Russia, Pakistan and other parts of Asia), and speculators.

In the past, regional investors turned towards real assets – in particular, property – to protect their savings. Conversely, property has become a popular investment in its own right over the past six years, just as it has in the United States and the European Union.

In Dubai, real estate markets have been opened to citizens of countries outside the GCC. Falling interest rates have led to more borrowing, and while rents and prices continue to rise steeply, it is generally believed that the sheer number of newly built properties completed and brought on to the market will lead to an orderly moderation in rents and property prices in the medium term.

However, a geopolitical deterioration or a real estate downturn in Dubai’s real estate market may have an impact on the foreign demand, and could be more damaging to the economy than the correction in stock markets, which took place in 2006.

In Dubai, the average price for all residential properties in the first quarter of this year was Dh1,579 per square foot. This was still well below Dh2,093 in London, according to Colliers International.

However, during 2009-2010, the number of new homes coming on to the market will reach new record highs. If current delivery plans are met, the fast expansion in housing stock is likely to extend supply beyond demand. It is worth noting that Dubai’s apartment segment will be more sensitive to a potential market correction than residential villas, due to more supply and the fact that the villa title-holder also owns the land.

For the office sector, the outlook also remains stable as a result of strong demand due to Dubai’s economic prospects — as well as the wave of financial institutions setting up regional offices, and existing ones expanding their operations. The 1.6 million population has approximately the same amount of office space under construction as Shanghai (population 20 million) and Moscow (10.4 million). Again, contingent to delivery plans being met, the market may start experiencing a price correction as a result of the massive new supply in 2009-2010.

Positive outlook

The outlook for construction in the GCC is more positive than in western Europe. Strong GDP growth, rising income levels, healthy liquidity, rapid population expansion and increasing mortgage availability are some reasons that drive the market.

These positive fundamentals, together with increasing corporate sophistication (such as improved corporate governance, increased scale, better geographical diversification, and more refined risk-management procedures) should support companies’ credit profiles over the medium term.

In general, property prices tend to react to changes in the balance of the market with a time lag of several months. This should mean the increasing supply effect will be reflected in medium-term prices. The favourable economic conditions in the region – together with project delivery delays – have deferred any such signals so far, and led to an extension of the period of rising prices. While Fitch feels these fundamentals should remain sound, property prices may moderate in an orderly fashion in the medium term – though the extent and severity will vary from sector to sector. Furthermore,the Dubai market is partly driven by sentiment, and, therefore, future price moderation could be more severe if sentiment were to be affected.

Mortgage asset quality

Rapid growth in residential mortgages in 2006-2007 has not resulted in a deterioration in banks’ asset quality to date, but mortgage asset quality has yet to be tested through the cycle.

According to UAE Central Bank statistics, the banking sector’s exposure to residential mortgages represented about eight per cent of its overall lending portfolio by December 2007. Residential mortgages are collateralised by the underlying assets, but risk arises as the realisation of collateral can be a complex and lengthy process – particularly when dealing with residential mortgages made to UAE nationals.

Many banks have been increasing their exposure to the real estate sector, particularly in Dubai. Since 2005, some of the largest UAE banks have also set up subsidiaries to manage projects, provide brokerage services and/or invest in the property sector. Exposure to non-residential real estate has been growing year-on-year and has gained a substantial proportion in most of the large UAE banks’ lending portfolios. Islamic banks tend to have a higher exposure given that all their transactions are asset-based.

Apart from direct lending exposure to the real estate sector (either commercial or residential), some large UAE banks hold property investments at fair value on their balance sheets in order to book a profit from the periodic revaluation of these investments. This exposes banks’ profitability to high market risks. However, banks’ exposure to the real estate sector should not account for more than 20 per cent of customer deposits, which is the regulatory limit.

Residential mortgage growth was less noticeable before 2006. This was in large part due to the lack of clear legislation and the inability of foreigners (apart from GCC nationals) to own freehold properties.

 (Source: www.business24-7.ae)

It is amazing what you read in the newspapers from academics who have a “solution” to the so-called housing crisis.

 One such “expert” wrote in “The Age” on 6th of May this year that one way to provide more land in the inner suburbs was to sub-divide the “traditional quarter acre block” into two and this will release lots more land for development.

 Now lets see, “quarter acres”.  An acre is 43,560 square feet or near enough to 4,000 square metres.  One quarter of that is 1,000 square metres.  If you can actually find a 1,000 square metre block within an 8 kilometre radius of the city that can be sub-divided, Planning Regulations at most inner city councils demand a minimum size allotment to be 500 square metres.

 So if you are lucky enough to find a block big enough with a house located to allow for a side driveway, fine.  But chances are the house is sited in such a way that a side drive way is impossible.  Therefore you may have to demolish a house in perfectly good order to achieve this academic’s goal. 

 Impractical and uneconomic.

 In most cases the inner suburbs owners are happy with their lot and will not sub-divide.

 Further, how many 1,000 square metre blocks are available in Footscray, Richmond, South Yarra, Elwood, Northcote, etc., etc?  Not many.

 So the academics view is terrific, sounds good, but like so many commentators opinions, not backed up with research.  How about some specifics?

 The phrase “Quarter Acre Block” for the Aussie dream home actually means a block which measures between 560 and 700 square metres.  A bit hard to sub-divide them when Planners have a say!!