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Competitive Home Loans Spark Real Estate Sales


Competitive Home Loans Spark Real Estate Sales

Home buyers are tapping into new discount loans to service larger mortgages and it's adding plenty of fuel to Melbourne's real estate market.

Despite the Reserve Bank's resolve to hold official rates at 2.5 per cent, mortgage rates are falling as banks and other lenders compete for market share.

Property commentators say the lender competition in a low-interest rate environment is proving to be a decisive factor for buyers, particularly for upgraders.

An upbeat mood was evident at many auctions and open homes on Saturday, with agents reporting competitive bidding and large crowds. The market appears to have resumed from where it left off last year.

''It may even be a little stronger,'' said buyers' advocate Kim Easterbrook, from Elite. She attended auctions in Prahran, Collingwood and Northcote on Saturday, and said each sale drew a big crowd and achieved prices 10 per cent to 20 per cent above reserve.

Sales conditions have a measured tempo in many suburbs. Buyers don't seem to be panicking, most are sticking to their spending limits, and for every runaway sales result there are other properties that just get over the line or sell for a price that's slightly below reserve.

Fairfax-owned Australian Property Monitors reported a clearance rate of 74 per cent from 436 auctions. The Real Estate Institute of Victoria, which unlike APM includes Geelong sales in its results, said 432 properties sold from 600 auctions to give a clearance rate of 72 per cent.

On Saturday, many vendors were owner-occupiers who had bought new homes last year. They were keen to sell, with some prepared to discount.

Jellis Craig director Richard Earle said there hadn't yet been enough auctions to draw hard conclusions.

''But we are getting very strong numbers through open-for-inspections, and the auctions that we have conducted so far this year have been well fought out,'' he said. ''The market is still robust and buyers of Asian origin are out there purchasing property.''

Low interest rates give an affordability advantage to buyers.

APM senior economist Andrew Wilson said the average weekly mortgage repayment for Melbourne home owners was $50 less compared to two years ago. ''That's what is really driving the market - mortgages are more affordable in terms of repayments,'' he said.

Buyers' advocate Catherine Cashmore stressed there was a difference between mortgage serviceability and affordability.

''That's what buyers should be aware of,'' she said. ''You are taking on a heck of a lot of debt - by the time you've paid off the debt on a medium-priced apartment in Melbourne on a 30-year mortgage, you have paid well over $1 million.''

Commentators are cautioning buyers to focus on infrastructure and scarcity.

Monique Sasson, of Wakelin Property Advisory, said there were now three distinct markets in Melbourne: the new unit market, established properties in the middle and inner suburbs, and housing estates on the city's outskirts.

''If someone asks me about the Melbourne market, my response is: 'Which bit of it?''' she said. ''You can't talk about the market as a whole any longer.''

Ms Sasson expects new unit prices to be hit by oversupply. She said the need for heavy private car travel in the outer estate areas had an impact on price growth. ''It has a direct drag on values and on demand,'' she added.

More than 1000 auctions are scheduled by the REIV for next weekend.


Reserve Bank of NZ  lifts Interest Rates, Australia could follow

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Reserve Bank of NZ lifts Interest Rates, Australia could follow

The Reserve Bank of New Zealand's interest rate rise has cemented its status at the head of the developed world's economic cycle, but Australia's huge jobs gain means it may not be far behind.

The RBNZ raised the cash rate one-quarter of a percentage point to 2.75 per cent on Thursday, as expected, before Australian employment figures showed the best jobs growth in two years, with 47,000 new positions created during February. The employment data suggests the jobs market has caught up with the acceleration in the rest of the economy and resolves a worrying lag.

New Zealand is further ahead of Australia, thanks to a terms-of-trade boom that is underpinned by demand for Kiwi dairy exports, mostly attributed to China and India. RBNZ governor Graeme Wheeler said: ''By increasing the [official cash rate] as needed to keep future average inflation near the 2 per cent target mid-point, the bank is seeking to ensure that the economic expansion can be sustained.''

The RBNZ also upgraded its growth forecast to 3 per cent from 2.8 per cent for 2014, thanks to $NZ40 billion ($37.79 billion) in construction activity in Christchurch and the expansion of the housing supply elsewhere in New Zealand.

With that comes an inflation risk that needs to be contained.

The New Zealand Manufacturers and Exporters Association said it was yet to see a policy response from the RBNZ that addressed the high currency.

''Early increases in our OCR put us further out of line with the rest of the world in terms of monetary policy, which will have the effect of appreciating our already overvalued exchange rate,'' chief executive John Walley said.

''This is a major concern for exporters and import-competing manufacturers. For the traded sector the exchange rate determines what sort of margin gets banked, and margins are thin right now.''

HSBC chief economist Paul Bloxham said by the second half of this year, interest rate rises should push the New Zealand dollar to parity with the Aussie.

''That would be the first time in 40 years that it happened if it does arrive,'' said Mr Bloxham.

''They'll pop the champagne because the NZ dollar gets to parity, but they'll have a big hangover the next day because Australia is still NZ's major trading partner.

''A high currency will make their traders less competitive.'' After the RBNZ's decision the New Zealand dollar rose to above US85¢ and was fetching A94.8¢.

Mr Bloxham said it made sense that the currency was so high.

''You have got to keep in mind that the economy in NZ is growing very strongly and it's quite broad-based, and because of that, in a world where the rest of the developed world is picking up but not particularly strongly, it makes sense that the NZ dollar is very high.''

New Zealand's official cash rate has been at a low of just 2.5 per cent since early 2009, apart from a small lift in 2010 that was reversed in early 2011. That has seen mortgage rates at their lowest levels for about 50 years, in the wake of the global financial crisis.

Last December, the RBNZ signalled that the interest rate would rise 200 basis points to 4.5 per cent by the end of 2015.

That would see rates near ''neutral'' levels, neither speeding up nor slowing down the economy.

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