Well you read it here first. Last week I posted that I was concerned that Australian first home buyers were getting in too deep. Now there are news reports are that Commonwealth Bank’s CEO, Ralph Norris, believes that the generous government grants could lead to a residential property bubble if its extended past the 30 June deadline.
More on First Time Home Buyers in Australia Getting in Over Their Heads
The pundits at interest.co.nz are predicting that New Zealand’s houses will be officially affordable for median income earners by later in 2009.
The perfect storm has occurred in New Zealand – the official cash rate is at a historic low of 3.5% with many economists predicting that it will go lower again when its next reviewed on March 12. This has seen floating mortgage rate drop to 6.4% – rates not seen since the start of the housing boom in 2002.
Despite reductions in mortgage interest rates and the big increase in the first-home buyer’s grant, the business of auctioning houses still seems to be in trouble.
As we have already reported Australian property auction clearance rates dropped along with most of the world’s stock markets. Improvement doesn’t look imminent either. Figures out today make interesting reading: so long as you are not trying to sell a property – then they are depressing.
Australia has a wonderful bonus for anyone who emigrates to Australia, not only are the beaches as good as they looked on “Bondi Rescue” but if you decide to buy you own piece of Australia the government will give you money!
New Zealand’s house prices and interest rates are at their highest rates for years. Property Investors Federation vice-president Andrew King says
“a 25-year mortgage for 90 per cent of the cost of the country’s median-priced house, worth $345,000 last month, would currently cost a new home-buyer $745 a week, including rates, maintenance, insurance and an allowance for other costs. By contrast, the national median rent last month was only $305 a week.”
The devil is in the detail though. King’s figures are based on a 25 year mortgage, almost all mortgages written in the last few years are 30 years. He’s also assumed only a 10% deposit. That is low, most banks will add the extra costs on anyone borrowing more than 80% of the property’s value. King also assumes a floating mortgage rate of 10.95% – no one in their right mind would float their entire mortgage, especially now that the 2-year fixed rate has dropped to 9.2%, at that’s just an indication that interest rates are on their way back down, finally.
