Australian residential land developer Australand Property Group Ltd says a mortgage interest rate rise in August would have little impact on its business, as the company had avoided projects likely to be affected by such a change.
Australand reported a 34 per cent lift in first half profit, saying it is on track to record an improvement in annual earnings.
The diversified property group made a net profit of $119.596 million for the first six months of calendar 2007, up from $89.256 million in the same period last year.
The result was mainly driven by strong performances in its commercial, industrial property and investment property divisions.
However, the residential development business did record a small increase in pre-tax earnings, as it weathered mixed fortunes in housing markets across Australia.
The residential division's pre-tax profit rose five per cent to $34.3 million.
Asked if a rate rise later this year would affect the company, acting chief executive John Thomas said Australand had shielded itself against such an increase, in particular, by distancing itself from the first-home buyer market.
A rise of 25 basis points to 6.50 per cent has been predicted by many economists after last week's surprisingly strong inflation figures.
"From Australand's perspective, the markets that we are focussed on are unlikely to be affected significantly by interest rates," Mr Thomas said.
"The first home owners market is not where our focus has been. Our focus in on ... quality projects with existing underlying demand, fundamentally from the people who still have plenty of money.
"People in Sydney, for instance, in the eastern suburbs, on the North Shore, likely to be less affected by an interest rate rise.
"Interest rates will really have an effect in the longer term on affordability, particularly in the first home owner market, and those markets that are not performing strongly are the ones we've been pretty careful to keep ourselves out of."
Housing affordability, however, remained a concern for the company, said executive general manager residential, Peter Bourke.
"We still have affordability concerns in Perth and in Sydney, where it takes about 39 per cent of a weekly earnings to service a mortgage," he said.
"That is far too high, especially when you're talking Melbourne at about 28 per cent."
Mr Bourke attributed the affordability problems and spiralling rents in part to a lack of apartment construction, particularly in NSW.
"We have got a lack of apartment construction and some land constraints, and that is adding pressure on the demand supply relationship," he said.
"Apartment construction in the eastern states has basically stalled."
At 1218 AEST, Australand securities had fallen three cents to $2.27.
Source: AAP
Monday, July 30, 2007
Sunday, July 29, 2007
Home construction surges 8 percent in Victoria
Home construction activity in Victoria has surged seven per cent in 2006-07, figures show.
Building permit activity in the financial year to June 30 hit a record $16.7 billion, up from $15.6 billion in 2005-06, Building Commission data has revealed.
Victorian Planning Minister Justin Madden said the figures reflected the state's booming growth. "Given our growing population, it is reassuring news that we will have a strong supply of new homes to ensure Victoria continues to have more affordable housing than the national average,'' Mr Madden said.
Building permit activity in metropolitan Melbourne was up 9.4 per cent, while outer Melbourne rose five per cent and regional Victoria remained solid.
In Melbourne, almost 40 per cent of activity was recorded in the inner suburbs while outer Melbourne comprised 36.8 per cent and regional Victoria, 23.4 per cent.
Statewide, permits for home construction jumped 7.9 per cent in the last financial year, while permits to build apartments fell 12.8 per cent.
Commercial permit activity rose 13.1 per cent, retail increased by 9.1 per cent and industrial permit activity surged 7.9 per cent.
There were 97 permits issued where building work was valued at more than $10 million, 10 of which were in regional Victoria. Share this article
Building permit activity in the financial year to June 30 hit a record $16.7 billion, up from $15.6 billion in 2005-06, Building Commission data has revealed.
Victorian Planning Minister Justin Madden said the figures reflected the state's booming growth. "Given our growing population, it is reassuring news that we will have a strong supply of new homes to ensure Victoria continues to have more affordable housing than the national average,'' Mr Madden said.
Building permit activity in metropolitan Melbourne was up 9.4 per cent, while outer Melbourne rose five per cent and regional Victoria remained solid.
In Melbourne, almost 40 per cent of activity was recorded in the inner suburbs while outer Melbourne comprised 36.8 per cent and regional Victoria, 23.4 per cent.
Statewide, permits for home construction jumped 7.9 per cent in the last financial year, while permits to build apartments fell 12.8 per cent.
Commercial permit activity rose 13.1 per cent, retail increased by 9.1 per cent and industrial permit activity surged 7.9 per cent.
There were 97 permits issued where building work was valued at more than $10 million, 10 of which were in regional Victoria. Share this article
Thursday, July 26, 2007
US subprime mortgage crisis spills over into 2nd Australian hedge fund
As defaults in risky US subprime mortgages grow the fallout is damaging the US mortgage market as a whole, and now its affecting Australian Investment funds.
A second Australian hedge fund has been hit by the escalating subprime mortgage crisis gripping the United States.
The boutique company Absolute Capital has suspended two funds worth around $200 million that are exposed to defaults in the risky mortgages, and admits it is worried about the state of the debt market in the US.
Absolute's suspension comes a week after another fund, Basis Capital, told investors their investments were in jeopardy.
The local developments comes amid renewed fears that the US mortgage crisis will spill over into other parts of the world's biggest economy.
Absolute Capital describes itself as a specialised structured credit fund manager, playing the usual tactical game of balancing high risk with high return.
It has two funds worth around $200 million that are exposed to the crumbling subprime mortgage market in the United States.
In a letter to investors last night, Absolute said its portfolio was diversified and it had not engaged in risky end of the market.
Managing director Deon Joubert said although the subprime exposure was less than 5 per cent, the funds had to be closed to protect investors.
"Absolute Capital believes a temporary closure of the funds is the best defensive measure to protect the longer-term interests of our investors and to ensure equity amongst all investors as we manage any withdrawal requests, given the current illiquid nature of the funds' investments," he said in a letter.
But Mr Joubert warns Absolute investors that any rush to withdraw their money could be even more problematic, given the number of bigger players already unwinding their positions.
"Given the reduced market liquidity Absolute Capital believes the funds are not placed to adequately satisfy or price withdrawal requests," the letter said.
Absolute says the funds' performance is down 4 to 6 per cent for July, and the processing of withdrawal requests could be delayed until late October.
Despite the subprime exposure, Mr Joubert remains optimistic.
"We are expecting that markets will settle over the next few months, in which case investors in the funds may be able to benefit from these opportunities and improved market conditions," he said in the letter.
The suspension of Absolute follows a similar but higher-stakes story for Basis Capital, which has two funds worth more than $1 billion that are exposed.
Basis has hired the private equity group Blackstone to help defend a fire sale, and the global rating group Standard & Poors has been criticised for failing to detect the fund's fragility.
Distress in US
Meanwhile, Wall Street bounced back this morning after yesterday's heavy losses were fuelled by concerns that subprime defaults were spreading to more traditional mortgages.
But the signs of distress remain, with sales of existing homes falling for the fourth straight month, taking the US housing slump to its lowest level since 2002.
Real estate analyst Mike Larson agrees with yesterday's prediction from the major US mortgage lender Countrywide that subprime uncertainty means a recovery might not be seen until 2009.
"We've seen a real deterioration in the mortgage finance industry," he said.
"A lot more loans are going sour and a lot more lenders are cutting back on the types of loans they'll make.
"We'll probably see a continued weak market for the rest of this year and into next year with relatively weak sales and stagnant to falling home prices."
The mortgage instability in the US is being compounded in Australia by another collapse in the risky property sector.
South Australian private mortgage firm John West and Associates has been placed in voluntary administration with debts of almost $10 million.
Source: ABC
A second Australian hedge fund has been hit by the escalating subprime mortgage crisis gripping the United States.
The boutique company Absolute Capital has suspended two funds worth around $200 million that are exposed to defaults in the risky mortgages, and admits it is worried about the state of the debt market in the US.
Absolute's suspension comes a week after another fund, Basis Capital, told investors their investments were in jeopardy.
The local developments comes amid renewed fears that the US mortgage crisis will spill over into other parts of the world's biggest economy.
Absolute Capital describes itself as a specialised structured credit fund manager, playing the usual tactical game of balancing high risk with high return.
It has two funds worth around $200 million that are exposed to the crumbling subprime mortgage market in the United States.
In a letter to investors last night, Absolute said its portfolio was diversified and it had not engaged in risky end of the market.
Managing director Deon Joubert said although the subprime exposure was less than 5 per cent, the funds had to be closed to protect investors.
"Absolute Capital believes a temporary closure of the funds is the best defensive measure to protect the longer-term interests of our investors and to ensure equity amongst all investors as we manage any withdrawal requests, given the current illiquid nature of the funds' investments," he said in a letter.
But Mr Joubert warns Absolute investors that any rush to withdraw their money could be even more problematic, given the number of bigger players already unwinding their positions.
"Given the reduced market liquidity Absolute Capital believes the funds are not placed to adequately satisfy or price withdrawal requests," the letter said.
Absolute says the funds' performance is down 4 to 6 per cent for July, and the processing of withdrawal requests could be delayed until late October.
Despite the subprime exposure, Mr Joubert remains optimistic.
"We are expecting that markets will settle over the next few months, in which case investors in the funds may be able to benefit from these opportunities and improved market conditions," he said in the letter.
The suspension of Absolute follows a similar but higher-stakes story for Basis Capital, which has two funds worth more than $1 billion that are exposed.
Basis has hired the private equity group Blackstone to help defend a fire sale, and the global rating group Standard & Poors has been criticised for failing to detect the fund's fragility.
Distress in US
Meanwhile, Wall Street bounced back this morning after yesterday's heavy losses were fuelled by concerns that subprime defaults were spreading to more traditional mortgages.
But the signs of distress remain, with sales of existing homes falling for the fourth straight month, taking the US housing slump to its lowest level since 2002.
Real estate analyst Mike Larson agrees with yesterday's prediction from the major US mortgage lender Countrywide that subprime uncertainty means a recovery might not be seen until 2009.
"We've seen a real deterioration in the mortgage finance industry," he said.
"A lot more loans are going sour and a lot more lenders are cutting back on the types of loans they'll make.
"We'll probably see a continued weak market for the rest of this year and into next year with relatively weak sales and stagnant to falling home prices."
The mortgage instability in the US is being compounded in Australia by another collapse in the risky property sector.
South Australian private mortgage firm John West and Associates has been placed in voluntary administration with debts of almost $10 million.
Source: ABC
Monday, July 23, 2007
Will mortgage rates rise after the election? Home buyers think so.
Home buyers are jumping in ahead of the election in order to buy before a perceived mortgage rate increase would put a home beyond their reach. Also the Liberal Government suggestion of making people save for a 20 percent deposit has paniced many first time home buyers to act now.
Political debate about housing affordability, and promises to lure first homebuyer votes, are also weighing heavily on would-be homeowners.
Woodards real estate group chief John Piccolo said the election's impact on interest rates were also a consideration. "There seems to be a bit of frenzy among house hunters at the moment, and that may be because of the perception that after the election, the interest rates are more likely to go up than down," Mr Piccolo said. "I think that's creating some pent-up demand." Prime Minister John Howard is yet to name an election date for this year. Election to 'clam' marketReal Estate Institute of Victoria chief Enzo Raimondo said an election would usually calm the market right down. "Historically, what happens before an election is announced is everything stops,"
Mr Raimondo said. "People want to know the outcome before they spend their money." But Mr Piccolo believes first-time buyers are taking a "better the devil you know" approach. Affordability hurdleHousing Industry Association chief Caroline Lawrey said would-be first homebuyers were certainly watching the affordability debate closely. "If there's one party suggesting the first homeowner's grant might double, then you could understand why a young person would want to wait until after the election to buy," Ms Lawrey said. This month, Opposition Leader Kevin Rudd proposed a range of affordability initiatives. The initiatives included tax breaks for investors who build affordable housing, a tax-free savings account for first homebuyers, and increasing the first homeowners' grant for low-income earners. Treasurer Peter Costello responded with a proposal to release Commonwealth land for housing, calling on states to do the same. But State Planning Minister Justin Madden is keen to argue Victoria doesn't have a problem. Property prices risingOver the weekend, Mr Madden launched new figures on property price growth during 2006. He said the 6 per cent rise in Victoria's median price showed the market had returned to "sustainable levels of growth". But Mr Raimondo said he didn't believe affordability improved last year. He predicted house prices would rise well above the 6 per cent this year.
Source: The Herald
Political debate about housing affordability, and promises to lure first homebuyer votes, are also weighing heavily on would-be homeowners.
Woodards real estate group chief John Piccolo said the election's impact on interest rates were also a consideration. "There seems to be a bit of frenzy among house hunters at the moment, and that may be because of the perception that after the election, the interest rates are more likely to go up than down," Mr Piccolo said. "I think that's creating some pent-up demand." Prime Minister John Howard is yet to name an election date for this year. Election to 'clam' marketReal Estate Institute of Victoria chief Enzo Raimondo said an election would usually calm the market right down. "Historically, what happens before an election is announced is everything stops,"
Mr Raimondo said. "People want to know the outcome before they spend their money." But Mr Piccolo believes first-time buyers are taking a "better the devil you know" approach. Affordability hurdleHousing Industry Association chief Caroline Lawrey said would-be first homebuyers were certainly watching the affordability debate closely. "If there's one party suggesting the first homeowner's grant might double, then you could understand why a young person would want to wait until after the election to buy," Ms Lawrey said. This month, Opposition Leader Kevin Rudd proposed a range of affordability initiatives. The initiatives included tax breaks for investors who build affordable housing, a tax-free savings account for first homebuyers, and increasing the first homeowners' grant for low-income earners. Treasurer Peter Costello responded with a proposal to release Commonwealth land for housing, calling on states to do the same. But State Planning Minister Justin Madden is keen to argue Victoria doesn't have a problem. Property prices risingOver the weekend, Mr Madden launched new figures on property price growth during 2006. He said the 6 per cent rise in Victoria's median price showed the market had returned to "sustainable levels of growth". But Mr Raimondo said he didn't believe affordability improved last year. He predicted house prices would rise well above the 6 per cent this year.
Source: The Herald
Thursday, July 19, 2007
Mortgage and other debts explosion sparks enquiry
An inquiry into home lending practices is to be launched as new research reveals a sharp jump in the number of households going into debt or drawing on their savings to make ends meet.
The financial divide is growing between those struggling under debts and those with the resources to pay off their home, according to Melbourne Institute research.
Rising interest rates and the drought have led to an increase - from 10.8 per cent to 15.1 per cent over the past year - in the number of people running into debt or drawing on their savings.
The parliamentary inquiry, which will report before the election, responds to concerns that lenders are breaching the banking code in their tough treatment of people in financial difficulties.
Leader of the inquiry, Liberal Bruce Baird, said it would also look at declining credit standards and the level of home loan defaults.
"Given comments by the governor of the Reserve Bank and a recent report by the banking ombudsman, we wanted to see if there were issues in the approaches taken by the various banks," he said.
Negative equity in focus
Labor committee member Craig Emerson said parliamentarians were particularly concerned about western Sydney and the Illawarra region where many people now owe more on their mortgages than their homes are worth.
"Committee members support the deregulation of the financial system but one consequence has been that existing and new entrants into the market have sought to capture market share as a top priority and that has led to very aggressive lending practices," he said.
The Melbourne Institute research shows that the number of people devoting more than half their salary to debt has increased from 5.9 to 7.5 per cent over the past year.
Rural stress
Financial stress is greatest in rural districts, where the number of people running into debt or drawing on savings has soared from 9.9 to 20.8 per cent.
But there has also been an increase in metropolitan areas. The number of people succeeding in saving some of their income in metropolitan districts has dropped from 57.7 per cent to 50.7 per cent in the past year.
The study confirms Reserve Bank research showing that people with the highest debt service burdens are generally those with higher incomes.
More than 80 per cent of people earning less than $40,000 a year spend less than 10 per cent of their income on debt. Most are either in the rental market or, in the case of age pensioners, have a fully paid-off home.
The survey nevertheless found that 28.8 per cent of the people who spend more than half their income on debt service earn $50,000 or less.
Source: The Australian
The financial divide is growing between those struggling under debts and those with the resources to pay off their home, according to Melbourne Institute research.
Rising interest rates and the drought have led to an increase - from 10.8 per cent to 15.1 per cent over the past year - in the number of people running into debt or drawing on their savings.
The parliamentary inquiry, which will report before the election, responds to concerns that lenders are breaching the banking code in their tough treatment of people in financial difficulties.
Leader of the inquiry, Liberal Bruce Baird, said it would also look at declining credit standards and the level of home loan defaults.
"Given comments by the governor of the Reserve Bank and a recent report by the banking ombudsman, we wanted to see if there were issues in the approaches taken by the various banks," he said.
Negative equity in focus
Labor committee member Craig Emerson said parliamentarians were particularly concerned about western Sydney and the Illawarra region where many people now owe more on their mortgages than their homes are worth.
"Committee members support the deregulation of the financial system but one consequence has been that existing and new entrants into the market have sought to capture market share as a top priority and that has led to very aggressive lending practices," he said.
The Melbourne Institute research shows that the number of people devoting more than half their salary to debt has increased from 5.9 to 7.5 per cent over the past year.
Rural stress
Financial stress is greatest in rural districts, where the number of people running into debt or drawing on savings has soared from 9.9 to 20.8 per cent.
But there has also been an increase in metropolitan areas. The number of people succeeding in saving some of their income in metropolitan districts has dropped from 57.7 per cent to 50.7 per cent in the past year.
The study confirms Reserve Bank research showing that people with the highest debt service burdens are generally those with higher incomes.
More than 80 per cent of people earning less than $40,000 a year spend less than 10 per cent of their income on debt. Most are either in the rental market or, in the case of age pensioners, have a fully paid-off home.
The survey nevertheless found that 28.8 per cent of the people who spend more than half their income on debt service earn $50,000 or less.
Source: The Australian
Sunday, July 15, 2007
Mortgage Funds top $22 billion
Is there such a thing as too much money? Most of us would think not, but when large chunks of money are competing for a home, investors are often forced to take on more risk.
One area where this has happened in recent years is the mortgage fund market.
While mortgage funds don't have the sex appeal of share and property funds, they have captured a fair slice of the investment pool.
Australians are estimated to have more than $22 billion invested in mortgage funds, with the largest retail funds having assets of close to $2 billion.
The appeal of mortgage funds is simple. They provide a steady, regular income and should deliver a better long-term return than cash investments.
But traditional mortgage funds have been lagging the cash rate and the better returns are being generated by funds that pack more punch but also carry greater risks.
Morningstar performance figures for the past financial year show returns ranging from 5.19 per cent (Colonial First State's Bricks and Mortar Fund) to 9.46 per cent (Mirvac's AQUA High Income Fund).
The median return is 6.58 per cent. But comparing funds at the top and bottom of the ladder is more like comparing chop suey with mangos than apples with apples.
If a fund is showing returns of 9 per cent or more, says Morningstar's Anthony Serhan, it is almost certainly lending against construction and development. Borrowers don't pay higher interest rates because they want to; they do it because lenders charge them a higher rate to reflect the loan's higher risk.
It's a point that was lost on many investors who bought debentures and unsecured notes with groups like Fincorp, Australian Capital Reserve and Bridgecorp, and inevitably some mortgage fund investors will miss it too.
This isn't to say that mortgage funds fall into the same basket as these collapsed property lenders. Investors in these schemes often put their money into unsecured or secondary securities that rank behind secured lenders.
Most mortgage funds insist on first mortgage security, and while they may be creditors of the collapsed groups, Standard and Poor's fund analyst, Peter Ward, says they should get out relatively unscathed without causing losses to their investors.
The fact that mortgage funds are generally well diversified and don't put big slabs of their money with one borrower, also helps.
But you still need to understand just how much risk your mortgage fund is taking on and what protections it has in place.
Standard and Poor's has just completed a report on 52 mortgage funds and found big differences in what's on offer.
The report says conventional mortgage funds have been suffering from "milking the same cow" as the banks. Competing for loans has led to lower margins and, in some cases, lower credit standards.
Morningstar's Serhan says smaller mortgage players, especially, can't compete on price when the banks decide to buy market share.
They may be able to compete by establishing better relationships with borrowers, but some have chosen to move up the chain - to look at loans less fiercely contested by the banks.
At the same time, traditional mortgage funds have been showing less than spectacular returns.
S&P's report found they have increasingly underperformed bank bills, and Serhan says they have lost ground to newer listed debt investments (many of which are also a step or more up the risk scale).
Traditional funds still make up the bulk of the market, but the number of higher yield or higher risk products is growing to adapt to these market forces.
So is it a case of once bitten, twice shy? Take a lesson from Fincorp et al and avoid the higher yield mortgage funds like the plague?
Not necessarily. S&P gave four-star ratings to four high yield mortgage funds and said they should generate better short- to medium-term performance than the traditional funds. But you need to do your homework.
Ward says some of the more dubious practices in the industry (and these can occur in both higher yield and traditional funds) include lending against the "on completion" value of development projects (which includes the developers' profit) rather than the cost of the project, plus related party loans, insufficient liquidity within the fund, and high gearing levels. He says funds should be well diversified (geographically, across sectors and across borrowers), have a stable management team, and effectively manage arrears and defaults.
You also need to understand what the fund invests in. Ward says some mortgage funds have become hybrids and invest in fixed interest securities as well as mortgages, and there has been a rise in the number of residual product loans where mortgage funds lend against unsold units when a development is completed, in anticipation of the units being sold. As with development loans, interest on these loans is usually capitalised and represents higher risk.
S&P found widespread use of mezzanine finance (where higher geared loans are split, with the senior lender taking a first mortgage and other lenders providing additional finance) and some funds specialised in areas such as low-or no-doc lending.
If understanding all that sounds like hard work, you're right. Mortgage funds have become more complex and investors are further hampered by poor or inconsistent disclosure.
While he believes mortgage funds have a role in investors' portfolios, Serhan says they should provide standardised disclosure so that investors can compare risks between funds and understand measures such as the level of a fund's arrears. They may still not be comparing applies with apples, but at least it would look a bit less like chop suey.
One area where this has happened in recent years is the mortgage fund market.
While mortgage funds don't have the sex appeal of share and property funds, they have captured a fair slice of the investment pool.
Australians are estimated to have more than $22 billion invested in mortgage funds, with the largest retail funds having assets of close to $2 billion.
The appeal of mortgage funds is simple. They provide a steady, regular income and should deliver a better long-term return than cash investments.
But traditional mortgage funds have been lagging the cash rate and the better returns are being generated by funds that pack more punch but also carry greater risks.
Morningstar performance figures for the past financial year show returns ranging from 5.19 per cent (Colonial First State's Bricks and Mortar Fund) to 9.46 per cent (Mirvac's AQUA High Income Fund).
The median return is 6.58 per cent. But comparing funds at the top and bottom of the ladder is more like comparing chop suey with mangos than apples with apples.
If a fund is showing returns of 9 per cent or more, says Morningstar's Anthony Serhan, it is almost certainly lending against construction and development. Borrowers don't pay higher interest rates because they want to; they do it because lenders charge them a higher rate to reflect the loan's higher risk.
It's a point that was lost on many investors who bought debentures and unsecured notes with groups like Fincorp, Australian Capital Reserve and Bridgecorp, and inevitably some mortgage fund investors will miss it too.
This isn't to say that mortgage funds fall into the same basket as these collapsed property lenders. Investors in these schemes often put their money into unsecured or secondary securities that rank behind secured lenders.
Most mortgage funds insist on first mortgage security, and while they may be creditors of the collapsed groups, Standard and Poor's fund analyst, Peter Ward, says they should get out relatively unscathed without causing losses to their investors.
The fact that mortgage funds are generally well diversified and don't put big slabs of their money with one borrower, also helps.
But you still need to understand just how much risk your mortgage fund is taking on and what protections it has in place.
Standard and Poor's has just completed a report on 52 mortgage funds and found big differences in what's on offer.
The report says conventional mortgage funds have been suffering from "milking the same cow" as the banks. Competing for loans has led to lower margins and, in some cases, lower credit standards.
Morningstar's Serhan says smaller mortgage players, especially, can't compete on price when the banks decide to buy market share.
They may be able to compete by establishing better relationships with borrowers, but some have chosen to move up the chain - to look at loans less fiercely contested by the banks.
At the same time, traditional mortgage funds have been showing less than spectacular returns.
S&P's report found they have increasingly underperformed bank bills, and Serhan says they have lost ground to newer listed debt investments (many of which are also a step or more up the risk scale).
Traditional funds still make up the bulk of the market, but the number of higher yield or higher risk products is growing to adapt to these market forces.
So is it a case of once bitten, twice shy? Take a lesson from Fincorp et al and avoid the higher yield mortgage funds like the plague?
Not necessarily. S&P gave four-star ratings to four high yield mortgage funds and said they should generate better short- to medium-term performance than the traditional funds. But you need to do your homework.
Ward says some of the more dubious practices in the industry (and these can occur in both higher yield and traditional funds) include lending against the "on completion" value of development projects (which includes the developers' profit) rather than the cost of the project, plus related party loans, insufficient liquidity within the fund, and high gearing levels. He says funds should be well diversified (geographically, across sectors and across borrowers), have a stable management team, and effectively manage arrears and defaults.
You also need to understand what the fund invests in. Ward says some mortgage funds have become hybrids and invest in fixed interest securities as well as mortgages, and there has been a rise in the number of residual product loans where mortgage funds lend against unsold units when a development is completed, in anticipation of the units being sold. As with development loans, interest on these loans is usually capitalised and represents higher risk.
S&P found widespread use of mezzanine finance (where higher geared loans are split, with the senior lender taking a first mortgage and other lenders providing additional finance) and some funds specialised in areas such as low-or no-doc lending.
If understanding all that sounds like hard work, you're right. Mortgage funds have become more complex and investors are further hampered by poor or inconsistent disclosure.
While he believes mortgage funds have a role in investors' portfolios, Serhan says they should provide standardised disclosure so that investors can compare risks between funds and understand measures such as the level of a fund's arrears. They may still not be comparing applies with apples, but at least it would look a bit less like chop suey.
Friday, July 13, 2007
Mortgage home loan demand growth above expectations
OVER 66,000 Australians bit the bullet and took out a home loan in May, despite the rising cost of buying a property.
Growing job security, as the unemployment rate falls, rising wages and recent stability in interest rates have made people more comfortable about taking on debt, economists say.
In total, 66,040 owner-occupied housing loans were agreed to by banks and finance institutions in May, a seasonally adjusted increase of 0.1 per cent over loans committed in April, Australian Bureau of Statistics (ABS) data released today found.
This is the sixth straight month of growth in housing loans.
Economists had expected to see no growth in May.
The total value of dwelling commitments in May was $22.139 million, a 2.7 per cent increase on the previous month.
Housing affordability has been a hot topic in the political arena in the past week with the Opposition saying it will hold a summit in Canberra on July 26 to find ways to ease the pain for first homebuyers trying to get into the market, as well as tackle soaring rents.
The Government wants to conduct a national audit to find suitable land for housing and ease the cost burden on homebuyers.
The ABS data shows that first-time homebuyers made up 16.6 per cent of loans committed in May, down from 17.2 per cent the previous month, and well shy of the 26.1 per cent set in July 2001.
The average Australian home loan size was $268,900 in May.
Loan commitments in the country's largest housing market in NSW fell 2.6 per cent in May after four straight months of growth, while loans grew in Victoria by 1.7 per cent.
Demand for home loans growing
Growing job security, as the unemployment rate falls, rising wages and recent stability in interest rates have made people more comfortable about taking on debt, economists say.
In total, 66,040 owner-occupied housing loans were agreed to by banks and finance institutions in May, a seasonally adjusted increase of 0.1 per cent over loans committed in April, Australian Bureau of Statistics (ABS) data released today found.
This is the sixth straight month of growth in housing loans.
Economists had expected to see no growth in May.
The total value of dwelling commitments in May was $22.139 million, a 2.7 per cent increase on the previous month.
Housing affordability has been a hot topic in the political arena in the past week with the Opposition saying it will hold a summit in Canberra on July 26 to find ways to ease the pain for first homebuyers trying to get into the market, as well as tackle soaring rents.
The Government wants to conduct a national audit to find suitable land for housing and ease the cost burden on homebuyers.
The ABS data shows that first-time homebuyers made up 16.6 per cent of loans committed in May, down from 17.2 per cent the previous month, and well shy of the 26.1 per cent set in July 2001.
Loan commitments in the country's largest housing market in NSW fell 2.6 per cent in May after four straight months of growth, while loans grew in Victoria by 1.7 per cent.
In Queensland, loans rose by 1.4 per cent, a fourth straight month of growth, and in South Australia they rose by 0.7 per cent.
In Western Australia they dropped 7.3 per cent, almost whipping out the 7.9 per cent gain in the previous month, while the strongest state in the month was Tasmania, up 6.3 per cent.
In the Northern Territory loans rose 2.3 per cent and the in ACT they increased by 4.6 per cent.
In Queensland, loans rose by 1.4 per cent, a fourth straight month of growth, and in South Australia they rose by 0.7 per cent.
In Western Australia they dropped 7.3 per cent, almost whipping out the 7.9 per cent gain in the previous month, while the strongest state in the month was Tasmania, up 6.3 per cent.
In the Northern Territory loans rose 2.3 per cent and the in ACT they increased by 4.6 per cent.
Source: AAP
Growing job security, as the unemployment rate falls, rising wages and recent stability in interest rates have made people more comfortable about taking on debt, economists say.
In total, 66,040 owner-occupied housing loans were agreed to by banks and finance institutions in May, a seasonally adjusted increase of 0.1 per cent over loans committed in April, Australian Bureau of Statistics (ABS) data released today found.
This is the sixth straight month of growth in housing loans.
Economists had expected to see no growth in May.
The total value of dwelling commitments in May was $22.139 million, a 2.7 per cent increase on the previous month.
Housing affordability has been a hot topic in the political arena in the past week with the Opposition saying it will hold a summit in Canberra on July 26 to find ways to ease the pain for first homebuyers trying to get into the market, as well as tackle soaring rents.
The Government wants to conduct a national audit to find suitable land for housing and ease the cost burden on homebuyers.
The ABS data shows that first-time homebuyers made up 16.6 per cent of loans committed in May, down from 17.2 per cent the previous month, and well shy of the 26.1 per cent set in July 2001.
The average Australian home loan size was $268,900 in May.
Loan commitments in the country's largest housing market in NSW fell 2.6 per cent in May after four straight months of growth, while loans grew in Victoria by 1.7 per cent.
Demand for home loans growing
Growing job security, as the unemployment rate falls, rising wages and recent stability in interest rates have made people more comfortable about taking on debt, economists say.
In total, 66,040 owner-occupied housing loans were agreed to by banks and finance institutions in May, a seasonally adjusted increase of 0.1 per cent over loans committed in April, Australian Bureau of Statistics (ABS) data released today found.
This is the sixth straight month of growth in housing loans.
Economists had expected to see no growth in May.
The total value of dwelling commitments in May was $22.139 million, a 2.7 per cent increase on the previous month.
Housing affordability has been a hot topic in the political arena in the past week with the Opposition saying it will hold a summit in Canberra on July 26 to find ways to ease the pain for first homebuyers trying to get into the market, as well as tackle soaring rents.
The Government wants to conduct a national audit to find suitable land for housing and ease the cost burden on homebuyers.
The ABS data shows that first-time homebuyers made up 16.6 per cent of loans committed in May, down from 17.2 per cent the previous month, and well shy of the 26.1 per cent set in July 2001.
Loan commitments in the country's largest housing market in NSW fell 2.6 per cent in May after four straight months of growth, while loans grew in Victoria by 1.7 per cent.
In Queensland, loans rose by 1.4 per cent, a fourth straight month of growth, and in South Australia they rose by 0.7 per cent.
In Western Australia they dropped 7.3 per cent, almost whipping out the 7.9 per cent gain in the previous month, while the strongest state in the month was Tasmania, up 6.3 per cent.
In the Northern Territory loans rose 2.3 per cent and the in ACT they increased by 4.6 per cent.
In Queensland, loans rose by 1.4 per cent, a fourth straight month of growth, and in South Australia they rose by 0.7 per cent.
In Western Australia they dropped 7.3 per cent, almost whipping out the 7.9 per cent gain in the previous month, while the strongest state in the month was Tasmania, up 6.3 per cent.
In the Northern Territory loans rose 2.3 per cent and the in ACT they increased by 4.6 per cent.
Source: AAP
Monday, July 09, 2007
Queensland credit unions announce merger proposal
The boards of the Queenslanders Credit Union and Ipswich-based Discovery Credit Union have announced a proposal to merge.
A proposal - which would create a new credit union with about $400 million in assets, eight branches and 80 staff - will be put to members of both credit unions at their respective annual general meetings in November.
The agreement ensures all staff will be retained and all existing branches will remain open. The merged credit union will trade under the new name Queenslanders Personal Banking.
The merger will also need approval from the Australian Prudential Regulatory Authority (APRA) and other relevant regulators.
Under the merger agreement, Ross McDowell, CEO of Queenslanders Credit Union, will be the CEO of the new organisation and the current management team of Discovery will be part of the new management structure.
John Weier, the general manager of Discovery will be the deputy CEO of the new credit union and will continue to play a major role in the development of the organisation in the greater Ipswich area.
All Discovery directors have been invited to join the board of the merged credit union.
"Discovery Credit Union has been proud to support many local sporting and community groups through ongoing sponsorship programs and this will not change if the merger proceeds," Mr Weier said.
"As all of our staff and branches will be retained, members will not notice any change except for the name."
In a joint statement, Mr McDowell and Mr Weier said the boards of both credit unions had recognised the potential for growth in the Ipswich area.
"(We) believe the merger will create a financially strong regional credit union with sufficient size to ensure that it can continue providing friendly, personalised service to members," they said.
"In addition, having the economies of scale of a large financial institution will allow the merged credit union to take advantage of the opportunities that are available in the western corridor due to the strong local economy and continuing development."
A proposal - which would create a new credit union with about $400 million in assets, eight branches and 80 staff - will be put to members of both credit unions at their respective annual general meetings in November.
The agreement ensures all staff will be retained and all existing branches will remain open. The merged credit union will trade under the new name Queenslanders Personal Banking.
The merger will also need approval from the Australian Prudential Regulatory Authority (APRA) and other relevant regulators.
Under the merger agreement, Ross McDowell, CEO of Queenslanders Credit Union, will be the CEO of the new organisation and the current management team of Discovery will be part of the new management structure.
John Weier, the general manager of Discovery will be the deputy CEO of the new credit union and will continue to play a major role in the development of the organisation in the greater Ipswich area.
All Discovery directors have been invited to join the board of the merged credit union.
"Discovery Credit Union has been proud to support many local sporting and community groups through ongoing sponsorship programs and this will not change if the merger proceeds," Mr Weier said.
"As all of our staff and branches will be retained, members will not notice any change except for the name."
In a joint statement, Mr McDowell and Mr Weier said the boards of both credit unions had recognised the potential for growth in the Ipswich area.
"(We) believe the merger will create a financially strong regional credit union with sufficient size to ensure that it can continue providing friendly, personalised service to members," they said.
"In addition, having the economies of scale of a large financial institution will allow the merged credit union to take advantage of the opportunities that are available in the western corridor due to the strong local economy and continuing development."
Saturday, July 07, 2007
Housing affordability gets political boost
Australian Labor Opposition Leader Kevin Rudd says he will hold a national housing affordability summit later this month to look at ways to ease the burden on families.
Releasing a paper in Brisbane entitled New Directions for Affordable Housing, Mr Rudd said representatives from the finance and property development industries and state governments would be invited to the summit in Canberra to work on solutions to the growing crisis.
Mr Rudd said land release strategies, urban infill, high government infrastructure charges and skills shortages in the building sector would be examined.
``Once we've had this national summit on housing affordability, we then want to work through the individual responses from the finance sector, from the housing sector and others, to then define and shape exactly the proposals we'll take to the next election,'' Mr Rudd said.
Mr Rudd said one new initiative raised in Labor's paper was allowing for new home deposit savings vehicles, which allowed higher returns and tax advantages to ``supercharge'' the savings capacity of young Australians.
Contributions would be made from pre-tax dollars and earnings could be taxed in the same way as super nest eggs with the money only able to be withdrawn to buy a first home.
``Our national government has to show leadership to find better ways of making it easier for working families to save for a deposit on their first home, and to deal with the overall problem of affordability,'' Mr Rudd said.
Source: Courier Mail
Releasing a paper in Brisbane entitled New Directions for Affordable Housing, Mr Rudd said representatives from the finance and property development industries and state governments would be invited to the summit in Canberra to work on solutions to the growing crisis.
Mr Rudd said land release strategies, urban infill, high government infrastructure charges and skills shortages in the building sector would be examined.
``Once we've had this national summit on housing affordability, we then want to work through the individual responses from the finance sector, from the housing sector and others, to then define and shape exactly the proposals we'll take to the next election,'' Mr Rudd said.
Mr Rudd said one new initiative raised in Labor's paper was allowing for new home deposit savings vehicles, which allowed higher returns and tax advantages to ``supercharge'' the savings capacity of young Australians.
Contributions would be made from pre-tax dollars and earnings could be taxed in the same way as super nest eggs with the money only able to be withdrawn to buy a first home.
``Our national government has to show leadership to find better ways of making it easier for working families to save for a deposit on their first home, and to deal with the overall problem of affordability,'' Mr Rudd said.
Source: Courier Mail
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