Fourth Quarter Property Update

October 2010

Interest Rates on the Up

Banks loosen their grip on lending

Housing shortage set to reach record

highs by 2020

2010 has been a year watched by homeowners and investors due to the current economical climate positioning stock markets and property markets on hold. However, in the midst of this turbulence, interest rates rose in the first two quarters of the year, clearly highlighting the great position of the Australian banking system.

However, it is the fourth consecutive month that the RBA has left rates at 4.5% leaving the borrower feeling comfortable, and thinking that this will be the trend for the next quarter or possibly even longer. Recent information shows that the Australian economy has been growing at the forecasted trend pace, which is due to public spending over the past year. The private sector has also shown signs of higher demand and trends show that business investments are to increase over the coming months. Borrowers are currently avoiding rate increases but with trends meeting expectations this will soon change.

Last week Westpac raised its Loan to Valuation Ratio (LVR) for new customers to 92% reversing the cut made in Jan from 87%. ANZ followed suit allowing their existing customers to borrow up to 97%. The Banking sector is coming to the realisation that at some point they need to begin to loosen their belts on lending or soon they will see new buyers locked out of the market.

What is an LVR? WWIP says: A Loan to Valuation Ratio is simply the loan amount divided by the value of your property, for example, the LVR of a $225,000 loan on a $283,000 property is 79.5%.

To the savvy investor all of this information is a good indication of better times ahead as banks start to ease on their lending criteria and new home buyers are able to get into the market. This will certainly raise the demand in the property market which as we all know, adds to our capital growth allowing us to grow our portfolios. It couldn't be a better time to invest in the property market.

HIA forecasts the housing shortage across the country to exceed 500,000 new properties by 2020. "A lack of skilled labour is an emerging threat to the much needed housing supply response. A second round resources boom this decade will draw heavily on an already tight labour market. The $90 billion worth of resources projects on the books is expected to demand an additional 136,000 direct and indirect jobs. This labour will need to be housed, thus adding additional pressure to the supply of labour and materials in the non-resources regions", Harley Dale Senior HIA economist.

The local government area report (LGA) shows that the shortage exists just under 295 of the 699 LGA's across Australia.

What is an LGA? WWIP says: An LGA refers to areas controlled by each individual local government. An LGA report explains the regional development etc in that particular area.

The majority of the shortages can be found in and around metropolitan Sydney and Brisbane. It was also found that many of the LGA's with the largest housing shortage are also the same regions with the highest level of demand. "Again, it's the growth areas in the greater Sydney area and in South East Queensland where the demand will be amongst the highest in the nation", Dale stated.

In summary, the future is on an uphill trend, so what does this all mean to you the investor or the first time investor? Well the above outlook clearly shows the movement in the market is looking to stimulate growth which creates stability, meaning your investments will be growing. Therefore, if you're thinking of investing, now is the time to start talking to us.

Please feel free to contact WWIP with any questions or queries. Our service is obligation free so take advantage of our expertise and knowledge today.

Regards,

Angela Jones